Michael Barry FCA MCSI

FRIDAY INVESTMENT TALK: USD INTEREST RATES, CURRENCIES, CHINA AND VIETNAM
This week we review how US real negative interest rates have pressured the USD while giving strength to the Euro and some emerging market currencies and sovereign debt. The Ruble has not benefitted from low US interest rates as oil supplies remain high amid the COVID demand destruction pandemic.

Friday Investment Talk: USD Interest Rates, Currencies, China and Vietnam - AVC Advisory This week we review how US real negative interest rates have pressured the USD while giving strength to the Euro and some emerging market currencies and sovereign debt. We look at commodities, FAANG stocks, china and even Vietnam.

Alan McGregor and Michael Barry were delighted to have had the chance to talk in interview with Andrey Movchan, of Movchans Group, and non-resident scholar at the Carnegie Institute.
Looking around us in the context of Covid-19, "the virus did not cause the crisis, human actions did," we explore what might be the consequences, the impact on innovation, the possibilities of inflation, the evolution of education as the world looks for ways to, "Make the Economy Great Again"

Andrey Movchan Interview - AVC Advisory AVC Advisory’s Alan McGregor and Michael Barry interview Andrey Movchan, an asset manager and non-resident scholar of the Carnegie Moscow Center.

Are markets overbought? The narrow bull market in FAANG and some other technology stocks has led to concern among analysts that stocks are out of sync with the economy. We explore how interest rate assumptions affect analyst pricing in discounted cash flow models and lead to inflated asset prices. A discussion of the opposite case – where inflation fears cause higher interest rates – reveals reasons to be concerned when COVID ends.

This week began a noticeable move from growth and momentum stocks to more value companies. Can that trend continue? We discuss if the healthcare and gold stocks will be the beneficiaries of this trend.

Seasonality is explored as investors head into the worse months of the year.

Video of another Friday Investment Talk on our blog

Friday Investment Talk: Valuations, Growth to Value Transition, Gold and Healthcare Stocks - AVC Advisory Are markets overbought? The narrow bull market in FAANG and some other technology stocks has led to concern among analysts that stocks are out of sync with the economy. We explore how interest rate assumptions affect analyst pricing in discounted cash flow models and lead to inflated asset prices. ....

Серебро зеленеет Цены обновили многомесячный максимум

Июль остается бычьим, так как низкие процентные ставки поддерживают доходность акций и рост золота.
Если цены на нефть останутся высокими, а цены на природный газ стабилизируются, Россию можно рассматривать в качестве возможности для получения высоких дивидендов. В докладе Merrill Lynch подчеркивается спрос на водородные топливные элементы, что поддерживает цены на природный газ (UNG).
Китай продолжает привлекать внимание в качестве очага технологий – даже с собственным производителем электромобилей – Nio, которого мы рассматривали в нашем аналитическом исследовании в начале 2019 года.
Речь в нашей пятничной инвестиционной беседе также шла об акциях компаний по производству полупроводников - AMD и Intel (INTC), а также круизных компаний Norwegian (NCLH), Royal Carribean (RL) и Carnival (CCL).

Friday Investment Talk: Gold, Interest Rates, Russia and Natural Gas, China, Fuel Cells and EVs - AVC Advisory July remains bullish as low interest rates fuel stock returns and gold gains. Russia can be viewed as a high dividend value opportunity if oil prices can remain elevated, and natural gas prices stabilize. A note from Merrill Lynch outlines the demand for hydrogen fuel cells that support natural gas....

Dear Friends, here's an email I received today from a Fund manager in London. I support his sentiments entirely, and even explain my occasional stubbornness.

"Dear Michael,

Terry wrote an article for the Financial Times in the UK this week on market timing which was published yesterday.

Financial Times
There are only two types of investors
Terry Smith
2nd July 2020

I last wrote about the problems of so-called market timing in these pages in 2013 (Market timing: don’t try this at home).

With the Covid-19 pandemic dominating the news and recent volatility on world stock markets, you may have heard a lot about market timing again.

Advisers and financial commentators will probably not use that actual term. What they will talk about is whether you should sell some or all of your equity investments because of the economic effects of the coronavirus and the subsequent effect on the markets.

All of this is what is termed “market timing” in the jargon of the investment trade — holding back investment or taking some or all of your money out of the market when you anticipate a fall.

The word “anticipate” indicates the first problem with this approach. Most people whom I encounter take their money out during or after a fall — as they did in March. They are doing the equivalent of driving whilst looking in the rear view mirror (or at best, out of the side window of the car). You need to look out of the windscreen in order to have the best chance of driving safely. The trouble with doing that in terms of the stock market is that the visibility is often so poor, it feels like driving in fog.

Such approaches to investment are almost all futile. Markets are second order systems. What this means is that in order to successfully implement such market timing strategies you not only have to be able to predict events — interest rate rises, wars, oil price shocks, the impact of the coronavirus, the outcome of elections and referendums — you also need to know what the market was expecting, how it will react and get your timing right. Tricky.

However, there are quite long periods when the market falls and takes a long time to regain previous highs. How shall we judge whether you should try to take advantage of this?

Take the market (in this case the Dow Jones Industrial Average Index — the Dow — which I will use because there is data on this strategy courtesy of YCharts) from 1970-2020. This is a period of 50 years which spans inflationary and deflationary cycles and which has seen several crises and crashes as well as bull markets. It seems like a long and fair sample period.

Imagine that over this 50-year period there were two competing investment strategies. One is to invest an equal amount every trading day throughout the period irrespective of market conditions — so-called pound (or dollar) cost averaging which many investors actually apply by making regular contributions into a pension, Isa or regular savings plan.

The other strategy requires enough foresight for the investor to invest the same amount daily, but to stop investing when the market turns down and save the cash. This money is only invested when the Dow makes a new bottom, hitting its low point in any period of decline (hence why it’s known as an “absolute bottom buying strategy”).

In my view, this is a somewhat more realistic example of how you might apply foresight, rather than measuring what would happen if you had such certainty about the future you were able to sell everything just before the market turned down and then buy it back at the bottom.

Over the 50-year period, the second strategy would have produced returns 22 per cent higher than the first. It sounds impressive — perhaps a little less so when you break it down to an 0.4 per cent outperformance per year. But think of the time and effort you would have to spend monitoring markets to get those calls just right.

Compare and contrast this with the rise in the market since I last wrote about this subject in March 2013. The Dow is up just over 150 per cent in total, averaging 13.3 per cent per annum. Imagine if you had acted on market fears and taken your money out of equities or stopped investing ahead of that performance. Should you risk foregoing any significant portion of that gain for a maximum upside of 0.4 per cent per year?

In reality, attempts to implement the second strategy will almost certainly cause harm to your net worth as nobody has perfect foresight. In your desire to time the markets, you will stop investing, or worse, sell and take money out when you expect the market to go down, and instead it goes up.

Think back to Brexit and Trump’s election. We were told by most commentators that they would not happen, but if they did, the markets would plunge. Not only were they wrong about the events but they were also wrong about the market’s reaction to events. The markets soared.

When it comes to so-called market timing there are only two sorts of people: those who can’t do it, and those who know they can’t do it. It’s safer and more profitable to be in the latter camp.

Terry Smith is the chief executive of Fundsmith LLP; the views expressed are personal




Kind regards,

Greville

Grev Ward
Fundsmith LLP

33 Cavendish Square, London, W1G 0PW

Fundsmith Equity Fund

No Fees for Performance
No Up Front Fees
No Nonsense
No Debt or Derivatives
No Shorting
No Market Timing
No Index Hugging
No Trading
No Hedging
"
https://www.fundsmith.co.uk/news/article/2020/07/02/financial-times---there-are-only-two-types-of-investors

For those thinking about decimated pensions and longer working lives, and looking outside the US for returns, the FTSE 100 is cheap (and pays proportionately sporting dividends, I would add).
Only three things are needed for the London market to recover:

1. A Brexit conclusion,
2. A recovery in the oil price,
3. A recovery in the British economy.

Easy-Peasy Lemon Squeezey.... is another thing they don’t teach you at Harvard Business School...

Alternatively, the compound annual returns on the works of Monet for the past decade or so have been around 13%.

London market left in shade as rivals zoom on The recovery of London’s stock market from the coronavirus sell-off is the weakest among its peers, with New York, Frankfurt and Tokyo surging ahead, figures show.One analyst described London as “the

Here's our Friday investment talk for the weekend of 12-14 June.
How to profit from fallen angels?
And cash and gold are the investing equivalent of wearing a mask and washing your hands...

Friday Investment Talk: Fallen Angels, Gold vs Miners, and Weak Seasonality - AVC Advisory AVC partners discuss corporate bonds from some surprising names now considered "Fallen Angels". Gold, inflation and the undervalued gold miners are discussed in relation to the current overbought market. Thursday's huge sell off is a set up for a last run of strength before real seasonal weakness se...

In another Friday's conversation, AVC partners discussed corporate bonds of some unexpected companies called "fallen angels". Gold, inflation and underrated gold mining companies are discussed due to the current overbought market.

Friday Investment Talk: Fallen Angels, Gold vs Miners, and Weak Seasonality - AVC Advisory AVC partners discuss corporate bonds from some surprising names now considered "Fallen Angels". Gold, inflation and the undervalued gold miners are discussed in relation to the current overbought market. Thursday's huge sell off is a set up for a last run of strength before real seasonal weakness se...