The Weekend Rebel Review – 9th, August 2024

Charles isn’t king, cash is.

This is just some thoughts, it isn't investment advice or incitement to buy in any way, just my views - please do your own thorough research. I’m not an analyst, I’m just a private investor looking after my own money. Nothing I do or say is meant as advice or should be taken as such. Here I publish my ideas and research that I have done and discuss the way I invest.  Anything written here needs to be verified for its accuracy. Assume any stock I write about I likely own, so my views are biased. Inevitably I will get things wrong, everyone is responsible for their own decision making and what they buy and sell. Subscribing and reading this article means you accept the above and you take full responsibility for your own actions and decisions. Small Cap stocks can be illiquid and very hard to sell at times when demand is weak so caution is required.Well that’s the election over at last but really it’s just the start. 

Risk has risen heavily over the past month and I have decided to act accordingly.

I posted last Friday on Twitter that I had gone heavily into cash, completely selling all my non ISA and non-pension holdings. I have sold my ISAs and pensions down heavily and that has left me just 15% invested (20% now having bought a small amount back). I still like all the companies I was holding, I just don’t like the market. I think if you make a decision that the market has changed then you need to act. I never fall in love with a stock, they don’t love you back, they are emotionless. I never did a Substack last weekend as I’d  spent late Thursday and all Friday selling down, there literally was no time, I was knackered and drained, especially watching all the shenanigans of the protests.  I had one snipe this week from someone asking why I waited till Monday to say I had sold, I never, I posted it on Twitter on Friday while selling, so it’s not Harry Hindsight after Japan.  Also punters can panic a bit when they read negative stuff and I didn’t want to put sleepless nights into the heads of people, who then do things they haven’t thought through on Monday morning.

What has happened recently isn’t my country. The violent riots, the police, and particularly the government and the main stream press.  So I can’t leave it alone, especially the Main Stream Press, they are not balanced in their coverage. So I apologise that the tweets have been a bit political the last two weeks rather than much share based stuff but sadly fairness and justice is in my DNA. I will try to read and not tweet (well not tweet as much). I ran my chatroom for 6 years, I think I had to remove 3 in all that time, anyone could have any opinion and there was nobody banned for their view, as much as often some requested me to do it.  I tried to play as fair as I could and believe I am very fair.  Sadly I just cannot sit by and watch the one sided Main Stream Media just show one side, that of the idiots that have been looting and damaging and threatening the mostly lovely, decent muslim community.  There is also another side and it isn’t being shown by main stream media.  All parties need to be honest.  With 750k migrants arriving each year and 250k houses being built, housing issues are just going to get worse as that’s enough to house migrants only.  Until we build 750k house a year or we reduce migration to sub 250k a year that circle won’t square and people will be angry that the homeless and their children cannot get homes.   We need migration, we are an aging population.  You need to have a plan, a control and accept a set number of migrants that can be housed while still providing new houses and infrastructure for existing young and homeless. Until politicians on both sides have honesty, we will be in a mess regarding housing and immigration in my opinion.

So onto why have I sold and why do I think the market has topped?  Well I’m not certain, you never can be, I’m reluctant to call it ‘the’ top, possibly just a short term top.  But I feel like I’ve been here before.  US jobs data weakening.  The Fed now seem to have a number of rate cuts being priced in – rate cuts that look like it’s because of a slowing economy.  Are they behind the curve? If they start to look like they are panic-cutting that will be a problem.  So it’s more a prudence thing, having seen the signs I am not keen to stay heavily invested  and then see the market dive and think ‘why didn’t I sell?’

Here’s the Russell 2000 – a 15% drop. You have to go back to Covid to see a drop that sharp and deep. But then again that may be an opportunity now.

Similar for the Dow Transport:

Look at Copper – in a bull market this should be heading north – I though we were going to be making all these EV’s, modernising the grid…..’there isn’t enough copper on the planet I was told.  Well Copper topped in May and has fallen ever since.

That’s not the look of a bull market chart.  It may be short term – here’s the10 year chart – I’m not staying fully invested to find out though:

Unemployment rising in the US and around the world and China still moribund.

Then Japan fell 12% at the weekend.  It was luck that I sold 75% of my holdings late Thurs and all-day Friday but obviously what jitters I was seeing possibly stemmed from what was about to happen.  This was because Japan raised rates by 0.25% instead of the 0.1% markets expected. This knackered the carry trade, where investors borrow in Yen at next to nothing then invest elsewhere with the money for a higher return, highly levered. Hedge funds and pensions scrambled to sell assets to cover obligations. How levered are these two groups?  If they are over levered there could be problems as they sell assets to raise cash.  It’s basically like a Liz Truss budget on steroids.  Most average investors take no notice and it may well just wash out ok but there’s a possibility a lot of dominos start to wobble.  It may have bounced a fair bit now but that fall shows weakness and fear out there. The Japan bank indicated they would like 1-2 more rises like that I heard - that would create a bit of insomnia for many. There’s a lot of counter party stuff that can get hit in these situations and many realise they were over leveraged and so you get selling into rallies. When a market falls like that, many private investors realise just how over invested they were and so they sell too imo. Why did Sunak go in July?  He is former G.Sachs – did he know the data was rolling over or would be here? Perhaps that’s being a bit paranoid. Most of the big market falls start from investors being over leveraged. World famous Bill Gross of Pimco, the bond company, tweeted this on Tuesday– worth noticing:

Bill would say that though, he’s a bond guy, he likes equity tops.

The £ is now starting to plunge as money leaves the UK as I said it would under Labour’s hideous plan – if they have a plan. The top on both of these charts are July 17^th, the day of the King’s Speech, so you know the likely trigger:

Notice the darkening of the line recently, that’s the change in volatility. Why would foreign investors want to invest in the UK and see any gains wiped out by the currency drop? Look back at the entire chart – do you see the fall and the volatility on the right is nowhere else on that chart?  Something big has changed on Labour’s election.  The big money in the UK leaving on fear of being taxed in my opinion.  Non-doms and the super wealthy starting to cash in before the budget?  That won’t be good.

Let’s park that and move onto the Middle East.  It looks like we might be close to an all out war brewing – what will that do to the markets, especially as our great new government has banned future North Sea exploration?  Is the market pricing this in? Great ah?  An oil producing nation and we are going to stop producing it and buy it from abroad, higher cost to buy it and loads more carbon burned to get it here.  Except there might not be any if the middle east kicks off. Solar and wind are all very well but they don’t work when sun doesn’t shine and wind doesn’t blow.  What if there was a coordinated attack on Israel by several countries surrounding them? The yanks would get involved and it could get very ugly.

And then we have the domestic situation. Two tier policing, rioting, real civil unrest. What is that doing to tourism, retail, pubs and bars, plus the middle east likely to damage travel? Do retailers sell stuff these days, or do they just open the doors and let people take what they like? What is the shrinkage like with that business model?

Then we have Rachael Reeves, upsetting the public by ending pensioner winter fuel allowance that keeps many warm, while giving £11bn billions away abroad in aid to help cool the planet – irony anyone? She’s saying they have found a £22bn black hole and so will be raising taxes and breaking a promise.  Now she wants to adjust the fiscal rules so she can borrow more, something Labour said it wouldn’t do before the election but are very good at, another promise being broke.  All of that and we go into a budget in September where she will likely hit investors one way or another.  What investor will ever trust them? Why will overseas investors want to invest here if their word means nothing? Investing has been done for centuries in the UK under the investor’s mantra – ‘my word is my bond’.  If one side lacks trust, investment weakens. If overseas investors get lucky and find a UK co out-performing they are going to give the profit back in the currency.

I am also seeing little snippets that tweak my nose, like Airbnb falling 14% on Tues after saying things are slowing. That’s how these declines take hold, they trigger sells in their sector and make investors cash in. XP Power trading update was pretty weak this week, another co that I have watched in the past for bottom and tops in the market. If shares are so cheap, where is all the director buying?  There is hardly any of it.

Is all of that priced in?  I don’t think so. But that doesn’t mean the market can’t keep going – the GDP data here has been much better, and if Labour do throw money around like a man with no arms then that may be a stimulus.

So sometimes you have to take a view.  The spike in the Vix, the falls in the Russell and Dow Transport might mean we are at the bottom in the US or a short term one.  I don’t care. I’m not giving back the 75% I have worked hard to make since the end of October.  If I’m wrong, I miss out on a bit more profit but I can buy back.  Investing for me is about making the maximum amount of profit for the maximum time. But that means realising when there is risk and not being over exposed at those times – avoiding losses is as important as making profits.

I would say gauge the market feel.  On Tuesday, after the big market fall – what was your reaction?

When the market fell on Monday did you think ‘I can’t wait to buy the dip in a lot of these stocks’?  Or did you think ‘when the shares rally I’m going to sell some into strength’ ?

Whatever you feel, the market likely feels too, along with other investors.  Institutions can’t ‘just sell’, they are too big, but they will likely trim.  It’s in the institutions interest to say ‘just hold on and ride it out’, that’s okay if the market only gives back 10-12% but if you have a big fall, how great do you feel about giving all your hard earned gains back?  And as a private investor your holdings are small in the bigger scale of things, it’s easy to bank some cash. So for me, that’s the way I deal with what might be a top if I am alert enough to spot it.  I think I’d feel comfortable 40% invested here so I will buy some bits back, lower than where I sold hopefully.  But for now I’d only buy back up to 40% invested.  As I get more confident I’ll increase – but a lot of these issues need to settle and especial watching leverage around the place.

I’ve tried to be balanced and not alarmist.  Part of the reason for not doing the Substack last week was so I don’t make people knee jerk, more time to think makes more rational decisions.

Watch the intraday charts. Bowls and rolling tops often tell you a lot intraday too.  This was Wednesday’s 250 up till lunchtime- it tells you the market is weakening – here’s Wednesday’s intraday chart – the opposite of a bowl:

Intraday charts tell you market mood – when they bowl through the day the market is usually positive, when they roll over like this, frequently, it’s negative imo.

So that’s what I have done. I’ve traded a couple of stocks in the fall but right now, that 20% odd is all CMCX, who tend to do well out of volatility and CAR, who are potentially crazy cheap, so my two highest ‘potential’ holdings, plus a few CRL that I bought, just small compared. I will keep watching the market and will decide when I should buy back but discipline is a fabulous asset that I lack a lot of at times.  I will gently nibble away buying back what I sold in small bits at lower than what I sold at where possible and have already, in most instances, when I feel the time is right.   But whatever I do I’ll be holding far more cash for some time.  That’s the plan, let’s see where we go.  I might be completely wrong but I don’t much care.  The market isn’t going to roar away and I’m not giving my hard earned gains back to the market – Rachael Reeves is going to take them off me instead 😊.

Up 75% in 9 months I am in the position now to just sit and watch and I might have more profit to give back than many.  What I have left in the market here is less than the profit I have made since January, it feels a great position to be in while this country goes through what I think will likely be a punishing political lesson – and let’s face it, Blair’s government was more Tory than Labour so I’m talking Callaghan and Healey in the 70’s – look it up if you aren’t over 60.

As I always say, don’t follow me blindly, I’m just posting what I have done as a diary.  You do your own research, you make your own buy and sell decisions as you know how comfortable you are sitting out falls in the market. I can sleep well at night too – there’s a lot to be said for sleep that I haven’t covered, it’s at a premium for me. If I lose out on a bit more profit for the sake of not giving back lots of my gains, I’m cool with that.

Buying and holding long term works. Institutions will tell you to sit and ride it long term.  But you have to know your fortitude.  During covid, the biggest selling was right at the bottom of the 40% fall – and most of the sellers there were those that had said they would just ride it out. You have to know your gut.  I don’t have the gut that having worked hard to make 75% in 9 months to then give huge chunks of it back.  Some of you may be made of tougher stuff. 

Here's Thursday’s VIX

A big spike shows a lot of fear in the market so that may indicate a bottom short term. That’s the good news.  The bad news is that trend of lower highs has broken out of the down trend and also  the 2022 high and the next resistance is 40. The break of that down trend of highs is the most negative thing there imo.

Fear/Greed at 18 is well into Extreme Fear so again, that may signify near a bottom, but big falls can get as low as 2-5.

That’s the best indication I have of where we are going I’m afraid but hope it helps.  I hope I have kept is balanced.  Have a good week ahead, whatever you personally do. Know your true risk and true potential reward.

As ever, I’m just a private investor, this is just my opinion, I am no analyst and this isn’t advise so you make your own decisions as I know you will.

Have a good, sunny weekend.

Sorry about the subscribe buttons in the middle, it wouldn’t let me delete.

Rebel.