It’s inevitable that you will lose sometimes. The trick is not to make a habit of it!

I have no mind-blowing observations to make, but then those of you who read my emails are already aware of that fact. I am not in the business of forecasting the future. I will report that the tide is coming in, but only when my feet get wet.

Stock markets, as you can see from the table below, are showing drops of anything between 3% and 27% from their highs earlier this year. The only important question to ask is which way will they move now?

inevitable

These corrections occur at regular intervals, and normally after such an event one watches and waits for the signs of a recovery. Not so this time. World debt, Mr Trump and Brexit all combine together to make me feel that there is more pain to come. More a time for asbestos underwear than sunshades!

As a subscriber to Saltydog, I hope that you have followed the direction of our own portfolios and like me are sitting on large percentages of cash. When the world changes then you can use this cash to move into the new progressing sectors, leaving behind those areas that are failing. It is not much fun at the moment making no gain from the cash, but it is surely better than losing.

It would be worse to be fully invested all through a crash and then try to recover with half your initial investment already lost when the markets start to pick up. That would be like starting a game of strip poker already naked. Rather like the UK Brexit negotiations!

I recently read an interesting observation about the American economy. We are all aware that the Fed intends to continue to lift interest rates throughout next year with the possibility that US Bond rates would follow on and could reach 4%. That alone would possibly mark the end of the meteoric rise of growth stocks such as the FAANG businesses. These companies are due a correction and that could be the banana skin that sets it off. The other interesting observation was that the FED has stopped doing Q.E. and is set to recover much of these monies. What I had not been aware of was that it was the intention of the American government to spend more than $700billion on defence with this money aimed at American manufacturing and development companies. This is simply Q.E. in a different guise. Less being purchased abroad, and in particular from China. It is a sad thought but perhaps this, along with the trade wars already launched, means America is already involved in a second cold war. This time with China!

On a lighter note I read a paragraph written by Merryn Somerset Webb which gives an explanation as to why Momentum Investing, although successful, does not receive much press. She wrote, “Fund management companies are mostly paid a percentage of the assets they have under management. In the main, it is easier to get in new assets by getting a good marketing manager to tell an interesting stock market story to investors, than it is to grow by performing well. After all, what kind of marketing story would include the words “we just buy the stuff that is going up and sell that which is going down.” Spot on Merryn!

Best wishes and good investing,

Douglas.

Remember that patience is your most powerful weapon. (Warren Buffett)

The last few weeks has certainly been taxing my patience, which is not one of my strong suits. I am now sitting with 75% of my investment portfolio in cash and it is burning a hole in my pocket. The 25% balance is split between property, gold, healthcare/pharmaceutical and technology funds. The recent weeks have resulted in a balance between the rises of the property and gold, and the relative stability of the healthcare versus the losses of the technology funds.

The press seems to be full of speculation about which way the markets will move next. There are finance houses advocating being fully in the market because after this correction the next move is a “melt up”(a new expression to me). Maybe they really believe that, but more likely it is to put their own subscribers` and investors` minds at rest after their recent sizeable losses. I said in my last article that I feel there are many reasons for the market to move downwards, rather like a theatre slowly filling with smoke – how long before there is a rush for the exit?

At times like this I revert to the sayings of Jesse Livermore to endeavour to control my urge to reinvest before the time is right. The following are four of his many recorded sayings.

•    It was improper and unwise for me as a speculator to allow myself to be influenced by any consideration to act against my own judgement.
•    A man cannot be convinced against his own convictions, but he can be talked into a state of uncertainty and indecision, which is even worse.
•    The trend has been established before the news is published, and in bull markets bear items are ignored and bull news exaggerated, and vice versa.
•    One of the most helpful things that anybody can learn is to give up trying to catch the last eighth – or the first. These two are the most expensive eighths in the world.

With these maxims in mind I intend to stay with last month’s tactical retreat and will wait further until the time to reinvest becomes more obvious. The only exception will be if the markets do continue to correct, then I will build up my holding in gold funds as in these circumstances they can be expected to pick up.

Best wishes and good investing,

Douglas.

Last week was enough to give the devil the hot sweats.

After a couple of really volatile weeks, Friday saw many of the world’s stock markets closing down by more than 10% from their recent highs. This I understand is called a correction and not a collapse. So there it is, everything is fine and dandy, and it is not a life savings implosion.

Many financial commentators and fund managers have been writing over the weekend that this is simply the way of the investing world, just sit on your hands and the fall will produce buying opportunities in the future. What arithmetical world do these people live in? Most investors have their pension pots or portfolios as a finite quantity. If it falls in value, where do they get the money from to take advantage of these buying opportunities in the future? They presumably have to sell some of their portfolio at the lower value to reinvest back in again at the lower value. Now that makes no sense at all.

Surely it would have been much better to be moving into cash at the time of the impending “correction” to have this money available later on to reinvest at the lower prices. Higher valued cash, buying lower valued funds.

O.K., the argument is that before the correction took place, how did we know if, and when it would occur, and when to be selling funds and moving back into cash? Well of course we did not know, but there have been sufficient warnings to suggest getting such action underway might be a sensible course of action.

  • The American Bond yield starting to rise.#
  • Brexit.
  • Chinese stock markets dropping by over 25%.
  • Trump’s trade wars and America First policies.
  • The Italian economy.
  • Oil prices rising.
  •  Most major economies are carrying enormous debts which are still rising at an uncontrolled rate.

This is quite a list of grim reasons to say “that all is not well in the state of Denmark”. Something in the bilges is smelling, and needs to be resolved!

So if like the Saltydog portfolios you are sitting on around 50% cash, the question is what to do next? Will the markets continue to fall? Will they rise back up only to fall back again in what is fashionably called a “dead cat bounce”? Perhaps they will recover their mojo and ignore the points made above. Who is to know the definitive answer to this question? Certainly not me, so for the moment I intend to sit on my hands and the cash, whilst nature and the markets take their course.

By taking this action I have halved the loss if the market falls further, and if it rises I will have missed some of the gain, but at the moment I think that the chances of the first occurring outweighs the chances of the second.

On a personal basis it has been painful, if not unexpected, to see the old technology funds take the largest knock, with one of my favourites Scottish Mortgage Trust falling by over 20% inside a week. The new technology, medical and pharmaceutical funds seem to have taken the strain a little better with an average decrease of 3% to 4%. Perhaps one could read into this, that those funds heavily invested into the over-valued FAANG businesses have come off worse, and there may be more to come to bring their p.e.ratios down to more realistic levels.

In May I discussed the potential of being able to invest into the newly legalised marijuana industry via the ETF Horizon Marijuana Life Sciences Index. This turned out not to be easy, and I struggled to find a UK platform prepared to carry this fund. Eventually I was able to purchase it through a company called Stocktrade (A division of Brewin Dolphin Ltd) and it sits inside my Standard Life SIPP.  The end of month prices since the purchase are 1039, 1013, 929, 1288, and 1424. The recent increase would seem to be due to the passing of the bill to legalise marijuana for personal use throughout Canada, and in more and more states in America. I have also heard that one of the major drinks companies is considering incorporating it into one of their products, as is a tobacco company. Should this come to pass it would not be unreasonable to expect further fund price increases. It would be interesting to hear from any of you that have found other funds that are boarding the marijuana train.

In the early sixties I spent the last twelve months of my Merchant Navy life as the navigator on the Jamaica Banana Producer where the crew was mostly of Caribbean extraction. Their use of marijuana was endemic and this produced on occasions some very alarming actions, especially when they would consider challenging Newtons Laws of Gravity whilst working aloft. As a result I struggle to come to terms with the thought that in the future some people might be legally driving cars whilst high on wacky baccy!

Best wishes and good investing,

Douglas.

The early bird sometimes catches the worm, but the second mouse always gets the cheese.

In the last few weeks I have had the almost unbearable desire to bail out of Western Stock market sectors. A combination of the Brexit machinations, Mr Trump’s continuing unconstructive trade tariff utterances, the Developed World’s phenomenal debt, along with Mr Putin’s total disregard for International border niceties, in my mind all add up to an impending market disaster – the perfect storm!

Fortunately, as yet I have only taken partial action by halving my investments in Technology, Global, and dollar-based funds. I say fortunately because a glance at our Saltydog numbers still shows a slight lift in these sectors. Admittedly it does seem to be up one week and then down the next, and appears to have a direct correlation to the sterling/dollar relationship. I do not hold U.K. or European sectors or the sectors in our Slow Ahead group. As a result, for the moment my cash holdings are steadily becoming the largest part of my portfolio.

I am not unhappy with this situation, just unsettled. I still believe in technology as one of the investment places for my money in the future, but maybe not that much at the moment. Sciences are rushing forward at an uncontrolled rate and it is likely to produce some interesting moments in the next ten years. No one person can be an expert in everything: Artificial Intelligence, Robotics, Nanotechnology, Genetics etc-etc, and no one will be capable of connecting all the dots at the same time to see the developing big picture. This will definitely be out of the scope of the world`s politicians. The question then will be, who will be able to absorb all the latest scientific discoveries and be able to predict how the global economy will look and work in the future? Who will apply the brakes? Now that is a big job!

The above does not mean that there is not a potential investment opportunity lurking around the corner. I refer to the Asian economies.

China’s stock markets have taken an enormous hit over the last year falling by 20% to 25% and this has dragged down the Emerging Markets which rely on receiving work from China. Australia is in a similar position since its economy relies on selling vast volumes of commodities such as coal and iron to China. India’s market has also been on the back foot for different reasons as Prime Minister Modi endeavours to reduce the corruption in industry and streamline and increase tax receipts.

earlybird

China today still has annual growth rates of 6% that the West would love to experience. It also has a large well-educated young workforce and is slowly but surely arriving at the point that exporting to Europe and America becomes less essential as it becomes able to consume its own production. India already sits in this position with low levels of exports to the West. The rest of the Asean countries will just cling onto the coat tails of these two mighty economies when they take off again. At this point it will really be a mighty self-contained trading block, and surely a good place to have some of your pension money.

The big question for me, is when to put my toe back into these Asean waters? Whether to be the early bird or, what I would prefer as a momentum investor, be the second mouse. Wearing my rose-tinted glasses I think that the Saltydog numbers are starting to indicate a reduction in the rate of fall of the Chinese markets. The VinaCapital Vietnam Opportunities fund is a favourite of mine.  Before the Chinese fall it stood around 370p, then it fell to around 310p and is now back up at 345p. This perhaps is also a positive indicator of investment sentiment. Still, for the moment I think I need more good news on the Chinese markets themselves, before heading for the cheese.

Best wishes and good investing,

Douglas.

The right to the pursuit of happiness.

The American Declaration of Independence established the right to the pursuit of happiness alongside the right to life and liberty. This was not a guarantee of happiness, just the right of the individual to chase the concept. The state would not be held responsible for the achievement of this goal.

In the late 1700s the British philosopher Jeremy Bentham declared that the supreme good is “the greatest happiness of the greatest number” He concluded that the aim of the state, the market and the scientific community was to increase global happiness. Politicians should make peace, business people should foster prosperity, and scholars should study nature. This was not for the greater glory of king and country, but to enhance the happiness of the population.

At first glance one would think that there is not a lot of evidence to suggest that much progress has been made in achieving these aims, but a second glance suggests otherwise. Lifespan is now dramatically increased, poverty worldwide is hugely reduced, as are deaths from conflict. This progress continues and in the last few decades we have seen the right to pursue happiness morph into the right to happiness itself! Citizens now hold their governments responsible for whether they are satisfied or not, and by default, this means increasing the power and meddling of the state in all of our affairs, not the limiting of its interference as was the intention of Thomas Jefferson.

Happiness means different things to different people. Two thousand years ago Epicurus said that immoderate pursuit of pleasure is likely to make people miserable rather than content. The higher expectations are set, the more likelihood of failure and disappointment. Buddha taught that the pursuit of pleasure is the very root of suffering and by reducing this craving we would enhance our happiness. Now, at the start of the 21st century, the biochemical solution is to produce products that provide us with an unending stream of pleasant sensations. Science and technology are set up to provide ever more efficient painkillers, smart phones to remove boredom, more comfortable mattresses to sleep on, alongside a dumbing down of media information, all with the aim of keeping the masses happy. The capitalist juggernaut says that “happiness is pleasure”. Period!

The above is my attempt at a précis of the start of the book Homo Deus written by Yuval Noah Harari. I would heartily recommend it to you, because it is thought provoking and has made a contribution to my approach to life and also investment strategy. It is one of those books which you read three pages forward two pages back, and like his first book, Homo Sapiens, it is full of fascinating content.

Recently I have been attempting to control my desire for continuous investment gain by setting more realistic targets. This in order that I might achieve Yuval Noah Harari style happiness! Today this philosophy is under severe stress. I still have more than 30% of my investments in cash, and the rest is mainly in Dollar, American and Technology based sectors. Over the last few years this has been a really good place to be, that is until the last few weeks. Although the Dow and the Nasdaq indices have now moved to, or near to, their highest ever, the above sector prices have gone sideways and not up. This would seem to be a direct result of the currency relationship between the dollar and sterling. During the last month sterling has been as low as 1.281 and yet last week it temporarily peaked at just above 1.329, a gain of almost 4%. During this period a 100% dollar-based fund would have been knocked backwards by the same 4% when converting back to sterling prices. That is simple arithmetic.

What is not simple, is to sit on your hands whilst the diplomats, politicians and media commentators endlessly thrash the living daylights out of the Brexit negotiations. A successful conclusion to the trade and border discussions might see Sterling move back up to where it was before the referendum, when it was moving in the range of 1.40 to 1.50 £/$. A failure to reach agreement might see this range move down to 1.10 to 1.20 £/$. In the first case the above sectors would fall in sterling terms by around 10% and in the second case they would rise by around 13%.

pursuithappiness

Quite a conundrum.  Trying to forecast the end result is the job for mystics and people who read chicken bones. I do not fall into that category, so for the moment I intend to stay put, and only after the race is run, or the result is obvious, will I move either to increase or shed my holdings in these sectors. In the long term, when the dust settles, I still believe that the technology sector is the place to be invested in for the twenty first century.

Best wishes and good investing,

Douglas.

O.K., so what is the speed of dark?

Thirty six years ago I bought an oak long-cased Grandfather clock that had been made by John Charlton of Durham. It is old, because he died in the late 1790s and one must assume that he made it before he died!

Recently it needed the winding mechanism repairing and I took the opportunity of asking that the moon phasing also be fixed, as it had never worked whilst in my possession. The clock was repaired and returned to me last week.

Now the moon phasing had to be set, and to my astonishment I found that it ran from zero, a new moon, for twenty nine and half days to the next new moon. My first reaction was that Mr John Charlton had made a mistake and the silly man did not know that there were thirteen lunar months of twenty-eight days in a calendar year. Just to be sure, I went to Wikipedia to check.

Well as you might know already, or have guessed, he was correct and I, the long-term navigator, was wrong. In my defence, and it is not much of a defence, the sun and the stars are used for navigating and not the moon. Amazingly, it turns out there are five celestial variations of the lunar month, none of which are twenty-eight days. The twenty-eight day month is a common law period and was adopted in the Law of Property Act of 1925.

I hope that this is not too boring, but I will lay out the facts as I now understand them to be.

  • SIDEREAL MONTH. (27days 7hours 43minutes) This is the time it takes the Moon to return to a similar position among the stars.
  • SYNODIC MONTH. (29days 12hours 44minutes) This is an average period and references a line joining the Sun and the earth. This varies because the Earth’s orbit around the Sun is elliptical and not circular and the timing is dependent on the position of the Moon relative to the Earth and the Sun.
  • TROPICAL MONTH. (27days 7hours 43minutes) This is a similar time to the Sidereal month and is the time taken for the Moon to cycle with respect to the vernal equinox. I am starting to get lost at this point!
  • ANOMALISTIC MONTH. (27days 13hours 18minutes) This is a similar time to the Sidereal month, but is longer due to the allowance that has to be made for the fact that the Moon’s orbit around the Earth is elliptical and not circular. This we can observe in the different apparent diameters of the moon at different times of the year as its distance from earth varies.
  • DRACONIC MONTH. (27days 5hours 5minutes) I like this name as it refers to a mythical dragon, said to live in the lunar nodes and eat the Sun or Moon during an eclipse. The Draconic month is the average interval between two successive transits of the Moon through the same node. I said it might hurt!

SUMMARY – All Lunar months approximate to the mean length of the Synodic month, the average period the Moon takes to cycle through its phases and back again to the starting point. The Moon completes one orbit around the Earth every 27.3days (a Sidereal month), but due to the Earth’s orbital motion around the Sun, the Moon does not finish a Synodic cycle until it has reached the point in its orbit where the Sun is in the same relative position.

PHEW!

At the moment we are all intrepid adventurers on the high seas of investment. My apologies for yet again returning to the subject of technology funds, but these are the only funds that are making progress at the moment. The recent minor correction in these funds however poses the big question. Will they return to their upward momentum of the last few years, or are we due for a real fall should the FAANG businesses falter?

As a sterling investor, the strengthening of the dollar has recently made a significant contribution to the rise of these funds that have many of their investments in dollar-based businesses.

This brings me to the subject of Brexit. Sorry about that! But whichever way this mop flops it will affect the value of sterling. A good deal for the U.K. (whatever that is) and one would imagine that sterling would appreciate against the dollar and other currencies. The reverse is true if there is a disorganised W.T.O. no deal result. At the moment I am in a quandary and can see no way that one can anticipate the result. Certainly not from listening to and reading the news.

So for the moment, until the mists start to clear, I intend to hold on to the four technology funds that I hold. (Scottish Mortgage Trust, Smith and Williamson Artificial Intelligence, Polar Capital Technology and AXA Framlington Technology).  I have held them for some time, and they have served me well and still show favourably in our numbers. I am however on full alert.

Somebody once said that there is nothing wrong with optimism, as long as you do not get your hopes up!

Best wishes and good investing,

Douglas.

Founder & Chairman

The direction of the dollar, the dollar, the dollar, this conundrum is the stuff goose pimples are made of.

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.

N America Inc Sm Cos

sdi2

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.

Three men of a certain age (my age) met on the golf course…

Three men of a certain age (my age) met on the golf course. The first said “It’s windy today”, the second said “No, it’s Thursday”, and the third said, “So am I, let’s go to the pub!”

The above is a situation that can occur when deafness starts to impair our hearing. In this case, for the point of the article, it is an innocent example – a little like the game of Chinese whispers that one played as a child.

There is however the story from the First World War where a message was sent back from the front line saying “send reinforcements I am going to advance”. This arrived back at headquarters as “send three and four pence I am going to a dance”. The request was not acted upon and as a result many British soldiers are said to have lost their lives.

Current social media and irresponsible reporting of financial and political events definitely falls into the category of destructive Chinese whispers. In today’s world, who and what to believe is worthy of a University degree course in its own right. Mr Trump’s taking America towards isolation, North and South Korea doing the chicken dance, China heading up massive infrastructure projects both at home and in Asia and Africa, Italy finely balanced on the edge of bankruptcy and the UK and the EU with their Brexit problems. You can find good and bad news in all of these events, but who in their right mind would try to predict which will, and won’t occur, and what the knock on effect might be for your investments.

All of you that have read my previous emails will know that on a personal level I now hold a significant percentage of my investment in cash and I do not see that changing in the near future. I have however taken heart from the recent performance of the U.K. sectors as shown in our Saltydog numbers. They have been unloved and neglected for quite a long time, but have perked up in the last month. I have therefore taken a small holding in both UK small companies and UK income funds that have their investments in the UK and are not too exposed to the movement of the US dollar. Let’s hope that this does not turn into the kiss of death!

One of the oldest stock market adages that is frequently quoted is “Sell in May and go away”. This was usually associated with wealthy investors and stock-brokers who left their offices to head out of the country to warmer climes to spend and enjoy their “ill-gotten” gains. Their absence left the markets on hold until they returned in the autumn. We now live in modern times of computers and easy communication so whether this is still true must be debatable and I would not like to bet on which way this particular mop flops. Certainly in recent years we have seen substantial rises at this time of year and of course some falls. This year it may be good advice to be out of the market, and by the autumn funds may have become less volatile and also a lot cheaper.

I am now looking for that fund that will allow me to place a small amount of “blue sky” money into cryptocurrency and also blockchain technology. It must be a fund in order to spread the risk, as I fail to understand sufficiently the detail of each to make a singular company investment and I would be happy to rely on a fund manager and his team. So far I have only come up with the ETF “First Trust Index Innovation, Transaction and Process”. Before I invest I would be very interested to hear if anybody has found alternative funds.

Best wishes and good investing,
Douglas.
Founder & Chairman

If this market volatility continues I will be sending out for iron tablets.

What the Dow does today, the European markets seem to do tomorrow – it is like being on a see-saw. Up and then down, but is the down going to continue further or are we going to see the markets recover to where they were a few months ago? The graphs are starting to resemble previous occasions when we experienced major corrections.

Then again, when we get a turn up, should we believe that the worst is over? It may look like a boat, but will it float?

There is nothing but bad sentiment in the news at the moment. Donald Trump is economically “willy waving” at the Chinese, the Russians, the Europeans and anybody else that disturbs his karma. The Syrian war is escalating with the use of poison gases and over the weekend air strikes by the West. The large technology companies have seen their share prices go into reverse with further to fall as their tax havens are being assaulted. The pound is inexplicably showing signs of strengthening against the dollar, even though interest rates have been raised in America, and the U.K. is enjoying the doubtful joys of Brexit negotiations. Surely none of this can be encouraging for stock-markets; therefore would reason dictate that they have further to fall?

I should not be unhappy with this situation. On a personal basis 90% plus of my investments are now in cash with a small percentage held in property funds. A major correction would suit me perfectly; I will wait until the sharks have stopped circling and then afterwards put to sea again. This becomes just a question of patience and waiting for sufficient major investors to indicate when the market has properly turned. There is absolutely no need to be leading the way. Let somebody else volunteer for that honour first.

I am reminded of the time when aged fifteen, along with seven other stalwarts I joined the New Zealand Shipping Company’s cargo-carrying cadetship as a “first tripper”, this being the start of the first of five eight month voyages. It was January 2nd 1958 in Falmouth and it was bitterly cold. We were assembled on deck in front of the Bosun, who looked and sounded like the windjammer sailor he had been. He asked whether any of us been at sea before and like a fool my hand was up. Yes sir, I have been on deep sea trawlers fishing off Iceland. What a mistake to make. With that he shouted “come here sloppy bollocks” and he proceeded to give me the run around. It was easier for him to remember this nickname rather than the real names of the other new starters. Unfortunately the name stayed with me for the three years I was aboard. The lesson is obvious, do not be first, and do not seek attention, it is quite OK to be a follower.

An investment area that might fall outside the restrictions that I mentioned above is the boom in marijuana production. As I have previously written, when prohibition in America ended there was an enormous boom in the sales and distribution of alcohol. People like the Kennedys made their fortunes and this same money is still in trust today providing the lifestyle for the Kennedy descendants. We now have a similar situation with marijuana in America where the law is changing to make its use legal both medically and personally – there could be a similar explosion in demand as that which occurred at the end of liquor prohibition. Canada is already farming vast acreages destined for the conversion plants. Three ETF funds already exist that could be worth further examination.
• Horizons Marijuana Life Sciences Index (HMMJ)
• MG Alternative Harvest (was MJX now just MJ)
• Marijuana Opportunities Fund (MJJ)
When I first found out about these funds I could access them in my Standard Life SIPP, via a company called Stocktrade, but I know that other people have struggled with the normal fund supermarkets. If anyone else has been able to get hold of them, please let me know.

I hasten to add that I am not advocating or encouraging the use of this drug. It could however provide an interest to follow whilst the politicians and the markets continue to mess with our minds.

Might does not make right, it makes reality.

The above expression sums up many of the ruling classes of Southern African countries. It most certainly applies to the ANC party which controls South Africa, and also until two months ago to Mugabe who controlled Zimbabwe.

I have always had an interest in this part of the world, and some twenty years ago I owned a factory near Durban. It manufactured pine furniture, which we shipped back to the U.K. and then into our main furniture sales and distribution system.

At about the same time I almost became involved in setting up a saw mill and processing plant in Zimbabwe to supply timber to the furniture plant in Durban. It was an attractive proposition and the Shona race, the largest population in the country, was educated, friendly and not averse to hard work. Fortunately, as it turned out, we did not go ahead with the project because it was obvious the direction the country was heading under the rule of Mugabe.

As a result of these projects, my wife and I have many friends in South Africa and most years we will visit there on holiday. In recent years it has become more and more obvious that the “Zimbos” have been moving to S.A. to find work, and then repatriate money back home to keep the wolf away from the family door. Their work ethic and attitude makes them stand out amongst the rest of the S.African working population, and they have ended up with the better jobs.

This now brings me to the point of this article. Mugabe has gone, and it looks as if his successor Mr Emmerson Mnangagwa may be about to try to turn the clock back towards the time when Zimbabwe was the bread-basket of Southern Africa and it’s people were well educated and gainfully employed. That is a big ask, but any recognisable step in that direction will likely result in the return of the Zimbabweans to their home country. Achieve that and Zimbabwe, rich in agriculture and natural assets, will bloom again – but this time on a more equitable racial footing.

Another major problem in investing into these areas has been the disappearing value of their currencies. In 2015 the Zimbabwean dollar, after years of hyper-inflation, had become virtually worthless, and trade was being conducted in other world hard currencies. Now that Mugabe is leaving, perhaps the Zimbabwean dollar will obtain a value again.

In a similar fashion the S.African Rand was at 15R/£ in 2008, but after a few years of President Zuma`s careful attention it had fallen in value to 23.5R/£. Now that he is at long last heading for the sunset, and a cosy retirement, it has recently strengthened to 16R/£.  It will be good news for investors if Mr Cyril Ramaphosa is also able to ring the changes on the South African economy and the Rand continues to strengthen.

There are many funds that have Africa in their title, but frequently their investments are in international companies and are continent wide.

These two occasionally turn up in the Saltydog numbers.

  • African Opportunity Investment Trust
  • HSBC MSCI South Africa ETF

There are also many Emerging market unit trusts that have a percentage of their investments in Southern Africa but then you also carry the baggage of the other country investments.

If the above scenario was to come to pass, it would be nice to find that unit trust fund which was more country specific. Of course one would want to know that the above process was definitely, and irreversibly, underway before making an investment.

Using nautical terminology; “when approaching an unknown coast or port it is better to do this on a rising tide”. That is sound logic, and anyone who thinks otherwise should submit to counselling!