Thoughts of the Saltydog Investor

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

In the last few weeks I have had the almost unbearable desire to bail out of Western Stock market sectors.

A combination of the Brexit machinations, Mr Trump’s continuing unconstructive trade tariff utterances, the Developed World’s phenomenal debt, along with Mr Putin’s total disregard for International border niceties, in my mind all add up to an impending market disaster – the perfect storm!

‘I have had the almost unbearable desire to bail out of Western Stock market sectors’

Fortunately, as yet I have only taken partial action by halving my investments in Technology, Global, and dollar-based funds. I say fortunately because a glance at our Saltydog numbers still shows a slight lift in these sectors.

Admittedly it does seem to be up one week and then down the next, and appears to have a direct correlation to the sterling/dollar relationship. I do not hold U.K. or European sectors or the sectors in our Slow Ahead group. As a result, for the moment my cash holdings are steadily becoming the largest part of my portfolio.

I am not unhappy with this situation, just unsettled. I still believe in technology as one of the investment places for my money in the future, but maybe not that much at the moment.

Sciences are rushing forward at an uncontrolled rate and it is likely to produce some interesting moments in the next ten years. No one person can be an expert in everything: Artificial Intelligence, Robotics, Nanotechnology, Genetics etc-etc, and no one will be capable of connecting all the dots at the same time to see the developing big picture.

This will definitely be out of the scope of the world’s politicians. The question then will be, who will be able to absorb all the latest scientific discoveries and be able to predict how the global economy will look and work in the future? Who will apply the brakes? Now that is a big job!

The above does not mean that there is not a potential investment opportunity lurking around the corner.

I refer to the Asian economies.

China’s stock markets have taken an enormous hit over the last year falling by 20% to 25% and this has dragged down the Emerging Markets which rely on receiving work from China.

Australia is in a similar position since its economy relies on selling vast volumes of commodities such as coal and iron to China. India’s market has also been on the back foot for different reasons as Prime Minister Modi endeavours to reduce the corruption in industry and streamline and increase tax receipts.

China today still has annual growth rates of 6% that the West would love to experience. It also has a large well-educated young workforce and is slowly but surely arriving at the point that exporting to Europe and America becomes less essential as it becomes able to consume its own production.

India already sits in this position with low levels of exports to the West. The rest of the Asean countries will just cling onto the coat tails of these two mighty economies when they take off again. At this point it will really be a mighty self-contained trading block, and surely a good place to have some of your pension money.

The big question for me, is when to put my toe back into these Asean waters?

Whether to be the early bird or, what I would prefer as a momentum investor, be the second mouse.

Wearing my rose-tinted glasses I think that the Saltydog numbers are starting to indicate a reduction in the rate of fall of the Chinese markets.

The VinaCapital Vietnam Opportunities fund is a favourite of mine.  Before the Chinese fall it stood around 370p, then it fell to around 310p and is now back up at 345p.

This perhaps is also a positive indicator of investment sentiment. Still, for the moment I think I need more good news on the Chinese markets themselves, before heading for the cheese.

Douglas.

Founder & Chairman