The Great British Trade Off – Humbug vs Fagin, trading vs investing – £100,000 of their own money, and only one winner.
Since 2014 ‘Humbug’ – on account of his demeanour, or the fact that he owns an exquisite sweet shop; you pays your money and takes your choice – was the author of Diary of a DIY Investor.
Trading predominantly AIM stocks, Humbug entertained a loyal following with the thrills and spills of his small cap trading.
Following the Brexit vote, Humbug found it increasingly difficult to apply his system, because markets had become illogical and difficult to read, so he moved to the main market.
Humbug and trading partner, ‘Fagin’ – on account of his determination to pick the market’s pocket – developed a swing trading system, and hatched the idea of The Great British Trade Off to see whether a slow and steady, long term investment strategy, would trump Fagin’s wham, bang, ‘thank you kindly guv’ trading approach.
Fagin aims to pick the markets pocket by using the daily signals their system produces to trade a short term time frame of days and weeks.
Humbug uses the weekly signals to trade/invest for weeks, months and possibly the whole year.
Which will prove to be the better way of approaching the current market with all its uncertainties? Will it beFagin’s quickly banked trades or will it be Humbug’s longer moves?
In a more recent development, Humbug recognised that the tight timeframe of a twelve month competition was causing him to chase short term profits rather than build long term wealth, so they have agreed to run GBTO for five years.
In another twist, Humbug has decided that the analysis required to pick individual stocks was unduly onerous, so he is now trading funds, but in a style intended to achieve aggressive returns; the additional frisson of the competition is therefore stocks vs funds
The boys recently launched www.seekingfinancialindependence.com
to share more information and to create a like minded community as they plot their course to financial independence.
If you would like to see any of the archived content it is all available, and it has been shaping up nicely into quite a contest:
The Great British Trade Off Year 1 here
Diary of a DIY Investor 2016 here
Diary of a DIY Investor 2015 here
Diary of a DIY Investor 2014 here
It’s been a good week which is great. My running total increased by £1965. Albeit I’ve been caught on the wrong foot and am playing ‘musical chairs’ with myself.
But it’s easy enough to be happy and smiley when its going well and as a bonus I’m almost through Friday the 13th without a major crisis.
Underneath the smiles however, I’ve got a lot of concerns. As a momentum investor a steadily rising market somewhere or other is brilliant, because my mate Sharescope and I working as a team should have spotted it and I should be in it riding the wave and inching closer to financial independence.
A falling market is no problem because I’ll be out the moment my stops are hit. I may well lose a few hundred pound on each holding but a steadily falling market is not the end of the world for me.
The one that is a pain where the sun doesn’t shine and dangerous for me as well, is a volatile sideways market. My system will have me whipsawed in and out.. Death not from a deep stab wound, but from a thousand cuts.
Here’s a good example of whipsawing in action.
This scenario is bad news for me. The red arrows show selling to a stop loss, the green arrows are buying signals. In out. in out, in out and beginning to look like in again. Each trade isn’t a major catastrophe in itself, but cumulatively they hurt.
Its difficult to know how to trade these situations. The excellent Robbie Burns advocates trying something three times and if it doesn’t work, giving up and moving on. Might be an idea to incorporate this into my strategy, we’ll see.
My star performer this week is the Baillie Gifford American Fund, up 2.83%.
After its recent pullback to my eyes it looks in good shape. There is resistance just over 800, my guess is it will power through that and carry on up.
The Neptune Global Technology Fund is in a very similar position, it recently pulled back slightly and is now right up on resistance.
Its up 1.87% on the week and again my guess is it’ll power straight through the resistance at around 202p and take the next leg up.
The AXA Framlingham Global Technology Fund is looking strong, up 1.98%.
As is the Fundsmith Equity Fund up 1.92% and the Neptune Global Alpha Fund up 1.70%
Over the weekend I’m going to do a sweep right across the market to see if there is anything new I should either buy or at least have on my radar. I will be re-buying the Legg Mason IF Japan Equity Fund that I only sold three days ago.
DUH. This is where the playing musical chairs with myself comes in. I had no option but to sell as it gapped down through my stop-loss to protect my rapidly declining profit. But it bounced straight back up and has made.a buying signal.
I think I got lucky to be honest, in that my order was filled at almost the current price of 175p, rather than the sub 160p that it had fallen to. I came out with a profit of £650 and with a bit more luck won’t be too badly stung on the new purchase. Here’s hoping.
I plan to buy my usual opening stake of £5k. When this purchase goes through that will take me to about 70% invested.
Also this week I lost my last two China Funds to a stop-loss. The Fidelity China Consumer Fund went at 286p for a loss of £38.
It too has pivoted round and isn’t a million miles away from making another buying signal.
The second one was the Old Mutual China Equity Fund that went at 1562p for a loss of £102.
These two losses and the profit from Japan are included in the running total of £1965 profit for the week.
For the coming week, I’m hoping things calm down and that my portfolio performs more or less as the charts indicate it should. But I am worried about the volatility and these violent swings both up and down
I’m plotting and planning to achieve a financial independence with plenty of noughts on the end of it. The Great British Trade Off competition is one part of that endeavour.
I must say, I’m thoroughly enjoying the GBTO even though I’m being soundly beaten by Fagin. This first quarter of the second year has gone well for me in spite of the sharp correction that happened at the end of June.
Fagin and I started the competition on April the 5th 2017, each of us with £100k of our own money, a year later I’d lost £7500 of it. DUH.
However this financial year has started a great deal better. By mid June I’d made up the previous year’s loss and more…………………result.
Sadly nearly £4000 of that bled away in the next two weeks. The last week of June was the worst week I’ve ever had in twenty years of trading and investing. I lost 33p a minute for every minute of every day (and night) for the entire week. But even so at the end of June I carried a running profit of £3720 from the start of the second year into the second quarter.
Lets drill down into some of the facts and figures and talk about the methodology I use.
METHODOLOGY: I am useless at fundamental analysis. I’ve spent a small fortune with the excellent Robbie Burns, bought and read books, looked long and hard at what Warren Buffet does and doesn’t do, read the excellent Paul Scott’s daily reports and try as I may I don’t get it.
I’m not a forensic accountant so I have to take company accounts at close to face value. Sure I know what the different metrics mean but I cannot seem to pick ‘the wheat from the chaff’ Also I struggle to interpret the statements and the RNS.
Any bloody fool knows what ‘ahead of expectations’ means, the question I got wrong all too often was, was it already in the price? And don’t even get me started about profits warnings two weeks after a positive statement in the annual report.
Bearing all this in mind, it was logical that I invested in funds, where I am in effect contracting out the stock selection to the fund manager (who at least in theory knows what he’s doing). The costs and charges are a little opaque, but there’s a price to pay for everything in life.
The other big advantage of funds is that you can ‘buy into’ any sector in any part of the world with a product that is traded in London.
Further, with the aid of the brilliant Sharescope program (not cheap, but worth every penny and by the way I don’t get paid to promote them) I can easily find which funds are currently out performing ‘their’ sector.
Given, that apart from simple tracker funds almost all other funds have a fairly narrow remit over what they do and don’t invest in and therefore will always have periods of under performance, average performance and what I look for, out performance.
Here’s a good example, the last four months of the Baillie Gifford American Fund (black line) against the Dow (red line) and the Nasdaq 100 (green line)
As you see, the fund has significantly outperformed the two indexes. If your looking to out perform the market, not much point in putting your money in an index tracker is there? I set Sharescope up to go hunting for these situations where a fund is setting up to be ahead of the curve. Basically what I’m trying to do is always have my money where the action is.
FACTS AND FIGURES: After a bad year last year, I started this year with Great British Trade Off capital of £92,500. At the end of the first quarter of the current year I had a running profit of £3720 or 4%. 4% a quarter compounded up is almost 18% a year.
But stock market profits are a bit like chickens. Best you don’t count them till they hatch, because until they do……………………………….they’re eggs not chickens.
So yeah, a really good start to the year, but better to make the money before I bank it.
My best performing fund has been the Ballie Gifford American Fund
I’m up 22% since I bought in in April. But sadly only have £5k invested. The ‘Trump Bump’ is still very much in evidence and if I get a chance I’ll be looking to put another £5k into the fund, I just need a bit of weakness to take the price down below the two week average (the green line) and for it to then pivot back up………………………………………and I’ll be in.
You might well ask, ‘why don’t I just buy the damn thing anyway?’ The answer is that I’ve learnt the hard way to never ever chase prices again, so until such time as it makes my buying signal, I’ll engage in masterly inactivity.
I did fret and I do fret about what I think are crazy valuations for tech stocks, I just can’t get my head round the multiples. But hey, trade what you see, not what you think. So I did and £20k of my money is in the sector.
I’ve three holdings, the Neptune Global Technology Fund is my most profitable, up 17%. The AXA Framlingham Global Technology Fund is up 16% and the Polar Capital Global Technology Fund up 10%. Sod’s law being what it is, that’s the fund with £10k in, the other two each having £5k.
I’m a big fan of the no nonsense approach of Terry Smith who has a medium size fortune invested in his Fundsmith Equity Fund.My meagre £5k is up 10% since May.
That is some slope of hope is it not? I must say it looks a bit warm to me right now. However I’d like to have £10k in it rather than £5k and will look to top up if/when a correction and pivot back up occur.
All my other holdings are in profit, albeit some only slightly. They are:
The Neptune Global Alpha Fund
The Sarasin Food and Agriculture Opportunities Fund
The Ballie Gifford Japanese Smaller Companies Fund
The Jupiter UK Smaller Companies Fund
The Malborough UK Micro-Cap Growth Fund
The Legg Mason IF Japan Equity Fund
The Fidelity China Consumer Fund
The Old Mutual China Equity Fund
The Gam Star China Equity Fund
(however since the end of June the last four have also been sold, three were stop lossed out to small loss’s. One sold to protect a profit. On aggregate a profit of £370 across the four)
I made only one sale in the quarter, the Neptune Emerging Markets Fund that cost me £270 to stop loss out of my £8k position.
The red arrow shows my departure point and to be honest I’m glad I’m out. The chart doesn’t look pretty.
So thats what has happened. I think my idea of investing only in funds to get round my inability to do fundamental analysis effectively is a good one. Even more so as I’ve tied it into a momentum strategy using my liking for and dare I say it, ability with charts.
I’m not looking for a balanced portfolio anymore and I realise that my aggressive approach of following the hot money does have dangers and clearly isn’t for widows and orphans.
But hey you’ve got to risk it for the biscuit. I’m seeking to build enough capital for a good level of financial independence. A financial independence with noughts on.
I believe the best way for me to achieve this is to get market beating returns. Easy to say, not so easy to do. But an extra three or four percent compounded up over time transforms the figures.
What do I think going forward into the second quarter?
Wow what a bloody mess. The UK is in such a state, I’ve never seen anything like it in my lifetime..
Beware of politicians who try to be clever. My view is that Teresa May with her latest proposal for Brexit has succeeded in winding up not just Boris Johnson and David Davis but the entire country.
Remainers are deeply unhappy because the proposed deal is far worse than remaining in the EU and leavers are furious because as Boris Johnson so eloquently put it, the deal is a turd.
My guess is that her latest proposal will unravel and the political crisis at Westminster will intensify and spill over into the real world, creating even more volatility going forward.
And boy have we had some volatility in recent times. Wild swings are emotionally difficult for investors in general and for a momentum investor who uses stops as I do, its downright dangerous.
The risk I face in a sideways and volatile market is of being constantly whipsawed in and out of positions and the danger a swing trader like Fagin who takes trades for a few days to a few weeks (depending on how quickly they pan out) is much the same.
Here is a good example of what I mean.
The black arrow highlights a 30% upswing in about a year and a quarter, then the pattern changes, the three red arrows pinpoint stop positions and the two green ones highlight buying points. As you see, out then back in, then out, then back in, then out.
The difficulty we have is that we invest and trade in the real world and in the real world there is always something happening that has an impact on what we do.
I just cannot get my head round the mess that our cretinus politicians have created, but we are where we are. Although I think conditions are very dangerous I’m just going to carry investing my system. Chart says buy……………..I will, chart says sell………………I will.
Twice this week I’ve been chatting to people who’ve said they had looked at our blog and enjoyed the battle we’re having with the markets and each other as we look to grow our money and seek financial independence with noughts on.
Both people asked me which one was I? Was I Humbug or was I Fagin?
I said Humbug. One person said ‘right’ almost with pity, the other actually said ‘oh dear that is unfortunate’.
Do I need this? I mean not only am I getting a kicking in The Great British Trade Off, losing by a wide margin, which is bad enough anyway. But now people in the street are taking pity on me. DUH.
To be serious, I think both of them would have preferred to have been talking to Fagin and learning how they too could make a 34.2% return on their money in a year.
The glib answer is some inspiration but years of perspiration, oh and strong nerves.
You mark my words, if Fagin continues to bang in the great results one day he’s gonna be a big star.
The question for me is will I be a little star, or am I destined to be Fagin’s ugly sister for all time? Mind you being ugly in a pantomime for three weeks a year gives Christopher Biggins a good living, so maybe there are worse things I could be.
Talking of Fagin, he opened one new trade this week.in Evraz PLC (EVR).
The green arrow marks his entry on Wednesday, 9000 shares at 501.5p.
Me? How did I get on this week? Well better than last week, when I lost £3225, making it my worst ever week of The Great British Trade Off. My portfolio increased in value by £264.
I sold out of the Gam Star China Fund at 2031.2504p for a loss of £216 (the increase in portfolio value has taken that loss into account)
My sale went through at the beginning of the week, its since fallen a little further.
As a result of this weeks price action I’ve three sales planned for Monday of next week. My other two China funds have to go as they’ve fallen through my stops.
When you buy or sell funds it isn’t instant execution, so you never quite know what price you’ll be in or out at. This one will likely go for a loss of around £180.
The Fidelity China Consumer Fund has also broken down through it’s stop and will be sold..
The likely loss with this one is £150.
Its a shame that all three of my China funds have had to go. The momentum I spotted a few weeks ago was real enough as the charts show, but sadly for me it didn’t last long enough for these to become profitable trades.
My system works brilliantly when a decent upward trend develops, keeps me out of the market in cash and therefor safe in a prolonged downturn but doesn’t work well in a choppy sideways situation.
I don’t know of any way of working that could cope well with all three scenarios, up, down or sideways.
I’m also going to come out of the Legg Mason IF Japan Equity Fund to protect a profit that’s being eroded.
The profit on this one should be £235. If you look at the chart you could well take the view that at 360 the price is at strong support and may well bounce upwards again.
This is what I actually think is likely to happen, but As Fagin has drummed into me, TRADE WHAT YOU SEE, NOT WHAT YOU THINK.
When these sales have all gone through, my loading will be 55% invested, which considering all the current uncertainty is just fine. Also worth saying that in spite of last weeks dreadful results I’m still up £3500 since the start of year two of The Great British Trade Off.
Fagin’s traded in and out of Highland Gold Mining Ltd (HGM) with great success ever since I’ve known him. A man of many talents is our Fagin, when he’s not out picking pockets he goes gold mining.
SHARESCOPE CHART OF HIGHLAND GOLD MINING
The green circle shows the kind of price action he looks for (looking at the chart you’d say the price has fallen to around 140 from the recent high of around 160. Found support and made a floor over a few days and looks as though it’s pivoted round and is going back up)
Now whether it does on this occasion has yet to be established, as its too early to know. But it looks an intelligent trade to me, good luck to him, I hope it works out.
19,000 shares bought on Wednesday at 142.165.
Me? Oh my good God where do I start. This has been my worst week so far in The Great British Trade Off by a big margin; I’m down £3325 in seven days.
Your welcome to have a bloody good laugh at my expense, but just bear in mind that I may pop round not to buy you a steak dinner but to give you a damn good slap.
A loss of £3325 over seven days is roughly equal to loosing 33p every minute of every day and even when I was asleep for crying out loud.
However all that’s happening is the nature of the beast and in the grand scheme of things its nothing to worry about.
Although loosing three grand in a week takes a bit of getting used to, let me tell you.
Markets ebb and flow, this one has flowed a little too strongly in the last couple of months and is now correcting.
Since the start of this years Great British Trade Off I gained £8k at the recent market high, I’ve just had to give £3k of it back.
End of the world? No.
Of the fourteen funds I hold only one has actually triggered a sell signal. That’s the GAM STAR China Equity Fund, but as I write this report I’m not certain if I’m looking at the latest valuation. (funds aren’t instant execution like shares and it can take a while to get in or out) This is what my screen is showing.
SHARESCOPE CHART OF GAM STAR CHINA EQUITY FUND
A stops a stop is a stop and I’ve no problem taking a loss if my system tells me to. But if I am looking at Thursday’s price then my system which is end of week hasn’t actually triggered, although the graph doesn’t look pretty does it?
I may hold fire before placing a dealing order to see where the US fetches up tonight and get up really early on Monday UK time to see where the Far East closed.
Other than this one, which probably will go early next week, there’s nothing for me to do but Masterly Inactivity as everything else is well within limits (albeit being down).
Masterly Inactivity is closely related to Patience. There is great posting on the subject of Patience-The Importance of Being Idle on the Wheelie Dealer site at www.wheeliedealer.weebly.com/blog
Mind you, when you’ve had a read of that make sure you come back here or I’ll be round again.
Going back to the subject of stops, you may remember I was recently stopped out of the Neptune Emerging Markets Fund
SHARESCOPE CHART OF NEPTUNE EMERGING MARKETS FUND
The red arrow shows my sale point, I said at the time that whilst I thought the price could well bounce off around 160p I was selling because I traded what I saw, not what I thought.
As you can see, I was wrong about the bounce, it’s just tanked since I sold. This brings home to me yet again about the need to work the system exactly as I’m supposed to.
So I’m not prevaricating about selling the Gam Star China Equity Fund, I just want to make sure I’m singing off the right hymn sheet.
Finally why do we have a picture of the army as the heading for this posting. Well, the markets are like the grand old Duke of York marching his army up and down the hill.
The market goes up, then it goes down. This week for me is something of a kick in the nuts……………………………..but at least I haven’t had them cut off. Yet.
We’re both totally focused on financial independence and one with noughts on, so its vital that we only trade when there’s something we should be doing.
We never ever trade because we’re bored, doing that isn’t the road to financial independence, its the road to ruin.
There was not a lot happening for either of us this week. Fagin has not reported any trades and Humbug has made one sale only.
As I reported last week the Neptune Emerging Markets Fund was due to go as it had fallen down through my stop.
It was an £8k position I was holding and it was sold on Monday at 164.75p for a loss of £270. So far it looks to have been the right move as the price has fallen further since I sold.
For what its worth, I actually think the price will dead cat bounce up from around the low sixties (I hate that expression as I like cats) but I trade what I see, not what I think.
I work in an unusual way, in that my take profit or stop loss position is always in the same place.
I use a six week moving average (the red line) for both actions. If the price since the buying trigger has been strong enough, ie its gone up far enough, then when momentum fades and the line is crossed I sell to lock in a profit.
If on the other hand the price never really got going, as was the case here, then when the line is crossed I sell to stop a loss getting potentially worse.
When you start to bleed, the quicker you can stop it, the less mess there is.
A loss of £270 is a pain, but better than a loss of £2700 which is a real ‘FFS’ to state the obvious.
Emerging markets in general and this fund in particular have been a great story over the last couple of years. The Neptune Emerging Markets Fund at its recent peak was up 80% from the low early in 2016.
That would have been a brilliant trend to follow, but as you see the momentum now looks to have faded.
As a side issue, I’ll bet my life that sooner or later the upward trend will resume.
I’m a big fan of charts (especially Sharescope ones). I base all my buying investing and selling decisions on what I see on my screen.
Often I’ve no idea why a price is moving, I can just see that it is moving and that’s all I need to know.
On this occasion I think I do know why the steam is going out of the price. Its all to do with risk and the US.
America is in the process of sharply changing its monetary policy. For years its been printing dollars (QE) to keep interest rates low. The low rates on offer in the US and in the EU as well, meant that investors looking for higher yields took on the greater risk of putting their money in the emerging markets.
That’s now changing, as US rates rise and the Fed also cuts down the money supply, increasingly it doesn’t make sense for investors to stay in the emerging markets not least because those economies will suffer as the dollar strengthens.
So I recon the smart money is now flowing out of the emerging markets and back into the US. If I’m right that explains the chart action.
But as far as my quest for Financial Independence is concerned, frankly I don’t care why this fund has begun to falter, I’ve simply spotted that it has.
To get market beating returns (hopefully) what I need to do is spot when prices have momentum and then buy in, spot when the momentum’s faltering and then get out.
My numbers for this week are slightly up in spite of taking the £270 hit. Including that loss I’m up £152.
With this sale having gone through, I’m 83% invested, with nothing to either buy or sell this coming week.
I’ve had a brilliant week, I’ve been away sailing my boat on the Norfolk Broads for a few days. Some parts of the Broads are touristy and utter crap but there are plenty of hidden gems once you know where to look. Pulling up in an old sailing boat somewhere like this to spend the night is just heaven really. Especially if there’s a good pub nearby.
I got back last night having not thought about my investments for even ten seconds whilst I was away. Logged on and thought wow I must go away more.
Yesterday evening my Great British Trade Off portfolio was actually in credit. Yeah I couldn’t believe it either when I saw £100,239.00. But as I so often say, what goes up can come down and today £700 bled away.
Shame from an emotional point of view, but from an investing point of view believe it or not I don’t just want things to keep going up. The danger always is that if the market gets a bottle of spirits ahead of itself, the inevitable correction is not going to be fun.
Fagin with his Rolls Royce trade beats me this week by a few hundred pounds, but I’m not too unhappy with the £289 increase in my portfolio’s value.
Fagin and I approach the business of seeking financial independence from different angles, but one of the things we are in total agreement on, is if we want to generate wealth (and believe me, we really do) then the best way to do it is to get above average returns out of the Stock Market.
My return this week is .3% which if you plot it for a year is a market beating result.
Twelve of my fifteen funds are up this week, my star performer being the Legg Mason IF Japan Equity Fund up 3.36% on the week. This is closely followed by the Baillie Gifford American Fund up 2.81%.
CHART OF THE LEGG MASON IF JAPAN EQUITY FUND
I’m currently just over 10% up on this fund, with just over £11k invested in it.
In percentage terms the Baillie Gifford American Fund is twice as profitable for me, being 20.3% up since I bought in. But my position at £6k is only half the size which is a shame. My view is that it would be stupid to chase the price and buy in no matter what, as sooner or later there will be a correction. I’ll buy more after the correction once momentum has re-started.
CHART OF THE BAILLIE GIFFORD AMERICAN FUND
The signal I’d look for to make a top up would be the price coming down through the green line (a two week moving average) and then rebounding back up.
However whilst there’s much for me to be happy about, its not all singing and dancing on the table with my portfolio. As you may remember I’ve been wittering on about the Neptune Emerging Markets Fund for a couple of weeks. It’s now got on my nerves.
Last week it looked as though it was going to claw its way out of danger, but sadly that hasn’t happened and its broken down through my stop loss.
CHART OF THE NEPTUNE EMERGING MARKETS FUND
For what its worth I think the price is likely to bounce off the low 160’s, but I don’t bet on what I think, I bet on what I see.
And what I see is a fund that’s broken down through my stop (the red line, a six week moving average) so it has to go.
As we sit this evening I’m a couple of hundred down on the deal, so not the end of the world even if I suffer a bit of slippage before my selling order goes through early next week.
This pending sale will take me down to about 83% invested, which is probably no bad thing as everywhere I look prices seem very toppy.
So for the coming week nothing to buy and just this one sale.
I have to say that I so much enjoy pitting my wits against some of the cleverest brains (and machines) in the world, which is what you do when you ‘play’ the markets. The quest to seek Financial Independence will continue next week
Fagin’s had a steady but still nicely profitable week. He opened a long position in Rolls Royce (RR.) on the 11th of May at £8.43p, sat watching it meander around for five weeks and closed out yesterday at £8.69p for a profit of £667 or 3.17%.
GRAPH OF ROLLS ROYCE GROUP PLC
Last Friday in my weekly and monthly review of the Great British Trade off I said that May (the month not Teresa) had gone too well. I asked the question, ‘As an investor seeking financial independence how can you have too good a month?’
The answer obviously is when the results are way over trend and a correction is not only overdue but extremely likely in normal circumstances.
Well what can I say? This week has been an absolute stonker for me, and I’m beginning to wonder if we are operating in abnormal rather than normal circumstances. My funds are spread around all over the world and 13 of the 15 I currently hold are up this week.
Now here’s a thought I’ve not seen or read anywhere else – are we experiencing a worldwide ‘Trump Bump’?
In the US the TRUMP BUMP (where US shares are at or around all time highs because of the President’s policies) is widely reported and very real. It’s irrelevant whether you like or loathe the guy, the fact is if you give business’s tax breaks share prices will rise. Simples. Is the same thing now happening over much of the world for a different reason?
As we all know the markets are forward looking, so tomorrow’s news is in today’s prices.
Have the markets begun to price in Trump pulling off a deal and bringing North Korea into the so called civilised world? You know what? I think they might have done.
I wrote a few weeks ago that I thought if he did strike a good deal the markets would run up strongly over the summer. Is this what’s now happening? or am I losing my mind?
Let me know what you think via our Twitter feed @britishtradeoff
Also on the subject of Twitter a shout out and big thank you to the 500 new followers we’ve gained in the last few weeks. We’ll try hard to make the stuff we tweet interesting, informative and relevant.
Oh well, but for whatever reason my funds are doing well.Really well. To be honest, as a momentum investor it doesn’t actually bother me why prices are going up, all I need to do is spot that they are and place my bets. My best performer is the Gam Star China Equity Fund up 3.1% this week.
The green circle shows where my system picked up on the rising momentum and when I placed my buying instructions. The other two China funds I bought at the same time are also doing extremely well. As are the Tech Funds and the US.
Last week I was fretting about the Neptune Emerging Markets Fund and reporting how close to the relegation zone it was. In the last couple of days of last week it dragged itself away from the wire and this week although its the fourth worst performer in my portfolio its still up. Almost 1% at.94% and is beginning to look a little safer. My £8k investment is all of £68 in profit. Wow.
I bang on about what goes up can come down and it sure can. But for now things are brilliant. In my drive to reach a financial independence with lots of noughts on the end things are looking good. My Great British Trade Off portfolio is up £1371, that’s 1.4% on the week and up £10274 that’s 11% since the start of our new competition year on April the 5th 2018.
Nothing to sell this week and nothing to buy either.
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.
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.
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.
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.
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).
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
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.
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.
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.
When we started this competition last year I had no idea there would be such a large winning margin between investor and trader.
To my mind 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 simply bought and held a few stocks such as KAZ, EVR and GAW instead of dipping in and out of them, I would have had a much better performance than I did.
However, I did not know what was going to happen next at the ‘hard right edge’ of the screen, so the above is easy to note with hindsight, and would I have been able to sit through the drawdowns? I doubt it.
My secret target known only to dear Humbug was to double my account in one year, I didn’t achieve this.
As it stood at the end of the first year in the Great British Trade Off competition, my account increased by 34.2% and I am 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 etc.
I also, as I’ve written about many times, underestimated my own psychological behaviour.
The only times I lost more than twice my risk were through poor decisions of my own making and these have a knock-on effect. My financial bank account is taking time to recover (I haven’t quite yet recovered the portfolio highs of last year), it is also taking time to recover my emotional bank account.
However, as I said I am very grateful for what I achieved and for the most part I stuck to a method that gave me my edge. Over the period 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 have learnt a lot through discussions and duelling with Humbug.
Of course it is made all the more 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, Fagin’s Gang member and GCSE maths daughter/compounding expert to tell me what it will mean at the end of the year (+ 79.6% / + 125.2% Ed). For me I will focus on the next trade, emotional serenity and risk/money management.
Month 1 2018 – so far I am 2.7% up with one more week to go!
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 +0.25% 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 +0.65%, 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.
It’s 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. It’s 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. Let’s hope he’s taken his medication and calms down for a bit.
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, it’s been a calm week for the index, after quite a lot of recent volatility.
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? It’s 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 it’s never an easy call. When they go through my stop it’s an automatic no-brainer, but here they’re both in the discretion zone.
The question is do I take the hit (it’s 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
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 he would have won 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 those kind of returns without taking the kind of stupid risks that can so easily blow up an account (i.e. betting a £1k a point on the Dow (DJI)) and given that I invest to be financially free and for my eventual retirement, that’s the last thing I would want to do.
The purpose of the GBTO was to establish, is trading more profitable than investing? And whilst one year isn’t a long enough period to be certain, 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 about one hour a week. So we are comparing what is almost a full time job to something that takes no time at all.
But regardless of that, with the kind of results Fagin’s been banging in month after month last year and so far this, if he keeps that up in the future the writing’s on the wall me thinks, trading is very likely to be more profitable than investing.
So if that is, or is becoming my view, and given that I’m trying to increase my wealth, why do I only want to be an investor, if trading IS likely to be the better vehicle to make money? The answer is complicated, after a health scare last year that proved to be nothing, I had a serious rethink about everything I was doing and how much time and effort it was taking me to do it.
There’s an old gag that the only free lunch in the stock market is diversification, it’s also very true that equity markets are volatile. Now that volatility can be a hugely powerful engine for profit if its judged correctly as Fagin demonstrated last year, but it can also shred your money if you get the wrong side of it, or your just plain unlucky.
For me, lunchtimes haven’t been as good since I stopped drinking, but even so I decided to take the free lunch that diversification offers and the bulk of my stock market monies from now on will only be invested in funds, thus spreading my risks far and wide, or sitting in cash in times of danger. Fagin will argue differently about the risk that is inherent in taking large positions in single stocks but I believe that by spreading risk all over the place on the one hand I’m unlikely to lose all my capital with a flash and a bang, the trade off is that I’m unlikely to generate the returns he does when his system is working well. 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 day’s time. I must say I learnt a lot of hard and expensive lessons from last year’s GBTO and am quietly hoping that that experience will stand me in good stead going forward and whilst I doubt I’ll win next year’s contest, 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.
Let’s look at some of those hard and expensive lessons that I trust I’ve learnt. By nature I’m a risk taker and a trader, so although I wanted to become an investor to give myself a calmer easier life, to begin with I found the different approach I needed to adopt was almost alien. My four biggest mistakes were:
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 much easier than taking the view over a number of months or years.
I believe that avoiding a capital loss is equally important for both a trader and an investor, but for any given share the stops need to be in very different places depending on your likely holding period. Early on in the GBTO my stops were too tight and I wasn’t allowing my positions enough room to ebb and flow, all too often I was tipped out of a trade that subsequently came good, then I did something equally stupid and made them too loose running up needless large loss’s as a consequence.
Companies will always put a spin on what they’re doing and will always present their figures in the way that suits them best.
Paul Scott of Stockopedia, Robbie Burns aka The Naked Trader and Fagin and my friendsTeresa Day and the Wheelie Dealer are all world class at drilling down into sets 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 and doing it makes me lose 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, very difficult I found. I had some successes but not enough of them.
I wasn’t consistent enough in my approach and I chopped and changed my ideas too often. I started the competition using the weekly signals generated by the system that Fagin and I used, allied to my own (inept) fundamental analysis as well as trying to balance and to some extent hedge the various positions, I wasn’t getting good results and started overriding my own rules. I wrote at the time that I fetched up with a camel when I’d been trying to design a horse.
The whole thing was way too complicated, too clever by half and just didn’t work for me.
But here’s the thing, in-spite of making numerous errors of judgement, sometimes investing in the wrong companies at the wrong time, changing systems as I went along, twice being hit with a profits warning and a couple of times just being unlucky nevertheless one year on, even after 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; let’s 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 suppose and imagine how much fun it could be watching Bitcoin run up to $19k before Christmas and deciding this is how to make your fortune as it goes to $50k.
You’ve not got any real money but you’ve got £20k on a subprime credit card at 29% APR and a spread betting account. The £600 or so in monthly fees and interest that the credit card is costing you is the least of your worries, the grown up problem is meeting the spread betting company in court to explain how you’re going to pay them the £200k plus costs that you owe them as instead of hitting $50k Bitcoin slumped to $8k.
Think I’m joking? Think again, this is the sort of scenario some guys have faced, having literally lost everything betting wildly on Bitcoin and indeed not just Bitcoin.
There are some very sad 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 fifteen years ago by Jonathan Maitland called ‘how to make your million from the internet (the diary of a share trader)’, recounting how he re-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 spread betting by other means, so all ended up well in the end. But it was one hell of a ride while it lasted. It’s 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 trader’s nous kept my losses under strict control enabling me to fight another day. Since October/November I’m solely invested in funds (with a safety position of cash), have an automated system for buying holding and selling in place that I did ten years of back testing on and follow without deviation and in-spite of the flash crash of February and the most recent decline things could be a lot worse, although the last month has been pretty grim.
March has been my worst month of the year by a wide margin, 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 it’s 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 holdings everything else fell back in value quite sharply, although only four of them have so far fallen down through my stop loss. 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. Going forward, my head’s in a calm good place and I’m confident my system will produce profits or keep me out of trouble once clear market direction comes back.
Finally Fagin and I have launched our own website, do check it out if you’d like to at www.seekingfinancialindependence.com