I have over the years, cribbed and acquired a set of rules that I use when trying to make what I hope are sensible investment decisions. They are as follows:
- Don’t buy fund Managers on reputation. Buy them when their investment style is working.
- Momentum remains the simplest way to identify those getting it right.
- Never invest in hype and be aware of vested interest in financial reporting.
- Don’t let your heart rule your head. Stick to the facts and regularly review the funds and sectors you are invested in.
With the above rules in play I have been looking at those Technology funds, American and Global funds which are reported in Sterling, but are heavily invested in American or dollar designated economies. I have to be careful not to be too optimistic, because as some of you will realise I have a natural affinity for technological developments and the global arena. It is nice when the underlying business investments in these funds are performing well, but it is a double whammy when the dollar strengthens. Conversely, a falling dollar can just as quickly remove these gains.
So what is the likely future of the the dollar when it has already strengthened 7% against Sterling within as many weeks? This is not saying that Sterling is weak as it has been strengthening against the Australian, New Zealand, South African and Indian currencies, whilst marking time with the Euro. Looking at the economy of America today these are the facts as I see them.
- Q.E. is over and the Fed has already started to raise interest rates ahead of the rest of the world.
- American Bond yields are now on the rise.
- Unemployment is at its lowest level for sixty years, wage rates are now rising and spending at US retailers is soaring.
- Tax revenues are rising as the economy expands and some firms are repatriating their financial offices back to the USA on account of the lowering of corporation tax rates.
These four points are factual and on their own should lead to a continual strengthening of the dollar against Sterling and most other currencies. Yes, we do have President Trumps personal tariff war against most of the civilised world, but at the end of the day is this just posturing to secure better trading terms when the dust settles?
This week’s Saltydog figures and graphs for North America and Tech & Telecomms are very impressive, and have been so for the last couple of months. In their own right, these graphs are saying that an upwards momentum is already established and currently is showing no sign of slowing down. Therefore what is there not to like?
I already have small investments in Baillie Gifford American, Baillie Gifford Global Discovery, AXA Framlington Global Technology, Scottish Mortgage Trust and Polar Capital Global Technology. I am now persuaded, and intend to increase the percentages that I hold in these funds and trusts. I will also look at Allianz Technology Trust which shows gains of 6.7%, 20% and 31% over 4, 12, and 26 weeks. That investment trust had slipped in below my radar.
Last week I spent a day in the Basque fishing port of Getaria and I was amazed to see the number of large modern deep-sea fishing trawlers. There were a dozen tied up getting ready to put to sea and others had already left. Apparently these numbers are mirrored in many other ports around the North Spanish coast. What a difference to the situation in the UK where over the last sixty years our deep-sea fishing fleet has been decimated. I wonder if there will be a reversal of fortunes after the Brexit negotiations are completed. It is hard however to see the Spaniards accepting a major change to their livelihoods.
I have always been interested in the sea. My father wanted me to have all the educational opportunities he never had, so it was a close run decision between a girls school and going to sea. As a result, at fourteen I did my first trips on trawlers as an unpaid ‘decky learner’ fishing in Icelandic waters shortly before the start of the cod wars. This was prior to joining the Merchant Navy as an Officer Cadet. I can clearly remember that at the weekend the Hull trawlers filled St Andrews Dock from side to side, unfortunately this dock has long since been filled with concrete. I don’t think I would wish this result on the Spaniards.