I knew that I was always going to be one of those people in for a lengthy stay at home. Over seventy and waiting for an operation appears to fulfil the self-isolating requirements exactly. So, more time destined to be spent trying to fold sheets where I get one corner and the wife takes three, oh what joy!
Now the rest of the country looks housebound as well, at least for the next couple of months, as the UK goes into lockdown.
This morning I received an email from my younger brother, a doctor in Vietnam, who as you can imagine is heavily involved in the battle with the coronavirus. Astonishingly, with a population of over eighty million, so far there have been very few deaths attributable to the virus. The government’s approach has been to test the entire population and anybody testing positive has been treated to a hotel type confinement, wanting for nothing, whilst being looked after royally by the army. The rest of the country is masked up, and carries on as normal, but with restaurants, schools and bars closed as they follow the rules to reduce future contamination. Somehow, they have been able to manufacture sufficient testing kits at $15 a “pop”, and nobody comes in or out of the country without being tested.
When this is all over, it will be interesting to see a W.H.O. analysis of how this sort of pandemic should be approached in the future.
In the meantime, we have our portfolios to look after in a world where the stock markets are for the moment in free-fall, and where they go nobody knows. Of course there are some that say they do, but now is definitely the time to choose your media inputs carefully, and beware of the “tyranny of experts”.
The financial industry promotes a “buy and hold “approach. They maintain that successful investing is about time in the market, not timing the market. They will say that if you miss the few days during the recovery when the market really soars, your portfolio is “dead meat”. They fail to mention however that if you are out of the market on the days when the market tumbles, that can feel “quite nice” as well!
And there have been some significant falls in the last twenty-five years. The largest being the dot.com crash, starting in 2000, the Financial Crisis of 2008/9 and now the spread of coronavirus.
As trend investors we buy into uptrends and sell out of downtrends. If it turns out that the correction is a small one, then unfortunately we can end up selling and then buying back at an increased price. Not a clever result, but definitely better than experiencing the wealth-destroying crashes that you can see in the FTSE 100 graph.
We have used this approach religiously in recent times owing to the precariousness of world economics, and this time it has paid off in spades.
Looking at the Tugboat graph you can understand why at Saltydog we feel reasonably pleased at the moment. Since the beginning of 2018, we have successfully navigated three market corrections and are now well positioned to make the most of the latest crash.
The next question is when to step back into the market?
It is simply the opposite of the above. For the moment we will wait for signs of a definite uptrend. Thankfully we have a 30% buffer cushion. Hopefully, the markets will improve, and then it will be the time to make small purchases and watch closely what happens. We will use the Japanese philosophy of taking small steps quickly, no great leaps into the unknown! Looking at the graph, the last major collapses took around four, four, and six years to move back from trough to peak.
I am trying to imagine which sectors I would like to be invested into in twelve months time, that is assuming the world has moved on by then. It will certainly be a different investment scenario from yesterday owing to business closures and all the “helicopter money” being thrown into the pot. A strong dollar and inflation will certainly influence my choice. At the moment energy creation, technology funds, renewable funds and precious metals certainly feature, along with UK funds. It is amazing to think that some of my favourite funds are at a 30% to 40% discount to where they were just a few months ago. We are certainly living in interesting times.
I will end with this Jesse Livermore observation. “When you are investing, you cannot allow any member of your brain’s emotional executive committee to knock on the door of the decision-making boardroom, let alone take a seat at the table. You have to stay in the present. Do not let what happened yesterday affect what happens today!”
Best wishes and good investing,