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01 February 2019UNCERTAINTY

1/02/19

Last month the major Indexes either declined a little more or held steady. Generally speaking the European Indexes are in Bear territory while the US indexes seem undecided. Indexes having generally fallen over the past 4 months and have become volatile which is not a good investing climate. There does not seem a clear global economic consensus going forward at the moment.

How do we pick shares in these markets? The answer is that we do not try. Instead we wait until the Indexes start telling us that they want to start moving upwards in a sustained manner, which in turn increases our probability of making successful investments. Strong sound companies, bought at a good price, in a rising market, equals probability on our side and not against us. It is difficult enough trying to find successful investments (just look at the abysmal performance of the funds that look after the money of most people) so we need to have a fair wind behind us to afford us the good prospects.

As has been said before, sometimes the most profitable strategy is staying in cash and doing nothing.

01 January 2019WHERE ARE THE MARKETS GOING?

The markets have continued to fall in the Month of December. A fair argument could be made that the Dax and the FTSE are in Bear territory already with the S & P 500 while lower than at the beginning of the year is coming up to a long term trendline. If this holds at around the current level the S & P should stay above Bear territory but if not the slide may continue. None of this is helped by geopolitical concerns in the major trading blocks of the world with a potential trade war with US and China and the UK leaving the Euro trading zone, and a falling oil price which should be good news in the face of any possible recessions but could also signify a looming drop in demand.

So, how should we view all of this? The answer might be with lot of care – certainly we are not going to rush into investing just right now (although the time could be getting close) as we wait for the markets to settle at these lower levels. The danger is trying to pick the bottom which is why we wait until the market starts to show its hand by trading either consistently up or side-ways in a channel.

May 2019 be for you as you might wish.

01 December 2018FINDING VALUE 1.

During November the Indexes continued their decline and the markets were volatile. Increasingly voices are being raised about the prospect of a “Bear” market which we have been talking about for a while. We are mostly in cash so now we can start looking for possible candidates as we wait for the market upturn which will eventually come.

First lets us look at Indices, no point in buying a share in your favourite Index if that index is showing down. As a rough guide you could look at the S & P 500 index as when it begins to rise sooner or later most other indexes will follow.

So what would constitute a rise in an Index from down to up? You could use a monthly moving average, or something like a Heiken-Ashi monthly bar colour change or an indicator like the monthly Coppock crossing zero on the way up. Anything that you are happy with to stop you trying to pick the market bottom.

Having established a plan for the Indexes we now need to start looking for shares that have value built it and that are strong cash generators. In other words strong companies that have currently a cheap share price. So what constitutes a cheap share price? A price that does not reflect the value of a company ie a price that does not carry much (if any) of a premium to the underlying asset value. To do this simply multiply the price with the number of shares on issue and compare the resulting figure with the total assset figure in the last balance sheet. You can search for such companies either in the financial press or by using specialist software that can be rented for a relatively small monthly outlay and which will do this for you. Now you will have a list of undervalued companies so the next step is to pick out the diamonds from the dross. We will begin to look at this next month.

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