Investment markets – Update on equity markets

I’ve just wasted 4 and a half hours of my professional life.  And £15.80.

The latter was the cost of a return train ticket to get to a conference on investing.  The former was the time travelling and the 10% of the 2 day seminar I listened to.

Before I get more into that, I last wrote about the S&P 500, specifically, in November 2013 and of Emerging Markets vis-a-vis Developed Markets in April 2014.

I’ve been saying for quite a while that the great S&P500 surge in 2013 (which I got wrong) maybe was dying and we may be seeing the end of the (now) 5 and a half year rise in the S&P.  I’ve also been wondering if one wants to invest in equities then perhaps look at EMs, which had crashed nominally and relatively.  Why invest in shares which were on a high?  Doesn’t make sense to me.  And yet most do that very thing.  It’s going up so it will go up.  Er…

Don’t get me wrong.  I’m all for following trends.  But nothing goes in one direction for ever and if there are reasons to be cautious or bearish so be it.

So what’s happened since November 2013?

spxThe market continued rising until September and indeed rose a further c 18% to its peak.

Of course, since the peak it has reversed somewhat sharply and stands now at just c 4% higher than the blog written 11 months ago.

Bear in mind I am writing (and thinking) for Sterling based investors.  The £:$ is at the same rate as last November.  So, the net result is, whatever has happened in between, the market is up by all of 4% – hardly powering ahead after 11 months.

The thing is I wrote about concerns and rising risks.  That the market rose a hefty 18% then gave almost all of it back sharply, that is the kind of capital risk I am ever watchful for.  Great, you made 18%.  Aren’t you amazing.  Have you held on to it?

Are you certain the market is pulling back just to go to the next higher high?

I am not so sure.

Note the price is lower than the August low.  If….big if… the next rise goes to a lower high then we will have a lower low AND a lower high AKA a downtrend…

The fact is, there are numerous markets’ issues going on – too many to relate here – that suggest this may be more than a small correction – that at least we may be looking at a 2011 20% fall scenario or maybe even the ending process of the 5 and a half year bull market which can lead to a 2008 – type collapse.

It is far too early to tell but the old adage is spot on:

The higher a market goes the more risk rises and the lower it goes the more risk falls.

One point I will make of my thinking last November is this:

The FTSE – as of now – peaked 17 MONTHS AGO.

ftseAnd the peak in May 2013 has been tested 4 times since.  Normally, we would say a Resistance (to the high) or a Support (to the low) tested so often will eventually break.  Well, it hasn’t yet and IS down 7% over 17 months.  Bullish behaviour?  No.

So what has all that to do with wasting time and money?

Well, 6 and a bit years ago in the Summer of 2008 I attended an investment conference at the invitation of a Sales Rep of an investment house by the name of Ashburton.  At this conference the Keynote speaker was Anatole Kaletsky, the great – in his own lunchtime – economist and S Times guru (beware of gurus) who told the assembled throng that, economically and markets-wise, all is well and we have nothing to be concerned about.

I duly raised my hand.  Er… aren’t the banks in difficulty?  Hasn’t Northern Rock gone under?  Hasn’t Bear Sterns (5th largest US inv bank IIRC) just gone bust – Feb or March 2008 – etc etc?  … which he will have known about and probably in detail.

Weeks later we had the biggest economic and financial bust IN HISTORY!

And this so-called economist told us not to be worried about stuff (that you don’t understand…).  After all ‘I’ am getting paid a lot of money to tell you to invest more in nice Ashburton’s funds.  No vested interest.  And I truly care about your clients’ pension funds…

NB.  None of our clients lost money in 2008…

So how did I waste time and money today?

1.  I went to the conference of the same sales rep but now with a new company by the name of Momentum.  I should have known better.

Look, as a wealth manager, I am often invited to seminars and conferences to learn about markets, economics and products.  Well, when I say learn… it’s a big sales job and I get that.

2. The first 2 presenters were top guys at JP Morgan and Deutsche bank.

… who both essentially said… nothing to worry about.  Not in those words but essentially.  I kid you not.  After 5 and a half years of a US equity bull market, DMs crashing, govt bond yields crashing (as I have been saying would happen since 2013 again and again and they’ve been saying they would soar…), US$ rising, inflation all over falling to multi year and record lows,  aggregate household earnings collapsing etc etc

And yet these guys who earn 00s of 000s of £££ per annum were telling us, essentially, nothing to be concerned about as investment managers/advisers.

The best one was ‘QE hasn’t worked so we need much much more of it’.  FFS!

You Couldn’t Make It Up.

Serves me right?  I should have known that the inviter would be bringing me to exactly the same as 2008.  But no.  Naive little me says to myself – I’ll see if anything’s different.  I’ll give him another chance.

So I sat through the 2 presentations till coffee and he came up to me, all public school affable etc (count your fingers JD).  After genial discourse I gave him feedback and said I wouldn’t be coming back next year as the presentations so far have been lousy (well my language was much coarser than that) and said why.  The presenters are from huge investment banks and they and central banks are terrified of deflation whereas I would love a lower cost of living and businesses would love lower costs.  In other words they were giving us the same tripe that helps them but not the economy nor investors.  And all the reasons why there needs to be more QE and inflation.

I then reminded him of the Kaletsky incident.  At which point he suggested I not remain.  i.e. F… OFF.  So I did.

I am reminded too, in May 2013, I went to an investment conference by the firm of which John Redwood IIRC is Chairman.  I took a friend/client with me.  The message was invest in UK shares as all the banks are much much healthier than 2008.

Yes, May 2013.  Look what has happened since then.

The point is the investment industry could care two hoots if you make or lose money.  They want you to invest with them and they get their fees.  More importantly, when they get to a big enough size they will sell the company to an even bigger company.  It’s a bit like Securitisation – receiving a capital sum for future client fees.

They do not have a wealth preservation mentality as we do.  They do not have a deep deep value philosophy ie searching for quality global assets that have collapsed in price, ideally, thus hugely reducing capital risk.  They just want your funds and they will then invest like everyone else does.  When it goes tits up they’ll say no-one could have foreseen it as they drive away in their Merc S classes.

Actually there are many who are decidedly uncomfortable with the Western Economy and the outlook.

Newly elected Douglas Carswell MP for one:

Telegraph – Douglas Carswell truly grasps the root of our malaise.  And there are many many others.  But you’d be hard pressed to see many of us in the media.  I wonder why that is…

To finish off, it wasn’t a TOTAL waste of time.  I did take away a pen and a highlighter which were in the goodie bag.  Like I need a new pen and a new highlighter!

Nothing in these articles can be taken as financial advice.  Neither Jonathan Davis nor Jonathan Davis Wealth Management will be held responsible for action taken or not taken from reading these articles.

We recommend investors seek bespoke advice before acting.

© 2014 Copyright Jonathan Davis – All Rights Reserved

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2 Responses to Investment markets – Update on equity markets

  1. Alan Mcnally says:

    Why oh why do we not hear more of you on the news. We need more people like you telling the truth. Superb article

    The only problem is, I live in Northern Ireland, god help us, I hear you say. We are about to fall off a financial cliff.

    Alan McNally Belfast

    Sent from my iPad

    >

    • Thx Alan

      The media want me as an oddity most of the time.
      When it all hits the fan I expect I’ll be wall to wall.

      They don;t really care if someone knows what they’re talking about. They just want someone to tell everyone all is well (smell the BS) and all will be well when it isn’t.

      On verra.

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