THE GREAT BRITISH TRADE OFF
HUMBUG’S CHINESE ODYSSEY
(THE SLOPE OF HOPE!)
Monday June the 4th 2018. In my quest for FINANCIAL INDEPENDENCE and the FINANCIAL FREEDOM that that brings, I invest in an unusual way. Rather than spend hours doing fundamental analysis (which I’m useless at) I out-source individual share selection to the funds I invest in and then pick those funds purely on technical grounds.
I’m a momentum investor and the difficulty with that, is deciding which fresh up moves are likely to develop into a decent trend and which ones to avoid because they’re going to fizzle out prematurely.
As Fagin my opponent in the trading competition THE GREAT BRITISH TRADE OFF is wont to say, any bloody fool can look at the middle of the chart and tell you what you should have done. The hard part is doing it in real time at the right hand edge of the chart.
Obviously, it’s the right hand edge of the chart that I work with and its interesting how often a sell off followed by a pivot round and a few weeks of upward momentum as the price crosses up first through the six week moving average and then the two week one herald the start of a new trend.
let’s be clear, if it happens, the new trend hasn’t started because of the price action. The price action is simply reflecting and predicting the results of the underlying market fundamentals.
It’s the same as the canary in the coal mine those years ago. The canary falls off its perch because the dangerous gas in the mine killed it. The dangerous gas wasn’t caused by the canary falling over. It’s the same with charts and fundamentals. Do you see what I’m getting at?
I recently invested 15% of my GREAT BRITISH TRADE OFF portfolio in China purely because my charts said a new leg of the recent up-trend was likely starting.
CHART OF THE OLD MUTUAL EQUITY FUND
This is one of the three funds I invested in, £5k in each, the green arrow marks my entry point, however as the red circles show there have been two recent trend failures.
Whilst the early progress of the trend is encouraging, its too early to tell if this was one of my smarter investments. However underneath the price action of the chart there were some omens I wasn’t aware of and as they appear encouraging, I’m quietly optimistic.
Since buying I’ve discovered the underlying factors that may be driving the price action and created the chart pattern I look for. Last Friday the 1st of June hundreds of Chinese companies were added to the Morgan Stanley International Capital Index (MSCI). This index is followed by most global funds, who will now have to buy those shares,
The inflow of buying cash could be as high as £35 billion and as we all know, a bit more buying than selling tends to drive prices up. Which as a side issue is why the world and his brother spend their time trying to ramp up this or that crap little AIM stock, a tiny imbalance between demand and supply is all it takes.
If your new to the markets, don’t listen to tips or look at the pretty pictures put under your nose of share prices ‘about to break out to new highs’, either on the bulletin boards or on Twitter. Buying into these situations is all but certain to transfer money from your pocket to somebody else’s. Don’t go there, its a stinky place.
Back to China and the rosy glow continues. The International Monetary Fund (IMF) estimate that China’s Gross Domestic Product (GDP) will grow 6.6% this year (mind you, they don’t always get their figures right do they?) and also, more shares are now traded in China than in London.
These factors, allied to the fact that in the recent past the Chinese markets have been climbing the stairway to heaven lead me to think the next up-leg is starting.
GRAPH OF OLD MUTUAL EQUITY FUND
The green line which tracks the near 70% rise in this fund in the last two and a half years demonstrates the point. Hopefully momentum has re-started after the recent sideways action and that I have spotted a new leg to the established up-trend.
Will I be right? Well who knows, any number of things could blow up and cause impact.
First, despite China being the worlds second largest economy in some ways its still an emerging market. The Chinese leadership are, how can I put this, slightly less concerned about human rights than say Jeremy Corbyn or Diane Abbott.
Second, corporate governance is sometimes a creative art rather than a rigid set oif rules designed to protect investors. Years ago, when I was trading AIM stocks I had a rule for myself never to invest in a Chinese company listed in London. It saved me money on a number of occasions.
Thirdly, pollution is on an industrial scale both literally and metaphorically. A real big disaster sometime is a strong possibility me thinks.
Finally, China is engaged on a campaign to achieve economic world domination, with in their view the end justifying the means. They dump products on world markets to destroy competition, steal intellectual property rights from the West, aggressively protect their home markets and manipulate their currency.
Trump (largely rightly in my opinion) is kicking back hard against this.
In recent months there’s been much talk and fear in the markets about a US/China trade war breaking out. Which is probably why the up-ward momentum of the Chinese markets stalled. My guess is there’ll be lots of huffing and puffing but that a compromise deal will be thrashed out and that that is what the chart is predicting.
So there we have it. My chart I believe predicts a deal and that the positives currently outweigh the negatives. My system gives me buying discretion on whether to take a trade when its signalled. I tend not to argue with the screen.
I don’t risk my capital for the kick of placing the bet. My current investment in China is one small part of my plan to produce the capital gains I need to be Financially Independent and as a result have Financial Freedom.
My charts said BUY and I subsequently discovered what may have been the fundamental reasons why they did.
Friday June 1 2018
FAGIN’S IN THE MONEY
It’s been a good week for me. My quest for FINANCIAL INDEPENDENCE got a little bit closer. On Tuesday the 29th I took a large long position in Evraz PLC (EVR) 13000 shares at 488. It made the classic chart pattern I look for, the green arrows mark the action.
As you see I bought in a little above Tuesday’s closing price and sold out a bit below today’s high.
My closing price was 519 for a gross profit of £3978. 6.27% on capital in four days.
Chart of Evraz PLC
I wonder what June will bring, hopefully more pockets to pick. I’ll keep you updated here and also at www.diyinvestor.net as I battle both Humbug and myself in this drive for financial freedom.
Friday June 1 2018
HUMBUG’S WEEKLY AND MONTHLY NUMBERS
This month has been good, very good in fact. If I’m being realistic its actually been too good. When you’re an investor seeking financial independence, how can you have a month that’s too good? Well in the same way as you can be too pretty when you’re a girl looking to meet the love of your life.
A friend of mine is so drop dead gorgeous that her beauty actually deters what she considers to be the right sort of men from approaching her. She only gets pestered by flash tossers, as the nice guys think they’ve got no chance and don’t even try their luck.
My view is that you can have too good a month when you’re up over 5% because its way over trend and it isn’t going to continue.
However you need the really good months to counter the totally crap ones so best I don’t whinge too much. When your investing and looking to grow wealth for the long term aim of being financially free you can’t control the market.
Sure you position yourself as best you can, but then its largely out of your control.
I’ve said it before, when its going great for me and I get numbers like I did in May I don’t tell myself how clever I am. And when it goes badly wrong like it did for me in March I don’t self harm.
Lets first of all look at this week. I’m holding fifteen funds and ten of them are down on the past seven days. The worst performer is the Neptune Emerging Markets Fund down 1.22%. At one point mid-week it flirted with the red line (6 week moving average, which is my take profit/stop loss line) and it had me worried as its an £8k position that’s slightly under water. However in the last couple of days its dragged itself a little bit away from the relegation zone.
Chart of the Neptune Emerging Markets Fund
Interestingly, even though two thirds of my portfolio are down on the week, I’m actually up in money terms because most of the percentage declines are very small and some of the gains are quite chunky. The best performer is the Baillie Gifford American Fund up 1.67% on the week. Whether you like him or loathe him, THE TRUMP BUMP is still very much in evidence in the US markets.
Chart of the Baillie Gifford American Fund
My gain on the week is £323 or .33%.
Turning back to the monthly numbers again and all fifteen funds are up in May. In a similar situation to the weekly positions, close to the bottom of the list the second worst performing fund was the Neptune Emerging Markets Fund which was up 1.43% and well out front the best performer again was the Baillie Gifford American Fund up a fraction under 10 percent at 9.93%.
I’ve not sold anything this month, but on the 8th of May I invested £15k into three Chinese Funds. £5k into each of the Gam Star China Equity Fund, the Old Mutual China Equity Fund and the Fidelity China Consumer Fund. On average they’re up 3.4% since I bought them. As a side issue, I’m in the middle of writing a reflective piece about China that I’ll post on Monday.
The numbers for the month are £4747 up, a gain of 5.1%. Sooner or later there’s going to be a correction and prices will retrace, its the natural ebb and flow of the markets. The question I’m asking myself is will I get back to the £100k opening stake I had at the start of the GREAT BRITISH TRADE OFF competition fourteen months ago, before it happens?
So, for the coming week once again Masterly Inactivity, as the markets have got away from me there’s nothing for me to buy into. Nothing for me to sell either, but the Neptune Emerging Markets Fund is currently my weakest holding and is beginning to have my full attention.
Finally, sorry there haven’t been any podcasts lately. We have a technical problem that hopefully will be sorted in the next couple of weeks.
Monday May 28 2018.
INVESTING IN FUNDS USING CHARTS
This posting is not investment advice in any way shape or form, it is simply a record of our trades and investments. Please do not copy anything we’ve done and always make your own decisions and do your own research.
I simply do not pretend to understand how to do fundamental analysis. I’ve tried, I really have. I’ve read books on the subject, looked at the excellent on-line articles on the subject by Phil Oakley at Sharescope, read Paul Scott’s daily share briefing on Stockopedia and even spent over three thousand pounds going on four Robbie Burns courses.
All to no avail. Is is cos I is stupid? Well maybe I am, but I think not. I totally get the principles and understand the various ratio’s but when I try to put it into practise and use it to predict future price movements I fail totally.
What is the point of buying into something that you’re fairly confident is undervalued…………………………………………if no one else agree’s and it remains undervalued and not going upwards towards fair value?
For almost all of the past twenty years that I’ve ‘played’ the markets I’ve been a short term trader, and a reasonably successful one. But a health scare last year made me question the risk/reward elements of what I was doing.
To cut a long story short, my trading partner Fagin felt strongly that I was making a mistake changing from trading to investing. We talked at length about the different issues and in the end challenged each other to see which method would generate a better rate of return.
The rest is history really. The idea got picked up by the investment site diyinvestor.net and THE GREAT BRITISH TRADE OFF was born.
The competition has been running for fourteen months and Fagin is walking it. Last year he made £34k on a £100k of capital, I had a hopeless time and lost £7.5k.
Without wanting to take anything away from a brilliant performance on his part, I found the change in discipline very difficult to adapt to and spent a lot of time kicking the ball into my own goal. DUH.
However I’m a quick learner and I hate losing my hard earn’t money. Last Autumn I took radical action. I went away sailing on my own and spent hours and hours away from all distractions thinking about what I was trying to do.
The GREAT BRITISH TRADE OFF is one small part of my drive to achieve FINANCIAL INDEPENDENCE, perhaps saying FINANCIAL FREEDOM might be a better way of putting it. I like nice things, so for me having enough money to say to myself that I have complete financial independence or freedom involves having assets with a lot of noughts on the end of them.
To state the bleeding obvious, you don’t achieve that by incorrectly investing in things that fall in value do you? I really did need a rethink.
With either trading or investing you have to use a style that suits your personality. I do like the fast moving action that trading produces, but I’d lost my nerve with the risks associated with large positions in volatile companies like gold miners.
It’s strange how our sub-conscious mind works is it not. Set it a task and it beavers away in the background without any conscious effort on our part. One evening on the boat it suddenly came to me.
‘Your crap at fundamental analysis, so out source it by buying Funds not individual Shares’ ‘Your quite good with charts, so use them to spot momentum and invest when you see it’ ‘Use your traders eye to spot entry and exit points and use stop loss’s.
I’ve normally not got a lot of time for ticking boxes, but these idea’s ticked all my boxes. I was going to invest my money with the mindset of a trader, but I wasn’t going to be trading. Sure I would cut things quickly if the momentum I thought I’d spotted didn’t materialise, but I was after the big money that comes from the big move.
Wow, I thought how simple an idea is this. Now its far too early to be counting my chickens, but since the new year of the GREAT BRITISH TRADE OFF started on this 5th of April, my GBTO portfolio is up almost £5k.
Investing in Funds has got a lot cheaper in recent years, certainly there are extra costs on top of the market but they’re not as onerous as they once were. A number of the fund supermarkets no longer charge an upfront percentage fee to invest, there are no obvious buying/selling spreads on most funds, there is no stamp duty on the purchase price and you can take a position on any number of sectors in any part of the world and generally with most funds liquidity isn’t an issue.
This chart of the Legg Mason Japan Equity Fund (that I hold, although sadly only since the late Autumn) illustrates the sort of momentum I search for.
I’m using the simplest chart structure I could think of. The red line which is a six week moving average doubles as my take profit point if that’s the case or my stop loss point. if the investment simply hasn’t worked.
In this next chart of the Sarisin Food & Agriculture Fund the green circle marks the purchase action. There is a year long price up trend in place, a correction down below the red six week moving average, this pivots round and reverses up through the red moving average, by which time it has my full attention. It then crosses up through the green two week moving average which is my buying signal.
This is an investment I made at the end of April exactly as the chart shows, currently its £300 in running profit on a £5k stake. I will hold until such time as the price closes out a week below the red moving average.
And that incredibly simple system is how I now invest my money not just in my GREAT BRITISH TRADE OFF portfolio but also my other portfolio’s. There are a number of rules and percentage allocations that also apply, I’ll cover them in detail another day.
The easiest way of investing is simply to buy an index tracker and check how its doing once a year. Simple though that idea is, its only going to produce market returns less the costs of holding it.
My idea is way more complicated than that, but is still such a simple easy to drive method and one that should produce market beating returns.
Will it be good enough to beat Fagin over the five year duration of THE GREAT BRITISH TRADE OFF? To be frank with you I doubt it. I think a trader who is right on top of his game will produce better returns than an investor, however he will have to spend twenty or thirty hours a week at it while I’ll spend one, and I believe he is taking on a great deal more risk in the process.
So on balance I’m happy about my decision to only invest and if I do achieve market beating returns, then over the next ten years I will realise my goal of FINANCIAL INDEPENDENCE or FINANCIAL FREEDOM with enough noughts on the end to make it fun.
Friday May 25 2018
HUMBUG AND FAGIN WEEKLY REPORT W/E 25TH MAY 2018
This posting is not investment advice in any way shape or form, it is simply a record of our trades and investments. Please do not copy anything we’ve done and always make your own decisions and do your own research.
Yes, say’s he punching the air. I’ve won again, this is beginning to become a habit and one that I like. Mind you my new resolution was to not take any notice of what Fagin did or didn’t do wasn’t it. Oh well, two weeks out of three, result. Not that I give a toss you understand.
Hello I’m Humbug welcome to our weekly report.
To be honest with you its almost a non report in that Fagin hasn’t reported any trades (either buying or selling) this week and all I did was watch my portfolio go up. Which is about as exciting as watching paint dry, but more profitable.
As you may remember (and as reported last Sunday May 20) Fagin forgot to report the sale of a trade that was closed out automatically at the end of last week and so we carried the figures into this week. The trade in question was one of his classic ‘pick the market’s pocket’ trades. It was Bodycote PLC (BOY) and it produced a gross profit of £472 for him in fairly short order.
The green arrow marks the sale point last Friday when it hit it’s target. As you can clearly see with his trades, timing is sometimes absolutely crucial both on the way in and the way out. Sometimes not so much so.
The way he see’s it is: set a sensible fairly conservative (with a small ‘c’) target, reach target, exit with the money and be happy. He does tweek this sometimes with a tight trailing stop, luckily not this time.
In this case in the short term the conservative target of 948p was exactly the right call, as the price has retraced from the high he sold at. However if we look at one of his other trades from last week its a very different story.
Games Workshop (GAW) was closed out on Thursday the 17th at 2570p for a gross profit of £1288. But as you see……………………………….
It just kept on going up. If he still held he’d be £2850 richer. I haven’t actually talked to him about this trade, but I know exactly how he aims to operate. Will he be annoyed with himself? Nah, but if he starts finding a lot of these he might set a target and if the price action looks strong stay in with a tight trailing stop as he did very successfully a number of times last year.
Its never easy to know what to do for the best. We both feel strongly that the path for us, is have a system (with a few discretionary elements) , make sure the system has an edge………………………………and then enjoy the results.
Fagin plays a probability game, with he believes, the odds slightly in his favour.
Me? I to used to also be a short term trader, but just over a year ago I decided I wanted an easier life, so now all I do is invest in funds. Albeit I don’t sit and hold them for ever and a day, I monitor their progress once a week and shuffle my portfolio as I think right. (mind you, I not always am)
As I was saying in last week’s report, there are more similarities between Fagin’s and my systems than first meet the eye, in that we’re both looking for pivot points and then rising momentum.
So, how’s my week been? Well stressful beyond belief. My main computer with all my data on it was crushed by a routine Microsoft update, it froze and locked me out. DUH. Let me tell you, it’s taken a couple of days for my sense of humour to recover and I still haven’t got my computer back in one piece.
But its still been a another good week for me in this years GREAT BRITISH TRADE OFF. The fourth on the trot to be precise. This week I’m up by £751 taking my running profit for the year to just under £5k.
It’s been a week of solid numbers rather than spectacular gains, twelve of my fifteen fund holdings are up, the best by 2.2% and the worst down by .3%. The star performer being the Fundsmith Equity Fund up 2.2%
The worst result comes from the Marlborough UK Micro Cap Growth Fund, but as I’ve only got £1k invested in it and it’s only down a third of one percent, its no great disaster.
Where are the markets heading in the coming week, who knows I certainly don’t. The only certain fact is neither they nor my portfolio will just keep going up without a pause. Things now look a bit toppy with a correction due, the question is when?
Masterly inactivity for me again in the coming week, nothing to buy as the market’s got away from me and nothing to sell as everything is currently doing very well.
To recap I win with a running gain of £751, Fagin banks a gross profit of £472 from the sale of Bodycote (BOY) carried forward from last week to this.
Wednesday May 23 2018
COMPUTER SAY ‘NO’ HUMBUG IS PISSED OFF
I’m slowly calming down having totally lost my sense of humour when my main lap-top froze and locked me out after what should have been a simple routine update.
To begin with I was consumed by it and all the problems it is/will cause me and the feeling of impotence that comes when you just don’t know what your doing, or what to do and you also don’t want to make the situation worse.
That it happened very late yesterday evening after a long day and that I got very little sleep as a result of it didn’t help my mood greatly either..
However in spite of my anger I’m very aware that thousands and thousands of people are having a much much worse day than I am. Every thing is relative is it not. A ‘little’ bit of computer trouble is not up there at the top of a list of worst things that can possibly happen.
To say that you should always turn adversity to advantage is too glib by half as well as being trite. But that doesn’t stop it being true and is obviously what I need to do.
The first priority is get my old spare lap-top loaded with all my investment data, this alone is probably half a day’s work. In the short term I’ll accept that the details on my brokers site are gospel until such time as I can get the main computer unlocked.
Luckily I’ve always had the view that in order to have some safety cover I need to buy a new computer before the old one is completely ready for the knackers yard. So when I bought the one that’s failed, some eighteen months ago, I did so while the old one was still operational.
In the short term the documents I can’t access are not a problem not least because I’ve got a really good memory and can remember the salient points of the more recent ones. Also, almost all of my correspondence is by email which obviously I can still get either on my phone or the old computer so that’s no problem at all.
Sharescope allow their customers to have the programmes they subscribe to on two machines simultaneously, which I’ve always done for safety. But the huge mistake I’ve made is not keeping the spare version updated with my trades/investments/watch lists and personalised graphs.
With hindsight this has been a huge mistake, that I’ve made because of the time it takes to update not once but twice and not only for THE GREAT BRITISH TRADE OFF account but also for my other accounts and those of the three family members whose investments I look after.
To paraphrase a great quote from Stelios Haji-Ioannou the founder of Easy Jet, who said ‘if you think safety is expensive, try an accident’ I’m now very aware that ‘if I thought doing a daily backup of my data was time consuming, I should try loading a year’s worth all in one go, partly from memory’
DUH. Thinking the problem through calmly this morning it’s not as bad as it seemed last night. To be honest I feel a little bit stupid, this sort of thing was always going to happen one day wasn’t it?
One of the facts of life is that computers go wrong, get stolen, get left somewhere, get dropped, get drinks poured into them etc etc. I should have expected a major problem sooner or later and been backing up my market data every day without fail, either to a memory stick or my spare computer.
I’ve learnt my lesson,.I’m sure there’ll be other cock ups to contend with in the future, but I won’t get caught by this one again..
Sunday May 20 2018
FAGIN SELLS BODYCOTE PLC (BOY) ON FRIDAY 18TH MAY 2018
Sorry this trade should have been recorded in Friday the 18th’s report, we’ll carry it into the coming week.
As Fagin reported on the 14th (posting further down this page) he was holding Bodycote PLC (BOY).
The trade was closed out automatically for him on Friday (which is why it got overlooked) at his target price of 948p for a gross profit of £472.
Friday May 18 2018
HUMBUG AND FAGIN WEEKLY REPORT W/E 18TH MAY 2018
This posting is not advice in any way shape or form, its a record of our investments and trades. Please do not copy what we do, always DYOR.
After last weeks first ever victory for Humbug, Fagin smashes him this week, although for the third week running he had good numbers and his portfolio rose by just over 1% he still got wiped out.
Hello I’m Humbug and let me tell you competing with Fagin is like trying to stop a steamroller by standing in front of it.
I had what for an investor is a great week, but still no where near good enough to beat him. Oh well I made a £1k gain in seven days and my latest call on China has been dead right so far so there’s much to celebrate. I’ve come second yet again, but its not all bad.
Lets drill down into Fagin’s numbers:
His gross profit for the week is £3490. He sold out of the Games Workshop Group PLC (GAW) on Thursday the 17th at 2570 for a profit of £1288
With the benefit of hindsight he sold at least a day early. Had he held until today’s close he would have made twice as much profit. Is he upset? Nah, he sets a stop and a target and if the price hits either he exits and moves on.
As always with his trades it was a technical play. He looked for a pivot point, found what he thought was one and placed his bet of 1000 shares.
Watkin Jones PLC (WJG) was a trade he entered on the 5th of April at 189 and also closed Thursday May the 17th at 203.
The green arrow shows the entry, the red the exit. He always bets on exactly the same criteria, find a likely pivot point and set a sensible not too greedy target. The gross profit here was £1540.
His final monies this week come from a £662 dividend from a previous holding in the John Wood Group PLC (WG.)
As a side issue the arrows show his most recent trade and again with hindsight there was a lot more profit in the upswing than he made. Does he regret coming out too soon? As Sinatra famously sang ‘regrets I’ve had a few, but then again too few to mention’
So a brilliant week for Fagin, well done him.
Lets now take the drill to the Humbug numbers and see what happened to me.
Like I said earlier I had a good week. My portfolio increased for the third week running being up £1024 this week. For sure what goes up can come down, but so far in this second year of the GREAT BRITISH TRADE OFF I’m no longer embarrassing myself week after week (even if I’m still losing) because since the new round of the competition started on April the 5th I’m up £4200.
The way Fagin and I operate has more similarities than are apparent at first glance. Firstly we are both Chart Followers or Technical Analysts to use the posh name. Although we’re trading different instruments, him shares me funds we’re looking for the same thing, namely pivot points. Him looking for very short term upward momentum after the pivot, me longer term upward trends. So we’re both seeking upward momentum after a pivot and then betting our money when we think we’ve found it.
The three graphs of the three Chinese Funds I invested in last week the Gam Star China Equity Fund, the Fidelity China Consumer Fund and the Old Mutual China Equity Fund illustrate the point of what I’m doing quite well.
The price of all three came down below their six week moving average which is where I like to start hunting, pivoted round and started going back up first through the six week average and then through the green two week moving average, which is my buying trigger.
The green arrows show my entry points in each case.
I’ve got no sales pending for the coming week and although as I said before I would like to be 100% invested I can’t see anything matching my criteria so have no purchases planned either.
I’ve obviously no idea how much longer this almost worldwide upswing is going to last, but I’m happy to ride on its coat tails for now.
To briefly recap. A good week for both of us, but even so a resounding win this week for Fagin.
Monday May 14 2018
This posting is not advice in any way shape or form, its a record of our investments and trades. Please do not copy what we do, always DYOR.
The most important thing in life is to stop saying ‘I wish’ and start saying ‘I will’. Consider nothing impossible, then treat possibilities as probabilities. Charles Dickens.
I’ve made a reasonable start to the month making £3000+ trading BBA Aviation PLC (BBA), Wood Group PLC (WG.) and as reported in last weeks roundup Advanced Medical Solutions PLC (AMS).
I’m currently holding Bodycote PLC (BOY), Games Worshop Group PLC (GAW), Rolls Royce Group PLC (RR.) and Watkin Jones PLC (WJG) in my main GREAT BRITISH TRADE OFF portfolio and am running a longer term experiment with a number of tiny positions as well. I’ll document these in more detail another day.
I found my recent trade in Advanced Medical Solutions PLC (AMS) psychologically challenging.
To my surprise, I’m still slightly smarting from the mistakes I made five months ago in January.
As a result I snatched at my profits in true Fagin style as AMS hit my target for a third time, even though I could see the momentum in the share was still very strong.
Last year I believe I’d have handled the trade differently, I’d have added a trailing stop in the face of such strength and held on for a bit longer.
I’m also a little downbeat as I sat and watched my usual staple rockets KAZ, EVR, PMO and HGM take off without me. Had I traded these babies instead of the slower stocks above I might well have tripled my profits in the last two weeks.
What happened is, I got fed up with being wiggled in and out of them in the last correction and took my eye off them………………………………………typically they shot off!
Still I mustn’t grumble, Humbug’s right when he says that here in THE GREAT BRITISH TRADE OFF I pick the markets pocket and don’t aim to take the whole suit. Regular fast profits are a great way to build the capital for FINANCIAL INDEPENDENCE. Lets not be greedy.
I hope this doesn’t sound like ‘sour grapes’, because I am grateful for the profits I’ve made so far this month.
I’m a bit of a purist like one of my hero’s, Arsene Wenger. I put pressure on myself to trade as well as I can and try to focus on the quality of the trade rather than the money.
I like to win, but I also like to win with style!
All of Fagin’s gang are lifelong Arsenal supporters. AFC have taught me to be careful with my capital. I’ve learnt not to spend £16 on a burger and chips at the ground, when I can get one for a fiver outside!
Well that’s it for this update. Congratulations to Arsene for everything he’s done for British Football and for all the entertainment over the last 22 years.
Also congratulations to Humbug for beating me for the first time ever last week. However he was lucky I didn’t liquidate my position in Watkin Jones PLC (WJG).
Sunday May 13 2018
HUMBUG DRILLS DOWN INTO HIS WEEKLY NUMBERS
This posting is not advice in any way, shape or form, it’s a record of our investments and trades. Please do not copy what we do, always DYOR.
The market put a big smile on my face last week, certainly in the short term I would seem to have made the right call by increasing my loading to around 90% in the last few weeks.
However its only two weeks ago that I was posting how wary I was of the then prevailing conditions as I saw them. Seems to me that most of the same world problems are still there as ugly as ever, but the markets seem to have shrugged them off for the time being.
I’ve had a long look all round and whilst I would like to take my loading up to 100%, I can’t see anything that looks anything like short term value.
You can’t be an investor if your money burns a hole in your pocket and trust me I’m not gagging to spend my last GREAT BRITISH TRADE OFF cash reserves just for the sake of. So nothing for me to buy this coming week.
I’m not saying I don’t think the current upswing in the markets doesn’t have further to go, but I’ve missed some opportunities and don’t want to chase them.
The Sharescope graph of the Jupiter UK Smaller Companies fund illustrates the point quite well. I’ve had a tiny holding in this fund for a while and it made three of my secondary buying signals where the three green arrows are. My prime buying signal is where a price moves up through both the six week average (red line) and then the two week (green line) but I do also buy the dips when the price action is only around the green line.
But I have discretion in the matter, and my view at the time was that HM Government are making such a total balls of brexit that investing more money in the UK was a ‘no no’ for now.
With hindsight a wrong call, had I bought the first green arrow I’d be 5% up in twelve weeks.
As a side issue, the summit between President Trump and Kim Jong Un is a month away. For what its worth, my own view is that if Trump can pull off a really good deal that brings North Korea in from isolation then world markets will run up strongly over the summer.
Drilling down into my portfolio in a little detail, its not one that an old style bank manager (and as a side issue, what a tragedy they no longer exist) would have constructed for either a widow or an orphan.
Its a very aggressive fund that should outperform when the timings right for it and will under perform in bad conditions. My safety net is selling out and holding cash when conditions turn against me.
What I’m trying to do is be both half sensible but achieve better than average returns. No easy trick.
In round figures, this is the weighting across the IA sectors:
Technology and Telecom 22.6% Japan 16.3% China 15.4% Emerging Markets 8.2% Flexible Investments 7.5% US 6.2% Global Growth 6% Specialist (food & Agriculture) 5.6% UK Smaller Co’s 2.4% Cash 9.8%
Friday May 11 2018
HUMBUG AND FAGIN WEEKLY REPORT W/E 11th MAY 2018
This posting is not advice in any way, shape or form, it’s a record of our investments and trades. Please do not copy what we do, always DYOR.
Again this week we’re continuing the experiment of doing a joint report. I’m pleased to say that Fagin’s had a good week and I’m even more pleased to say Humbug’s had a better one.
For the first time in the fifty seven weeks that the GREAT BRITISH TRADE OFF has been running I’ve beaten him and by a decent margin. How good is that.
Mind you following on from the great Tweet I re-tweeted this morning from Assad Tannous, a guy with thirty eight thousand followers which said: ‘WINNERS FOCUS ON WINNING, LOSERS FOCUS ON WINNERS’ its about time that I stopped worrying about how well Fagin’s doing and just did my own thing.
But hey, I want to savour the moment, I’ll get all sensible tomorrow.
Lets look at what Fagin did this week. He opened a new position in Rolls Royce (RR.) on Wednesday, its a bit under water as I write, albeit the price action was good today. But as he won’t be booking the result until he closes the trade, the running loss doesn’t count, as it’s still open.
The only trade he closed this week was the sale of 10k shares in Advanced Medical Solutions Group (AMS)
As you see from the excellent Sharescope graph, the trade was entered on Friday April 27th at 313p and closed yesterday, nine trading days later at 325.57p. Trust me, yesterday’s open at just 310p would have been a buttock clenching moment with thirty one thousand pounds on the line. But a cool head and level two price data prevailed and he banked £1157 net profit.
The profit was only 3.7%, but this is the thing with trading. That 3.7% in nine days equates to an annual 107% return on capital and this trade wasn’t leveraged, if it had been the ROI would have been much higher.
The Wheeliedealer uses the spreads to leverage some of his long holdings, if your interested click here to go to his site to see his thoughts on the subject.
I’m Humbug and I wrote earlier, about how well this week had gone. The value of my GREAT BRITISH TRADE OFF portfolio increased by £1829, roughly 1.9% and now stands at £96,695. Now for sure what goes up can come down, but so far so good.
As a momentum investor who’s always looking for trends to follow I have to get onto them fairly quickly or they get away from me. Its only a few weeks ago that the markets looked doom and gloom and I was cutting back my exposure. But because market conditions have changed, I’ve changed. After this week’s £15k purchases of the three China funds, the Fidelity China Consumer Fund, the Gam Star China Equity Fund and the Old Mutual China Equity Fund I’m now 90% invested.
It never ceases to amaze me how the markets flip from optimism to pessimism in really short time frames.
The question I’m asking myself is am I jumping in too quickly? I’ll know in a few months, maybe sooner.
My best performing fund this week is the Baillie Gifford American B Accumulation Fund. I wish I had £10k in it rather than the £5k I have. It’s up 5.39% on the week and 32% on the year. Just look at what’s happened to it since Trump came to power. Wow.
So there we have it, Fagin’s up a very respectable £1157 but Humbug wins for the first time ever with £1829. Roll on next week
Wednesday May 9 2018
FAGIN OPENS A TRADE IN ROLLS ROYCE (RR.) HUMBUG INVESTS IN THE OLD MUTUAL CHINA EQUITY FUND
Fagin opened a new long trade this morning in Rolls Royce (RR.) based on its price action over the last three trading days, starting with one of those ‘roo tails’ he looks for that occurred on May the 3rd. He was in at the same price as yesterdays close namely 843p, putting £21k where his eyes are.
The buying order that Humbug placed over the weekend in the Old Mutual China Equity Fund was notified as filled late yesterday at 1594.78p. This price was almost 50p higher than its previous close, being sharply up just like the fill of the Fidelity China Consumer Fund that I reported on yesterday.
Again without wanting to be too cocky, my short term timing looks good, but of course it remains to be seen whether either or both of these funds prove to be a good longer term investment.
Tuesday May 8 2018
HUMBUG BUYS INTO FIDELITY CHINA CONSUMER FUND @ 288.099751
Only one of my three proposed purchases went through today. Buying funds doesn’t have the precision attached to it that there is with shares, unless your trying to sell a vast quantity of some crap aim stock after bad results that is.
So not only can you not be certain when your purchase order will go through, but you don’t know what the price will be. This freaked Fagin out one day when I was explaining what a good idea funds were. But then he’s looking to do almost surgical strikes on things with great precision, I’m not.
As of this afternoon I’m in the Fidelity China Consumer Fund for £5k at 288.099751p. The green arrow marks the spot and as you can see the price is well up from the 279.4p of Friday’s close.
In a strange way I like this, even though its costing me money. I’m a momentum investor and whilst the momentum may not continue I’ve certainly called it right to begin with.
Friday May 4 2018
HUMBUG AND FAGIN WEEKLY REPORT W/E 4th MAY 2018
This posting is not presented as advice in any way, its a record of what we are doing or have done. Please do not follow our actions. DYOR.
This week we’re doing a joint report as an experiment to see how it works out, we may or may not adopt the idea permanently.
The pattern of the competition continued as per usual and once again Fagin has beaten Humbug. But, the 1% gain Humbug made is not to be sniffed at especially as it was generated by only being 73% invested.
Just before we look at how we both did, its worth flagging up that because of the different nature of Trading and Investing we account to you in different ways. Fagin doesn’t declare a profit or a loss until he takes it by closing the trade.
Humbug’s figures are a running total of the value of his portfolio, it includes all closed trades be they a profit or a loss, but also all the current open positions at their latest valuation.
Lets start with Fagin. His profit this week comes from the two trades he closed out on Wednesday. BBA Aviation (BBA) was closed for a gross profit of £967.50 and the John Wood Group PLC (WG.) closed for a gain of £1544.
(There’s a more detailed report of these two trades on this page from yesterday, with graphs from Sharescope showing the price action)
A total over the two of £2511.50. His timing was good in both cases as they’ve both fallen back a little from the prices he got.
The way he works is to set a profit target and then be happy with the result. He’s aiming to get the guy’s watch out of his pocket not the suit off his back. Pick the markets pocket, no more no less. To state the obvious, its easier to be happy when prices fall after the sale, not so easy when a takeover at a 40% premium is announced the day after.
One new open trade. Games Workshop Group PLC (GAW) in at 2439.95. Too early to know how this one will perform, but the trading update released today certainly won’t hurt.
Humbug is quietly pleased with this week, in fact its been one of his best weeks of the competition. His portfolio has increased in value by £967.
All twelve funds currently held are up from this time last week. The best performer is the Baillie Gifford Japanese Smaller Companies Fund, up 2.6%, which as you can see is looking strong, albeit coming up on resistance.
The recent re-purchase of the Sarasin Food and Agriculture Opportunities Fund that had Humbug a little jittery as it came up on serious resistance has broken out to an all time high at 197.6. Sooner or later its going to pull back a bit, so it could do with running up to 205 or better before this happens. But so far so good.
Three re-purchases planned for the coming week, with orders going in over the weekend for action on Tuesday.
The Gam Star China Equity Institutional Fund up 3.23% on the week has crossed up through the two week moving average that in turn is above the six week moving average thus making the buying signal Humbug looks for.
As have the Fidelity China Consumer Fund up 1.85%.
And the Old Mutual China Equity Fund up 1.82%.
The plan is to put £5k into each, Humbug will then be 89% loaded going forward.
Thursday May 3 2018
FAGIN’S IN THE SWING………..This post should not be taken as advice, it is simply reporting two recent trades Fagin took, you should not copy them. Please DYOR.
FAGIN’S IN THE SWING, well swing trading that is. Two short term trades closed out yesterday for a combined gross profit of £2511.50.
The smaller profit of the two, £967.50 came from BBA Aviation PLC (BBA)
Starting with the big sell off that didn’t hold on the 12th of April (a Roo tail) it looked as though a pivot point was happening. Entered at 312 with a tight stop loss in place, had a wobble on the 24th/25th of April but held on for the fairly low target of 4%. Exiting at 325 on the 2nd of May.
The larger profit of £1544 was produced by the Wood Group (John) PLC (WG.)Again a very similar pattern to BBA, the stock formed a bottom at 520 between the 3rd and the 13th of April, confirmed by the roo tail on the 13th.
In at 552, out at 590 for a 7% gross gain.
Fagin the trader continues to outperform Humbug the investor and is beginning to open up a clear lead in this years Great British Trade Off.
Monday April 30 2018 HUMBUG WROTE (Podcast available)
HOOKING UP WITH AN OLD FRIEND. This post should not be taken as advice, I’m reporting what I’m doing, not advising you to follow me.
Yesterday I had a pleasant couple of hours looking round the market not for something to buy, but seeing if there was something I should buy.
There’s a huge difference, the operative words are SHOULD BUY.
I think there is something to buy and again the operative word here is THINK, I say that because I’m nervous of the state of the world and the attendant volatility. Also although the chart has made my buying signal, in an ideal world I’d like to see the moving averages going up at a steeper angle.
So this purchase certainly isn’t money burning a hole in my pocket, but it’s also not one of those situations where, if its the last thing I do on earth I must buy it. Why? Because I am a little nervous.
But what I must not do is start to let emotion enter, or worse still over ride my investing rules. My chart says buy, so I’m doing so.
The ‘something I should buy’, is an old friend I’m hooking up with again. The FundSmith Equity Fund with the brilliant ticker FUQUIT.
Terry Smith who founded and runs the fund is a no nonsense kinda guy and I’m a big fan of his style and his straight talking. He’s got a couple of hundred million pounds of his own money in the fund, which means his interests are closely aligned with his investors, which has to be good. After all, he’s not going to take stupid risks with £200m of his own money is he?
The fund itself is chunky at £14 billion pounds and is invested in 28 world wide mega cap stocks.
I’ve placed a buying order with the brokers for £5k worth to be action-ed as soon as possible. Buying funds isn’t instant execution as shares are and there is always a time lag so I can’t be sure what price I’ll be in at, Friday’s close was 357.74p
I’m very grateful to the excellent people at Sharescope for kindly saying we can use their charts to illustrate our blogs. Here is the three year chart of The FundSmith Equity Fund and as you can see the price ran up 75% from October of 2015 to January 2018.
However as the zoomed in chart for 2018 shows things have stalled so far this year. The two red arrows show where I’ve been tipped out of two previous investments in the fund. The blue circle shows my most recent buying in point, the larger of the two red arrows showing where that investment failed.
The green circle shows last weeks price action that’s my buying signal as it moved up through both the red (6 week) and the green (2 week) moving averages and the blue arrow shows a kangaroo tail where the price fell and then bounced back up. A very good sign.
Finally the two blue lines show what I think is the start of a new trend. The thing with trends is you don’t know one’s started until it has and you have to jump on fairly quickly because you don’t know how long it will last.
As Fagin pointed out not so long ago, any bloody fool can look at the middle of a chart and tell you what happened, the hard part is doing it on the extreme right hand side.
Wish me luck, my £5k’s on the line. Once its spent my portfolio will be 73% invested.
Friday April 27 2018 HUMBUG WROTE
You know that dreadful feeling when your out somewhere and you put your hand in your pocket and your wallet’s not there. OH CLUCK.
I’ve just had one of those moments a few seconds ago when I logged into the excellent Sharescope to check my weekly and monthly figures and they were obviously hopelessly wrong.
In my minds eye I was expecting to be somewhere around break-even on the week and up a bit on the month. Er no, Sharescope was showing way down on both.
Its to do with when Sharescope updates fund prices and the data I was seeing isn’t fully up to date. Panic over, but let me tell you there was a panic.
For years I’ve had the FTSE 100 (UKX) as my benchmark, but I’ve decided on a change of plan. Going forward I’m not going to bother with measuring my performance against anything, other than Fagin for The Great British Trade Off.
All I’m interested in is am I making money, if so how much. If an index is doing better or worse than I am…………………………….so be it.
As a trader I wanted to know whats moving, why is it moving, where’s it likely to go, what announcements are scheduled etc etc etc.
As an investor in funds I’ve traded (hee hee, pardon the pun) the excitement of all that crap, for a life of calm.
So what are my numbers? For the week I’m flat to all intents and purposes, being £19 down. The 2018/9 Great British Trade Off started on April the 5th., so this is a three week month. For those three weeks I’m up £475 from the £92,519 I started this leg of the competition with and now have £92,994.
On my calculations that’s a gain for ‘the month’ of .5%. This is a bit less than the .25% a week I was hoping for, but there’s no point in me setting myself targets because the markets will go where they go, will they not.
As flagged up last week I had a new buying order with the brokers for the Sarasin Food and Agriculture Opportunities Fund. £5k went through on Monday at 194p. I don’t want to tempt fate, but my short term timing was good, its up £62 on the week.
Other than that I didn’t do any other trades and I won’t be selling anything in the coming week. Tomorrow the plan is to do a sweep through all the different fund sectors to see if there’s anything I should either be buying or keeping an eye on. I’m currently 68% invested so I’ve got money to spend if something really catches my eye.
But the money’s not burning a hole in my pocket.
Monday April 23 2018 FAGIN WROTE
”Ride on! Rough-shod if need be, smooth-shod if that will do, but ride on! Ride on over all obstacles, and win the race!’ Charles Dickens.
When we started this competition last year I had no idea there would be such a large winning margin between Humbug the investor and me Fagin the trader.
To my mind, Humbug being able to buy and hold in a strong bull market might very well have beaten my short term, swing trading, pick pocketing method.
Indeed if I had simply bought and held a few stocks such as KAZ, EVR and GAW instead of dipping in and out of them, I would have made more money than I did.
However, I didn’t know what was going to happen next at the ‘hard right edge’ of the screen did I? So the above is easy to note with hindsight. Also would I have been able to sit through the draw downs inherent with buy and hold? I doubt it.
My secret target known only to Humbug was to double my account in one year, sadly I didn’t achieve this.
As it stood at the end of the first of The Great British Trade Off competition my account increased by 34.2% and I’m very grateful for it.
I found it harder to double my account than I thought. I underestimated the amount of distraction there would be. Family time, travelling, work, holidays, sitting around doing nothing, you know how it is..
Also, as I’ve written many times, I underestimated my own psychological behaviour.
The only times I lost more than twice my risk were when I made poor decisions and these have a knock on effect. My financial bank account is taking time to recover (I haven’t yet quite regained the portfolio highs of last year), it’s also taking time to recover my emotional bank account.
However as I said, I’m very grateful for what I achieved and for the most part I stuck to the method that gave me my edge. Over the year I had a 62.5% win rate.
To quote one of my favourite mentors David Paul, who in turn quotes the famous martial artist Bruce Lee, ‘I fear not the man who has practised 10,000 different kicks once, but I fear the man who knows one kick and has practised it 10,000 times’.
I must say I have thoroughly enjoyed The Great British Trade Off competition this year and I’ve learnt a lot through discussions and duelling with Humbug.
Of course it’s made all the sweeter by winning, but we all know as traders it’s never enough and I hope this year to improve my performance, my psychology and my skill again.
This year my target is to grow my account by 5-7% per month, I am going to have to ask my daughter, a member of Fagin’s Gang and a GCSE maths compounding expert to tell me what it will mean at the end of the year.
Going forward, I’m looking to always focus on the next trade and the risk and money management associated with it. Also as trading is very much a mind game I need to get my head in a place of emotional serenity.
For me the first month of the new Great British Trade Off has started reasonably well. I’m 2.7% up in April, with one more week to go.
Friday April 20 2018 HUMBUG WROTE
It’s been a good week for me, obviously there’s no point in my setting targets as such, because as an investor I’m at the mercy of the markets. However if on average I make just a +.25% gain a week, I finish the year with around a 14% capital gain.
Using the rule of ’72’ (where if you divide your percentage gain into 72, you’ll find how many years before you double your capital) I’ll double up every 5 years.
This week my portfolio was up +.65%, which whilst it lagged my benchmark the FTSE 100 (UKX) which was up +1.43% is still a result I’m happy with as I was only 65% invested and the cash element acts as a performance drag in a rising market. So yeah good.
I was asking the question out loud last week, ”was the way the market was performing, the calm before the storm?”
Hum, as always who knows. But I doubt that we’ve heard the last of Syria and I doubt we’ve heard the last of the sabre rattling between America and China over trade, although the news flow about both seems to have calmed down over the last few days.
I think the market rose this last week because of this quietening down along with some decent company numbers coming out of the US and it shows that although we’re now in old bull territory there’s still buying appetite and underlying upward pressure.
Its very interesting how the charts often point us in the right direction is it not? Again this time last week I was saying that the Neptune Global Alpha Fund and the Neptune Emerging Markets Fund were right down on the wire at my stop loss point.
I was wondering should I sell and take the hit (although because they were right on the line the decision wasn’t clear cut) It would have meant taking a small loss on both, which is neither here nor there. A system is a system and all that. The possible advantage to me would have been reducing my exposure to the market at a time of tension, the possible disadvantage would have been selling out of them if they bounced back up.
What stopped me from selling was the MACD indicator which was showing rising strength for both of them. This appears to have been the right call, the Neptune Global Alpha Fund is up 2.56% on the week and the Neptune Emerging Markets Fund up 2.06%.
With hindsight I’m glad I was slow to pull the selling trigger.
For the coming week I’ve got nothing that needs to be sold, but I could do with the Japanese market going back up, as the profits on my two Japanese funds are bleeding away and they are getting close to the selling zone.
Mrs Thatcher once said ”a week’s a long time in politics” and to paraphrase her words, a week’s a long time in the markets. Last week I was thinking of selling stuff, this week I’m buying stuff.
This fund has crossed the line that is my buying signal and the MACD is just turning up. So in spite of my doubts about the state of the world, I’ll be placing a buying order over the weekend with my brokers for execution on Monday. I’ll be buying the Sarisin Food and Agriculture Opportunities Fund up 2.55%.
This is an ”old friend” that I got shaken out of in the recent volatility. Its always a real pain buying back into something at a higher price than you recently sold it. But again a systems a system.
This purchase will take my Great British Trade Off account up to 68% invested. Only last week I was wondering should I reduce my exposure to below 50%. Funny old world init, market sentiment and direction can change very quickly. As a momentum investor I have to follow around behind the market, which at times like this isn’t easy.
The problem is that one minute ‘Mr’ Market wants to dance on the table the next he wants to sit under it and slash his wrists. Lets hope he’s taken his medication and calms down for a bit.
Friday April 13 2018 HUMBUG WROTE
The FTSE 100 (UKX) is up + .1% on the week, my portfolio is down -.1%. Basically both are flat, a move of .1% either way is neither here nor there. Although in the case of my portfolio, I was down rather more earlier in the week, being – .3% down at the close on Wednesday, thankfully it pulled back somewhat yesterday and today.
As the excellent Sharescope chart shows, its been a calm week for the index, after quite a lot of recent volatility.
Here’s a zoomed in chart of just this week.
Is this the calm before the next storm, well who knows I certainly don’t. But with the current military tensions over Syria and the possible trade war between the US and China, nothing would surprise me and I doubt it would surprise you either.
Mind you there’s always something going on somewhere isn’t there? Its interesting how some stuff spooks traders and investors and some stuff doesn’t, I am just crap at judging what will and won’t move the markets and have given up trying to get a handle on it.
As I write on Friday evening, I’m 62% invested. There’s nothing I want to buy for the coming week, but I have a possible selling dilemma.
The Neptune Global Alpha Fund and the Neptune Emerging Markets Fund are both right down on my stops. When something’s sitting on the wire its never an easy call. When they go through my stop its an automatic no-brainer, but here they’re both in the discretion zone.
The question is do I take the hit (its only a couple of hundred quid on each) and free up £15k of capital? This would reduce my market exposure to 46% which might be good if all hell breaks out next week might it not?
On the other hand as the charts show, the MACD indicator is rising and this is a strong signal that the price is likely to go up.
I shall go for a walk and wait for the US markets to close to see if this gives me any clues as to what I should do. There is a great quote from Frank Gretz of the American capital management firm Wellington Shields as reported by the news wire Barrons. ”It’s the last hour of the day that’s really going to matter, as the market open is known as amateur hour, while the last hour is dominated by the smart money”.
Following the smart money is always a good plan.
Saturday April 7 2018 HUMBUG WROTE
66 YEARS IN THE BUSINESS AND NEVER SEEN VOLATILITY LIKE IT (PODCAST of this posting on the PODCASTS PAGE)
”66 years in the business and never seen volatility like it” the words of Jack Bogle the founder and retired CEO of the giant Vanguard Fund being interviewed on CNBC a few days ago.
The sort of things he’s talking about is the S&P 500 Index in the US has made three times more daily 1% moves this year than it did in the whole of last year. Last Wednesday the Dow Jones Index fell sharply and then erased that 510 point decline to close 240 points up.
In January markets all over the world got themselves a bottle ahead of the party and it was a bottle of spirits not a bottle of beer. So my view of the February correction was that it was needed and although it cost me money was probably a good thing.
This volatility however is something else and is troubling me a great deal. As a trend following investor I hope to spot upward trends fairly soon after they’ve started, so I can maximise my return before they run out of steam.
Also I hope to spot obvious down trends shortly after they’ve started and try to get out of the way and into cash.
The danger for me is that my system spots what it thinks is a fresh trend starting, but instead of the trend building up it gets swamped by this extreme volatility.
I wrote the other day that my plan for April is to follow my system’s rules to the letter and I’m going to. I have no discretion over when to sell (either to bank a profit or stop a loss increasing) but I do have discretion over taking buying signals.
Hum, I may be a little slower to enter new positions in the next few weeks, as preserving capital is paramount.
However there’s a danger even in that, in that I may miss profitable investments by being too risk averse.
This battle to reach FINANCIAL INDEPENDENCE is anything but easy.
Thursday April 5 2018 HUMBUG WROTE
Crap, utter crap is the only (semi polite) way to describe my investing performance in March. In fact I think that its the worst month I’ve had in the past ten years, mind you I did have even worse ones in the very early days of my investment career………………………………………loosing £7k on a bloody company called Jarvis, where I doubled down not once, not twice but thrice (yeah I know) was my worst ever and still brings me out in a cold sweat.
From now on in my blogs I’m going to quote profits and loss’s as percentages rather than figures in sterling, as I think that will be more meaningful.
My GREAT BRITISH TRADE OFF account started March .62% percent up and finished the month 3.25% down. An overall loss of 3.87%. See what I mean utter crap, carry on that way for a year and I’ll loose almost half my capital, but trust me I’m not going to let that happen.
The trick when its going well in this game is not to become omnipotent. In his posting from early March Fagin talks with brutal honesty about how getting cocky cost him 10% of his GREAT BRITISH TRADE OFF portfolio in fifteen hours as he was flying back from a long haul holiday, its a salutary lesson for us all.
Equally the trick isn’t to become a manic depressive when the game’s going badly wrong. Its easy, albeit with hindsight, to see where I went wrong in February and March. In recent years the world markets went from having a reasonable number of tail winds driving them upward to where we now find ourselves with headwinds coming in from all sides causing considerable volatility. These inevitably have created loss’s and problems for me.
Volatility is Fagin’s friend and my enemy and whilst I’m quietly confident that my trend following system will generate good returns as and when some more upward trends become evident and equally will keep me on the sidelines in cash if a downward trend really gets going, I am at risk if markets flap around going up a bit then back down again.
My plan going forward into April is to carry on following my system to the letter, I’ll continue to look for upward trends and put my money where my eyes are when I spot one, equally I’ll sell out the moment any of my stop loss signals are generated.
Tuesday April 3 2018 HUMBUG WROTE
Sorry about the April Fool’s posting on the 1st., yeah I know it was a bit childish , but hey after the year I’ve had I needed a bit of light relief To business, first of all I want to offer MONSTER congratulations to Fagin on not only winning THE GREAT BRITISH TRADE OFF (GBTO) , but by beating me by such a wide margin. He’s turned in a brilliant performance this year and whilst my own efforts were patchy at best and very poor at worst, nevertheless with his performance he would have won almost no matter how well I might have done.
A stunning result. Well done him.
There’s no way a sensibly diversified investor, rather than a trader, can generate the kind of returns Fagin has produced, without taking the kind of stupid risks that can blow up an account (ie betting £1k a point on the Dow (DJI)) and given that I invest to be financially independent for my eventual retirement, that’s the last thing I would want to do.
The purpose of the GREAT BRITISH TRADE OFF (GBTO) was to establish, is trading more profitable than investing? Now one year isn’t a long enough period to be certain, but my guess is that even after another few years the answer is still going to be trading. Albeit trading as Fagin does it requires a great deal of hard work, whereas by contrast the way I now invest only takes me about an hour a week. So we are comparing something that is almost a full time job to something that takes almost no time at all.
But regardless of that, with the kind of results Fagin’s been banging in month after month last year and this, provided he keeps it up, the writing’s on the wall me thinks.. Trading is likely to produce better returns than investing.
So if that either is, or is becoming my view and given that I’m investing to generate wealth, why do I only want to be an investor? The answer is complicated, after a health scare last year that proved to be nothing, I had a serious think about everything I was doing, how much risk was involved and how time and effort I wanted to spend on things as well.
There’s an old gag that the only free lunch in the stock market is diversification, its also true that markets by their nature can be volatile. Now that volatility can be a hugely powerful engine for making profit if its judged correctly, as Fagin demonstrated this last twelve months, but it can also shred your money if you get the wrong side of it, or your just plain unlucky.
Lunchtimes haven’t been as good for me since I gave up drinking, but in an effort to de-risk I decided to take the free lunch that diversification offers and from now on the bulk of any monies I have in the stock market will only be invested in funds, thus spreading risk far and wide, or sitting in cash at times of obvious danger. Fagin will argue differently about the inherent risks of taking large positions in individual stocks but I believe that by being very diversified I’m unlikely to loose all my capital with a flash and a bang, the trade off is that I’m unlikely to produce the returns he does when it’s all going to plan for him.
But nought is for nought as they say.
Even so I’m looking forward to the next round of our competition starting in a couple of days time. I must say I’ve learnt a lot of hard and expensive lessons from the GBTO and am quietly hoping that the experience will serve me in good stead going forward. Whilst I doubt I’ll win next years competition either, I’ll be very disappointed if I don’t make a decent return for myself in what must surely be close to the end of the current bull market.
Lets look at some of those hard and expensive lessons that I trust I’ve learnt. By nature I’ve up till now always been a trader and a risk taker, so although I wanted to become an investor to give myself a calmer and easier life, to begin with I found the different approach I needed to adopt was almost alien. My four biggest mistakes were:
- NOT CATCHING MOMENTUM. I’m reasonably good at spotting short term upward momentum in individual shares, but I found translating that ability into the longer time frame I needed to make the bigger but slower generated profits all but impossible. Taking a view on the likely course of events over ten days is a lot easier than it is over a number of months or years.
- .PUTTING MY STOPS IN THE WRONG PLACE. I believe that it is paramount to avoid large loss’s whether investing or trading. But a traders stop loss positions would be much tighter than an investors. Early in the GBTO I had my stops far too tight and was being stopped out because I wasn’t giving things enough headroom to naturally ebb and flow. Then I did something equally stupid and made them too slack, running up needless large loss’s as a consequence.
- FAILING TO DO EFFECTIVE FUNDAMENTAL ANALYSIS .Companies will always put a positive spin on what they’re doing and will always present their figures in the best possible light. Paul Scott of Stockopedia, Robbie Burns aka the naked trader, Fagin’s and my friend Teresa Day and the Wheelie Dealer are all world class at drilling down into a set of accounts and sorting the good from the bad from the fraudulent. There are no two ways about it, this is something I’m crap at doing and it makes me loose the will to live anyway. I tried hard to invest in strong companies with good prospects that were unlikely to suddenly disappoint the market and that were displaying worthwhile medium term momentum, but found it a big ask. I had some successes, but not enough of them.
- NOT STICKING TO ONE PROVEN SYSTEM AND ALSO MAKING THINGS TOO COMPLICATED. I wasn’t consistent enough with my approach and I chopped and changed my ideas too often. I started the competition using the weekly signals generated by the system Fagin and I used, allied to my own (inept) fundamental analysis as well as trying to both balance and hedge my various positions. I found I wasn’t getting good results and then started over-riding my own rules. I wrote at the time that I’d fetched up with a camel when I was trying to design a horse. The whole thing was way too complicated, too clever by half and just didn’t work
But here’s the thing, in spite of all of the above, twice being hit with profits warnings and a couple of times simply being unlucky nevertheless one year on in spite of a very bad March the bulk of my capital is still intact. In times of either crisis or danger my traders instincts have served me well. Lets hope my alter ego continues to be my guardian angel for the rest of my investing life.
It could have been so much worse, just imagine how much fun it might have been watching bitcoin run up to $19k before Christmas and deciding this is how to make your fortune as it goes tom $50k. You’ve not got got any real money, but you’ve got £20k on a couple of sub-prime credit cards at 29% APR and a spread betting account. Jump forward a few months and the £600 or so in monthly fees and interest that the cards are racking up is the least of your worries. The grown up problem is meeting the spread betting company in court to explain to both them and the Beak how your going to pay them the £200k plus costs that you owe as unfortunately bitcoin didn’t hit $50k, it slumped below $8k.
Think I’m joking you? Think again, this is the sort of scenario some guys have faced having lost everything betting wildly on bitcoin and indeed not just bitcoin. There are some very sorry stories out there, Google ‘bitcoin loss’s’ you’ll see what I mean.
As a side issue, if you want a great read about some wild gambling, there’s an old book from about fifteen years ago by Jonathan Maitland called ‘how to make your million from the internet (the diary of a share trader) recounting how he mortgaged his house for £50k and tried to turn that money into a million pounds in a year by investing (if that’s the word) in ‘internet companies’ at the time of the dot com boom and bust. A long time ago I worked on the same radio station as Jonathan, he’s a great broadcaster and a talented and very funny man. I particularly commend the chapter where he discovers spread betting to you, I began to cry with laughter as I read it.
Jonathan had the nous as well as the media and market connections to make up the monies he lost by other means, so all ended up well in the end. But it was one hell of a ride while it lasted. Its both a great read and a salutary lesson at the same time.
Back to me, the first two thirds of the GBTO were not good, but my traders nous kept my loss’s under strict control enabling me to fight another day. Since October/November I’m solely invested in funds (with a safety position in cash) , have an automated system for buying holding or selling in place that I did ten years back testing on and follow without deviation and in-spite of the flash crash of February and the recent decline, things could be a lot worse. Although the last month has been pretty grim.
March has in fact been my worst month of the year, to put it in perspective , in round figures my loss for the month isn’t far short of my loss for the previous eleven months put together. My system looks to put me into trends, it back tests well but is vulnerable to being whip-sawed in and out both at the end of an old trend and the possible beginning of a new one.
Except for my Japanese funds everything else fell back in value quite sharply, although only four of them broke through my stop loss positions. The four I lost were the Fidelity China Consumer Fund for a loss of £308.87, the Fundsmith Equity Fund for a loss of £384.36, The Goldman Sachs BRIC’s Equity Fund for a loss of £271.30 and the JPM Emerging Markets Fund for a loss of £263.16.
I finish both the month and the year down -£7708 or 7.7%. Going forward, my head is in a calm good place and I’m quietly confident my system will produce profits or keep me out of trouble once clear market direction comes back.
Its worth mentioning that you can also follow the adventures of Fagin and I at diyinvestor.net
Monday April 2 2018 HUMBUG WROTE
FOOLED YOU……………………..WELL A FEW OF YOU
Fooled you, well a few of you. Yeah I know its childish, but hey these things have to be done sometimes. Fagin and I write about our competition THE GREAT BRITISH TRADE OFF in the online city website DIYINVESTOR.NET, we’ve been running the competition to see is trading or investing the best way of generating wealth from the stock market and build FINANCIAL INDEPENDENCE. I’m the investor and at the moment I’m loosing hands down, Fagin is about £40k ahead of me after just one year which is something of a nause, so a couple of days ago I decided to try to April Fool him and also to see if I could catch out some of the many of you guys who follow what we’re doing.
Cutting a long story very short I wrote a piece in diyinvestor that was posted on April the 1st about how I’d got fed up with loosing and had decided to spread bet my way to victory by taking a series of huge bets on the US Dow Jones Index (DJI) and how brilliantly they’d worked and how I’d made over two million pounds profit in a couple of weeks. To see the full article follow this link to DIYINVESTOR.NET, click on news and then scroll down to THE GREAT BRITISH TRADE OFF.
A mixed result to be honest, Fagin saw through it in ten seconds flat, that boy is too sharp for his own good. Mind you it was never going to be easy to fool a man who ‘picks pockets’ for a living and who runs a gang of teenage scalywags was it?
Judging by the comments flying around, I fared better with some of you lot, if your one of the ones I did catch…………………he he he.
To be serious, I claimed to have taken a spread bet at £1k a point on the Dow. Trust me that would be insanity, unless someone is MONSTER RICH they shouldn’t bet with these numbers, the Dow is very volatile and could move 50 points against you in five minutes, meaning you’ve lost ten thousand pounds a minute and certainly if your new to trading and investing don’t even dream about it, let alone think about it.
In fact if your new to this game I wouldn’t go anywhere near spread betting period and even if your experienced treat it as though your stroking a wild animal, ie best not to do it, but if you must do it with great caution
Tuesday March 27 2018 HUMBUG WROTE
Your first loss is your best loss. This was drummed into me when I was a management trainee with Marks and Spencer a working lifetime ago in the days when they really did know what they were doing and they dominated the high street.. As a side issue I was a bloody useless trainee and they very wisely suggested to me that it would be better all round if I resigned before I did any more damage to their business.
What they meant was, you jump and we’ll soften the landing with a fifty quid leaving present, or we push you and you’ll wish we hadn’t. I jumped.
I was a bit upset at the time as I remember, but fifty years on I don’t bear them any malice, in fact I’m wearing a pair of their pants as I write this and I practise what they preached in both my own shop and in my trading and investing.
No two ways about it, take your loss’s quickly and move on is good advice. In retailing it achieves three things, it frees up space and releases capital to invest in new stock, which improves your offering. In the markets it stops the bleeding, that’s the bleeding away of your capital. I never forget that I can’t be a capitalist if I’ve lost all my capital.
Yesterday my selling orders went through for the five funds that had fallen down through my stop loss. I sold the Fundsmith Equity Fund, the Fidelity China Consumer Fund, the Goldman Sachs BRIC’s Equity Portfolio, the Sarisin Food and Agriculture Opportunities Fund and the JPM Emerging Markets Fund for a total loss of £1521.31p.
I originally had £27k invested in them so my loss of capital is 5.6%. Good? Er no, end of the world? Er no, Have I forgotten it and moved on…………….Yes.
Saturday March 24 2018 HUMBUG WROTE
HELL’S TEETH HERE WE GO AGAIN
AHHHHHHHHHHHHHHHHHHHHHHHHHH, for the second time in less than six weeks I’m the wrong side of a market move. Everywhere you look markets are sharply down.Duh. Oh well its all part of the game I suppose, money in the markets isn’t called risk capital for nothing.
The spat between the UK (backed up to some extent by the rest of the EU) and Russia is probably the reason my holdings in the JPM Emerging Markets Fund and The Goldman Sachs BRIC’s Equity Portfolio have both fallen through my exit point.
The looming trade war between the US and China is why the Fundsmith Equity Fund and the Fidelity China Consumer Fund are also down through my exit point. As China is clearly hell bent on economic world domination at any price, it probably is a good thing the US is at long last standing up to them. Even though it’s cost me money right now and may well cost me more in the next few weeks.
If you think about it, the west traded their industries and millions of jobs in return for being able to buy cheap goods. With hindsight was it a smart move?
My Sarisin Food and Agriculture Opportunities Fund is also stopped out, dragged down by the overall decline I guess.
I don’t know exactly what my loss will be selling this lot, I placed my instructions with my brokers this evening for action on Monday, I’ll find out the bad news then.
As a momentum investor who looks to ride trends rather than a buy and hold, almost no matter what happens, investor I have no option but to sell at times like this.
I’m not getting out in panic, but simply protecting the downside as I’ve no idea how far prices will fall.
That’s it, I’ve sold and now I don’t look back, I forget and move on.
Monday March 19 2018 FAGIN WROTE
”A MAN MUST TAKE THE FAT WITH THE LEAN, THAT’S WHAT HE MUST MAKE UP HIS MIND TO, IN THIS LIFE” – CHARLES DICKENS
After a wonderful Santa Rally and an all time portfolio high, I managed to mismanage the resulting sell-off and instead of taking my planned FTSE short in ETF UK3S in mid Jan, I took two long mining positions (KAZ and HGM) just before getting on a plane!
I arrived back in the UK some 15 hours later only to find that both my ‘gambles’ had failed and I should’ve stuck to the original short position plan after all.
I took my two biggest losers of the competition so far!
OBVIOUS LESSONS LEARNED:
Don’t take impulsive trades and stick to the plan,
Don’t trade when your supposed to be on holiday!
Don’t be greedy. I had a good Santa run already and was at an all time high when I committed my act of sabotage!
LESS OBVIOUS LESSONS LEARNED:
Prior to taking the two loosing trades, around Jan 16, I had squeezed out two profitable trades for around £1000 profit each – my target for these two was nearer £2500 thousand each. Because I didn’t get what I thought I deserved I became subtly and insidiously petulant – this path led me to take the two impulsive trades.
On the back of a good run lasting many months I had become ‘omnipotent’ and the thing is , I hadn’t really noticed my smugness sneak up on me. This of course leads now to a fear of pulling the trigger!
Dr Alex Elder recommends going flat at these times and so that is what I have done for February.
I have entered back gingerly in March and I have made a little money with GLEN and STOB and lost money with PMO.
I am mostly flat again today until I get clear market direction, Its also time to put the highs and lows of emotion aside.
Time for a dinner with Humbug methinks, its important to share your mistakes with another trader to help not to repeat them!
Now for the numbers, the net result of this experience is, the Fagin trading account position now stands at £131,848.70. Nearly £10k down since Christmas.
Thursday March 1 2018 HUMBUG WROTE
In spite of a tumultuous month all is good round here even with my being down -£3657 since the GBTO began in April last year. I would have preferred the market correction to have been slightly less fierce to be honest as it caused me a bit of grief, but the trick as investors and traders is to work with what we’ve got at any given time.
Although I’m now only investing in funds to both spread risk and sub-contract the research that is needed with individual share purchases , I’m doing so in an aggressive style to build wealth, hopefully reasonably quickly. The plan is to chase momentum by following the smart money to anywhere in the world, looking for the strongest rising trends at any one time. Using big picture thinking allied to charts to determine which actual funds to buy and when to time the entry and exits.
Over time I’m hoping to beat the market by sensible use of this aggression, but I’m also very aware of the dangers and seek to mitigate them by going into cash whenever my charts tell me to do so.
Capital protection is paramount in this game, lose your capital and your no longer a player. In a nutshell, I need to be aggressive enough to make good money but not so aggressive that I lose it all.
By their very nature markets constantly overshoot either to the upside or the downside, its just the nature of the beast and indeed its this volatility that gives us our profit opportunities.
As I wrote last time we needed a correction because the market was bouncing off the walls with all too much sugar in the system and lo and behold we got our correction. When I wrote last month I had no idea when it might happen and exactly what form it would take, but on balance I’m pleased that it has happened.
Although I’ve had a small investment in funds right from the start of the Great British Trade Off, I only really started loading up last year in October, November and December.
In investing as in most areas of life, timing is close to everything and with hindsight my timing wasn’t brilliant, in that many of my positions whilst profitable hadn’t had enough time to generate significant gains, therefor I was always vulnerable to a sudden steep correction and so it proved.
But on balance its worked out fine, for sure I’ve lost a chunk of my recent profits in the first couple of weeks of February, but nothing to keep me awake at night.
The way I do things is to use various moving averages to tell me when to enter or exit, stay invested or go into cash (cash being my safety position) and the system worked well, in that it cut in to protect me from what had the potential to be very nasty losses when markets were in free fall and is now signalling new buying opportunities.
To state the blindingly obvious, none of us knows how high a market top or how low a market bottom will be until after the event. The way markets were behaving all over the world a couple of weeks ago really did have the potential to damage wealth.
As a result this month I’ve been forced into doing too many trades because of the intense volatility, I’m hoping that things will now calm down again. Here in detail is what happened.
This was my largest area of investment, four of the five funds I was holding fell through my exit level, three to a loss, one to a small profit.
I had £4k invested in the AXA Framlingham Robotech Fund these were sold at 11987p for a loss of £256.54. £4k in the AXA Framlingham Global Technology Fund sold for 291.7p, a loss of £170.92. £6k in the Neptune Global Technology Fund sold for 163.7p a loss of £179.44 and £5k in the Pictet Robotics Fund sold for 12042p a profit of £109.78.
Markets can turn on ‘sixpence’ and this recent correction was a good example. One week it was doom and gloom, the next singing and dancing.
My system whip-sawed me first by signalling the urgent need to sell these four funds which I did, then within a week posting a strong buying signal for two of them.
I’ve re-bought £5k of the AXA Framlingham Global Technology fund at 305.8p and £5k of the Neptune Global Technology Fund at 172.6p.
Gratifyingly both of these re-purchases are already back in profit by some £190, which really does go to show , first work out your system and then simply work your system.
FAGIN has been banging this into me for months, he’s so right, I can’t pretend I was in the mood to re-buy either of them but I’m glad I did. I also topped up my holding in the Polar Capital Global Technology Fund by £5k at 1777p, this is now my joint largest individual holding at £10k.
China was my second biggest investment at £18k, the decline was an average of 15% over the four funds I held.
I had £5k in the Baillie Gifford Greater China Fund sold at 465.8p for a loss of £420.36. £2k in the Fidelity China Consumer Fund sold at 207.7p for a loss of £90.29. £5k in the Gam Star China Equity Fund sold at 1972.62 for a loss of £229.41 and £6k in the Old Mutual China Equity Fund sold at 1509.28p for a loss of £11.84.
Once again I was whip-sawed and have re-bought £5k of the Baillie Gifford Greater China Fund at 498.4p and will look to buy back the others if and when.
EMERGING MARKETS/UNDERVALUED ASSETS/INCOME
I had £4k in the JPM Emerging Markets Fund sold at 308.7p for a loss of £132.18. £1k in the Man GLG Undervalued Assets Fund sold at 157.1p for a loss of £8.21 and £1k in the Man GLG Income Fund sold at 240.9p for a loss of £18.31.
In the last week the Neptune Emerging Markets Fund which had stayed out of trouble made another entry signal, I bought £5k at 1727p taking my holding to £8k and I was whip-sawed back into the JPM Emerging Markets Fund buying £5k at 3211p.
I also bought a top up of £5k in the Neptune Global Alpha Fund at 564p taking my holding to £7k
I was sorry to sell this one as I’m a huge fan of Terry Smith and I’ve no doubt I’ll be buying back into it in the future, but a couple of weeks ago it had fallen down past my exit point, I had no way of knowing how low it might go , so as my system gives me no discretion in whether to sell or not, I had no option. (as a side issue I do have discretion over whether to buy after an entry signal, but not after an exit one) I had £3k in the fund and sold at 350.84p for a loss of £77.89.
UK SMALLER COMPANIES
I had £1k in the Janus Henderson UK Smaller Companies Fund sold at 892.2p for a loss of £25.63.
My other two small cap funds the Marlborough UK Micro Cap Growth Fund and the Jupiter UK Smaller Companies Fund both kept out of trouble this month and i still hold, albeit only a tiny £1k in each.
Unless they generate an exit signal I’ll keep them, but i am wary of the UK right now. On the one hand we have some utterly brilliant small companies with huge potential for growth, that were it not for the political uncertainty I’d like to have a lot more of my money riding on and on the other hand we have no clear vision of where the economy and the country are going because we’re being led by a political class who are at best operating outside their capabilities (some do a good impersonation of being sub-moronic, thinking about it, maybe its not an impersonation)aided and abetted by senior civil servants who clearly have no idea how the world works and are scared of their own shadows.
The inept Brexit negotiations are perhaps the best example of the damage that happens when the lunatics run the asylum.
I do wonder if the talent in and the underlying strength of the UK small cap sector is enough to bulldoze its way through the economic obstacles the politicians are needlessly creating, but on balance right now I think there are safer places for me to invest in. However as always I’ll be guided by my charts.
This sector has been good to me, my Legg Mason Japanese Equity Fund is up 10% in just the couple of months since I first bought in and last week made another strong entry signal. I bought £5k at 3666p taking my total holdings to £10k. I also bought £5k of the Ballie Gifford Japanese Smaller Companies Fund at 4763p, this holding is up 1% in a week.
Whether you like Trump or not, his policies have made a big difference to the US markets.
The ‘Trump bump’ is very real and I’ve been looking for a chance to buy in for a while. I’ve bought b£5k of the Ballie Gifford American Fund at 651.4p, the fund is up 28% year to date.
BRAZIL/RUSSIA/INDIA/CHINA – THE BRIC ECONOMIES
Brazil and India are growing their economies strongly and I’ve wanted to invest, but both are very volatile. When you look at a chart for either the prices are all over the place.The Goldman Sachs BRIC’s Equity Portfolio Fund is up strongly for the year to date with a reasonably smooth line, I’m hoping the spread of the fund over Russia and China as well will enable me to benefit from the growth in both Brazil and India without too many gut wrenching moments. I bought £5k at 1714p.
FOOD AND AGRICULTURE
I’ve held the Sarisin Food and Agriculture Opportunities Fund since just before Christmas, my £2k investment is up 4% since then, si I topped up another £5k at 1935p.
There we have it for this month, much too much activity, but i had no option but to do what my system told me to do at what was a volatile and potentially dangerous time.
Computer ‘say no’ I sell, computer ‘say yes’ I but. Lets hope everything calms down now, calm is good.