Monday, 11 September 2017

What I did in my summer holidays

It's been a pretty dull summer, trading wise. I’ve been out of nearly everything speculative for the past couple of months having parked funds in what I thought would be really boring other funds. Rather than pick individual risks, why not basket them up in more capable hands and let them do the leg work. As I haven’t really had a clue towards any big direction either way in DM equity indices, I moved to divi/income funds whilst leaving my core positions in commodities and EM. Nothing really clever in the latter as I have owned them for ages, normally buying when people told me I shouldn’t.

Mean reversion has worked a treat and nothing in the last few years has dissuaded me from my normal contrarian investor plan of doing the opposite to what I’m told. Let's call it a 'teenage investment policy'.

Unfortunately, I didn’t take my own advice with the income fund, not really being too concerned about fine tuning so I dumped it into the broker's highly rated well known steady 'Woodford Income fund’. Well, that’ll teach me. Down 2.5% in no time, accompanied with apologies from the man himself for investing poorly. No, I invested poorly. So I am out of that and have been so peeved at such a well recommended ''safe as houses' fund such as his, can lose 2.5% in a couple of months in a steady market I might as well take my money out and do something fun and lose it myself.

First off - Short EURGBP. I know I've been trying to short it now and again and getting taken out on tight stops but now is the time for a bigger punt with a wider stop. Why? Narrative. I am not going to discuss Brexit here. I will, however, discuss why I am not going to discuss Brexit. Whatever is going to happen is going to happen. I, nor any other commentator, can change the outcome, despite many thinking they can. I am going to handle the issue as I do most crucial sports events by not watching it, instead I am just waiting for the result. The result is the important part not all the yelling and crying in the grandstands at the process that gets us there.

Hurricanes - There is a fashion to blame anything bad on things you don’t like, but the 'recency heuristic' has lulled everyone into a sense of security over hurricanes. We have just ended a very atypical 10yr run of low hurricane occurrence. These current ones are monsters and it is with great sadness I see what they have done to places I have fond memories of and to peoples who have never had much. But one thing that is sure is that there is going to be a lot of rebuilding going on and the Fed is unlikely to put up rates. Hurricanes are nature's Keynesian holes in the ground.
I would not be selling US equities in general on this.

Copper - You need it for rebuilding homes right? It’s a bit more complicated than that but the move up in copper came to an abrupt halt at the end of last week, said to be on the news that China imports were flat. It is more likely it fell because folks who don’t follow copper had just started following it because it had gone up a lot and had to get out before their mothers asked where the cash from their purses had gone.

But my attention is currently on the Tungsten market. Tungsten is rarely mentioned but it has gone up a lot (It is good for bullets and armour piercing weapons, but I'd rather say that demand is up for other reasons)

My attention is particularly piqued because during my latest batch of walking therapy on the UK’s wonderful Dartmoor I passed a mine. Not one of the hundreds of ancient tin mines that scar every brook, but the working Hemerdon Mine, that has been set up to extract tungsten from the world’s 4th biggest deposit of tungsten/tin. I was so impressed when I first heard about such a large deposit sitting in the UK I bought shares in the operator Wolf Minerals. These swiftly became bottom drawer investments as they dumped 85% on a combination of falling metal prices and poor extraction management. With tungsten prices exploding again I am just left with poor management, the ‘wrong type’ of ore grade and high debt. But the share price reflects all of that, even the Daily Telegraph isn't impressed .  So, in a typical contrarian way I have bought a lot more. If Mr Woodford can screw up a stable sensible fund, then throwing money at a bombed out stock that just needs a bit of time and luck as its product prices are roaring (but mostly unseen as tungsten prices aren’t that visible) is much more rewarding. And if it does bomb it's solely my fault.

But thank you, Bloomberg, for publishing this as I am writing

Oil - I'm still long the high leverage bombed out non-US producer stuff but have shifted some of that into US royalty owning trusts such as Permian and Dorchester. Without the leverage, they can last a dump better than the debt laden and should see a straight rise higher on an oil rally. I’m following Brent for the general direction of oil markets as WTI is too messed up by US weather/refinery issues.

EM - Still core long in the background on the simple premise that if someone is willing to do your job for less than you, you are screwed. Emerging markets are still hungry, whereas, judging by the bleating and moaning about everything from Developed Market twitter accounts, we just expect it all and when we aren’t given it, complain it's someone else’s fault.

Other trades out there? Probably the best one is to get a job that doesn't involve trading.

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