ADVFN’SBERICHHowtomake25%ayearinvestingsensiblyin

shares–areal

timedemonstrationVolume1

ClemChambers

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ContentsIntroductionWelcometoClemChambers’PremiumBlogPrometheanWorldThePortfolioisUpandRunningMathsisMyFriendFCUK–SolidPickinDiceyWorldofRetailTheAgeofAquariusPlatinum

Aquarius–UpStrongSantaRallyBoostsPortfolio2012:AGoodYearForMadPuntingHowIInvestTheFiscalCliffandtheThreePerCentLiftMyLegacyPortfolioFlybeAddedtoPortfolioBanksBallistic:ShouldIBuyMore?PremiumPortfolioProgressReport

WatchingthePortfolio:PartTwoReviewingtheRestofthePremiumPortfolioTheDifferenceBetweenTradingandInvestingChangeisDueintheMarketAWaitingGamePortfolioUpdateAvocetMiningHasCrateredYenShootsUpANewStockforthePortfolio:VolexMarketDuetoMove–But

WhichWay?DowHitsAll-TimeHighDowBreaksItsRecordANewErainEquitiesTheMarketisPatchyWhoops!TrinityMirrorTakesaTumbleCyprusMadness,UKSanityCupidCrashedButIDidn’tBuyJapanWillCauseEquityMarketstoRocketWhyGoldisDownYouNeedanInvestmentPlan

WillTherebeaMayCrash?TimingtheMarketHappyDaysinTokyoJapanCrashesBuyingSmallCapStocksBuyinginMayIsItTimeToSell?FirstGroupSharePriceMakesNoSenseSellinMay...InvestingHurtsBuyingaBoringShareWhyYouShouldDiversifyThePortfoliosAreRallying

BoringisGoodTryingtoSeetheFutureBarclaysRightsIssue–NotMuchElseHappeningFreudianInvestingPrometheanSlumps–IWasRightNottoBuyDegeneratePuntingAccountAddingtothePortfolioANobleInvestmentSpecimenPortfolioRecoversLostGroundPortfolioRallyisExhilaratingInvestorsCan’tBeFortune

TellersGoingBananasMomentaryProfitNearlyOutoftheSummerLullPortfolioinProfit–Just!SongbirdAddedtoPortfolioSongbird–GoingforaSongBuyingStockBrokersPortfolioinProfitMarketRunComestoanEndNewSubscribers:WelcomePreparingforaDropOutrageousSpreadStopsMe

BuyingTheMysticArtofInvestingTheMarketisFalling!It’saBearMarketAlbemarleandBondBouncingattheBottomUSDefault–Don’tPanic!MyBuyingIsOnHoldDefaultCrisisAverted–WeWereRightNottoPanicSpecimenPortfolioUpdateNewsflash:NorthamberTheFrustrationofBuyingNorthamber

PortfolioUpdateWhichWayistheMarketHeadingNow?InvestingisEasy–butDifficultFlybetotheMoonFlybe–TheMissingPostFlybe–It’sComplicatedPortfolioSuddenlyShowsaLossThankstoVolexDon’tBuyMiningShares.No,Really,Don’t!StatusUpdateBubblesaretheUltimate

HighRiskTradeTheMarketFeelsUnsteadyNotMuchActionRightNowDeadQuietDiversificationistheWaytoGoWhyBuyRSA?MayTheOddsEverBeInYourFavourI’veGotthePortfolioBluesWhyAnOfflineBrokerCanPayHowWillTaperingAffectEquities?

OurFirstSaleSharesThatPayDividendsWe’reInTheMoneyWhyWeHoldFirstGroupPortfolioUpTodayInvestingIsLikeGardeningTheMarketisinaCorrectionTheDiversificationRuleDon’tPanic!TheArtofDoingNothingWhyIamDabblinginGoldStopPress:PetropavlovskBuyingGoldThePortfoliosareStrong

SmallCapSpreadsareaDisgracePrometheanandFlybeFlybeRightsIssueGivesUsaGoodProfitBuyingaHedgeFundManGroupBringsProfitsReadingtheChartsGoingBananas:FyffesTakeoverIsThataBananainYourPortfolio,orAreYouJustPleasedtoSeeMe?MorrisonsTakesaFallSo

I’veBoughtItTheMayDipIsComingBettingonLadbrokesEssenden,StillRighttobeWrongTidyingUptheLegacyPortfolioAGoodDayForThePortfolioTheSongbirdConnectionPortfolioSpringCleanContinuesNotBuyingGoldFastenYourSeatbelts...

PortfolioProfitsAquariusPlatinumRightsIssueShenanigansTheBearNecessitiesWelcome,NewSubscribersAstraZenecaSharePriceUp15%SercoSlumpShowstheImportanceofDiversificationTheDogsListofSharestoWatchWinningwithFrenchConnectionTakingaCrazyPunton

BarclaysTheMarketisFlatGoingBananasHereComestheSlumpAstraZenecaTakeoverOffTheAstraZenecaPunt:ResultsAreInSummerLullisNoFunOneWaytoPickStocksConclusionAbouttheAuthorAlsobyClemChambersfromADVFNBooks

IntroductionInvestingiseasy,orsoitseemswhenyouhavebeendoingitallyourlife.AsachildIwouldcycleaftermyfriendswhowerecoastinginaleisurelyfashionontheirwaytothenearestsweetshop.TheywouldbepullingawayanddisappearingoverthenextbrowasIwouldbepedallingashardasIcouldto

trytokeepup.Formeonmysmallbike,itwashard;forthem,olderandonbiggerbikes,itwaseasy.

Investingisthesame;it’seasywhenyouknowhowandhardwhenyoudon’t.

Foranewinvestor,“playing”thestockmarketcanbeahugeandoftencostlylearningcurve.Howtoclimbit?Thereisnosimpleanswer.Youcanreadbooks,butthatdoesn’tstartto

explainhowtheprocessworksinpractice.

Thisbooksetsouttotakeyouupthatmountain,atleastthefirstyearoftheclimb.

IhaveboughtandsoldsharessinceIwasalittlekid,mainlybecausetradingwasmyfather’s“game.”Ibought£20ofasharecalledMetramarandmyfatherdockedhalfmypocketmoneyforafullyear.Irecallatsomepointsellingand

receiving£100in£1notesandthrowingthemintheairinmybedroomtoseethemfallallaround.Imighthavebeeneightornine.Myfatherhadsuccessfullyimbuedtheideathatgoodthingscamefrombuyingandsellingshares,orattheveryleasttoysandtuckboughtautonomouslyfrommyownhard-woncapital.

Forme,thingsgotseriouswhenIstartedADVFN,now

oneoftheleadingglobaldestinationsforprivateinvestorslookingforthetoolstheyneedtoplaytheGameofMarkets.IdecidedtoputalargepercentageofmyliquidassetsintosharessothatIwouldbeontiptoeswhenwebuiltthesite,asIwouldhavealotof“skininthegame.”

Havingstartedoutintheearlycomputergamesindustrythenpivotedintomassivelymultiplayergames,

thestockmarketfeltquitefamiliar.ThestockmarketISamultiplayeronlinegame.Iappliedmyunderstandingofgamesdesignandgamesplayingtothemarket.

Thatsoundsgrand,butitisn’t.Gamesarelikemachines:cogsrotate,dialsturn,therearemovements,controls,obstaclesandgoals.SoIdugin.

TheseareafewkeypointsIfound.

Themarketpayspeoplefortheriskoffundingabusiness.Themarketisveryoftenefficientatsettingtheshareprice.Intheshorttermthemarketmovesrandomly.Toearnmorethantheaveragefromsharesyouneedtobuyandsellwhenotherpeopledonotwantto.

Toavoidbadluckyoumustdiversify.

Thestockmarketisafungame.Itisespeciallyfunbecauseyoucanmakelotsofmoneyfromit.Ifoundtheprocessveryenjoyable,ifalittleslow.Ialsodiscovered,likethekidsdisappearingoverthehill,itiseasy.MakingsolidreturnsfrominvestinginsharesISeasy.

Losingmoney,however,

isalsojustassimple.It’scalledtrading.Makingmoneytradingsharesisnearlyimpossible.(Donotforgetthis.)

Investingisnottrading.

Tradingisbuyingandsellingshareswithnobasistoknowiftheshareisgoingtogoupordown.

Let’slookatthatmoreclosely.Herearesomeofthe

thingsthatamountto,“Nobasistoknowiftheshareisgoingtogoupordown”:

Sharetips.Chartsanalysis.Newspaperarticlessayingacompanyisgood.Whatotherpeoplearedoing.Advice,evenfromrichpeople,especiallyfromyourbroker.

Howyoufeel.Newsheadlines.

...ThelistismuchlongerbutIwon’tboreyou.

Recall:Intheshorttermthemarketmovesrandomly.

Ifitdidn’t,moneywouldbesuckedfromthemarketlikebloodfromavirginbytradersandthemarketwoulddryup

anddie.Sotradingisa50/50betandyoulosethecostsofthegamble,untilyouhavenomoneyleft.

Investingisdifferent.Withinvestingyouhaveachecklistofattributesyouwantyourcompanytohaveandyoubuyabunchofthebestfits.Thischecklistisbestcloselyconnectedwiththefinancialstatusofthecompanywhichcanbeseeninitsfinancialreports.

Investorsarefinancialgold-diggersandtheyneedtocheckoutthefinancesoftheircompaniesbeforetheyfallinlove.

This,atleast,ishowIchoosetodoit.

Thechecklistislooselybasedaround“valueinvesting.”ThatisamethodofinvestingcreatedbyBenjaminGrahaminthe1950’s.Astudentofhis,WarrenBuffett,tookthese

ideasandmadehimselftherichestmanintheworld.Assuch,it’sagoodplacetobeginone’sinvestmenteducation.

Youcanlookatitthisway:

Ifacompanycanbeboughtforafewyears’worthofitsprofits,it’sprobablycheap.Checkitforcash;itshouldhaveenoughto

getby.Checktoseeifthedirectorsarebuying.They’renotstupid.Looktoseehowmuchitissellingasaratiotoitsshareprice.Salesaregood.Welikedividends.

Thereareapilemorethingstothinkabout,butlowP/E,fatdividends,directorsbuyingisprobablyalmost

enoughtogetavalueinvestortakingapinchintotheirportfolio.

Thenthereisamatterofbeingcontrarian.

Recall:Toearnmorethantheaveragefromsharesyouneedtobuyandsellwhenotherpeopledonotwantto.

Thisistheartofappearingfoolishandmakingmoney.

Peopleliketothink

themselvescontrarian,buttheyaren’t.Mostpeoplelikethecomfortofcrowds.ManchesterUnitedsupportersarelegion,becausetheywinandthehordesofredscarvesmakenormalpeoplewanttobuyintothemovement.Whetherpeopleareherdcreatureorpackanimals,fewwanttogowanderingaloneevenifthegrassislongerandthespoilsofsuccesstheirsalone.

However,ifyouwanttobuywheneveryonewantsoutandsellwheneveryonewantsin,youhavetobeoneofthosecranky,asocialpeoplethatdoesn’tcarewhatthegroup-thinksays.

Youdon’thavetobecontrariantobeavalueinvestor,butithelps,becausestocksgetcheapwhenpeopledon’twantthemandnotcheapwhenpeoplewanttobuythem.

Itendtobecontrarian,inthesamewayascatstendtoliketuna.Itworkswell.However,thatjusttellsyouaboutme,nothowtomakemoneyinshares.

Thekeyis,tobuildaportfolio.Thisinitselfisquitecontrarian.Youwillseelotsofpeoplesayitisasillyidea.ThosepeopleareIDIOTS,orcrooks,orboth.

(Thefinancialindustrydoesn’tmakemuchmoney

fromlongterminvestorswithportfolios.Whentheindustrydoesn’tmakemoneyoutofinvestors,youwillhearcriesof,“don’tinvestlikethat,”andwheretheindustrycoinsitfrominvestors,youwillhearallsortsofencouragementtocontinuetofilltheircofferswithsuchbehaviour.Wherethereareresourcestherearealwayspredators.)

Recall:Toavoidbadluckyoumustdiversify.

Aportfolioishowyoudiversify.

Headsortails.Luckcutsbothways.However,youcan’thavegoodluckwithoutbadandbadluckcantakeyououtofthegamecompletely.Therefore,IamacontrarianvalueinvestorthathasadiversifiedportfolioofUKvalueinvestments.This

workswellforme.SoIdecidedtostarta

premiumnewsletteronADVFN.

Why?FirstlyIgetpaidforit.I

likemoney,IlikeitnolessthemoreofitIget.Mybook101WaystoPickStockMarketWinnershasbeeninthetopofthestocksandshareschartsonAmazonforyearsnowanditoccurredtomeImightgetafew

subscribers,ifIdocumentedmyinvestmentsonADVFN.

ADVFNhasliterallymillionsofusersandmanyhaveheardofme.IwritealotofarticlesforthelikesofForbes,soitseemedlikeagoodideatoturnmyfulltimecuratingofADVFNandmyhusbandryofmyportfoliointoanewsletter.

Thegoalquicklybecameto:

Showanewinvestorhowtobuildaportfolioofinvestmentsbypracticalexample.Exposetherealitiesofinvestingincludingmistakes,costsandfailureswhileusingonlyforesight.Investlikeaverysmallprivateinvestorwithallthenastydis-economiesthatgowithit.Bebluntlyhonestand

trynottobeboring.

Sowhatfollowsisexactlywhathappenedwhenasuccessful,highlyinformed,financialguru(socalled)actuallystartsanewportfolioandbuildsitlikeasmallprivateinvestor.

Thisisthefirstyear(andabit),fromnothingtosomethingwithalltheupsanddownsanewinvestorwon’texpectbutwillcome

upagainst.It’sadiaryofmyprogress,aswritteninreal-timeasIboughtandsoldshares,fromthestartofthebloginDecember2012uptoMay2014.Theblogisstillgoingandifyousubscribeyou’llbeabletofollowmeinreal-timeasIcontinuetoworkontheportfolio(gotohttp://newsletters.advfn.com/clemchambers/–oryoucanwaituntilnextyeartobuythenextvolumeofBeRich!

IfIhadmadea“pigsear”ofit,thisbookwouldstillbeasolidandpracticallyfreeeducationininvestment,buthappilyIdidn’t.

Soreadonandseefirst-handandinrealtimehowyoucanbuildwealthinthestockmarket.Youwillseethat,intheend,itiseasyandthatperhapsitdoesn’ttakeagurutomakealotofmoneyfromthestockmarket,onlyaroadmap.

http://newsletters.advfn.com/

WelcometoClemChambers’PremiumBlog6December2012

Thisismyfirstpostonmypremiumblog.

Firstly,welcome.IamavalueinvestorandIamaportfoliobuilder.Iaimtogetreturnsofbetween15-25%andinthemainhit25%,thoughsomeyearscanbemuchbetter.Thisisahugeoutperformanceandstrictlyspeakingshouldnotbepossible.Perhapsthisisbecauseweliveinspecialtimes.

OccasionallyIleavethemarket–ithappenedthreetimesinthelasttenyears–andImightbeoutforsixmonths.Thiscouldprovetryingforanyofmyreadersbutwewilldealwiththatifandwhenithappens.

CurrentlyIamverybullishshortandlongterm,thoughthereisamediumtermquestionmarkasyoumightexpectinacyclicalandvolatilemarket.

Iholdmypositionsonaverageforaboutayear,butitcanbelongerorshorterdependingonperformance,eventsandnews.ThismeansIdon’tchurnmyinvestments,whichhelpsreturns.

IdonotoperatestoplossesasIhaveaportfolioanddonotneedto.Iwillletcompaniesgobustratherthansell.Ithappensbutitmakesnodifferencetoreturns.Iwillavailyouofsomeamusing

storieslateraboutwhystoplossesarenotyourfriend.

Ioftenaveragedown,butnevertotheextentofbecomingconcentrated.

ManypeoplewouldsuggestIamacontrarianinvestorandtheyareprobablyright.Bettingagainstthepackiswherethegreatreturnsare.IamalsocontrarianbecauseIbelieveintheefficientmarkethypothesisandIwillgoto

greatlengthstousethetheorytohighlighthowtouseitforprofit.Therearegreatprofitstobehadwhentheefficientmarketbreaksdownorgetsbent,becauseefficiencyisalwayspullingonpricestogetthembacktotherightlevel.

FromthisblogIwillstartanewportfolio,whichwillbeofmybuysandsellsfromhereonin.Theywillineffectbeacontinuationofmylatest

portfoliostartedlastNovemberwhichisnowuparidiculous45%.Hereisachartofitsperformancewhichisveryilluminating:

Youcanseehowthevolatilitydeclinesastheportfolioisbuilt.Itcontains32stocks.Youcanalsoseeitwentnowhereforthefirstsixmonths,whichwasincrediblyfrustrating.Itisnowofftothemoonwithplentyofupside.Therearethirteenlosersasoftodayintheportfolio.Therehavebeentensales,allwinners,representingabout15%ofthecurrentprofit.Therehasbeenabout2%

worthofdividendsintheretoo.

However,ineffectwewillbestartinganewportfolio,allthewhilecontinuingtheprocessIwillbefollowingformyself.IwilltellyouwhatandwhenIbuyandsellandmyreasoning.

Itisthetechniquethatyoushouldfocuson,ratherthanthestocksthemselves.WhatIthinkandwhatstocks

doarenotstronglylinked;itisthefinalprofitthatisthekeyandthatisdrivenbyinvestmentprinciples.

FirstlyIwillbebuyingin“clips.”Wewillcallaclip£3,000.Youcouldscalethatupordowntosuityourpocket.£1,000isthesmallestcomfortablenumber;anylessisnotgoodascostswilleatintoyourreturns.

Iwilltrackreturnsincludingtradingcostsand

spreads.Alongsidebuyingand

sellingIwillburbleonaboutmyopinionsonthecurrentmarketsandwhatisaffectingthem.AssuchyouwillseemyideasinadvanceofwhatIwriteforfolkslikeForbes,TheScotsman,MacFormatandGulfNews.

Pleasefeelfreetocommentandthrowinquestionsandideas.

PrometheanWorld11December2012

IhaveboughtanotherclipofPrometheanWorld(PRW)at16.5panditisnowasignificantpart(4-5%)ofmyportfolio.Iwouldbuymorebutthecompanyhasshown

nothingbutbadnewssinceitsfloatationinearly2010ataround200p.

Itcouldgobustwhichis,ofcourse,alwaysariskinacompanythathasfallen90%.Aspartofaportfolioitmakesperfectsense,butasastartingpointforaportfolioit’sahighriskcandidate.

However,youhavetostartsomewhere,soIamstartingthespecimenportfoliowiththispurchase.

Theportfoliowillbeseededwith£30,000ofcashandwillbebuiltoutasIbuyandsellinmyownportfolio.Aclipwillbe£1,000andwewillhave30stocks.

Initiallyasitbuildsreturnswillbevolatileandfragile.Iwilltrackitwithrealcostsandspreadssotheoutcomeistruetolife.

OutsideofmyportfoliosIhavewhatIcall“astupidpuntfund.”Thisisaspread

bettingaccountIhaveusedforR&Dpurposesforovertenyears.ItspurposewasoriginallytohelpmeunderstandwhatADVFNcustomersgothroughpuntinginaleveragedaccountonallsortsofwildbets.ItisimportantformeandADVFNtounderstandtheexperienceandtheoriginalthousandshaveebbedandflowedovertheyearsandtodaythebalancereacheda

highwatermarkofroughly100%profit,aftertenyearsofmessingaround.WhenTrinityMirrorwasabsolutelydownonitsluckIbought£150apointat26p,becauseIcouldn’ttakeanymoreonboardwithinmyrulesinmyproperaccount.Mymaximumlevelforaninitialpositionis10%ofthetotalportfolioandisararity.

Asluckwouldhaveit,itisnow95p.Isold£50at90p

andanother£50at95p.Thisisakindof“scratchinganitch”tosell,becauseIamnotthesorttoholdoutformassivewinsandfatprofits.Themainpositioninmyportfoliois100%upsoitismyinstincttosellwithasmile,eventhoughIbelievethereisfurthersignificantupside.SoI’veuploadedalittleinthe“puntaccount”toscratchthatitchandIwillsellthelast£50pieceat105p.

MeanwhileIshallgritmyteethonthemainpositionandtrytorunmyprofitstoalogicalexitpoint.

Itisgallingtoseecompaniesyousellrunon,ashasbeenthecasewithEnterpriseInns,butitmusthappenoverandoveragainbythelawsofprobability.However,overthelastfewyearsI’vebeentryingtoforcemyselftorunthewinnersfurther,yetgreedisnotmy

strongsuit.Inanyevent,thebull

marketcontinuesandthefirstentryintothetrialportfolioisinplace.

ThePortfolioisUpandRunning13December2012

TodayIsetupthemodelportfolioandenteredtheinitialinvestmentintoit.Ithighlightsseveralimportant

investmentissuesbutoneisimmediatelyapparent.

ThecostofownershipofPrometheanWorldis11%.Thereisofcoursestampdutyat0.5%.Thentherearebrokeragecharges,whichasIuseanoldfashionedvoicebrokercometoabout1%,butofevenmoreimportancethereisthebidofferspread.

Thebidofferspreadisthebestpartof10%.Thisisahighhurdletogetoverinany

investmentandwewillmeetfatspreadstimeandagain.

YouhavetobeverysureinbuyingastockwithsuchaspreadandIwillturnstocksawaysimplybecausethespreadistoobig.Tenpercentisaboutmylimitanditstillgrievesme.However,whenstocksareatrockbottom,theycanbeperverselyhardtobuyandsospreadsarewide.

Thekeyideaistoalwaysrememberthespreadona

stockisahiddencostandyoumustn’tforgetthatitcanbeanenormousimpedimenttoyourprofits.Youneedtojudgethesizeofthespreadandcheckwhetherit’ssensibletobuy.

Whenstocksareinanilliquidphase,especiallywhentheirpriceislow,thespreadsdogetlargeandwillshrinkifthesharerecoversandtradingpicksup.

However,themainreason

IhaveanoldstylevoicebrokerisIcangethimtocallamarketmakerandhaggle.Thisoftenpaysforitselfmanytimesoverbecauseadecentspreadpriceimprovementcanbehundredsofpoundsonsomestocksandeasilycovera0.75%commission.Onlinebrokingoffersnosuchflexibilityandcan,whenthemarketsgocrazy,simplybecomeunusable.

YoucanalsocallyourbrokerfromabusinKathmandu–somethingthatcan’tbesaidforanonlinebroker.Sosometimesoldisbetter.

MathsisMyFriend17December2012

Ilikemaths.Mathsisaveryimportanttoolformetolookatthemarkets.Take“gametheory”forexample.Thisisthemathsofgames,howgamesworkandwaystowin

andlose.Therearethreebasic

games:“positivesum,”“zerosum”and“negativesum.”Theonlygameyouwanttoplayispositivesum.Thisisagamewherethepotgrowswiththeplaying.Ifthepotisshrinking,ifyouplaylongenough,evenifyouaregoodatthegameyouwilllose.

Equitiesareapositivesumgamebecauseofeconomicgrowth,soit’sa

gameworthplaying.Thepotgrowsanywhere

between3-7%ayearonaveragedependingonwhosenumbersyouwanttouse.Thismeansyoushouldget3-7%profitonanaverageyearifyouboughtarandombalancedportfolioofequities.ItsmodernequivalentisanETF,whichmimicsthemarket.Somesaythisishowtoplayshares,justbuytheFTSE100ETFandletthe

positivesumgamedeliver.Howeverwewantabit

moreprofitsowearegoingtostockpick.

Thefirstthingtorealiseis,ifwespendmorethan7%investinginsharesayearwearenotgoingtomakemoney.Hencewearecarefulofthespreadsomeshareshave.Wearealsoshyofusingleverage,becauseoftenleveragecosts7%ayearininterest,ineffecteatingall

ourprofit.Bytradingslowlywehelp

capturethefullaverageprofitofferedbythemarketforplayingthestockmarketgame.Themorewetradethemoreofthisprofitwespend.Soslowandsteadyisthewaytogo.

Thisisoneofthereasonswearenotgoingtogethyperactiveorforthatmatterstartthispremiumblogwithacompletedspecimen

portfolio.Wearejustgoingtobuilditupovertimeanddiscussthemarketasthedayspass.

FridayIdumpedallmyleveragedbetsinmy“stupidpuntingaccount.”I’vemadeafatprofitthisyearthereandwiththefiscalclifflooming,leveragecanstripyoutothebonereallyquickly.Ihaven’tsoldanythinginmyportfoliobecauseunlevereditcansafelysailthroughallbutthe

nastieststormsandcomeoutoftheothersideunscathed.

Thatisthebeautyofaproperportfolio:youcanrunit,itdoesn’trunyou.

IhaveaddedVolexandAggrekkotomywatchlist.Notbuysyetbutontheradarforthefuture.

FCUK–SolidPickinDiceyWorldofRetail19December2012

I’mprettybullishonFrenchConnection,whichI’vebuilt

apositionin.Itisn’tintheportfolioasI’monlyputtingmyfuturepositioninthatsopeoplereadingtheblogwhowishtoemulatetheprocesscanseetheresults.

At29pIseevaluebeyond40p,withupsidestothe60-80plevel.

Retailisofcoursetricky,butacompanywithprofitsandasnearenoughnodebtandafatcashbalanceareinadifferentworldfromthe

HMVsandGameGroups.Especiallyiftheyhaveabrand,somethingthefashionindustryhasinspades.IseemtobetheonlyonewhothoughtFrenchConnection’sFCUKideawasbrilliant.ForthelifeofmeIdon’tknowwhytheypulledtheplugonitallthoseyearsago,andInoticeit’sbackinevidence.

Fcukhasa5P/E,a5%divvy,£34millionofcash,amarketcapof£27mandnet

assetsof£75m.IlikethenumberssomuchIsecondsourcedthedata.Salesareroughlysixtimesmarketcap.Theonlythingnottoloveis,Ican’tfinddirectorsbuying.IftheydidIwouldbuyabitmore,toaddtoapositionwhichisapproximately2.5timesmynormalposition.

ThisisexactlythekindofstockIliketobuy.It’swhatpaysofftimeandagain.Cheap,unfashionable

companieswithsolidfundamentals.

InhappiertimesI’dbelookingtobuyAggrekkoforthedeadcatbounce,butnotthesedays.Sometimebetweentonightandtheweekendthecompanywilljump5%,butthesearenotthetimestotrade.

TheAgeofAquariusPlatinum19December2012

Japanisgoingtorocktheworld:inagoodway.AbewillmostlikelystriptheBankofJapanofits

independenceandreflate.Japan’seconomywillgoballisticandthiswilltriggeraglobalwithdrawalofcentralbankindependenceinthefirstworld.Thiswillinturnsettheprintingpresswhirring.

Thisisgreatnewsfortheemployedandbadnewsfortheretired.Goodnewsfortheyoungandbadnewsfortheold.Itisgoodnewsfortheprivatesectorandbadnewsforthepublicsector.Good

newsforequityholdersandbadnewsforbondholders.Sovereigndebtgetsshredded.

Soinanutshellaboomiscoming.However,itisstillawayaway.I’dliketothink2013butit’sprobably2014...even2015beforeitgetshotoreven2017/2018beforetimesareswinging.Howeverthegreatrecessionisdead,oratleasttheworseisover.Theonlywayisup.

Ofcourse,thatdoesn’t

meanitisn’tgrittyandhorriblenow.Itjustmeansthetrendisnowbullishuntilfurthernotice.

Thiswillbethebasicplankofmyinvestingnowforyearsunlesssomethingruinsthepicture,whichisalwaysapossibility.

TodayIboughtaunitofAquariusPlatinum(LSE:AQP).Idon’tlikeminers,becauseIdonottrustmanagementorthecountries

theydigin;however,Ican’tresistabargainandaspartofaportfolioyoucantakesillyriskstochasebigreturns.Ilovethischart:

Iwillbuystocksmakingthis

patternalldaylongifthefundamentalsaren’tshottopieces.

Asinglestockpicklikethiswouldbeverydicey,butas3%nowofmyportfolio,it’snotanissue.It’sslightlynon-optimaltobeintroducingthesepicksatthestartofourjourneybutitwillprovidearoughinitialride,whichwillbeinstructivetomany.Portfoliobuildingisalwaysrockyatthebeginningbutit

smoothsoutastheportfoliospreads.

Aquarius–Up20December2012

AquariusPlatinumshotupto55pafterIboughtit.Niceluck.

Thebuypriceofanyshareinthisportfolioconsistsofacommission,stampduty

andabrokerage“compliancecharge.”Calculatedona£1,000blockofstocktheaveragepricewas51.35p.Thenakedpricewas49.9pbutcostsarerealandanyperformancemustincludethemtobe“real.”

Prometheanwashorriblyexpensiveduetoitsterriblespread.However,weatethatonthebasisthatitsupsideismighty,ifithasone,andbecausebombedoutstocks

canbeimpossibletogetintoatadecentspreadsometimesandasaninvestoryoujusthavetojumponboardorbedamned.However,Ioftendon’tjumponboardifIcan’tgetsignificantimprovement,soexpecttoreadaboutthatinduecourse.

IdidaCNBCshowthismorningandsuggestedthefiscalcliffwouldbeagoodthingtofalloff.Butpeoplearetooscaredoftomorrowto

stopstoringupcatastropheinacoupleofyears.Totheactiveinvestor,however,itisanopportunityandwewillseehowthispansoutintheweekahead.

I’mitchingtobuymorestocksbutmakinghasteslowlyisthesensibleapproach.

StrongSantaRallyBoostsPortfolio24December2012

Theproto-portfolioisapparently5.17%upalready.Thisis,ofcourse,pureluckandalittlesilly.Aquarius

Platinumisup8.5%andPrometheanisalreadyoverits11%costhurdleand2%ahead.Allthisisatthebidandafterbuyingcosts.

Thisisnotskillandisofcourseverynicebutnonethelessnotwhataportfoliobuildingprocessisallabout.

WehavebeengettingaverystrongSantarallycreatedbyseveralfactorsbutthemainonebeingfunds

balancingtheirbooksandsomewouldsaypumpingthemforastrongyearfinish.Thisisallfunwhenit’sinyourfavourbutit’sjustanicesideshowinalong,oftenboring,journey.

Lastyearhadsixmonthsofreturnsbestconsideredlacklustre.OK,sotheportfoliowasup15%byaroundFebruarybutbyJuneitwasbacktosquareone,withhardlyahappyor

satisfactorymomentfromitsbirthinNovembertothen.Ifithadbeenapremiumserviceasubscriberwouldhaveverylikelybeenextremelyscepticalofwhatwasgoingtohappennext.

What’smore,therewaslittletosayexcept,IT’SAGRIMWORLD.Yetthisportfolioisnowuparidiculous50%,allcomingfromthelastsixmonths.

Patienceisavirtue.

Don’tbemisled.50%returninayearistoohigh.Thetargetis25%whichiswaytoomuchinmostpeople’sbooks.However,Icanusuallyhitthatnumberonaverage,with15%beingalowfloor.Ofcourse,thepastisnoguidetothefuture.

ThiskindofmassivealphaistheoreticallyimpossiblewhichisironicasI’manadherenttothetheory.Itisprobablybecause

followingtheideasofefficientmarkethypothesisissorarethatthemarkethasopportunities.Ifsomanyusethemarkettogamblethentherewillbeinefficienciestoprofitfrom.Longmaythatcontinue.

However,making5%aweekisnotgoingtohappenveryoftenandthingswillgoagainstus,getboringandtakedetermination,positivementalattitudeandgrit.

Meanwhile,however,wecandrinktothefatherofinvestmentgenius:luck.

2012:AGoodYearForMadPunting31December2012

SubscriberswillknowIhavewhatIcalla‘madpuntingaccount’whichIuseasanexperimentalaccountfor

wildlydangerousspeculation.Ithashadagreat2012,effectivelyup400%ontheyear.Butdon’tgetexcited,itisup100%intenyears,roughlytwicethereturninadecadethatmysafeboringportfoliohasmadesinceMay.

Youhavetorememberthatspreadbettingcancostyou7%ininterestcharges.Sowhenyouleverituptentimesthat’sa70%chargeon

yourcapital,ifnothinghappens.Obviouslyyouhopetoleverupyourprofitstoo,butbeating7%justtobreakevenistricky.Effectivelyintenyearsyougiveup100%worthofprofitjusttostandstill,1,000%ifyouareleveredup.Soifyouusespreadbettingtopuntindices,wherethespeculatorisluckytomakemorethanzilch,yourcapitalisdoomedprettyquickly.

Anyway,PaceandTNIinparticularandsomefortunatespeculationsdeliveredabigyearandIclosedthelottheFridaybeforeChristmasbecauseIcouldn’tbebotheredtocareaboutitandathumpingbigpotentialdumpcareofthefiscalcliff.Leveragemeansasmallmoveagainstyoucanbeafinancialavalanche,soyoushouldbeascaredrabbitwhenyouplaywithleverage.

ImissedoutonaniceNikkeiprofitbutImissedoutonaeuroloss.Moreimportantly,Icouldlookatthefatprofitlyingsafelyincashandrelax.

Ofcourse,youcan’tkeepagambleratbayforlong,soyesterdayIre-enteredtheNikkeilongandtodaytookcoupleofsmallpuntsonPetrofacandRIM.IlikethePetrofacSchlumbergertakeoverrumourandRIMisjustplaincheap.Ofcourse

ResearchinMotion,themakeroftheBlackberry,ishavingabadtimebutitsvaluationisdaft.$6billiondollarswinsyou$10billioninsales,abillioninEBITDAandover$2.5bnincashandequivalents.Meanwhile,adollarinApple’ssalesisworthperdollarofmarketcap,tentimesthatofRIM.Thatlooksbargainbasementtome.

Butallthispuntingisin

mycrashdummyaccount.It’snotaboutmakingmoney,it’saboutplayingaround.Thisiswhyitisseparatedfromthemasterportfolio,theonewearebuildinghere.

I’durgeanyofyouforcedto“trade,”toseparateyourtradingaccountfromyourinvestmentportfolio.Investingisnottrading.Whilepeopleliketothinkintermsoftrading,investingisaboutvalue,whiletradingis

aboutspeculation.Investingiseasy,tradingishard.Don’tmixthemup.

Why?Simply,itwillconfuseyou.Youmaybearubbishinvestorandagreattrader,orviceversa.Keeptheaccountsseparateandyouwilleasilyknowwhereyourstrengthslie.Mixthemupanditwillbeverytimeconsumingtopullthemapartagaintoknowwhatyoudidrightorwrong.

Inmyopinionyouwillclearlyseethatyoushouldinvesttobecomewealthyandyoushouldtradeforfun.Itislikehuntingforfoodandshootingclaypigeons.Theyhavedifferentpurposesandwhatismore,claypigeonpietastesterrible.

AsIwrite,theUSseemshighlylikelytotipoverthefiscalcliff.Myportfoliowilltakeahit,butIcan’ttimetheexitortheentrysoIwillride

itout.Iwillloaduponbuysifit’sabigdrop.

SoObamaandBoehner,bringiton!I’mreadyforsomeaction.

HowIInvest2January2013

Ithinkitisimportantforfollowersofthisblogtounderstandmycurrentinvestmentthesis.

Firstly,Ilikesharesbecauseitistheonlypositivesumgamethereis.Thismeansagameinwhichall

canwinbecausemoneyiscreatedbythegameitself,makingiteasiertowin.Thestockmarketislikelytheonlymarketgameyoucanwinasaplayer,thoughthehousewinsinallmarkets.That’sthebasicplatform:playawinninggame.

Thenextlayerofthethesis:efficientmarkethypothesis.Fromdaytoday,marketsareprettyrandomandveryefficient.Ifyoudoa

littlemathswiththeFTSEindexyoucanprovethisforyourself.Thereisatinynon-randomelementequaltothelongtermprofit.Thisisabout3-7%ayeardependingonhowyouwanttocalculateit.IfyouputalongtermmovingaverageontheFTSEyouwillseetherandomnessdisappearandalongterm“return”appearintheformofagentlyrisingcurve.

Randomnessmeansthere

isnorightorwrongtimetobuyperse;it’salljustaprocessofaverages.Youalreadyknowthetropes–winsomelosesome,swingsandroundabouts,eggsinonebasketetc.

Thelayerabovethisis:ValueInvesting.Buycheapstocksandsellthemwhentheyaren’tcheap.Idothisbyfollowingunpopularstocks,whichItrymybesttogetatrockbottom.Bycheckingout

theirbalancesheetandapplyingallsortsofrulesofthumbIendupwithaportfolioofcandidatesintheleast“realtrouble”,whichmeansthattheyareundervalued.Historyshowsusthatthesesharesgiveaprettygoodreturn;formesomewhereinthemid20%ayear,oftenmore.

Thelayerabovethisis:Macro.Thislayerstartsgettingintotherealmsof

speculation.Speculationisfascinatingbutitisalchemynotscience.Itcanbefluffynonsensethatmayormaynotaddthecheeseonthebreadandbutterofvalueinvesting.

Atpresentthemacrosituationmeansthatthefirstworldisgoingtodigitselfoutofdebtthroughinflation.Forme,thereisnootherplausiblepositiontoimagine,excepttobelievetheunsustainablelevelsofdebt

anddeficitaresustainable.EuropeandtheUSneed

tocuttheirdebtroughlyinhalf.Thatmeans7%inflationfortenyearsor10%inflationforsevenyearsor25%forthreeyears.

Shortly,(twotothreeyears)wewillsee+10%inflationforayearorfive.Thismightnotshowupintheofficialfiguresbutyouwillseeitin“hardasset”pricesand“hardpricedassets”like

haircuts,hotelroomsandotherserviceindustriesand,ofcourse,energyandutilities.

Togetcomplicatedforamoment,QEhasputalargeproportionofacountry’slongtermdebttowardstheshorttermend.TheUSwillsimplyturntheirshorttermdebtintocash(monetisation)asitcomesdueandthenboom!Wegetinflation.

Atsomepointinterest

rateswillshootupto5-10%andbondswillimplode.Iwouldguessthiswillbeanotherslowmotioncrisissotherewillbeplentyoftimetomovewhenthingsstarttogopearshapedbutitwillhaveabigeffectonequitiesandotherfixedassets.

Thethingtorememberisthepassivearetheonesthattakethebrunt,whiletheactivewilladaptandrideoutsuchdifficulties.Assuch,

readersofthisblogwillprobablybejustfine,eventhoughitwillofcoursebequitestressful,orasIusedtothink,fun.

Thekeytothemacroisnottobeabsolutelyright,butinsteadtobeonone’stoestotakeadvantageoftheopportunitiesandavoidthepitfalls.

Anyway,thatiswhereI’mcomingfromand2013couldbeahugeyearin

equities.Justsayingsowon’tmakeithappen,but1Januaryislookingveryniceindeed.

Meanwhile,myNikkeipuntpaidoffbigandIcloseditthismorningforwhatlookslikea3-4%profit.Ialwaystakeareallyfatprofitquicklybecauseprofit=squarerootoftime.Forthoseofyouwhoarenotmathematicallymindedyoucantakethisasmeaning“itdoeswelltocashoutquickifyouhititlucky”.

I’lllookattheNikkeiagaininadayortwoandprobablyruemysnapprofittake.Tradingreallyissillybutagain,itisfun.MyportfoliohasmademesixtimesmyNikkeipunttodaybutthequickprofitisfirstinmymind.

Thisiswhypeoplelosetheirshirttrading;itisnotaboutprofit,itisaboutadrenaline.

TheFiscalCliffandtheThreePerCentLift3January2013

Wehaven’tbuiltupmuchofaportfolioyet,whichisa

littlefrustratingbuthowitshouldbe.Hyperactivityisacostlybusinessininvesting,slowandsteadywinstherace.

Yesterdaywasspectacularasthe“fiscalcliff”downdraftlifted.Mylongtermportfoliotooka3%lift.AsabrokeratTSCTraderemarked,it’sgoodifyouarelongbeta,whichsuggestsmyportfolioisfullofrubbish.Irepliedit’sfullof“value”

whichisnotthesameatall.Betaisdefinedas

volatilityaroundthenorm;thismeansthatinarallyhighbetawillzipupmoreandinaslumpfallmore.It’satechnicalvaluederivedfromlookingatthechartofthepastandderivingitsjigglinessfromthedata.Themoreitjigglesthemorebetaithas.It’sthesizeofthejigglethatdefineswhetherit’shighbetaornot.The

moreitflailsaround,thehigherthebeta.

Betahasitsuses,butmystocksareoftenlowbetabecausetheyfelloffacliffandhavebeenlyingmotionlessforalongtime.Deadequalslowbeta.Somuchofmyportfoliohasbeenlowbeta.However,Iselectstocksontheirbalancesheetnottheirvolatilitysobetaisn’tabigfactor.InfactIliketobuyadeadstock

whenitstartsmarchingwithlowvolatilityupwards.Butthat’sanotherstory.

MeanwhileIboughtaclipofAvocetMining.It’sabitirritatingthatallthefirstthreestocksIhaveboughtintheportfolioareminers.Ihatethem!Butyoucan’tgoagainsttheflowofyoursystem.

InmyhistoricportfolioIonlyhavethreeoutofthirty-two.

MyLegacyPortfolio7January2013

Sothisismylegacyportfolio.AsIaddtoitIwillposthereandthebuywillbecomepartofthespecimenportfolio.Thebelowperformanceincludescostsandstampduty

andthesellpriceisatthebid.

ThefirstthingthatisclearisI’moverweightonTrinityMirror.Thisiscausedbyamixtureofgoinginheavyandbeingright.Ishouldlightenupandthiswillbeinthebackofmymindnow.

Sincethisportfoliowasstartedattheendof2011throughearly2012therehavebeenafewniceprofitstakenincludingPace,EnterpriseInns,PVCrystalox,CableandWireless,Mothercare,

Transense,RobertWisemanandaFindeltopslice.Manyhavezoomedonup.Profittakenisaboutequivalenttoa20%profitontheoriginalcapitalanddividendssofarabout3%.Thegrossprofitisabout56%,whichisahugeoutperformevenforme.

Itwilltakeahugeyearformetorepeatthisin2013andI’mnotexpectingit.I’maimingfor25%andnormallygetitbutI’mhappywith

anythingover15%.ThiswouldbeshootingforthemoonifIwasafundmanagerbutbeingbelowtheradarandnothavingtotakegiantpositionsisabigedgeininvesting.

Soonwardsandupwards!

FlybeAddedtoPortfolio11January2013

ItoppeduponFlybeinthelegacyportfoliotoday,sothatisanewentryintothe“getrichslow”portfolio.Beforeitgoesin,theportfolioisat10.5%profit.

Flybeisabetontherecovery.Aren’ttheyall.Airlinesdogobustonthestockmarket;infacttheygobustalot,buttheyalsodowellasyoucanseefromRyanairandEasyjet.

Thechartlooksgood.Ilikeitwhenstocksformasidewaysbaseatalowlevel.£36millioninmarketcapgetsyou£600minsales.Let’scallitas£1ofmarketcapgetsyou£20insales,

withEasyjetit’s£1to£1,BAY£1getsyou£2andinRyanair£1getsyou50pinsales.

Ofcourse,theycanalwaysdroplikearockagain,whichiswhyIoftentopupatlowerlevelsandbuildaconvictionpositionifIfeelthecompanyisworthyofit.

TrinityMirrorhadanRNStodaythatspikedthepriceto112p.ItisnowbelowtheopenasIwriteat98p.A

cynicwouldsaysomeonewantedanupdrafttogetoutonat100p.Anoptimistwillsaythecharthastofillthe112pgapnow,sothat’sgood!Idon’treallylikethiskindofweirdbehaviourbutI’llsititout.Ihadpromisedtosellsomeat£1butthatwasjustatargetalongtimeago.It’sbettertobepatient.

IsoldthelastofmyFindelyesterdayfromthelegacyportfolio.Itthenwent

up.That’slife.Ibagged110%orthereabouts.

ThemarketisfeelingabitsofternowandonthetradingsideIboughtsomeBarrickGoldwhichalsohasatightrange.Tightrangesaregoodbecausetheysay,“thiscompanyisstablypriced.”Afterstabilitycancomegrowth.Itishardtohavegrowthwithoutstabilityfirst.ButBarrickisjustcrazypunting,sonotpartofthe

portfolio.Iamalsokeentogolong

onNikkeibutI’llwaittillI’montherighttimezonenextweek.FranklyI’mfeelingalittleriskadversethisminuteandIcouldn’treallybemorelong.

BanksBallistic:ShouldIBuyMore?14January2013

OnthewaytotheADVFNUSoffice.Banksaregoing

ballisticandIwouldbuysomemorebutI’muptomyearsinbankssoI’mholdingoff.InsteadI’mtoppinguponFirstGroup,whichisthereforeanewentranttothemodelportfolio.It’slowP/Eandhighdividend.It’sabitlikebuyingabankreally,inanodd,recoveryplayway.

Addingnewstocksiskillingtheaveragereturnontheportfoliobutthat’sthewayitgoes–portfolio

buildingislikefarming.Currentlyweareplantingacrop.

Incrazypuntingland,RIMpuntisdoingwellcancellingoutthedamageontheHMVHollywoodorbustpunt.IreallylikeRIMasitsbusinessisstrong;it’sjustitsfuturethatcrushesitsvaluation.Classic!

PremiumPortfolioProgressReport22January2013

Thepremiumportfolioisdoingwelleventhoughithas

hadtojumpthehurdleofbuyingnewstocksthatdilutesthefatprofitsoftheearlybuys.

It’sfunny,butimagineyoubought2stocksandtheyhalved.Youwouldbenursinga50%loss.Nowbuyeightsharesofsaysuperbluecheapquality,henceyourcostsarelow.Nowyou’dbeshowingaportfoliolossof5%andovernightyouwouldn’tbelookingso

stupid.Sadlythisfacthasworked

inreverse.Ourearlyluckhasbeendilutedbyourrecentpurchases.Thiswillbethecaseforafairamountoftimeaswewillbebuildingforatleastayear,perhapsmore.

Howeverweareoverall3.68%upaftercostssinceroughlyamonthago.Sothatwouldbeover40%annualised.It’spossibletokeepthisupbutunlikely.

25%istheyearlytargetandthereisnotimingit.Arallyoracrashcanmessthenumbersuphorriblyintheshorttermastheabovesimplyshows,butastheweeksgobythetrendwillshowitself.

Sofarit’s:

Meanwhilethelegacyportfolioislookinglikethis:

Ithinkthisunderlineshowimportantpatienceisandhowdifficulttimingcanbe.

Anyway,backtoevaluatingthelegacyportfolio.Whatfollowisa

onelinertakeonthestatusquo.

Aga

Peopleareaddictedtothesestupidthings.Balancesheetstrong,nearhistoriclows.P/Eminimal.Value150-400p.84pnow.

AquariusPlatinum

Easy150ponthechart.Preciousmetalplay.Ifyoubelieveininflationyouhavetohavepreciousmetalexposure.Political/miningriskabigdowner,butmostpeoplelovethat.Couldgoto400pinaperfectworld.71pnowboughtat46pforthelegacyportfolioand51pforthespecimenportfolio.

Aviva

Creditcrunchsmashedinsurersjustlikebanks.Banksbackuptotheiroldhighs,ifnotkilledbythefall,eg:HSBC/Stan,likewiseinsurerswillgetthere.ThatmeanAVgoesfrom366pto600p-800ponefineday.Insurerveryunpopular,thesesentimentswillchangeespeciallyifassetinflationgetsunderway,especiallyinequities.Meanwhile7%dividend.

AvocetMining

Goldplayofcourse.Whatashaggydog.2P/E.Is65p,shouldbe150p.Ofcoursethecompanyhasdoneitselfover,butthatmakesitapuntonthemputtingthatright.Iwillbuymoreifittanksunlesssomethingawfulcausesit.ThechartislookingalittlewobblythoughtheChairmanhasboughtsomerecently.I

don’tlikeminersbutIdolikethiskindofopportunityandIdolikegold.Needtokeepabeadyeyeonnewsflow.

Avarae

I’mnon-execofthiscompany.ThedrawbackisIcanbuybutnotsellwithoutgrovellingapologiestotheboard.Thisisthereforealongtermhold.However,can’t

resist14.2pofassetsfor10.4p.Iknowtheinventoryandtheassetsaregolden.

Astrazenica

A6.6P/Ewitha5.8%dividend.It’sanobrainer.ThencomparewithGSK:http://uk.advfn.com/p.php?pid=uk_compare&btn=s_ok&symbol=LSE%3AAZN&s_ok=OK&symbol2=gsk

AZNhasmoresalesand

moreprofitandisworthhalf.

WillholduntiltheseratiosequaliseandtakethedivvywhileI’matit.Willofcoursescoreonageneralrally.

Barclays

Barclaysisanoldfriend.Saton72%profit.20%-50%upsideinitifconditionsremainstable.100%on

recovery.Stilllovingbanks.Scalebackaround100%onrecovery.Stilllovingbanks.Scalebackaround400pisanoptionifI’mfeelingcautious.

BankofIreland

Lovethisopportunity.IneffectIhaveboughtinaroundthepricetheUSrescuerspaid.Irelandiscomingbackquickandevenafterdilution

theupsideis100%.AfterallyoucanimagineWilburRossandcohavedonetheirduediligence.Aretheygoingtopuntthiskindofhugemoneyoutforlessthana100%upside?Willcrunchthenumbersagainat0.2c.

Cenkos

Hum..notsurewhyIholdthese.ProbablybecauseI

thinktheyareagreatbrokerandwillfightback.Notagoodenoughreasontoholdreallybuttheyarerallyingsotheygetthebenefitofthedoubtona“runprofits”kindofreasoning.Definitelyonthepotentialculllist.A2013rallywillofcoursebegoodforbusiness.Lookslikea100-110pselltarget.

Drax

Ican’tresist4.5P/Eand5%dividends.Shouldhavetoppedupthedaythissummeritgotkicked,butwastoobearishingeneralatthetime.Remainssleepingbeauty.Goodforaround700p.

....anothertenthumbnailsonWednesday.

WatchingthePortfolio:PartTwo23January2013

Itisgoodtorememberthatmyopinionsarenotirrefutable,invincible,incontrovertibleoreven

correct.LikeaworkmanIhaveasetoftoolsandwiththemIgetdowntothejobofselectingstocks.Thereisafairamountofbodgingtobedone.Stockpickingislikeplumbingnotcabinetmaking,thereisalotofbruteforceinvolved;itsimplydoesn’tneedtobeanyotherway.

Asawholethemarketisveryefficient,butincertainparticularinstancesitiswoeful.That’swhereIliketo

invest.That’swherethemoneyis.Likeallfatpickinggroundsonecanbelaidbackandevenlazy,becausethekeycallis,isthisapartofthemarketthatisbadlyserved,illunderstoodorsimplyneglectedforagoodreason?Ifitisyoucanlazilypicktheharvest.

Contrarianvalueinvestinghasbeenfatcitysinceitwasdiscoveredinthe1950s.Longmayitremain

so...

Dixons

Havedoneverywellonthis(+66%).Thechartlooksgreat.However,Dixonsisalamentableretailer.Itlookslike“thelastmanstanding”butistheresuchathinginitssegment?I’llletthemarkettellme.It’sgotastrongtrend.I’llfollowthat,ifit

breaksI’lldropit.It’sprobablygoodfor50pallbeingwellandmaybejustmaybe100pifsomethinggoodhappensliketheyfindaformatthatisn’tgenericrubbishyretailing.Itistheretobefound.Shopswillnotgoaway,walkintoanApplestoretoseethefuture.

JustnoticedDixonshavehadfatdirectorsbuys.Good.However,apethateofmineiswhengoodnewscomesout

aftercloseonFriday.ThisisbadIRandasignofweakcoordinationfrommanagement.PLCshaveadutytospreadgoodnewswithasmuchdiligenceasbad.

FrenchConnection

ThisisacompanywithgreatfundamentalshamperedbywhatIconsider“gauche”

management.That’snottosaytheyaren’tgoodatfashionretail,justthattheyareweakinthecitywalkpartoftheirjob.AperfectexampleofthatwasSlyBaily.ShewasgreatatherjobattheMirrorbutadisasterinthecity.FCUKseemtohavethatkindofthinggoingon.

Thisisa50p-100p-200pstockiftheycansortthemselvesout.Theyjustneedto“chinup,chestout.”

FirstGroup

It’shardtoresistasub5P/Eforacompanywith£6billioninsalesandasemi-monopoly.Itsdividendisfatevenifit’sfrozenorevencutback.Thestockfelllikeastonewhenitdidn’twinthepoisonedchaliceoftheGlasgowtoLondonroute.AproperP/Emeansthisshareisgoodfor300-400pfromitscurrentlevel.

FlybeGroup

Ilovethischart.Soitmightgodownheavilyagain,butfornowIlikethelookofthisbase.Twoyearsagothiscompanyfloatedat300p,it’snow49p.Sothequestionis,isthisadudoracomebackkid?Crudely,it’svaluedatabout33%ofBA’ssales(IAGasitisnow).IfIlookedatEasyJetthenumberwould

be1/20.Ofcourseasit’spricedfordoomitcouldverywellgobustliketheotherminorairlinesbutifitdoesn’tithasalargeupside.Notetomyself,keepaneyeonIAG,twicetheprofitofEasyJetsamemarketcap...andfourtimesthesales.

Goldplat

Agoldminerthatminesother

goldmines’rubbishforgoldandmakesgoodmoneydoingit.Crazyminingopportunitiesattached.Allminingisapunt,butthisisatthevalueendandwellpositionedtodowellifgoldtakesthenextlegup.Adarkhorseandalongtermoneatthat.Chartsaysit’satthebottomofitsexpectedchannelsoexpectabounce.Butat£20mmarketcapandsalesof£26m,couldgofarifanumberofwhat-ifspanned

out.

HomeRetail

Willseethisbackover200p.Giantsales.OKbalancesheet.Seemstobecrackingtheonlineretailproblem.Performingwell.Takeovertarget?Willgetakickupthepantsfromanyrecovery.Shouldbuymoreofthis...hum...

Hornby

Comingbackfromitspoornumbers,lookingfor100p.Solidbalancesheet.Killeddivvytobuildupcashwhichissensible.Nicedoublebottomchartpatternandahistoryof“zerotohero”sharepricemoves.Notgoingtodoublebutanicepotentialwinnerinanyevent.

Lamprell

Anothermess.Worth250pifthereisn’tsomethingterminalinthecupboard.You’dthinktherewaswhenthepricecollapsedearly2012,butitisstillinbusiness.Thisisnotasmallcompanywith£700mplusinsales.Thisisastraightrecoveryplay.Onthecuspofabigjumpordumpaccordingtothechart.Astockthat

needsafairamountofattentionasitsuffersfromafuturewithpoorvisibilityandcouldgobustunlikemuchintheportfolio.Noneofmystocksaresafebutwhentheygouptheyfly–that’sthetrade,Hollywoodorbust.

Lighthouse

Bigsales,greatcustomers,lowlyvalue.Toannoypeople

IaskwhatisthedifferencebetweenHargreavesLansdowneandLighthouse.Theanswerappearstobeafundplatform.Thereisofcoursetheissueofskillandvisionbutifyouwereablearyeyedalienthebigdifferenceyou’dnoteisthevaluationratios.TheIFArulechangeisthebigwhat-ifofcoursebuttheideaisthatabiggroupofcommissiondrivensalesmenwillfinda

way.Longshotwithbigupside.Closecallwithgoingprivatethough.Shouldbeontheiffylistreally.Howeverthisisnotcheapbecauseit’snotamess.(Thisiswhyareviewisgoodpractice,theworldchangesandgoodbuyscanlooklessgoodastimepasses.)

Lloyds

Ilovebanks.Lloydsisworth150pandwillhit100pifnothingkicksthemdownthestairs.Thechartlooksballisticsomakesagoodguide.At53pstillasnip.EndofPPIabonus.LikeBarclaysIlooktoHSBC/Stanasthebenchmark.

Part3tofollow.

ReviewingtheRestofthePremiumPortfolio25January2013

FirstlyIboughtsomeXeroxinmycrazypuntingfund.

TheRIMItookalittleofaweekortwobackhasexploded.Moreluckbutitdoesmeanthepuntingfundcontinuestoswell.ThisissimplyafunctionofabullmarketIsuspect.

However,meanwhileAppleimploded.ThisisstrangelysatisfyingthoughIwishholdersnoharm,becauseI’vebeenwritingformonthshowAppleisabubble.Ievendrewsome

chartsatChristmaspredictingexactlywhathashappened.YoucanseetheseonForbesifyouhaveamomenttogawp.

OK,thisnewsletterisnotaboutUSstockssobackatthelegacyportfolio...

Idon’tseemtomeetmanypeoplethathaveapracticalgraspofportfoliobuilding.Youneedtoworktowardsgetting30plusstocksintoyourinvestment

portfoliotogetthemagicworking.Thatseemslikeamountaintoclimbbutitisn’t.Itjusttakestime.

Tobuildupaportfolioiseasy,likegettingrich.It’sjustthetimeittakesthatistheissue.Ifyoudon’thaveaportfolioyouwillprobablynevermakeasixorsevenfigureshareportfolio.Youwillbestuckwithtradingandnevergettinganywhere.Oneyearyouwillbeageniusand

makealotthenthenextyouwillgetwipedout.That’swhyit’sworseifyoudon’tinvestwithaportfolio.

SoIhearbackfromalotofpeople,“WarrenBuffettsaysyouhavetoconcentrateonafewstocksyouknowaregood.”Myreplyis“really?”BerkshireHathawayishugelydiversified.Ifyoucountthecompaniesthatmakeuphisnetworthit’swellover30.

Portfoliosareunpopular

withinvestorsandtheindustrybecausetheyareboring.Brokersdon’tlikethembecausetheownerwillbeaslowboringcustomer,thatdoesn’tringthemonceadaytothrashtheirstockaroundandmakethemcommission.Thisisanotherreasontobecontrarian.

Alwaysbeverycautiouswhentheinvestmentindustryiswelcomingyouin.Alwaysthinkofthebanneroutside

theCityPokerroomoffQueenVictoriaStreet:“Beginnersalwayswelcome.”

Ifyougoaroundthecityandtalkaboutbuildingaportfolioofvalueinvestmentsyouwillfindyourselfnotthecentreofattention.Trytheprocessagaintalkingaboutcrazyminingstocksalmostboundtogobellyup.Suddenlyyouwillbepopular,aspopularasthemaninthebettingshoptalkingaboutthe

nextpotential100-1winner.Sohowtobuilda

portfolio.Firstlydon’tmakebig

positionsuntilyouhavebuiltto30stocks.Ifyouhaveagreatstockzoomingorcrashingdown,don’tplaywithit.Buyadifferentstockwithnewmoney.Ifastockdoublesandyousellit,buytwodifferentstocksnext.Getto30stocksbeforegettingclever.

Thenthinkaboutclips.Let’ssayit’s£1,000.Youhavesay£33,000nowinplay.

Nowyouhave£1,000and£2,000clipstoplaywith,oroneortwounits.Soifyouwantedtobuymoreofastockyouhad£1,000in,youcannowbuyonemoreclip.Likewiseifyouloveanopportunityyoucoulddiveinwithtwoclips.

Nowlet’ssayyouhave

£50,000,youcouldgoone,two,threeclips.Oneclipfornormalstocks,twoforterrificonesandamaxof£3,000inanything.

I’msureyouseehowitpansout.I’vegotfrom1to5:

1. Excitingbutwildlyrisky.

2. Slighthesitationduetotiming.

3. Normal.4. Ilikethisalotorhave

toppedup,2+2forexample.

5. Probablytoppeduptogethereorit’sredhot.

Then6to10I’vegotherebecausethisstockisaconvictionplay.I’veprobablytoppedupthreetimesmainlyonthedrop.Withthismodelyoucanstillendupwith50%ofyourcapitalintenofyourstocks.

Butthentherearethe

runningprofits.Don’tselluntilyoustarttosweat.Thenyoucantopslicebackifyouwishtoanallocationyoufeelcomfortablewithorjustsell.Ashareisapieceofpapernotapuppy.

Thepointisthatmostandhopefullyallthestocksyoupickareasideshowtotheportfolio.Theygiveyounotonlysafetybutcomfort.

Whenastockgetsoverweightthenyouneedto

watchitlikeahawk,apositionIhavewithtwostocks:LloydsandTrinityMirror.IcouldtopslicethembutI’mgoingtohangonandkeepaclosewatch.Meanwhile,whenIfindanotherstockIwillbuytwotothreeunitsofit.

LondonStockExchange

ThissectorisM&A-ville.ICE’stakeoverofNYSEisthelatestinstalmentofthissaga.SowhenIsawtheCEOoftheLSEinaFrenchmagazinepromotinghiswine,Ithought,WHY?LikeCincinnatuswouldheberetiringtohisfarmsoon?TenuousIknow,butifequitiescomebackintofashiontheLSE/ItalianBoursewillflourish,sothetakeoverideaisinforfree.

Pendragon

Cheapturnover,£3bnturnoverfor£300m.A5P/E.Meanwhilethecompanyisinbreakoutmode.30-100%upside.

Promethean

Wheretostartonthisone?AhightechcompanywithalowP/E,marketcap20%of

historicsales.Listedthreeyearsagoat200p,it’snow20p.Ifitdoesn’tgobust,whichshouldn’tbeonthecards,thenitmustdoubleatleast.

DownsidesareithasaVCbacker.VCsaretoxic.

Saleshavecollapsedbuttheyarestillbig,£123morthereabout.Thisisabitofamysterycompanyasthestorydoesn’treallypanoutinmyhead.However,ifthereisn’t

adeadelephantinthebasement,andtheremaybe,thishasgiantupside.ButIwouldnotbesurprisediftherewasn’tanastysurprisecomingup.It’sastraightbetontheoddsandexpectedreturns.

RBS

Niceupsideifthepoliticiansdon’tbringthehouse

crashingdown.Thelikelihoodofthatisdecreasing.UsingtheSTAN/HSBCbenchmarkitisaneasydoubler.

RDSA

Shell.7P/E,amarketcapof25%ofsales,a4.8%dividend.Nobrainer.UnlessIneedthemoneyforamuchbetterbet,thisisaperfectbit

ofstodgeformyportfolio.Imustownthisstock,thenumbersareperfect.

RM

WhenIwasakidIusedoneofthiscompany’scomputers.RMhasbeenoutoffashionforadecadeonthemarketbut150p-200pfeelsrighttomeforit.Itisnow76p.Publicsectorsuppliersaren’t

invogueandIsuspecttheeducationsectorisfurtheroutoffashion.Ithasa4%dividend.Moreimportantly,it’sbeencleaninghouse.

600Group

Boughtthissmallindustrialat11p,it’snearly13pnow,lookingfor20p.IthasturnedacornerandisnowinprofitafteraCEOchange.It’sa

smalldabble.Itseemstobeturningoutpositivenewssuggestingrenewedenergy.£40salesfor£11marketcap.Non-execboughtstock.Thecompanyisworthasmallposition.

SSE

Ihaveahistoryofbuyingthiscompany,wonderingwhyIhaveandsellingitagain.A

portfoliogivesyouleewayforthiskindofsillinessbecauseagainstthebigpicture,alittleinconsistencyisoflittleconsequence.OK,ithasa5.8%dividend.It’sastodgybigcaptogivesomegravitastomoreriskyportfoliomembers.It’sasteadyperformerandIhopeit’sinthetakeoverframeasabitofspice.TheCEOjustleftinahurrywhichcutmyoutstandingprofitoff.I

shouldreallysell,butthenI’drememberwhyit’sagoodpickandbuyagain.

TrinityMirror

Thishasbeenastar.I’mup118%onthisasIwriteandIwentfullycommittedbybuyingasitfell.Ithinkthishas150pinit,butIhavetobemindfulI’moverweightinthestock.I’mholdingfor

now.WhenitnearsanythinglikethevaluationmetrictoDMGTI’dsell,butit’sstillmilesfromthat.

RSMTenon

Thisisawildpunt.Accountantsshouldnotgobust,buttheydo.Ifthisdoesn’titshouldbealothigherthatthecurrentprices.Asplashofsharesisapunt

ontheobviousupside.

Tesco

Abluechipona10P/Ewitha4%dividend?Itshouldbe400p.Willsellitthere.

Thismightallseemperfunctoryanditis.Myfeelingis,themorecomplexargumentyouhavetomaketoownastock,theless

chanceyourthinkingiscorrect.Ifyouthinkit’sgolditisn’t,whenyouknowit’sgolditis.Itworksforgoldminersanditworksforme.

TheDifferenceBetweenTradingandInvesting30January2013

Thetroublewithproperinvestingisitcanbeboring,whichisoneofthereasonsIhaveacrazypuntingaccount.Ifyoupuntyouneedtokeepthatmoneyseparatefromyourinvestments.

Tradingandinvestingarenotthesame.Don’tmuddlethemup.Foronething,youcanbenchmarkyourprofitsquicklyifyoukeeptradingandinvestingindifferentaccounts.

TheonethingaboutinvestingisyouneedtokeeplookingforopportunitiesandontheweekendInoticedFordandGMwerebadlyoutofwhack.FordwasmuchmoreexpensivethanGM,sotheobviousideaistobuyGMandsellFordforalovelyhedgedposition.

InmycaseIwasn’tgoingforthehedge,IwasgoingtojumpintoGMinmypuntingfund.

Sohereisgoldenruleno874.Keepcheckingyourdata.

Whatdoyouknow,thedatawaswrong.GMandFordwerevaluedroughlythesamewhenyoufoundgooddata.SoIdidn’tbuyGM.

Ifyoucan,alwayscheckyourdata.Anaberrationisonlyanaberrationifthenumbersaretrue.

Investingcanbefulloffalsestartswhichiswhy

patienceanddiligenceisneeded.Investingisnothardinitsownright,butbeingpatientanddiligentseemstomanytoomuchtobear.

TodayacompanycalledTOYEwentmad,shootingup70%atonestage.Iusedtoownthisstockanddidwellinitbutit’sanotherlessonwaitingtobelearned.Isimplycouldn’tbuymuchofthisshare,itwasandisprettymuchcompletelyilliquidand

hasamassivelywidespread.Themarketwillalsorefusetosellyoumuchoranystock.

Forallintentsandpurposesyoucan’tinvestinasharelikethis,evenifit’sdirtcheap.OnthesurfaceTOYEstillisdirtcheap.However,ifyoubuyinitmightbeyearsuntilyoucansellout.Buyingasharelikethatisasnare.Toaddinsulttoinjuryitisveryhardtogetmuchofapositionevenifyouwantedit,which

inafunnywaywashowIsoldmyholding,by“crossingit”toaprivateinvestorbuildingupastake.

Saveyourselfthehassle,don’tbuyveryilliquidstockswithwidespreadsandnotradingvolume.It’stoomucheffort.

Meanwhile,ifyouwanttoconsideratradelikeFordshort,GMlong,lookatGSKandAZN.ThecorrectanswerislongAstraZenicaandshort

GSK,lookatthefundamentalsandseeifyouagree.

ChangeisDueintheMarket5February2013

Themarketfeelstoppyandtherearechangesintheworks.Afterrocketing,theeurosuddenlylookswobbly

again,withItaly,SpainandGreecelookingfragile.I’mprettysureallthisisnotbeingcausedbythevariousrationalisationsbythesocalledMSM(mainstreammedia.)

Firstlyitmustbeunderstoodthatthelevelofinsidertradingistitanic.Itisnotpeopleintheknow,it’sinstitutionsintheknow.ForexampleiftheUKAAAratinggotdowngradedinthe

nearfuture,youwouldknowthatsomeoneknewtheUKwaslinedupforthisandwasre-hedgingthemselves.

Politiciansareasleakyashell,sothoseneartothemwillgetthenoddays,evenweeks,beforetheoutsiders.Thisiswhyweasoutsidersneedamodeltonavigateby;wehavetoworkoutthebigpictureandpositionourselvesaheadoftheaction.Thisisnotashardasitseems

becausethosehandsthathavetakenmuchcontrolofthemarket,moveslowlyandonlywhennecessityabsolutelydemandsaction.

It’safinebalancebetweenacorrectionandahistoricbreakout.Acorrectionismostlikely,Ifeel.Thepoundactionistomeabitominous.ItsayssomethingiscomingbuttobehonestIdonotknowwhat.

Asinvestors,ninetimes

outoftenweshouldsittight.Thismakesforboringstockpickingbutweareinvestingnottrading.

PeopleseemtohaveforgottenaboutthefiscalcliffandtheUSdebtceilingcomingupsoon.Ifthiswasfixeditcouldcreatethatrally,ifitblowsupwewillgetthatcorrection.

I’mgropingforthebottomofsterling.Soundslikearudejokebutitistrue.

1.15couldbeit,butthat’saguess.

AWaitingGame7February2013

Sometimesyoujusthavetositandwait.IwouldlovetobuybutI’veboughtenoughandIwillwaitforthebreakoutwhichwillmeanahistoricneweradawns.Nice

thought,soprobablyweareinforacorrection.Sowithonlyfourstocksintheportfolionothingtoobadcanreallyhappen.

Meanwhilewearesatona7.4%profitor£380of£5,137ofstockaftercosts.Thisis,ofcourse,great.However,ifyoutipped£30,000intoyouraccountwhenwegotgoing,thenyouareonly1%up,aboutwhatyouwillgetinthebankina

yearifyoudidn’tlockitupforages.Henceifwecandothatallyearwewillbeveryhappy.

Butthat’snothowthingswork.Volatilityahead.

Theeuroisamessasisthepound.Theyen’sweaknessisballooningtheeuroastheeuroistheanti-yen.It’sacaseoftheyenbeingtheleastweakcurrency.Thisisnotreallyapositiontoinvestinasnot

onlyisithighlyvolatileandbasedonlotsofhiddenvariables,itisasemi-fixedgame.Itishoweverhardtositandwatchthesituationunfold,soIamlongsomeNikkei225.IfJapantakesofftheequityboomofthedecadewillbegin.Ifwecorrectfromhereitwilljustbedelayed.

Themainproblemisthattheabsolutelyobviousistakingsolongtounfold.Governmentsaresoslowand

hugethatit’seasytothinkthestorywillbetoldinmonthswhenitinfactwilltakeyears.Thisisanotherreasontotakeiteasy.

Getrichslowisthewaytogo.

PortfolioUpdate13February2013

ThelegacyportfoliohadagiantdayyesterdaywiththebanksrallyingandTrinityMirrorup7.5%.Themarketisstrugglingtobreakupintonewlevels.

Combined,thefivesharesintheportfolioaredoingfine.PrometheanandAquariusarethestars,up31%and37%.Avocetisthedogdown31%andFlybeandFirstGrouparetreadingwater.YesterdayBarclaysreleaseditsfiguresandfutureplansandthebanksralliedhard.Thisstuckabout1.5%ontothevalueoftheportfolioandasmuchagaincomingfromTrinityMirrorwithits7%pop.

Thisportfolioseemstobebreakingupaheadofamarketrally.

Itisalwayseasytotakeonfurtherriskafteragoodday,butthethingtodoistobedismissiveofgoodfortunesandkeepploddingon.IreallywanttobuyBankofIrelandbutwillwaitalittlebecauseIhaveenough/toomuchbankexposurealready.HoweveritmightfitinthenewportfoliobutbeforeI

decideI’mgoingtowait.Theprofittobemadewon’tgoanywhereasit’snotthestockthatmakesinvestormoney,it’sthemethod.

Ofcoursethisisallveryboringandyoumightthinkyoudidn’tsubscribetobebored.AstheportfolioisinprofitmorethanayearlysubscriptionafteronlyafewweeksIhopereaderscanstomachthecalm.

IaminTokyorightnow

andhavebeenlookingatastockcalled“Chiome”Biosciencewhichisasketchybiotech.AJapaneseprofessorhasjustwonaNobelPrizeforMedicineandbiotechsarerocking!Pitytheprivateinvestorspilingin.

We’veallseenthiswealthdeathtrapbefore!!!Uplikearocketanddownlikeastick.

Slowandsteadywinstherace.

Update:

AfterconsiderationIboughtaunitofBankofIreland.ItwillbegoodfortheportfoliotohavesomebankingexposureandtherecoverypotentialofIrelandisstartingtoshowthrough.

IlookedatBumiagainbutIseenothingbuttroublethereevenifthechartlooksgreat.Meanwhile,I’vebeen

lookingatAfricanBarrick.Wordsfailmeonthiscompany;whattheblazesisgoingonthere?SometimesthegoingsonatcompanieslikeAfricanBarrickandBumijustbeggarbelief.Stillit’sworthkeepingtabsonthemevenifonlytoseeperformancesthatshowthatnomatterhowmuchregulationthereisintheworldnothingwillstopinvestorsbeingleadamerry

dance.

AvocetMiningHasCratered14February2013

Avocet(LSE:AVM)hascrateredtoday.Thisiswhywehaveaportfolio.Ifyoudon’thaveaportfolioitis

thesekindsofeventsthatkillyou.Instead,ifyoudohaveaportfolio,youmerelyscowl.Aninvestorwhohadallhismoneyinthiscompanywouldnowbedown50%.Meanwhilewearestillamighty£7inprofitoverall,whichprobablystilloutperformsagiltsecurityonanannualbasis.

NormallyIwouldtopuponthiscompanyinthelegacyportfoliobutthisstoryistoo

shaggytogobigon.Thechartssaythiswasall

knowninJuly,perhapsevenobvioustosomeinJanuary2012.Thisisthetroublewithminers.Theyarenottransparent.Thisisakindwaytosaysomethingrude.

Itseemspossiblethattherewillnowbearightsissue,soifwetopupwewilldoitthen.

Thequestionthatneedstobeaskedishowthesegold

mineslosemoneywithgoldatrecordhighs.TheOccam’srazoranswerisofcourseunprintableforlegalreasons.However,it’shardtoknowhowthesethingswillpanout.Ibuyandholdandletthedogsgobustandtakeprofitswhentheyseemgoodandthecompanyisnolongercheap.Inayearthiscompanycouldbeapoundoritcouldbe10p.Itseemsoddtothereforeholdbutriskdoesequalreward

andforeveryonethatfailsmoresucceedandchoosingthewinneraheadoftimeappearsimpossible.

Ofcourse,it’salwayseasiertopredictthepast.

Whatdidtheannouncementsay?They’vegot1.2mouncesratherthan1.8minthegroundattheirInatareserve.Theyclaimtheyshoulddig100-135,000ayearat$1,100cost.Blah,blah,blah.Thebombistheir

statementthatthehedgingpositionwiththeirbankiscripplingthemandtheymighthavetodilutethroughanissueofshares.Astheyusedtosay,“Whatashower.”

Butit’sjustonecompanyintheportfolio,solifegoeson.Themorecompanieswehavethelessthisthingaffectsus.

Itremains,however,highlyannoying.

YenShootsUp18February2013

YenshotupovernightonthebasisthattheG20weren’tgoingtospankJapanfordevaluingitscurrency.Japanlookslikelytoleadthefirstrallyofthenewera–if

anotherasteroiddoesn’tspoilthepicture.

Itis,ofcourse,nerve-rackingsittingonaresistancelineonthecharts.Ifthemarketgoeshigher,especiallyinahurry,itwillbethestartinggunofanewlong-termera.Unsurprisingly,peoplefindthisunlikely.

InawayIdotoo,butIamsimplylookingattheindexesandtheirchartstell

thestorythatifwerallyfromhereanddon’tslump,somethingbigisunderway.

I’minnohurrytojumpinmorebecauseabreakoutwillbethebeginningofalongtermtrendwhichIcansitonforyears.Idon’tmindmissingafewpercenttoestablishitclearlyinmymind.IfthereisapullbackIwillbuy.Itisthatsimple.Headsbuy,tailsbuy.Itisjustamatteroftryingtotimeit.

Meanwhileitisfascinatingtowatchthepound.115totheeuroseemslikethelevelforarallybutwewillsee.

Tradingcurrencyisjustbackingrandompolitico-economists.Howrandomisthat!!!

ANewStockforthePortfolio:Volex19February2013

Anewstockfortheportfolio.Asthemarkethesitatesand

oscillatesatthetopofitslongtermchannelwecontinuetobuildtheportfolio.We’veaddedVolex.

Whenyoulookatthechartyouwillseeithastakenapounding.Thisisathemewewillbefollowingoverthelongterm.Watchangelsfallfromtheskyandbuythemwhentheylookliketheyaremakingacomeback.

Itcanbetoughaswehavequicklyfoundwith

Avocet.Someofthesedogswilldie.Somewilllookliketheyaredyingandcomeroaringback.Sometimeswewillgetthebottom,sometimeswewon’tevenbeclose.Overallwewilldowell.Itwilloftenfeelprettygrim,especiallywhenthemarkethasacorrection/crash.Wesimplyploughon.

Volexwasanoldfavouritealongtimeagoanditrocketed.Ithasnowfallen

backtoearth.However,thedirectorshavebeenpilinginandthatisalwaysasigntobuyacheapshare,becausedirectorsdon’tthrowbigchunksoftheircashdownthedrain.Infacttheydotheopposite,theyarecautiousbuyersoftheirownstockbecausenotonlydotheyknowwhereallthebadnewsisandareconstantlydealingwithit,theyarealsolockedintothestocktheybuy

becausetheyhavetosendoutanegativeRNSreleasewhentheycometotakeprofitsandthat’samostuncomfortablething.

InSeptembertheywere250pashareandtodaytheyopenedat120p.

Wenowhavesevensharesintheportfolioandwearestillacountrymilefromdiversification.AssuchtheP/Lwillshootallovertheplace,sometimesmakingus

lookclever,sometimesstupid.Tohavetakena71%hitonastockandstillonlybe5%downisagoodexampleofwhydiversificationissoimportant.

Promethean’sresultsaredueon27February,whichissuretobringchampagneorchagrin.

Investingissomuchnicerwhenyouhave30sharesintheportfolio.

MarketDuetoMove–ButWhichWay?25February2013

Themarketiswaitingforasignaltorallyhardorslump.Thejuryisoutastowhichway.

JapanhadamassiveMondayjump.TheideaisthatAbetheJapanesePMisseriousingettinginflationinthesystem.Themany-headeddeflationhydrathatistheBOJisacquiescing.ThatmeansahugeshotofQEinthearmoftheworldeconomy.

Atsomepointbondsaregoingtobuckleandinadvanceequitiesarerallying.13,000isonthecards.Weak

yen=marketrallyinJapanandtheworld.

MeanwhilebackinLondonthedaygotofftoanicestart.Thedowngradeshouldtriggerasterlingrallyastheinsidertraderstippedoffattheturnoftheyearcovertheirshorts.Iwillgolongthepoundinafewdaysoncetheideaisestablished.Ienteredat1.15totheeuroweeksbackandIamhappytobuyinonfurtherfallsif

theycome.Withthemarketdeciding

whethertorocketorcorrect,theonlythingtodoissitandwait.ThiswillproveboringandIwillbeforcedtowitteraboutsecondarymatterswhilewewait,hopingforopportunitiestocomeourway.

Thisisfarbetterthantradingone’sstomachliningawayandmuchcheaper.

DowHitsAll-TimeHigh5March2013

Itonlygoestoshowyoushouldn’tlistentothedoomandgloommerchantsinthemedia.Afterunendingbadnewssincethecrashof2008hereweareatanall-time

highontheDow.Moretocomenodoubt.

Meanwhileasthemainindicesrally,thesmallcapsandrecoveryplayshavebeen

struggling.Wearestillintheidiotcornerwiththeportfolioevenifitisupacoupleofpercenttoday.Whenthemainindicesareboomingitisoftenthecasethattheminorstockstakeabreather.

Themarketshavebeeninhibernationsincethenewyearasfarasvalueinvestinggoes,evenwhiletheDowhasbeenheadingupwardtobreakrecords.

SomeyounginvestorsI’m

helpinginJapanarewellaheadontheirinvestinginUKstocks,bringinginhugeprofits.However,thisispurelytheresultofthecollapseoftheyen.Currencycantotallymessupyourportfoliostrategyifyouarenotcareful,akeythingtobearinmindinUSstocks.OfcourseabunchofUSstockswouldhavedonewellbecauseofthefallingpound,butIfeelthepoundhashad

itsslumpandiswellsettorally.

SellinMayisstartingtoloomahead,ofcourse,butagainI’mnottoosureitwillprecipitateanexitformethisyear–unlike2010andforthatmatter2008.Butweshallsee.

Meanwhile,Ican’tgettooexcitedaboutnewstocks.Thatcanchangequickly,ofcourse,butfornowI’mholdingback.

DowBreaksItsRecord6March2013

TheDowisnowinnewterritory.TheFTSEisstill500pointsaway.

UndernormalcircumstancesIwouldincreasetheAvocetposition

butinthiscaseI’mnotgoingtodothat.ThismayturnoutwrongasholdingoffbuyingThomasCookwaswronglastyear.However,thereismethodtomydecision.

Firstly,whenacompanysays“......mayneedatsomepointandarethereforethinkingofconsideringxxxxx”itmeans“wewilldoxxxx.”ThereforeasfarasI’mconcernedAvocetwilldoamoneyraiseanditwillbeat

abigdiscountwithsignificantdilution.Assuchitisnotagoodideatobuybeforethisisannouncedevenifyouweregoingtobuymore.

Thesecondthingis,I’velosttrustinthemanagementandthereforewillnotgrowmypositioninanyevent.Ifthereareanynastysurpriseslikerestatementsofaccounts,Iwillconsiderexiting.

Ireallyshouldsteerclear

ofminesaltogetherbutit’shardtodoablanket.Theprevalenceofcrooksinminingispestilential.

ANewErainEquities7March2013

Astheyoungsterswouldsay:WTF.Indicesgowild.TheDownowhasnotechnicalresistance,onlysupport.All-timehighsareawildevent.Ithinkthisisverybullish.

I’vebeensayingforweeks,ifthemarketbreaksupfromherewehaveenteredaneweraforequities.Well,Ithinkwehaveenteredanewerainequities.ThisisinherentlyasillystatementtomakebutIfeelIneedtomakethebigcalls,becausethisblogisaboutinvestmentthinking,notaboutalwaysbeingright.It’saboutprofitsinthelongrun,notbeingrighttoday.

WhatInoticeis,thevalueendisnotrocketingwhilethebigcapindexis.

Whatdoesthismean?Itmeansthebigmoneyismovingintostocksobliviousofstockpicking.Itisaneventdrivenbymoneyflow.It’smoneyintostocks,probablyfrombonds.Thisisgreatbecausemoneyflowisthekeydriverofmarkets.Oncetheflockofmoneyhasflappedintothegameitthen

allocatesitselfatafinerresolutionsothatgoodsharesrisemorethanpoorvaluepropositions.ThinkofitasbuyingaFTSEETFnow,thenpickingstocksoverthenextthreemonthswhilesellingdowntheETFasyougo.

Sowhatwemaybeseeingismoneymovingfrombondsintoequitiesinadvanceofinterestraterisesayearoutfromnow.Ineffect,

weareseeingafinancialbeachheadbeingformed.ThiswilltrickledownlatertothesortofvaluestocksIinvestin.Risingtidesraiseallboatsandweareseeingthatrisingtidebegininearnest.

Theseralliesarealwaysabithair-raisingifyoutradetheindicesdirectlyandwhileindextradingisbetteravoidedIcan’tresist.I’vedoneprettywellontheNikkeibutIkeeptaking

profitsandhiding,soIhavedefinitelynotoptimisedmyprofits.Ihavegotperhaps60%oftherisefrom9,500.Butaprofitisaprofit.RightnowUK,JapanandUSlookliketheyaregoingtoexplodeupwards.However,thatisexactlyhowitfeelsatthetopofthemarketbutsometimesyoujustneedtogowithit.

Meanwhile,backatthespecimenportfolioweremaininthedumpswhilethelegacy

portfolioiseffectivelystuckgoingnowhere.

Avivajusttookakicktotheheadbecauseitsfatdividendhasbeenslashed.However,TrinityMirrorhashelpedperformance,butasawholetheportfolioisstuckinadaytodayrange.

IfI’mright,inafewweeksthisFTSE100rallywillfeedintotheportfolioanditwilltakeoff.

TheMarketisPatchy13March2013

Themarketgrindsupagainstheadwinds.It’sactuallyagoodsignwhenthemarketsneaksupbitbybit,butitdoesn’tfeelthatgreat.Themarketlooksonitswayto

7,000butwhilethetechnicallooksgreat,therideislaborious.

ItoppeduponFirstGroupyesterdayinthelegacyportfolio.Ididn’tputanymoreintothespecimenportfoliobecausewearebuildingitoutindepthratherthansize.Isaywearebuildingitout,butinfactwehaven’tboughtanythingrecently,justsatbackandwatchedabearruninitsfew

constituentsknockitdown.It’sbouncedalittlebutnothingtowritehomeabout.

Themarketisatbestpatchy.

Avocetisstillflatonitsbackandwewaitforwhatisalmostcertaintobeacashcallrightsissue.BankofIrelandisrallyinghardandAquariusPlatinumiscomingbackalittle.

I’vementionedbeforethatIamalmostallergicto

miningstocks,allthewhilewehavetwooutofsevenmembersinournascentportfolio.Youcan’tblanketbananything,butI’mtemptedtodoitformining.

Acoupleofdaysagotheun-spell-ableFinnishminerTalvivaaraannouncedarightsissue,effectivelyaskingtheshareholderstoponyupthewholevalueoftheircurrentstakeinthebusinessandatthesametimenukedthe

currentvalue.Howcouldthathappen?Onlyaminercouldgetawaywithit.Itislikereturninghometofindyourhouseburntdown,leavingyoujustyouroldgaragebehind,onlytobepresentedwiththebilltobuildanewonebythearsonist.

Granted,afewnon-miningcompaniespulledthistrickinthedepthofthecreditcrunch;3iandInchcapecometomind.However,thatwasin

thepitoffinancialcollapse.IfIwasashareholderI’d

befrothingatthemouth.Sothisiswhywewon’t

beseeingtoomanyminesintheportfolio.However,IlikegoldandIlovevaluesoitmaybehardtoresist.ThekeytominingstocksistorecalltheMarkTwainsaying,whichInamedmythrillerTheTwainMaximfor:“Amineisaholeinthegroundwithafoolatthebottomand

acrookatthetop.”Happilywedon’thold

Talvivaara.

Whoops!TrinityMirrorTakesaTumble14March2013

TrinityMirrorfelloutofbed.Theyearendreportwas

strongbutitappearedthattheinitialfallwasa“buyonrumoursellonfact”butthen...fouroftheirex-reportersgotarrestedintheongoingphonehackinginvestigation.Sofrom120plastnightthepriceisnow100p.

Iboughtsomeinmycrazypuntingfundat103.5.ThisisprobablytwodaystooearlybutIsimplyfeellikehavingmore.

ThecrazypuntingaccountislongBlackberry,Xerox,poundveuroandlongNikkei,BankofIrelandandPetrofac.Thesearealltradinglunacybutperformingwell.Sonowthereissomephonehackinginthere.

MeanwhileIwouldbuysomemoreVolexinthespecimenportfoliowereitnotforthefactweareindiversificationmode.Thatisfrustrating.

IboughtaclipofFirstGroupinthelegacyportfoliowhichcouldbesaidtobedoingwellwereitnotfortoday’sTrinityMirrordump.

AsIwrite,the100pstoplossesjustfiredandthepriceslumpedto96...ohtobeatrader.Nowthestopsaregone,upshegoesto102.Isowanttojumpinandplay,butthatisnotwheretherealmoneyis.Howevermuchitseemslikeitisintrading,the

millionsareininvesting.IsaythiswithgrittedteethasTNIhits102.75.That’s8%inminutes.

Youhavetolookaway.

CyprusMadness,UKSanity20March2013

AsCyprustottersonthebrinkofmeltdownthereareglimmersofgovernmentalsanityintheUK.Thisis

turningintoaninterestingweek.Themarketstillhasitsmotoron.

IhaveboughtaclipofCobham.It’sanicesolidpieceofFTSE100stodge.Thisisn’tastockthathasdonemuchintherallybutIfeelithasachunkofupsidepotential.Currentlythespecimenportfoliohasnothingbutexplosivecandidatesandthereneedstobesomesolidballast.

IoftenbuyShellforthis,butI’mstartingtofeelShellisjusttoobigtobebeautifulevenwithitsthumpingdividend.HoweverImightbuyasI’mtemptedtoaddsomeballastatthemomentingeneral.

TheCyprusmesshashadmemessingaroundinthepuntingfund.ItookprofitsoffmyswooningNikkeiandboughtgoldforafewhourstoclipalittleprofit.Iturned

completelyaroundontheNikkeiandboughtbackinforabiggerpositionthanI’dleft.Sillybutprofitable.ThemarketsaysCyprusisnobigdealnow.Why,Ican’timagine.Iremainshorteuro/poundevenifeurostrengthorratherlackofweaknesssaysCyprusisoflittlematter.Inanyevent,thelunaticsareinchargeoftheasylumwhichmakesithardonusall.

Meanwhilebackinthelegacyportfolio,TrinityMirror’sslumphurtbadly.A160%profitisnow100%.I’vegrownthepositioninmypuntingaccountasIbelieveinTNIat150p.Thetroublewithbeingoverweightisclearlyshowninthiswholeaffair.However,tobefrankI’mtryingtomodifymynormal“scaredyrabbit”stylewithincreasedaggressiononpositionsIfeelstronglyon.I

usedtosellata30%profitbutwhilethisisgreatdisciplineandsensibleandsafeitveryoftenleavesbigprofitsbehind.

MythoughtisthatweareatthebeginningofahugebullsoImustforcemyselftobegreedy.It’shardandunpleasantbutImustincreasemyaggressionwiththecircumstances.Offenseinabull,defenceinabear.

MeanwhileImustremind

myselfnottobuyaslumpingstockforthreedays.It’soverlyintricatebutstillthewaytoplayslumpingstockslikeTrinityMirror.However,that’sjustfiddlingonthemargins.Thekeyistobuycheapstocksandholdthemuntiltheyarenolongercheap.Ikeepremindingmyselfofthisanddoingsooverandoverdoesnoharm.

MeanwhilestampdutygoesonAIMstocks.Hurrah,

another0.5%profitperpositionforus.

CupidCrashedButIDidn’tBuy28March2013

MynaturalinstinctistobuybigsharecrashesandCupidcouldnothavebeenmorespectacular.Myphonewas

outtobuybutIstoppedmyself.

AcompanylikeCupidisaveryintangiblebusiness,unlikesayDeLaRuewhichIboughtintoorforthatmatterTrinityMirror.Buyingcrashesshouldbelimitedtocompanieswithmaterialbusinesses,oratleastthatshouldbeabigweighting.

Thenthereisamatterofbullorbearmarkets.Ifthemarketislookingbearish,the

topisnotatimetotakeonriskytrades,it’sthetimetogosilent.Riskon/riskoffisagoodmodel.Iamriskoffrightnow.Thiswasthesecondstrikeagainstit.

ThenofcourseitbouncedhighonMonday.However,youmakeyourcallsandyousticktothem.Beingrightforthewrongreasonisnouseatall,eventhoughitcanbegallingwhenyouthinkyouarewrongfortheright

reasons.Thegameofspeculation

isnotaboutbeingrightallthetime,it’saboutyourprofitsattheendoftheday.Muchbetterstilltonotevenplayandinsteadinvest.ThisisthemostsolidreasontoresistthetemptationsofthelikesofCupid.

TheMaycorrectionisaroundthecornerandwhetherthatiscausedbydevelopedworldrebalancing

orUSpensionrebalancingIstillthinkcautioniscalledfor.Whilesomanymarketsaretrappedinthissidewayschannelandsmallcapsaresuffering,thisisnotatimetobebrave.Tomorrowwillalwaysserveupanotheropportunity.

JapanWillCauseEquityMarketstoRocket5April2013

Japanhaskickedoffthenewglobaleconomicera,forreal.

Equitymarketswillrocket,especiallyinthedevelopedworld–butfirsttheMaycorrection???

CaughtbetweenScyllaandCharybdis.TheMaycorrectioniscloseandthebearmarketweareinisreal.However,weareontherimofamassivebullrun.Thisishorrible.Whowantstobuybeforea5-10%dipdueforthefirstweekinMay?Butequitiesareontheedgeof

explodingupwards.QEisabouttomorphintoQQEanditwilldrivevastpoolsofcapitalintoequities.(QQEiswhattheBOJhasnamedtheirprogram.WhatistheextraQ?Itisquality.Theyaregoingtolowerthequalityoftheyen.)

SoI’msatwaitingformid-Maytogetin.

Today’sBOEnewsspikedtheNikkeifrom12,200to13,000.TheBOJ’s

$1.5trillionreflationisamassivenews.Theyenfellfrom140tothepoundto146.TheNikkeiisheadedto16,000.

Therallyintheindexwe’vebeenseeinghasnotbeenpoppinginthelowerlevelsofthemarket.Thismeanstherallyisatechnicalmoneyflowrally.Thismeansmoneyfromotherplacesisbeingparkedinindexstocksforsafekeeping.Thereisno

stockpickinggoingon,nolinkagetothingslikeearningsandP/E,justaparkingofcapital.Thisisnotnecessarilybadbecauseifthismoneysticksaround,arbitragewillkickinanddragthenon-indexstuffupandmoneywillflowaroundandrebalancetheindexstocksbasedonstockpickingfundamentals.Butthistakestime.

Rightnowmarketfundamentalsaresecondary.

Themarketiscontrolledatapoliticallevelandiftheeconomyimprovesthatwillfallintotheeconomiclevelandfinally,sometimeinthelongterm,stockswillbebacktradingatthemarketlevel.However,fornowthebigpicturerevolvesaroundmovesliketheBOJ’sthisweekandtheEU’smovesonCypruslastweek.Japanissignallinganeweconomicrealityanditismonetisation.

SterilisationofnewmoneywaswhatQEdoes...QQEisgoodoldfashionedZimbabweanmoneyprinting.

However,Mayiscoming.Willwedodgethe1Maybullet?Itseemsunlikelybutpossible.Wearelong,afterall,butitseemssillytogoyetlongernow,notunlesssomethingamazingcropsupworthbuying.

Meanwhileit’samatterofsittingoutthisbearmarket

andwaitingforthemoneytoseepintotherealmarket.Whenitdoestherewillbeafatrally,butfornowwearegoingtohavetositandsuffer.

Thisisveryfrustrating.

WhyGoldisDown16April2013

Goldcrashesbecause...Themarketisupalotone

daybecauseQEisfailingsothereismoretocome.ThenextdaythemarketisupbecauseQEissucceedingso

theeconomyisbetter.IrememberacompanyI

ranwhosesharepricehadrocketedandweknewexactlywhyithadsuddenlyjumped.Ofallthestoriesandrumoursthatconsequentlyflewaboutnotonewasevenclosetotrue.Whatwasmoreinterestingwasthatnoonewouldbelievetherealreasonwhentold.

Ofcoursemathssaysthatthingslikegold’scrashcan

besimplyrandom.Itprobablyisn’tandthisiswhatIthinkitis.It’s...

...TheyearlyportfoliorebalancingoftheBRICs.BRICscountriesget1,000billionintradesurpluseveryyearandalotofitgoestogovernments,especiallynon-BRICArabstates.Youcan’tleavethismoneylyingaround,youhavetomanageit.Managinghundredsofmillionsisnoteasyandyou

canimaginethepoliticsthatgowiththatkindofprogress.

AssuchIbelievethebigportfoliochangesofatleastoneoftheseplayersgoesintoeffectaboutnoweveryyear.Youcanimaginetherebalancingprocesstakingthree-fourmonths.Imaginehowlongitwilltaketohaveallthemeetingstosetsuchaprocessup,alltherecommendationsfromthebankerstoconsider,allthe

spreadsheetstoporeover,thecodingoftradingenginestoexecutethenewallocationsandtradethemasefficientlyaspossible.Thensomeonehits‘return’onacomputerandoffthemulti-billion(trillion???)dollarprocessgoes.

Takealookatthestillproperlyunexplained‘flashcrash’of2010.I’vealwaysthoughtthatwasthefattestoffatfingersofalltime.Itwas

apparentlyjustanS&P500trade,butfunnilyenoughitshowedupinallthecommoditiesandcurrenciestoo.Ofcourse,allfinancialinstrumentsaretiedtogethersoyouwouldexpectthis,buttellinglytheyearlyslumphitthesamelimitsintheendastheephemeralflashcrash.Thisaclassicsignofalgotradingmalfunctionandlongtermtrajectorylimitsarereachedinm=minutes=1,

ratherthanM=Month=1.That’smainly

conjecture...buthereweareandgoldjustwentoffacliff.Assuchweneedtobewaryofthesummerslumpbeingnigh.Normallyitkicksoff1May.Itshouldcomeearlyaspeoplepre-emptit.Ifithappenswearegoingtobuythefallheavily.Ifitdoesn’twearegoingtostartbuyingonthethirdweekofMay.

Thisprocesswillkickoff,

butitdependsontheportfolioshiftastowhathappens.Ifit’sportfoliomoneytocomeoutofbondsintoequities,stocksmightexplode;butthat’salongshot.Thekeyprocesswillbehowmuchshiftingofresourceswilltherebebecausetheslumpiscausedbyone-waysuckingoutmarketliquidity.Pricesslumpbecausethemovehurtsmarketefficiencybecausethesizeoftheactionistoolarge

toeasilyswallow.Thatiswhywhenitendsthemarketsnapsback.

Itcould,ofcourse,justbefolksgoingonholiday,theold‘sellinMay’reason,butlet’sfaceit,Americansdon’tdothat,nordotheAsiannations.AssuchtheoutcomeofholidayfeverinEuropeshouldn’tbesodramatic.

Anyway,it’shere.Getyourmoneyreadytobuythedip.

YouNeedanInvestmentPlan23April2013

Youneedaplanwhenyouinvestandyouneedtouseittonavigatethemarkets.Thiscanbeveryfrustratingif,for

example,youdecidenottobuystockuntilthethirdweekinMay,asIhave.

Thelastcoupleofyearshavebeenverydifficultmarketstonavigatebecausetheyhavebeenwhat’sbestcalled‘stop/start.’Thefirsthalfoflastyearwasdead.Thesecondhalfoftheyearglorious.It’snotsurprisingbecausethemarketsarecarryingaheavyloadofgovernmentmanipulation.

Thistimeitisaconspiracy,andtheG20won’tsayitisn’tone.Governmentsarefirmlyindirectcontrolofthemarketsthroughfixingthemotherofallinstruments,interestrates.

Thegovernmentsofthedevelopedworldaretryinghardtosavetheir‘welfarestates.’Youcouldimaginethewelfaretheyaredefendingisthatoftheirbureaucratsbutultimately

whocares;thisblogisn’taboutpolitics,itisaboutinvesting.

Thesetupis,governmentsaregoingtotryandstretchoutreadjustmentinthehopegrowthwillcatchupwiththeirdeficitspending.Theywillkeepinterestratesartificiallylowtofundthemselvesandconfiscatethroughosmosisthemoneyofsaversthrough‘financialrepression.’

Itisgoingtobehorriblydrawnout.Withthemarketsdammedin,thingsmoveslowly.Recoveryisslow,readjustmentisslowandyawninglyobviousoutcomesaredelayedanddelayeduntilthedambursts.Damsdon’thavetoburst,buttheygenerallydoineconomics.

ImustsaythatInolongertrustofficialfiguresonGDP,inflationetc,sowearelefthavingtoestimatewhatis

reallygoingon.Foodisagoodbenchmark.Intheendthisisallaboutinflationandmoneysupply.

Wearelookingtorideopportunitieswherethereisfundamentaldisagreementoveroutcomes,sothepriceisdebateableuntilonesidewins.Wetrytobeontherightsideandgettheprize.

Thedebateis:inflationorno.

Inmyopinionthereis

stronginflationwhereChinaisn’tmakingthestuffinvolved:food,education,transport...youcancreateyourownlist.Thisiswhereweshouldconsiderbuyingassets.Takingsidesinthesedebatesiswherethereisplentyofmoneytobemade.Dividedopinionisthefundamentaldynamicbehindvalueinvesting.Theargumentgoes:

“Thisstockiswaytoo

cheap.”“Ohnoitisn’t.”“I’llbuysomethen.”It’sthatsimple.However,governments

andothersuchbubblescanfixpricesforalongtime.Onlywhenthegravityofrealitystrikesdoesthebubbleburst.

Meanwhilethemarketsareinhiatus.Ibelievewewillbreakoutupwardslaterintheyear,strongly,butnowisnot

thetimetoloadup.Waitingisapain!

WillTherebeaMayCrash?30April2013

Mayissoonuponusandthenwewillseeifthemarketswillcrashastheyhaveforthelastfewyears.Iftheydowewill

thenbuy,iftheydon’twewillstartbuying.It’sasimplestrategy...tryandmissalikelycorrection.

Afterthefirsttwoweeksisoverwewillbemovingintobuyingmode.ThiswillbeslowatfirstbecausethereisnorushandbecausemarketsworktotheirowntimescheduleandifthereisnocrashI’llstillbenervous.Wehaven’tcoveredourselvesinglorysofar,butthat’snot

surprisingorevenunexpected.

Thischartofthesmallcapindexisthebackgroundtothemarketwearein:

SofromMarchwe’vebeenin

astaticmarketandwe’vebeenfishinginthehighriskendabittoomuch.

TheeffectofAvocet’scollapsewillwashoutovertimeinthesamewayasifwehadabigwinner,butitdoesn’thelpnonetheless.Trickswithnumbersareacursebuthalfthepointofhavingabroadportfolioisthatitsmoothslumpsandbumps.

Solet’sperformatrick.

TomorrowI’llbuy30FTSEstocksatrandom.Nowourportfoliowillshowa3.5%lossoverall.Thatwillfeelandlookbetterbutitwillnotbeso.

NormallyIwouldbuyabigchunkofAvocet,butIcannotbringmyselfto.EvenwithoutthelatestsagasofENRCandBumiyoudon’thavetobetooparanoidtoseethattheminingsectorisrifewith,wellIcan’tusea

pertinentwordwithoutriskingdefamation...

Volexisintriguing.AgainI’mtemptedtobuymorebutthelongtermchartissoveryeccentricI’mgoingtostaypat.

Franklythiswaitinggameismostfrustrating.

Meanwhileincrazypunting,I’mverylongNikkeiandshorteuroagainstthepound.Don’ttakeanynoticeofthisbecauseindextrading

mightaswellberandom.IthinkNikkeiisgoingto16,000andthepoundwillrallyhardbutthisisjustpieinthesky.

Untilthenextfewweekspasstherightthingtodoissimplysitbackandwatch.

TimingtheMarket8May2013

Markettimingisdifficult.Actuallyitisnotdifficult,itisimpossible.Hereiswhy.Ifyoucould“markettime”peoplewouldmakesuchhugeprofitseveryonewould

getmassivelyrich.Markettimingistheholy

grailofinvesting.Therearearmiesofpeopleemployedonthevaguehopeofbeingabletomarkettime.Thisisthesecondreasonyoucan’tmarkettime.Witheveryoneattemptingtodoit,ifthereisanywaytodoit,thetimingwouldbepre-emptedtodeath.Whichisexactlywhathappens.

Peopleinbankswhotry

todothis,fromthebiggestinvestmentbankstothesmallesthedgefunds,arecalledquants.Theytrawlthroughthedatatotryandfindapatterntotrade.Topaytheirwagestheymeasurehowthebanksaredoingmeanwhileandwhattheirrisksare,buttheydreamoffindingawaytomarkettime.However,iftheyfindsuchaschemetheytradeitandwhenenoughpeopleknow

thescheme,itisdestroyedbyeveryonequeuejumpingittodeath.

Youcangetthetimeseriesofanystockforyourselfandtrytoseeifanyseriesofmovespredictsanother.ButanarmyofmathPhDsisdoingthesame,sofunnilyenoughthereisnonetobehad.

Thekeytroubleforthoselikeusalwaystemptedtotimethemarketisthatit

involvesgettingoutrightandgettinginrighttoo.Youdon’tneedtotimethemarketoncebuttwice.That’sa4to1manoeuvre.Thereforeeventhe“sellinMay”ideaisverytricky.

Soherewearewallowinginmiserywitha15%loss,waitingfortheMaycrashandBANG!!!,suddenlythemarketchangesandourproto-portfoliolevitatesandit’sa9%loss.Inthebatofan

eyeathirdofthelossisgone.Whenmarketsturnthey

turnfast.Ahugerallycanbeoveranddoneinthreeorfourdays.Ifyoumissthat,you’vemissedmuchofthebenefitofgettingoutinthefirstplace.Soinafewdayswehavegonefromidiotstosimplyfools.It’sanicedemonstrationofwhybuyingandholdingandforgettingthenoiseisthebestwaytogo.

Sothisistheweekthemarketismeanttokeeloverandflop.Rightnowthereisnosignofit.Ishallstartbuyinginaweekorso.Slowlyatfirst.

MeanwhileG4Sslumpedtodayonadisappointingupdate.ThisisthesortofcompanyIdonotunderstand.Itisoneofthoseservicecompanieswhicharegovernmentstooges,thatmakebarelyanymoneyyet

havevastsalesandhaveaneffectivelybrokebalancesheetonceyouremovetheintangibles.Barthefactthatintangiblesaregenerallyworthlessinanyevent,howcanacompanyofbraindeadsecurityguardshaveintangibleassetsof2.5billionpounds?Theirauditorswilltellyouofcourse,butmypointisrhetorical.IfIhad1.2billioninnetassetsofwhich2.4billionwereintangible,

I’dbeinacoldhardplace...ButG4Sdoesn’tseemtomindbeinginsuchatrickyspot.

SoIdoubtI’llbebuyinganyofthat.

HappyDaysinTokyo15May2013

It’sallkickingoffinTokyo.TheNikkeiisnowover15,000fromunder10,000atChristmas.Themother’smarket–Japan’sequivalenttoAIM–hasgonefrom400

toover1,000.Happydays!!Butwhatnext?

MeanwhiletheJGB,theGovernmentbond,isgoingmental.Interestratesareexploding...atleastbyJapanesestandards.Fromziptonearly1%.IbailedoutlastFridayat14,750onthebasisthat5,000pointsofprofitswereenoughevenforme.

Tradingindexesonmarginismadnessevenwhenit’sgoingyourwayandIdo

thatinmycrazypuntingaccountwhichisnowuncomfortablyfatforanaccountthatismeantasatestbedfortradingratherthanaplacetoaccumulatewealth.It’saniceproblem.

Iclosedmyeuroshorttodayascurrenciesarejusttoohardtocallbecausetheyaredrivenbypoliticalwhimnotmarkets.Ihavedecidedtheeuroisstrongtokeephighyieldbondcountrieslike

Spainafloat.5%onabondbackedbytheECBisjustwhattheguyshuntingforyieldwant.HenceSpain’shighlysuccessfulrecentbondplacement.IthurtsFranceandtheClubMedcountriesbutfloatstheirpublicsectordeficits.Atleastfornow.

Backtoourportfolio:we’vegonefrom15%downto6.7%inthebatofaneye.Thisiswhyyouhavetogrinandbearaportfolio.Youjust

can’ttimethemarket.I’mstillnervousaboutthe

marketbutwearetodayaddingFrenchConnection.IboughtsomemoreformyoldportfolioonMondayandwonderedwhetherthatqualifiesfortheblogportfolioandtheanswerisyes.Soinitgoestodayat31p.

I’mstillcautiousaboutthemarketsingeneralbecauseMayiswhenit

implodeseveryyear.Ithasn’tandIsaidifitdidn’titwouldgomadlyupanditis.Butbutbut...

Youcan’ttimethemarket...Argh!

Anyway,atthisratetheFTSEwillhitanall-timehighandthensoonthemoneyenteringthemarketatthetopFTSE100levelwilltrickledownintostockpickingandourvalueendwillmove.

That’sthetheory.

JapanCrashes23May2013

BoomcrashgoesJapan.Itcrashedtoday9%frompeaktoclose.ThishassetoffchaosintheEuropeanopen.IsthistheMaycrash??Wellitcouldbe,themarket

certainlyishigh.However,Ibelieveweareinacompletelydifferentmarketfromthelastfewyears;ineffectanewera.

Thismarketwillcorrectbutwhoknowsbyhowmuch.Thisisvolatilityre-enteringthemarketandthefutureisfullofralliesandslumps.Youcan’tletthembotheryou.

Meanwhilebackattheportfolio,whichhasbeen

waitingforaslumptobuymore,FirstGrouppulledarightsissue.Wearetakinguptheserights.

Beforetodaywewerebacktoonly5%down,comingback10%inafewdays.

TherightsactuallyunderpintheFirstGroupstory.Nowlookatthefollowing.

FirstGroup’sBalancesheet:

NowatStagecoach’s:

Stagecoach’sbalancesheetismuchweaker,yetitssharepricehasbeenzoomingforyears.ActuallyStagecoach’sbalancesheetisashocker.Negativeequityisahugelyweaksign.Arightsissuesoonforthem?

Here’sFirstGroup’sincomparison.

Sowithanewslugofcapitalandanewchairman,thiscouldbeaturningpointforthecompany.

Meanwhilethemarketmayhaveabadtimeinthe

nearterm.

BuyingSmallCapStocks29May2013

It’sanastyfactbutbuyingsmallcapsisaverycostlybusiness.

WeboughtTotalProducenearthecloseyesterday.It’snon-UKsostampdutyalone

is1%.Thatjustcatchesinmythroat.It’sbasicallyrobbery.

TheUKmoansaboutapotentialTobinTaxanditalreadyhasone:it’s1%onIrishstocks.Soifyoubuy£1,000,asweare,banggoes3.5%oncoststhenanother4%onthebidofferspread.Talkaboutmakingeveryoneelserich.

Itisoutrageousthata£200mstockshouldhavea5%bidofferspread,butthere

itis.Callingthemarketmakersdirectforadealitwasdiscoveredtheywantedaboutanother3%ontop,sothebrokershadtogoviaRSP,therobotmarketmaker,togetinsidetheofferprice.Thisineffectsavedmostoftheircommissionbutitremainsdaylightrobberythatastockshouldhavea55p-58pspread.

ThishighlightsthattheLondonsmallcapmarketis

stilldysfunctionalandthatthisrottenstateofaffairsgivestheinvestorahighhurdletovault.Thereareplusestothisbutthat’salongconvoluteddiscussion.InessencethisnonsenseiswhatcausesasharelikeTotalProducetobemispriced.Ittakestimetocorrectitselfbutthereisafatreturntobehadbythepatient.

Thatisasmaybe,butitisstillaflamingoutrage.There

issimplynoexcuseforsharestohaveaspreadmuchover1%.Meanwhile,thisstockhasa10P/E,sellstentimesitsmarketcapandpaysa3%dividend.

NowwithFirstGroupcorrected,wesitatan8%loss.OnlyCobhamandBankofIrelandarenotinthedoghouse,thoughroughlyspeakingAvocetisthesumtotalofourlosses.

OffthisstreamI’m

buildingaverylongtermboringportfolio.It’shalfUSandhalfUK.Initiallyit’sdoinggreat.Sofarinthereis:

AstraZenecaCobhamImperialTobaccoLadbrokesRDSAVodafoneAMDCitigroupGoldmanSachs

Xerox

Theideaistobuyinterestingbluechipsandleaveindefinitely.It’snottryingforanythingsensational.I’llupdateyouwhenIaddtoit.Beingbluechipit’sgettingafatupdraftfromthecurrentbondequitystockrallybuttheideaistohaveapound/dollarhedgedportfolioofbigcapsforachange.

It’sgettingtrickytogetin

andoutofsmallcapsinscale,soIneedtogetsomepracticeonthewhalesandseeifIcanbeattheindexfromwithin.

BuyinginMay29May2013

Sothemarketdidn’tcrashinMay,andthereforewearebuyingagain.Youcan’ttimethemarketsoitwouldbepoeticjusticeifthemarketcrashedinJune.However,

youcan’tgoonthinkinglikethat,youhavetobuy.SoweboughtLand.

I’mastrongbelieverinthisrecovery.Ithinkwehaveenteredaneweconomicera.That’sbraveandit’sgoodtobebraveearlyonwithacaveattochangetackifcircumstancesproveyouwrong.Inthismodelpropertywilldowell,asitisdoingwellattheresidentiallevelnow.Solongmarketandlong

economymeanslongproperty.

Andthereisakicker.LandandBritishLandarethetwomainplayersinthisarenaandforthelifeofmeIcan’tseewhyLandSecuritiesisn’troughlyathalfpricetoBritishLandasfarasfundamentalsareconcerned.OK,somaybenotexactlyhalfpricebutsignificantlycheaper.

Takealook:

http://uk.advfn.com/p.php?pid=uk_compare&btn=s_ok&s_symbol_select=LSE%3ALAND&symbol=LSE%3ALAND&s_ok=OK&symbol2=blnd

Opinionsdifferonthetwocompaniescloseup,butfromarm’slengthIcan’tseewhytheyshouldbesodisparatelyvalued.LandischeapincomparisonwithBritishLand.

Youcoulddoapairstrade,longLANDandshortBLNDbuttobehonestIcanneverbebothered.

Sotorecapherearethe

reasons:

Longmarket.Longeconomy.Cheapinpeercomparison.Fatdividend.Ishouldthinkthisisgoodfor1,400psoanice40%upside.Allthisandabluechiptoboot.

IsItTimeToSell?5June2013

SellinJuneandgotothemoon?Themarketisfeelingbearish.Isittimetopulltheplug?

Theanswerhastobe,neversellyourportfolio

outrightunlessyouthinktheworldisending.Yousimplycan’ttimeit.Itcostsyouafortuneinfees.Itishardtopsychologicallyre-enteranditisimpossibletogetrightonaverage.Youcanonlysellshareswhentheyaren’tcheapandbuyshareswhentheyare;throughthickandthin.

Sohereissomeadviceanditislikelywrong.Itwillsoundgood,butitisn’tlikelytrue:Ifyouthinkthemarket

isgoingtocrash,stopbuying,saveyourmoneytillthecrashcomesthenbuy.Thisis‘buythedips’ineffect.

Theorysays,youcan’tanticipateacrash.Sothiswon’twork.Itisassimpleasthat.Soasfarastheoryisconcernedthisadviceisnull.

DoIdothis?Yes.Astheyoungsterssay:

WTF???Randomwalk,efficient

markethypothesisneedstobe

thebedrockofyourthinking.Itdoesn’thavetobeacauseforreligiouszealotry,butasaninvestoritshouldbeananchorpoint.

ARandomWalkdownWallStreetbyBurtonMalkielisthekeybooktoread.Themarketisnottotallyrandom,butitishighlyrandom.Themarketisnotperfect,butit’samazinglyefficient.Inthesamewayamirrorisnotperfectly

smooth,butfromourstandpointitmayaswellbe.Assuch,weshouldattachourselvestothedoghouseoftherandomwalkwithaleashofacertainlength,becausetostraytoofarcancourtdisaster.

IsaythisasIamgettingpummelledbytheNikkeiwhichhasshoweredmewithgoldandseemsintentonrecoveringit.Thisisthepointofmypuntingaccount,tofeel

thejoyandpainofmyspeculatorcustomerbase.It’snighonakindofS&Mexperience.It’shorribleevenwhenyouareontop.

Backtotheportfolios.Thismarketreallyisvery

differentfromthepost2008crashmarket.Thereisalotofnoiseinthemarket.ItlookslikevolatilitybutIdon’tthinkitiswhattraditionallyyou’dthinkofas“Vol.”

Thelegacyportfoliois

doingwell,butI’mnothappy,becausealargepartoftheperformanceiscomingfromonestock:TrinityMirror.Thisisofcoursehowaportfoliocanwork,buttheperformanceisnarroweveniftheprofitsarequitefat.Thatisnotreassuring.

Thespecimenportfoliojustcan’tgetarrested,whichisfrustratingtosaytheleast.Contrarianinvestingandvalueinvestingcanbelike

thisbutitcanbeatestofresolve.

Sofromidiottogeniustoidiotagain,thisistheoutcomeofvolatility.Atleastthat’swhatI’dlikeyoutobelieve.

FirstGroupSharePriceMakesNoSense13June2013

Sometimesyouhavetoscratchyourheadandwonder

ifsomeonechangedtheruleswhenyouweren’tlooking,orwonderwhethertheworldiswrongandyouareright.FirstGroupshouldnotbebelow£1butitis...

AsIwriteitis98p.Itshouldbe135p.Orratherifyoutaketheroughlevelofwhereitwasbeforetherightsissueandputallthenumberinandswirlthemaround,thecurrentsharepriceshouldbe135p.Infactwhentherights

wereannouncedthatisthelevelitfellto.Sincethenithastumbledmuchlower.Why?

Ifyouwerebearish,you’dsaythecompanywasabasketcase.Youcouldsayitisnolongergoingtopay22payearindividend.

However,thelikelihoodis,manyholderswillselltheirholdingofoldstocktobuytheirlowerpricedrightsastheycan’taffordtohold

andbuymore,whichiswhatwehavedone.

Thistemptsmetobuymore.However,thismarketisjustnotencouragingme.It’sbearishrightnow,butevenwhenitwasrallying,Istillhadmyreservations.Wearestilltakingapounding,whileingeneralthemarketis,sowecontinuetoholdback.UntilIfeeltheduncecaplifted,wearegoingtobecautious.

Equitiesarebeingdrivenbybondsandcurrenciessoindexmovesatthebigcapendaretechnicalandnotaboutvalue.

Wegrinandbearit.

SellinMay...17June2013

ComebackonStLedgerday.Perhapsthebestthingabout“SellinMay”isthatyoucanresteasyintheglorioussummerandforgetthemarkets.Thismightjustbea

bigenoughdividendtomakeitworthwhile,comeboomorbust.

Thenumberslookgoodifyoustudytheminacertainway,butithastobesaid,buyinginthesummerafterabigcorrectionisalsoanexcellentwaytomakemoney,soleavingittilltheStLedgerisfarfromtheoptimalstrategy.

Ican’trememberbeingsolethargicinthemarket.The

smallcapsindex(SMX)isdown5%butwemayaswellbedown20%.

OutsideofthespecimenportfolioIhaveloadeduponFirstGroup.It’soneofthoseopportunitieswhereI’mtemptedtogoinheavy,butI’msimplyjustgoingtomynaturallimitof7-8%becauseitseemscrazyforthesharetobepricednearitsrightsissuepriceof85p.135pisabouttherightprice.120pwouldbe

fine.SoI’mlefthangingontotheideaofstayingdiversifiedratherthanriskinghavinganastysurprise.

Whatnastysurprisecouldonesuffer?Therealityinthestockmarketisthatasmallproportionofshareswillalwayssufferscandalouslyfromallsortsofmisdemeanoursandfeloniesandyoujustcan’ttellwhentheymightstrike.Assuchyoushouldnevertrulypilein

onanystockbecausebadthingscanhappen.Thisisthepointofdiversification.Havingsaidthat,ourcurrentfledgingportfolio–whilenotexactlydiversifiedyet–isgettingkilled.

ThelegacyportfolioisdoingmuchbetterbutthatisbecauseTrinityMirrorisholdingupwellanditsrunawaysuccessisoffsettingalotofpain.Thiswaskindofthesituationlastyearwhereit

wasthetailendoftheyearthatprovidedforbumperprofits.2012wassixmonthsgriefandsixmonthsexultation.Itmayormaynothappenagainin2013.

Thethingis,yousimplyhavetotaketheroughwiththesmooth.Thiscanbespreadoverstocksorovertime,itcanbeeitherorboth,it’stheonlyway.Sonowwearewearinganincreasinglybigdunce’shatandwemust

sitinthecornerandwaitinthehopethattimewillmakeusageniusagain.Itisnotonlyatestofpatiencebutitisalsoatestofconfidence.

Meanwhilebackinstupidpuntingland,I’vebeentakingapoundingfromtheNikkei,whichhavingshoweredmewithtreasureisnowproceedingtopulveriseme.TheNikkei’sdramaticcrashhasgonealotfurtherthanIwasexpectingandis

demonstratingthesortofvolatilityIrecallinthe90s.Thisismeanttobeexperimentaltradingbutthesumshavebecomefatenoughtomakeitratherreal.

Theentertainmentvalueofjugglinghundredsofthousandsinamarketthatisswingingaroundinpercentagepointsaminutehasadistinctshelflife.Thisisanotherreasonthattradingisforthebirds;tomakethe

bigmoneyyouhavetohavethekindofengagementlevelthatwouldsuggestyou’dhadalobotomy.

Investingisfarmoresustainable.

InvestingHurts25June2013

Weareallusedtogettingpaidtoworkandmanyofusareusedtogettingpaidevenwhenwearen’tworking,bethatthroughstatutorymeasureslikepaidholidays

orsickness,orthroughdowntimeorslothorunemployment.Soworkingandlosingmoneyisnotsomethingweareusedto.Peoplejustdon’tlikeit.

Sadly,investingisnotaonewaystreet,youwinandyouloseandintheendyouwinoverall.Abadstartisabouta50/50chance.It’snotprettywhenithappens.

Hereisa2008portfoliowhichwasepicandyouwill

seewhatImean.Theinitiallossissimilartowherewearerightnow.

Youwillnoticelongperiodsofboredomandchurnand

alsothattheprofitscomeinstrongnearlyverticalrallies.Thisiswhyaninvestorhastoshowahugeamountofstoicismandhencewhyinvestingisnotaverypopulargame.

TheFTSEisdown12%fromitsrecenthighandwearedown21%.Ifyouaccountforthe3-4%ofcostsfactoredintoourloss,wearestilldown6%morethanthemarket.Thisnegativealpha

shouldbeafactorofbuyingoutoffashionstocks.ItwouldbeeasytoblameAvocetwhichisdown90%butinaportfolioyouexpecttohavebigwinnersandlargeloserswhichcanceloutsoyoucan’tpassofflossesorprofitsbytakingindividualsharesintoaccount.

Weonlyhavetwowinnersrightnow,BankofIrelandandCobham,andeverythingelseisinthe

dumps.SoamI,butthat’showthisgameworks.Whenweboughtthefirststocksandtheyshotupandwewere20%aheaditfeltgreatandnowitfeelsawful.

Thisiswherepeoplegiveup.Theycan’ttakethepain.

Whatwehavetodoissoldieron.Ifthereisacrashthissummerwewillgetyetmorepainandwewillbuyintoit.Fornowit’sjustwaitandsee.

Meanwhile,FirstGroupisacompletemysterytome.Thereiseithersomethingcatastrophicallywrongwiththiscompanywhichisabouttostrikeortheshareisutterlythewrongprice.Ithinkit’sthelatterandthatiswhatthisgameisallabout,separatingthemuckfromthebrass.Itseemsimpossiblethatamassiverightscouldbeachievedifthecompanywasbroken,butitremainstobe

seenforsure.Weshouldbuyanotherlotbutthatwouldbebreakingtherulesofcontinuingtospreadtheportfolio,soIwillreluctantlyholdback.

Ihaveboughtmoreinmylegacyportfoliowhichisalsotakingapounding.EvenmynewexperimentalbluechipUK/USportfoliowhichshotup8%oninitiationhasbeenhackeddownto-5%.Fortherecordthathas:AZN,

Cobham,ImperialTobacco,Ladbrokes,Land,Shell,Vodafone,AMD,Citigroup,GoldmanSachsandXeroxinit.I’mjustplayinginthisportfolio,tryingtogetalphainstockswithnorealliquiditylimitation.

Risingbondyields,akarisinginterestrates,shouldpushmoneyintoequitiesbutit’sgoingtobearoughrideandfornowthemarketisjustshiveringwithfright.Itwill

settleandwewillfindoutwhatthisnewerareallyhasinstore.

MaybeIshouldcomebackonStLegerday.However,soonbargainsaregoingtostarttoappear,soitpaystokeeppayingattention.

BuyingaBoringShare4July2013

Wehaveanewstockselection.Inthecurrentmarketit’shardtogetexcitedaboutshares.Thatisnotabadthing,becauseexcitementcostsmoneyininvestingin

thesamewayasitcostsmoneyinentertainment.

Entertainmentvalueofsharesislowbecausethecostishighandtheentertainmentisgenerallyrestrictedtotheemotionsoftherollercoasteroratbestagoodthriller,butmorelikeahorrormovie.

Boringisgood.Sowehaveboughta6

P/Estockwhichisalong-standingmediaagencycumconsultancycummarketing

agencycumPRoutfit.ItiscalledCreston.Icouldwaxlyricalaboutitbutfranklyit’ssimplyanicepieceofdiversification.Thecompanyisonthecheapishside.Ithasbeengoingforalongtimeandithassolidcustomers.Itscashpilehasjumped.

I’mbullishonallthingsinternetmarketingandit’ssimplynotgoingtobeashrinkingmarket,withorwithoutarecovery.Internet

marketingistrickystuffandCrestonseemstobeonitsgame.Areyouyawning?Ihopeso.Ithasa3.4%dividendandfortherecordaP/Eof6.7andstrongcashgeneration–whatisnottolike?

ItwasaverylongtimeagowhenIwouldbuy£1,000ofashareanditisslightlyshockingtoseetheimpactoftradingcostsbuyingatthatlevel.

Wehavebought£1,000ofCrestoninlinewiththerestofthemodelportfolioandthenetcostincludingspreadandstampdutyetcisawretched3.97%.Youhavetoworkhardtogetthatunder2.5%inanyeventnomatterhowmuchyoubought.Thesharehasa2%spread,soeveniftherewasnostampdutyorcommissionyou’dstillbedown2%fromthegetgo.Intheorythiscomesout

inthewash,butitisgalling.Itreallyshouldn’tcostthatmuchtoinvest.

Meanwhile,wehavehadalittleportfoliobounceandweareonlydownarotten16%.Iwillhavetoadjustfordividendswhichwillmakethispoorperformancealittlelesslame,butagain,itwillcomeoutinthewashevenifitlooksdepressingatthismoment.

Thisistheimportantpart

ofunderstandingtherandomwalkandknowing/believingthatovertimeyouwillearn10-30%perannuminvestingproperly.Thereasonsofewpeopledoinvestisthatittakesgrittoputupwiththesetbacks.However,talkischeap,wewillseehowtheorytransfersintorealitybyyearend.

Meanwhilemynewbookisout:UKKindle

UKpaperbackIt’sacracker.

WhyYouShouldDiversify8July2013

We’vebeenbuyingapproximatelytwosharesamonth,whichislikelytoofastformanyofyouwhoare

startingout.Thismeansifyouarebuyingsharestomirrormybuysyoumayhaveonlyboughtthreeorsixsharesbynow.

Sohowmightyoubedoing?

Hereistheresultofbuyingthreeorsixofthetwelvesharesintheportfolioandgetting–byluckorjudgement–thebestorworseorthemiddlingperformers:

Firstoffyoucanseetheeffectofdiversification.Thebestislessgoodandtheworseislessbadifyouhavesixratherthanthree.Thespread,ietherangeofoutcomes,isalsotighter

betweenthebestandworstperformance.Soyoucanseehowvariableasmallportfoliocanbeevenifyoupickfromasimplegroupofsharesselectedwithatleastsomekindofplan.

Meanwhile,themarketsarecontinuingtogomad.Afewdaysagowewere21%downandnowweare14%.Yesterdaywasahugedayforthemarketsbutit’snotthebeginningofanewera,rather

thedelayofonethatcausedthejump.Thiskindofvolatilityisafunctionofmarketconfusionsoit’snotreallygoodnews.However,youcan’tcomplainaboutarandomwin.

Flybehasgotitselfanewboss,flowninfromthestellarEasyJet.IfFlybeturnsitselfarounditwillgotothemoonandwewillseetheflipsideofbuyingoutoffashioncompanieswhichisthe

fantasticreturncompaniesproducewhentheycomebackfromthebrink.MaybeitwillbeFlybe,maybeitwon’t.It’sthegeneralideanotthespecificcompanywebackbecauseyoucannotbesureofanyoneoperationbuttheoddsarehighinaggregate.

Meanwhile,Isimplyfindithardtoresistbuyinggoldminersbecausetheyaresodownontheirluck,butImustrecalltheyaremainlyabunch

ofshadyoperatorsandImustresisttheirsirensong.Somecompaniesarenothighriskatall,becausethereisnochanceinmakingmoneyfromthem.Thereisnoriskinthecertaintyofabadoutcomeandminersfitthisbillveryclosely.HoweverthebaitisthereandI’msniffingit...nooooooo!

ThePortfoliosAreRallying9July2013

Wehavehadamassiverallyonthelegacyportfolioandanicespikeonthespecimenportfolio.Thespecimen

portfolioisupabout10%inafewdays,thatistosay,ithasclawedbackalongway.Itisstilldownalongway.

Flybeisbeingastar.Thisishowcompaniesgofromzerotohero.EasyJetandRyanair’svaluationsareinsaneandevenifFlybecamewithinacountrymilewewouldmakeamassiveprofit.Togiveyouanidea,Flybe’smarketcaptosalesis15/1oraround6%,Ryanair’s

is200%.SoifFlybewasvaluedlikeRyanairasfarassalesgoesitssharepricewouldbe1,800pnot57p.Ofcourseitwon’tgetthere,thereareamillionreasonswhyitwon’t–butitgivesanideaofwhyitcouldgoto£1.Ifitrecoveredtoitsfloatpriceitwouldbe£3.

Wecan,afterall,waittenyearsforthatandstillclaimafatrateofreturn.Butwecan’tthinkitwill,wejust

thinkoneortwooftheshaggydogsweboughtmostlikelywilldosomethingsimilaratsomepoint.Everyyearacompanyortwodoesit.

Youcan’tberightinthemarket,onlyprofitable.

SotodaythemarketisrocketingandIsay,“thisismad.”That’sshorthandfor,“Idon’tunderstand.”IthinkIdobutI’mstillnothappy,soit’sstillmad.ButdoIsell?

No.IknowwhyIboughtmy

stocksandtherestisjustnoise.Forgetthenoise.Tradingnoiseispurecost.Followit,marvelatit,laughatit,railatit,butdon’ttradeit.

MeanwhileDowhashittheceilingofitstrend–ifitbreaksitcouldgotothemoon.Thatwouldbebonkers,butI’mlong...sobringiton,rallyor

correction,becauseI’mnotlongbecauseoftheindex,I’mlongbecauseI’veboughtcheapstockandamwaitingforthemtocorrect,whetherthat’sthreedaysorthreeyears.

Meanwhiletheinsanitybroughtonbyrisinginterestrateshasonlyjustbegun.

BoringisGood18July2013

Boringinvestmentisgood.However,itisrather,well,boring.Riskingmoneyisfun,sowhenthingsgoquiettheentertainmentvaluedropstozero.However,moneyand

fundon’tgotogether.Silenceisinfactgolden.Thisishowitworks.

Ifsomethingisfun,ithasvalue.Afunstockpaysyouinfunandassuchdoesn’thavetopayyousomuchinmoney.Sofunstockscostyoucash.Boringstockshavetopayyouincash.Therefore,inthelongrun,excitingtimesinthemarketsareexpensive.

Youmayofcoursefindmakingmoneyenjoyablebut

strangelypeoplegetmoreintolosinggamesthanwinningones.Thisiswhygamblersgamble.Itisnotthewinningthatdrivesthem,it’sthelosing.Itdoesn’tseemright,butIlearntthislessonasachildwithmyownpubfruitmachine.

Themomentyoucanopenafruitmachineandreimburseyourselfyourlosses,thereasontoplayisgone.Themomentyoucan

setupajackpoteverytimethejoyisover.

Meanwhile,backinthemarketswearestillscrapingourknucklesaroundontheground.It’snotquiteasmiserableasitwasbutwearestill14.6%downontheinvestedamountor6.3%ifweimagineweput£30,000intothebrokertogetgoing.Thereareprobablysomedividendstotakeintoaccountbutthat’sjustsmallchange.

BankofIreland,CobhamandFlybeareup,buttheotherninearedown.FirstGroupisastandout,inasmuchasinmybookit’sfarbelowitscorrectprice.Itshouldatleastbe130p.Itshouldbe200p.IfitwasStagecoachitwouldbe400p.Butitisn’tandmightneverbe130pagain.However,youmakeyourcallandwait.

Lotsofnastythingscouldhappenandyoulosethelot.

ThinkMarconi,FirstStar,Gartmoreandaconstellationofshockersthatflutterpasteveryyear.However,youhopeforaTrinityMirror,oneyearat25pandnextat120p.OneTNIpaysforafewbusts.

SoI’mleftlookingatlotsofgoldminersthinkingBUY!HowevertheyaresuchamessI’mnotgoingto.Imightchangemymindbecausetheyhavecrateredbutevenmycontrarian

tendenciescan’tbekickedintoactionbycompaniesthat,atbest,squanderedtheopportunitiesofoneofthebiggest,longestcommoditybullmarketsever.

AfewmoreweeksandStLedgerdaywillbeonus.Thenthefunwillstart,hopefullynotofthecostlytype.

TryingtoSeetheFuture26July2013

WaybackwhenThomasCookwasunder20pIwrotethatinnormalcircumstancesI’dbuysome.However,Ididn’tbecausethemarketwasinaveryfragilewayand

Ididn’tneedtobuyintoacompanylikelytogobust.Itdidn’tgodownandrallied1,000%.Still,Idonotthinkitwasthewrongdecisionatthetime,eventhoughmonthslateryoucanseeatenbaggeryoumissedstaringyouintheface.

Youcannotclearlyseethefuture–evenifyoucouldseethenextfiveminutesyouwouldbecometherichestmanintheworld.Soweare

forcedtoseetheworldasafunctionofrisk.Youcanonlytakeontherightlevelofriskforthecircumstancesandiftheriskistoohighforyou,youshouldneverplaynomatterhowtastythebait.

Thisleadsmeontogoldminers.Isoreallywanttobuygoldstocks.Petropavloskisaperfectexample.Itisdownover90%fromitshigh.Goldminesacrosstheboardhavecratered,ashasour

Avocet,whichIwouldlovetoloadupon.ButIwon’tandtheymayflyandmakemefeellikeafool.

However,youcannotinvestincompanieswherethemanagementhasnocredibility.Itissimplemadthesecompaniesarealleffectivelyzombies.ItismadthatPetropavloskcanbesaidtohaveacashcostofextractionover$2,000anounce.

Howdidthathappen?It’samine.Youblowrockup,putitinbigbuckets,swirlitaroundandtakeoutgold.Howdoesthisevergetsooutofcontrolitwouldbecheapertobuygoldchainsatretailandgrindthemup,thanrunyourmine?Howcouldthestockmarketevenletthishappen?Sohowcanyoubuyintosuchnonsense,evenifitlookssotantalisinglycheap?

Meanwhile,Avocet

jumped35%today.Thislooksgoodbutitisn’t.100–90%=10%,10%+3%=+35%or13%ofwhatyoustartedwith.Ofcourseifyouboughtthebottomitfeelsgood,butthatisalevelofriskwecan’tentertainandfranklyamug’sgameingeneral.Thebigmoversupanddownarealwaysinsuchzombiestocks.Punterslovethem,buttheydon’tgetrichplayingthem.Solike

Ulysses,I’mtyingmyselftothemastandstuffingwaxinmyears.

Theportfolioisrecovering,itisnowonlyarotten11%down.Howeveryoucanseehowfastaportfoliocansnapbackespeciallyonefullofsuch“smartbeta.”

“Smartbeta”isthenewbuzzwordforhedgefunds,meaningcrazystocksyouboughtbecausetheyare

goingupbecauseyouareasmartguywhoknowsthedifferencebetweencrazybadandcrazygood.Hedgefundsreallyarethepits.Thefactthatmanyhavetentimesmoresalesmenthantradersshouldtellyouallyouneedtoknow.

Hereisachartofourprogresssofar.Thechartisdrawnasifweput£30,000inabroker’saccounttogetgoing:

Ifwewerejustbuyingaswewentalong,wewouldhavespent£12,991includingcostsandit’sworth£11,533atthepricewecansellitfor(thebid),whichis11.2%in

thehole.IfIwasascumbagfundmanagerI’dsayweweredown£1,458on£30,000whichis4.9%,butofcoursethat’snothowitfeelsandnooneisdoingitthisway.

Thewholepointofthisblogistotakeyouthroughtheprocessofinvestingandtheswingsandroundaboutsthatareunavoidable.

BarclaysRightsIssue–NotMuchElseHappening30July2013

It’saratraceatasnailpace.Theendofthemonthapproachesbutnotmuchisgoingonastheworldisonholiday.

Barclaysishavingarightsissueandlookstohitthenewdilutedpriceasoftoday,30July.WithourFGPthepricethenskiddedmassivelylowereffectivelyhittingtherightsprice.IfBarclaysrepeatstheFGPoutcomeitwouldplummetto

around200p.BarclayswasinthelegacyportfolioandIhavesolditatabout292p.FGPwashighinmymindbutsoisthefactthateveryregulatorontheblockissuing/investigatingBarclaysforonethingoranother.Itfeelslikeabitofawitchhunt,butofcoursetheremightbewitchesintheretoo.

SoIdecidedtobailonBarclaysfornow.Theprofitwasafat75%,soI’mnot

goingtogrumbleandthereistoomuchbankintheportfolioingeneral,soitachievesmyneedtoun-concentrateinthelegacyportfolio.

Backatthespecimenportfoliowearestillimprovingalittlewiththelossnowdownto10.7%.Stillmiserablebutlessso.TwelvesharesisonlydiversifiedalittleandIshouldbepickingnewentrantssoon.However

I’mbeingverysluggishinmyinvestmentthisyear,itislikelivinginslowmotion.Thisismeanttobegood,butitdoesn’tfeellikeit.Everythingfeelsverytentative.

InthebackgroundtheNikkei225inJapanisallovertheplace,whichisformeakindofleadingindicatorforwhatisgoingtohappenintheUS/UK.InanutshellJapantodayportendsrallies

andchaosinthefuture.CurrenciesarebeingnailedintightrangesagreedbythevariousG8/G20countries,whichiskindofweirdtowatch,whilecommoditiesarethrashingaroundinalongtermbearmarketsettorunandrun.

ThebrokenmarketsspoiledbyfixedlowinterestratesandQEmakeforadisjointedpicturebutoneinwhichequitieslooktorally

andrally.Rollontheautumn!

FreudianInvesting31July2013

Ican’trememberamarketthatfeltsodullandyetsouncomfortable.However,Irealisethatakeytoinvestingistoforgetyourfeelingswithouttryingtosuppress

them.Thespecimenportfolio

jumpedtoonly9.6%downtodayasPrometheantookanothernicejump.Myemotionsare,unavoidably,“IwishI’dboughtatonofthisstockwhenitwaslanguishing,”butwhenIwasthinkingaboutdoingjustthatbeforeitbegantorally,Icouldn’tfacetheprospect.TomorrowiftheshareslumpsI’llbesighinginreliefI

didn’tloaduptothegunnels.Thisistheemotionalrollercoasterthattrapssomanypeopleintobadinvestinghabits.

However,feelingtheseemotionsisinescapable;itishowyoureacttothemthatdeterminestheoutcome.Somegurussayyoushouldinvestandtradewithoutemotion,butthat’sasimpossibleaseatingwithoutnoticingtheflavour.Insteadit

occurredtomethatinvestingisbestundertakeninaFreudianway.

That’snottosayyourfatherneedstolookoutforjavelinsetc.IntheFreudianmodelthereistheid,whichisthewildemotionalchildinallofus,thereistheego,thebigadult-ish“me”andthesuper-ego,theparentpersonalitythattriestokeeptheidandegoincheckandoutoftrouble.Itisthesuper-ego

thatisthegoodinvestororratherthevoiceagoodinvestorwilllistentomost.

AsmyidlamentsnotbuyingmorePromethean,mysuper-egoissmilinghappilythatIhaven’ttakenontoomuchrisk.Thereisemotionbutthereisalsocontrol.Makingsensibledecisionsininvestingisaboutcontrol.Thefunnythingisalackofcontrolsimplymakesyouthrashyourinvestingbetween

fastbuysandsellswhichofcoursedrainsyourcapitalincosts.

Highemotionsdon’tmakesomeonepickgoodorbadstocks,theyjustmakethemblowtheirmoneyinbuyingandsellingtoomuch.

Sointheendyouhavetoletyourphlegmaticsuper-egoleadtheway.

PrometheanSlumps–IWasRightNottoBuy1August2013

Well,well,PrometheanWorlddown10%,nowmyid

canberelievedIdidn’tbuymoreandmyinvestingsuper-egocanbesmug.

Prometheanisastrangestock,whichiswhyitisso“cheap.”Itreleasedinterimstodaywhichshowaslowingofthedeclineoftheirbusiness.Thisisthesummary:

Tradinginlinewithmarketexpectations

Financialresults

--RevenueGBP70.0m,down15.8%(H12012:GBP83.2m,down22.9%versusH12011)--AdjustedEBITDA(1)GBP2.5m(H12012:lossGBP0.3m)--Adjustedoperatingloss(1)GBP2.6m(H12012:lossGBP5.7m)

–OperatinglossGBP3.4m

(H12012:lossGBP148.5mpostexceptionalitems,includinggoodwillimpairment)

--Proformanetloss(1,2)GBP3.4m(H12012:netlossGBP4.1m)--CashbalanceGBP9.1masat30June2013(30June2012:GBP8.5m;31Dec2012GBP8.0m)

Operationalhighlights

–Continuedprogresswithsoftwarestrategyandlarge-groupinteractivedisplaynewproductlaunches

--Operatingcostbasereduced31.5%belowH12012--22%growthinPrometheanPlanetcommunityinthelastyeartoc.1.7mmembers--SignednewGBP25mbankfacility–which

maturesinSeptember2017

(1)Excludingexceptionalitems,share-basedpaymentsandamortisationofacquiredintangibleassets.

(2)Statedonaproformabasisusingataxrateof24.0%(H12012:26.0%).

-----

Thistimelastyeartheirnumberschoppedthemdownfrom35pto20p.Thisisthecompany’slongtermchart:

Soyouaregetting200pof2010valuefor15ptodayand

roughly£140mofsalesfor£30minwhatisahightechgrowthindustry.Educationisamassiveglobalmarketandgrowing.Butthatisjustjawboning,Prometheanisaloathedstockwhichiswhyitsvalueissolow.Ifitturnsarounditwillrocket,ifitdoesn’titwillgobust.Thedownsideis100%,theupside200-500%,that’swhyweareinthisgame.

However,whateverthe

storyofthiscompanyis,itfeelstomemorecomplicatedthanwhatisonshow,itshouldn’tbe15p.Itshouldbeatleast50p.Butitisn’tandthemarketisalwaysright.

ThenagainasFirstGroupclears100phavingtradedat90ponanex-rightsdilutedvaluationof135p,itcanbeseenthatthemarketisn’talwaysperfectwhensituationsareunusual.Themarketthereforepaysusto

investintheinefficientmarginwherethemarketneedsrisktakerstoplaytomakethepriceeventuallyright.Thisiswhereweareplaying,whichisseenashighriskbutovertheyears,atleasttome,ifplayedwithdiversification,noriskatall.

Ofcourse,aswesitona9.5%lossorabout4%ifweputinastartingpotof£30,000,itlooksprettyriskyindeed.However,theeffect

ofentrytimingneedstimetowearoff.Whenyoustartinvestingyouwillmakeshorttomediumtermeffectsonyourresults.Ourtiminghasn’tbeenluckyoverallbutimagineifyouhadsubscribedonthe23Juneandboughtalltheexistingstocks,youwouldbeover10%up!!!Thatsubscriberwouldthinkmeagenius,whilesomeonewhojoinedearlyonmightstillconsidermeadunce.

Meanwhile,Iwentlongpoundversuseuroinmy“stupidpuntingaccount.”ThisaccounthasswungmassivelythisyearduetomepuntingtheNikkei225–ithasrocketed600%andfallenby60%torally80%overthatperiod.Ineedtorenametheaccountthe“degenerategamblingaccount.”

Eventhoughitismakinginterestingmoney,morethanisfuntopuntwith,itis

basicallyawasteoftimewhenitcomestotheprospectsoflongtermprofits,becausenogainsaresafe,sonomoneyinthataccounthasanylongtermreality.

Theonlywaytowin,asanyonewhohaswonastackofchipsattheroulettetablefindsout,isnottoplayanylongerandtakethemoneyoffthetable.However,thataccountistheretoremindmeofthegameADVFNusers

aregenerallyplayingandwhatoursiteneedstodotohelpthem.

PerhapsIshouldtakesomeoftheprofitsoffthattablethen.Hum....

DegeneratePuntingAccount2August2013

WellIdidit,Itookmoneyoutofmyspreadbettingaccount.I’vehada“degeneratepuntingaccount”

fortenyears.ThepurposeofitwastotraderecklesslylikemanyADVFNusersandunderstandhowitworksandfeels.

Surprisingly,itneverwentbrokeandIdidn’thavetochargeitupmuch,exceptin2008.Eventhenitneverhadmorethanafewthousandpoundsputin.IknowbecausewhenitwasrecentlyflushwithsuccessIwentbacktodayonetocheckhow

muchIhadtossedintoit.Iwassurprisedhowlittle.

Theaccount,however,hadflappedaroundfrom100%upto40%offinacycleoverthatdecade,butitmustbesaiditwasn’toverused.Thewholepointoftheaccountwastomessaround.EverytimeithitacertainlevelthemarketwouldcrashandI’dbebacktosquareoneorless.Strangely,Iseemedtowinonindexes,which

shouldn’tbepossible,indexesbeingthemostrandomofequitydevices.

Thekeyelementofaspreadbettingaccountisleverageandthehighcostofpositions.Thisishiddenbuttheinterestonyourtentimesleveragedpositionistitanic,oftenaround70%ayear.However,Icanforgetallthetechnicalaboutspreadbettingbecauselikeatestpilotflyingaprototype,it’snotabout

flying,it’saboutnearlycrashing.

Anyway,yesterdayItookouteverypennyeverputinandlefttheremaining(threetimesasmuch)theretoplaywith.ApparentlyI’vemade12%perannumcompoundedoverthetenyearsthoughalltheprofithascomeinthelasttwoyears.

Whatamess.Well,itwasmeanttobe.Itwasmeanttobeanexerciseandithas

turnedouttobeso.ItclearlyshowsthatleverageisnotgoodforprofitsasIcompoundmycapitalwithoutitatamuchhigherrate,althoughyou’dbeforgiveninquestioningthatfromtheperformanceofthespecimenportfolio...whichasofnowis8%down,whichis14%upfromthelowofafewweeksago.Thelegacyportfolioismeanwhilestormingaway.

WhatdidIdowithmy

withdrawal?Ipaiditintomystockbrokerageaccount.

AddingtothePortfolio5August2013

TodaywehaveaddedDartytotheportfolio.Dartyhas3.2billioneurosofbusinessandisworth£400million.It’sarecoveryplanpureandsimple.Itpaysadividendbut

thatmightgoawaybecauseitisinnegativeequity,aparlousstatetobeinasHMVfoundout.However,itisverylightonintangibles,thewaymostcompaniesmanagetolookinpositiveequity.IthasanewmanagementteamoperatinginwhatIbelievetobeageneralrecovery.

Evenstillthecompanyneedstocontinueitscomebackwhichthechartshowsasunderway.

WhatIlikeisthatthenewmanagementisloadinguponshares.Thisisaclassicpositivesign.Thenon-execsbuying£10-20Kisanicesmallpositive,butitstillcan

onlybethoughtofasagesture,butwhentheChairmanpicksupacoupleofhundredthousandandtheCEOthesame,thisispropermoneygoinginandmusttakealotofconfidenceinthefutureofthebusiness.

Witharecoveryunderwayandpropertyhotagain,thingsshouldgobetterforthecompanyinanyevent.Newmanagementafterallshouldn’tbetheretoburythe

company,meanwhilearesurrectionofthecompanywouldresurrecttheshareprice.

ItoppeduponFlybeinthelegacyportfoliobecausethereorgiswellunderway,withmoreEasyJetmanagementbeingparachutedin,whilstdirectorsarebeingpushedofftheboardandbacktooperationalduties,nodoubtundertheguntodeliveror

leave.RyanairandEasyJetvaluationsspinmyhead,poundperpoundofturnoverFlybewouldbe£10ashare!!!!Itwon’thappenbutit’sastarkcomparison,onethathelpedthecompanytoIPOover£3around2011.

Thechartpatternismostodd...lookslikeafightbetweentwoforcesisunderway.Whoknows...

Meanwhiletheportfolioisdown8%.

Asthelegacyportfolio

roarsaway,itisinterestingtonotethatthesamemethodologytopickbothisthesame.Thereisanelementofmaturingthatisgoingonwhichisnotthatsurprising.Weareingeneralpickingout-of-fashionstocksandawaitingtheirrehabilitation.Thelegacyportfoliowasstarted,ifyouaveragethevariousentrypoints,aroundDecember2011andittookmonthstotakeoff.

Thelegacyportfolio:

Thisistheperformanceofthespecimenportfolio.Trackedasifitwasstartedwith£30,000incash.(No

adjustmentfordividends.):

Theyareinterestingtocompareandcontrast.

Investingisapatientgame.

ANobleInvestment9August2013

YesterdayweboughtNobleandtodayitisup2.5%.I’veownedthisstockonandoffforalongtime.Themanagementareverysmartandtheyarebuyingup

auctionhousesinwhatisamustermarket.

Iamalong-standingcoininvestor.IperhapsshouldsaycollectorbecausemypernicketyinvestmentstyleisnotverypresentwhenIbuycoins.Ibuyultra-rarestuffandamtoopriceinsensitiveformyowngood.However,theyaretobeheldfortheultra-longterm,soIsay“phooey!”

ThethingisNoble’sis

oneofmysuppliersandwhatismoretheCEOusedtobeADVFN’sbrokerbeforehewentAWOLandintothenumismaticbusiness.SosuchdetailedknowledgemeansIknowalotaboutthequalityofthisfirmanditishigh.

TheyhaverecentlyacquiredDreweattsandBloomsburyAuctions.IhavefollowedDreweattsforsometimeastheyhavelovelystuffforauction.Theiracquisition

aloneisasolidstepupintermsofscaleandBloomsbury’sisyetmoregrowth.AcquisitionsaretoughtomanagebuttheNoble’smanagementaresmartandrespected.Ifeeltheyareontheirwaytothebigleague.

Witha12P/Eandadividendofacoupleofpercent,plusagrowthstory,Icouldn’tresist.Noble’shasa50-100%upside,asawild

guess,withanincreaseofsalesto£20mandanimprovementofP/Etosay15.

Idon’tnormallydogrowth,Ilikerecovery,butNoble’sisthekindofstoryIlike.

MeanwhileAvocetMiningwentapethismorning,up33%atonepoint.Apparentlytheysaythingsarebetternow,blah,blah,blah.Ifanciedbuying

some,butthen,whybuysharesinacompanywhenthemanagementhasnocredibilitytoyou?SoIdidn’t.

OntheotherhandFirstGroupisonitswayup.Thepriceshouldbe135pandastheeffectsoftheliquidityshockoftherightswearoffitseemstobeheadingthere.Iwanttobuymore,butwehaveenough,sowecan’t.Ifindmyselfgenerallyfullup

onFGPsoIcan’tevenbuyformycrazypuntingaccount.

Ohwell,sucharethedemandsofdisciplineininvesting.

SpecimenPortfolioRecoversLostGround12August2013

SorightnowitlookslikeImightbeabletostartholding

myheadupinpublic.Thespecimenportfolioisnowonlydown5.8%.Thisisstillverypoorbutthisrecoveryisaperfectexampleoftheswingsandroundaboutsofinvesting.AssuchI’mgladithasworkedoutthiswaybecausethiskindofgutwrenchingperformanceissomethingyouhavetoexperiencetounderstandthatthisisthekindofpathcanhappenonyourwaytofat

profits.AttheendofJunewe

weredownwellover20%.Imustsaythiskindofperformancehasneverhappenedtomebeforelikethis.WhenIpickedthebottomin2008Iwentdownaboutthismuch,butthoseweremassivelyvolatiletimes.Buyinganewportfolioandgettingstompedisafirst.Isupposethisisafunctionofnothavingachoiceofentry

pointastheportfoliohadtobestartedwhentheblogwasstarted,butevensoittakesnothingmorethantherandomwalktoclobberyoulikethis.

ThelegacyportfoliowasdoingroughlyOKduringthisperiod.However,thereisnodifferenceinselectioncriteriabetweenthetwo,onlytimingandscale.Soinduecoursethespecimenportfolioshouldperformthesameasthe

legacyportfolio.Thisseemsfarfetchedbutitisinevitablebecausetheywillovertimebecomeapproximatelythesamegroupofstocks.

Meanwhilethemadpuntingaccounthasexploded.Thepoundeurolongisdoingwell,the“waytoomuch”FGPishelpingandtheBlackberrymesshasrecoveredalittle.Italladdsuptoaniceslugofmoney.I’mwaitingfortheNikkeito

fallbacktore-enterthatmarket,butI’mhappytonotbepummelledbyridiculouslyriskypositions.Theaccountbalanceispureprofitnow,whichisnice,andI’vedecidedtopullchunksofcashoutas/when/ifIhitfurthermilestones.

BackinthelandofsensibleinvestingFGPcontinuestodowhatit’ssupposedto,headfor135p.TheChairmansoldwhat

looksliketherightshebought,whichissomewhatofaworry.Isupposeroughly£250,000ofextraFGPsharesmighthavelefthimfinanciallystretchedbutitseemsalittleoddtomeinthecircumstances.Formethisisalittleblackmarkthatwillnag.

BankofIrelandisthestaroftheshowrightnow,up46%.Flybeisup23%andIhavehighhopesforit.Even

soofthirteenshares,onlyfourareup.

SinceIhavebeenwriting,theportfoliohasrecoveredanotherpercenttolayat-4.8%whichisapproachingourtransactioncostsandspread.

Soonwego.

PortfolioRallyisExhilarating13August2013

InthelastfewweekswehavegonefromDuncetoGenius.Hereisthechart:

Whatmagicpotiondidwetake?Whatsacrificestothegods?Whatpowersofpositivethinkingdidweuse?Thequestionsarerhetoricalbutitunderlinesthefactthat

abearmarketmakeseveryoneafoolandabullmarketeveryoneagenius.

Itisourperformanceinaboutayearthatwillgiveatrueindicationofhowwellwearedoing.

Havingsaidthat,thisrallyisexhilaratingandthelegacyportfoliohasgonevertical.Itiscarryingabout32%inprofitwithroughlyasmuchagainbankedsinceitsinceptionabouteighteen

monthsago.Thisisastellarreturn,butnotoneIexpecttomaintain.

Thespecimenportfolioisnowonly3.3%downandasIaddanewsharetothelegacyportfolio,soitisaddedtothespecimenone.

Belowisareminderoftheconstituentsofthelegacyportfolio:

Intermsofwinnersandlosers:

Longmaythisrallycontinue.

InvestorsCan’tBeFortuneTellers19August2013

“Ifonly,ifonly,ifonly...”Thespecimenportfoliois

nowtoyingwithbreakingeven.AsIwritewearelessthan1%down(0.78%).ThewinnerhelpingusaloftisFlybe,nowup66%,becausethenewmanagementflowninfromEasyJetmakesthecomebackstorysoundverytasty.

AmIexcited?No.Thisishowinvestinggoes.Inaportfolioyougetbigwinners,goodrecoveriesandabjectfailures.Today’sinvesting

horrorstorycanbetomorrow’sheroicprofitandviceversa.

ThisbringsmeontoAvocet,ourworsedogwhichisnowrocketing.Ifwehadloadedupatthebottomwithmoreshares,whichIwastemptedtodo,wewouldhavemadeapacket.

AmIdejected?No.Missingbigwinshappensalot.RememberThomasCook?Wedidn’tbuythat

becausethesituationwastoohorribleandthemarketsowobblyIconsidereditthesortofcrazygamblethatHMVwas.Itwasandstillisabadbetinmymind,butitpaidoffmassivelyinanyevent.Avocetisinthesamebasket.

However,wedon’tsellthesemistakesorchasethem.Wejustdoourthingandhopetogetafatprofit,yearinandout,overtheportfolio

ofrecoverycandidates.Wecan’tbefortunetellers.Weareplayingtheodds.

Who’dhavethoughtsixweeksagowhenweweredownnearly25%,wewouldbebacktoaroundflattoday?(Rememberthislossincludesfatcostsandthenegativeeffectsofsellingatwidespreadsatcurrentprices.)Thesortofrallywhichhasbroughtusclosetoparisrareandimpossibletopredict.

Anditcan’tgoon.Actually,yesitcan.But

wedon’tknow.Wehavetoletgoworryingaboutallthemissedopportunitiesandspeculativeguessing.Webuycheapsharesandsellthemwhentheyaren’tcheap.Wetrytobeassafeaspossibleinthishighriskendeavour.That’sallwetrytodo.

AsanasideIrealiseI’mbuyingthesestockstooearly.Actuallythisisnotreally

true.Thereisnorighttimetobuy,onlytherightprice.However,inthiscurrentmarket,thesharesthatfitourcriteriaseemtocontinuetofall.

Canwedelaybuyingandmakemoremoney?No,becausetomorrowthatdynamicwillchangeandsuddenlywaitingwon’tworktoouradvantageandonlyhindsightprovesusrightorwrong.Wehavetoforget

timing.Timingthemarketshouldbeconsideredimpossible,evenwhenitisn’t.

Itisalltooeasytoviewthepastwithperfecthindsightandregretone’sdecisions.Itisanemotionaltraptoavoid.Wehavetoworkwithonlysmallamountsofforesight.

GoingBananas22August2013

WehaveboughtFyffes,thebananafolk.I’veownedthisshareseveraltimesovertheyears.P/Eis8.5andit’sonmyfilterswithsalesoverfourtimesmarketcapanda

dividendof2.7%.It’snotscreamingtome,butnothingis.Thechartlooksverystrong:

Thislookslikeabreakouttome.Ialwaystakethiswitha

pinchofsalt,butI’msureyouseewhatImean.Thisisnotamultibaggerbutitmightgiveus50%.50%isfatbutI’vegrowngreedyandremindmyself50%wouldbeveryniceindeedwithadividenddroppingintheletterboxtopayustowaitforit.

Atthissecondwearelessthan1%downoverall,evenincludingthesellingspreadpercentagewhichisacoupleofpercentnodoubt.

Dartycamestormingback,afterthepricefaintedonustheinstantweboughtit.Weareup56%onBankofIrelandand38%onFlybe.Avocetremainsthedog,down75%andtherestaremildlybobbingabout.

Hereisachartoftherollercoaster:it’splottedasifweput£30,000inanaccounttogetstarted:

Soafterninemonthswehavefourteenstocksandhavejustaboutcoveredourcosts.It’sthanklessbutonwego.

Forthosewhocouldn’tbuyfourteeninninemonths,

thiswon’tbeaproblem,becauseifyoubuyaswegoalongyoushouldendupinthelongrunwiththesameresult,youwillineffectcatchupovertime.Allthesharesarepickedusingthesamemethodology,sooneisnotbetterthantheotheronaverage.That’snotintuitivebutthat’sprobabilityforyou.

MomentaryProfit23August2013

Foramomenttherewewereinprofit.Itmighthavebeenonly£5forhalfanhourbutconsideringtheportfoliowasdownwellover20%lessthantwomonthsago,itis

surprising.Whathappenedinthe

markettocreatethisturnaround?Nothingmuch.Certainlynothingoutstandinglybullishhasapparentlyhappenedinthemarket.(That’snottosaysomethinghasn’thappenedthough.)

Ikeepwritingaboutthehighlyrandomnatureofthemarketandhowyoucan’ttimethingsandyoucan’t

trade.Whileefficientmarkethypothesisisstillthestateoftheartmarkettheory,noonebelievesit.Thisisakindofproof.Whowouldhavepredictedit?Whowouldhavehopedforsuchaquickturnaround?Itfitsthetheoryperfectly.

Myinterpretationofthetheoryis,tobesuccessfulinthemarketyouhavetobuyabasketofstocksyouconsidergoodvalue,foragoodreason

innichesandwaitoutalltherandommessingaround.Themarketthatpeopletrytotradewillmakeyoulookafoolorageniusbutonlytimewillrevealtherealstory.

Whoknowswhathappensnext,butwearebuildingaportfolioofcheapstocksandovertimetheywon’tbecheapandwewillbaganiceprofit.Whichstockwilldowhatandwhen,wecan’tknow.

Themarketisveryrandomandhighlyefficientandwebuysharesthemarketmis-valuesbecauseitisnotperfect.However,thisrandomnessandhighefficiencymeansthisprocesstakestimeandpatienceanddisciplineandthemarketwillpayusforthatandthefactwearemakingitmoreefficientbydoingso.

AsIfinishupwearebackdown0.21%...0.14%

down...0.17%...0.18%...0.17%...

NearlyOutoftheSummerLull29August2013

Notmuchtowriteaboutthisweek.Thereisnothingmuchmoving.

Obamalookslikehe

planstotryanddropabombonAssad’shead.Itoccurstomeit’stheonlyfunanAmericanPresidentgetstohave.The“bombsaway”buttonistheonlyonetheygettopress.However,theyshoulddothemath.Totalnationaldebt$15trillion,costofMiddleEastWar$5trillion.Thisshouldn’taffectusmuch,whateverhappens.

Meanwhile,nothingmuchhashappenedtotheportfolio.

Wewereupafewcoppersandnowwearedown1.26%,butafterthehugefallandrisewehavehad,thisisjustnoise.Ithasbeenveryquietevenasthemarkethasbeenprettybearishandchoppy.Thelegacyportfolioremainseffectivelybecalmed.

Hereisalistofourportfoliowithitswinnersandlosers.Thesellpriceisatthebidandthecostincludesalltaxandcharges.

Fivewinsvnineloses,hardly

stellar,butlessabysmalthanallbutafewweeksago.Let’sseeiftherandomwalkcanmakeuslooklikegeniusuptoChristmas.

PortfolioinProfit–Just!3September2013

Thespecimenportfolioisbobblingaroundinprofit.While0.65%isn’texactlymindblowingforallthistroubleitisahugeturnaroundfromover20%downinless

thantenweeks.Ifonlywecouldknowwhichtenweeksinayeartopick.

SellinginMayandgoingawayto15Septemberasthesayinggoeswouldnothavedoneusanygoodatall,wewouldbewellover10%down.It’shardtofocusontheunknowablerandomnessofthemarketbutitisgoodtokeepbringingittomind.Investingisnotagameoftag,it’sagameofwaitandwait

andwaitandsee.Ofcourse,ifMrObama

bombsSyriawewillloseapacketforabitandifhedoesn’twewilllikelyearnafewpounds.Butwhoknows?Ifthemarketdiveswemaybuyafewthings.

Whileweareinprofitoverall,aftercostsandtakingtheneedtosellatthebidintoaccount,onlyfouroutoffourteenstocksareinprofit.Sothatisaninteresting

lesson,onlyfourofourselectionoffourteenneedbeinthemoneyforustobeinprofitoverall.Thechancesofbeingabletojustpickthosefourfromtheselectionoffourteenisoneinathousandandifyoudidtheprofitwouldhavebeenjust34%.Ifyouhadpickedtheworsefouryou’dhavethesameoddsandyouwouldhavelost24%.

Insteadoftryingtowin

the1/1000lottery,wehaveasmallportfolioandareflatforallourtroubleandrisk.Thisisthepointthatunsuccessfulinvestorssellandgrabbacktheirmoney.Theyhavelost,thenwaitedalongtimetogetevenbeforerunningaway.Thisis,ofcourse,nowaytomakemoney.Youcan’tgetevenwiththemarketbecauseitdoesn’tcare.Likewiseyoucan’tbeatit,thereisnothingtobeat.It’slikeshoutingat

yourchequebook:itisnotlistening.

Inthestockmarketyoueithermakemoneyorlosemoney;youareeitherrightorwrong;it’saplacenotaperson.Waitingtogetevenisaspointlessassellingifyouactuallydogeteven,waitingdoesnotaffecttheoutcomeinanyway.Tryingtogetevenisnotaninvestmentortradingstrategy.

Imagine,nowweareback

ateven,Istoppedthisbloghere!...

...Don’tworry,Iwon’t!

SongbirdAddedtoPortfolio3September2013

BoughtSongbird,moreinfotomorrow.

Songbird–GoingforaSong4September2013

Iratherlikepropertyatthemomentbecauseifwearegoingtogetinflation,arecoveryorboth,property

willdowell.EverywhereIgointheworldthestupidmoneylovesproperty.That’snottosayanyoneisstupidtolikeproperty,buttheloveofpropertyinmanypartsoftheworldisblind.PeoplebuysmallishhousesintheRivieraforamajorfractionofthevalueofthewholeofCanaryWharf.Thisisthekindofpropertylustthatgloballyknowsnoboundsanditdrivestheideathatthebest

propertycannotfailbuttoappreciate.It’sabubblemindsetandwelikebubblesbeforetheyinflatetoomuch.

SoI’veboughtSongbird,theholdingcompanyofmuchofCanaryWharf.Thepricetodayis155pandthenetassetspershareis240pashare.SoasfarasI’mconcernedthecompanyisforsaleatan85pasharediscount,whichmeansifitroseto240pitwouldgoup

54%.Ofcourse,thevalueofthepropertywouldrisewithmoreeconomicrecovery,sotheupsideistastyandwillgettastierstill.

Thereisadownside.Thecompanystructureisratheropaqueandthemanagementwipedouttheshareholdersinthemidstofthecreditcrunchwithagiantrightsissue.

Ididwelloutofthatbutitdidshowthatthemanagementwasruthless,to

saytheleast.Ruthlessmanagementisnotnecessarilyagoodthingasshareholderscanwakeupandfindthemselvesonthemenuifthemanagementaretoopredatory.ThisisalessonI’velearntinmanyapeople-basedbusinessinlisted,fundmanagement,recruitmentandaccountantPLCs.

Anywaywe’vetakenthejumpbecauseSongbirdislikeLandorBritishLandbutwith

amuchhigherriskrewardratio.TheCanaryWharfandrecoverystoryshouldplayoutwellbutthereisneverafreeridewhenthemarketvaluesastockatafatdiscount.

BuyingStockBrokers9September2013

AsIwriteweare2%uponthespecimenportfolio.However,Ihavejustboughtanothersharesothiswillpushusback.ItisWalkerCrips.Theideais,itsmarket

capnowequalsitscashandithasabusinesswithsalesaboutthesame.Soineffect,thebusiness–whichisstockbroking,wealthmanagementetc–isinforfree.Thatismyhand-wavyanalysisandifIcan’tkeepitsimpleinmyinvestmentsIdon’twanttheshare.

Thetriggerwastoday’sannouncementthattheyhavesoldsomeloanstocktheyreceivedfromsellingtheir

assetmanagementbusinesslastyearforconsiderablemorethaninitiallyexpected:http://uk.advfn.com/news/UKREG/2013/article/59119497

Idon’tfollowthiscompany,soItookalookatthechart.Result:waydownonfiveyearsago.Otherfactorsinclude:normaldividend4-5%.Thefatcashbalance.Afocusonreorganisationbacktoasolidcorebusiness.Pullingtradingstatements.Allforfreeifyou

takeoutthecash.Ilikestockbrokers

becausetheyaredownontheirlucktosaytheleast,butI’mexpectingthistochange.Anewageofequitiesinthewestisopeningandbrokerswillflourish.Thatisblueskythinkingbutitisoneofthoselongtermthemesthatnudgemeonewayortheother.

Thetroubleisthebloodystockhasa10%spread!!!!Thatisakiller.Sotobuyin

weimmediatelylose10-12%ofourpositionbecauseofthedysfunctionalmarketsthatmarketmakerscreate.EvenwithanicepriceimprovementfrommybrokeratTSCTradewestillendedup9.75%alltoldintheholeforourtrouble.Sometimes,though,youjusthaveto,astheAmericanssay,suckitup,andwehave.Ithasalsopusheddownouroverallprofitto1.38%.

Thisisaveryimportantpointtoalwaysholdinyourmind.Ifwebuyshareswhichcostussay5%tobuyincludingstamp,commissionandspread,that’sanastybump.Overanaveragetwoyearhold,however,thatfallsto2.5%perannum.Stillnastybutnotdrasticifwearelookingtocapturesay15%.Thelongerweholdthefurtherthecostfalls.

Nowimaginewetrade

ourportfoliofourtimesayear.That’sa20%costandthat’ssimplyunsustainable.Thisiswhytradingdoesn’ttendtoworkandwhyinvestingiseasier.

PortfolioinProfit10September2013

Anotherfineday.ThemarketisverystrongandI’mleftwonderingifwearepeaking.Butwearen’ttradingsoitdoesn’treallymatter.Weare2.9%upasIwrite.Blowing

pastshorttermbondyields...OK,soI’mbeingironic,butweareinprofit.

Therearetwothingstobearinmind.First,thisrecoveryinourfortunesisnotbecauseoftrading.Wehavesoldnothingyet.This20%falland20%riseisinthesameportfolioofstocks.Wehave,asIhopedonlyahandfulofweeksback,riddenoutamarketcycle.

Thisfallwasafunctionof

thecostofbuildingaportfolioandrandommarketfactors.Thepassageoftimeisdealingwiththisasnowweareenjoyinganequallyrandombutnonethelesswelcomerally.Thisvolatilityshoulddropaswegrowtheportfoliobutitunderlinestheuncertaintyinherentininvestinginshares.Itiseasytobeleftasking:Whatchanged?Whoknows?Butthatispointless,youhaveto

makeyourchoicesandstickwiththem.

Secondly,costssignificantlydiminishourprofits.Theaveragespreadonourportfoliois2.1%.Sovaluedatthecurrentofferprice,wewouldbeup5%.Poponthe.5%stampdutyandsay2%forcommission(£20atrade)andweseeourun-truncatedprofitonourstockpickingis7.5%.Thisisaharshrealityoftenmissed,

costscanbeswingeing.Butnonethelessevenafter

allthesecostsweareup2.9%andlikelytobeholdingthesestocksforalongtimesotimewillhealthesegouges.

Hereisthelistofspreads:

Meanwhilebackinstupidpuntingland,Itookanothertrancheoutofmyspreadbettingaccount.ItisequivalenttowhatIputinallthoseyearsago.IhavedecidedthatifImakeonetimesmyoriginalcapitalfromthepreviouswithdrawallevel,Iwilltakeonetimesmyoriginalcapitalout.Ithasn’ttakenlongtodothat.

How?Bybeing15times(1,500%)leveraged.Thisis,

ofcourse,madnessbutthewholepointofthataccountistotradelikeabeast.

Onethingisclear,youcan’ttradeandmakealiving,thescaleisjusttoobig.Tomakesay£100,000,evenifyouwereasluckyasI’mbeing,youwouldhavetobethrowingaroundmulti-millionpoundindexpositions.

Let’skeepitsimpleandsayyoucancatchtwopound

euromovesfrom115to120ayear.That’s10eurocents.Youwouldhavetoholda1,000,000europositiontopullina£100,000profit.Thisisn’tincludingfundingcostsbutlet’ssayyouwereholdingforjusttwomonthsofhellandyouscrapedacouplemorepointstocoverthatcost.Areyoureallygoingtobedoingthatyearinandout,longafterthethoughtofarideonamotorbikestopped

beingfunorfeasible?Sittingonacarefully

nurturedportfolioofstocks,however,ishighlymanageable.Thedifferenceisbetweenbullfightingandbringingupchickens.

Anyway,fornowatleasttheduncecapisoff.

...AsIfinishwriting,(30minutes)wearenowup3.1%.I’vebeenageniusfor30straightminutes.Lifeisgood.

(0.4%returnsperhour...Imaginecompoundingatthatrate!)

MarketRunComestoanEnd12September2013

Themarkethassuddenlygonebearish.Thisisnotsurprisingaftersuchagreatrun.

Inthelegacyportfoliowehavetwotakeoversintwodays–yikes:600GroupandNoble’s.Ihavesoldthemboth.IftheoffersarefirmandhaveahostiletingeIwouldholdbutwhentheyarevagueasin600GroupandfromanopaquesourceIwillsell.TheNobleofferhaspaymentinsharesasabigelement.SoIprefertotakethecashnow.600wasa50%profitandNoble’s6-7%.

IfStanleyGibbonsdoesthisdeal,whichiseffectivelyrecommended,itwillhavedoneabrillianttakeoverandwillgetafatuplift.ItisagrowthsharenotavaluesharesoI’mnotreallyinterestedinit,asitdoesn’tfitneatlyinmyinvestmenttheme.IwouldhavebeenveryhappyindeedtositonNoble’sstockforayearortwoandwatchitdouble,butthatpossibilityappearstobe

recedingfast.Inthespecimenportfolio

thingsaretakingabreathertoo.NotmuchtoreportexceptWalkerCripsisactuallyinprofitwhichisaniceperformanceforafewdays.

ThisweekendistheStLedgerof“SellinMayandgoaway”fame,soitwillbeinterestingtoseewhat“backtowork”inthecitybrings.Myflagsareyenvdollar,

weakyenequalsstrongequities.

Meanwhilethepoundlooksonitswayupagainsttheeuroanddollarandifthisisafinalreversiontoitscorrectrate,thenwecanexpectamuchstrongerpound.Goodorbadforequities?Toosoontotell,butprobablygoodifthehotmoneydecidestoperchinUKequitiestocatchtheFXupdraft.

NewSubscribers:Welcome16September2013

Awelcometoallmynewsubscribers.Youhavemissedmuchpainandpleasure.

Iambuildingacontrarian

valueinvestingportfolioasifIwasanewinvestor.Iambuyingonly£1,000ofeachstock,usingabrokerwhoisnotthecheapestandtakingintoaccountthespreadaswego.Thatmeanstherearebigrealcoststoclimbovertogetintoprofit.ResultswouldlookmuchbetterifIbought£5,000ofsharesatadiscountbrokeranddidavaluationatthecurrentpricenotthebid.ButI’mtryingtokeepthe

recordabsolutelyreal.Thisnewportfoliois

goingintomylegacyportfolio–mylongtermportfolio,soovertime,perhapsanotherthreeyears,the“specimen”portfolioandthe“legacyportfolio”willbethesame.

Thelegacyportfoliohashadmassivereturns;thespecimenportfoliohashadahugerollercoasterride(seebelow).Iliketothinkthis

rollercoasterispartofamaturingprocess.Ibuywhensharesgetcheap,buttheycangetcheaper.Assuch,buildinganewportfolioofvaluestocksisinitiallyacostlybusiness.Inthismodeltheprofitscomethroughlater.Thiscouldberight,thismightbejustaconvenientnarrativeforsomethingelsethat’satwork.

Investingisjustaboutbuildingathesisandbacking

itwithmoney.Sometimesyoulooklikeagenius,othertimesanidiot.We’vecertainlylookedfoolish,butnowweseemjustnotparticularlyclever.Anotheryearandwewillknowbecauseweshouldbeup15-30%withaproperlydiversifiedportfoliobythenifweareontherighttrack.

Sohereisthehistoryofthespecimenportfolio.Thechartiscalculatedasif

£30,000wentintoabrokerageaccountfromdayone.Ofcourseitisunlikelytohappenlikethatasmostpeoplewilldripfundsin.

Hereisthetransactionlog:

Transactions17and18ishowIkeeptrackofdividends.

Interestingly,onaverage

we’vehadthisportfoliofor148days.Soattheaveragerateofperformance,ifweheldthisportfoliofor365daysandfactoredinthecostofthespreadwewillbeup6.5%.OfcourseifweprojectedouttheperformancesinceJulywewillbearidiculousamountup.Thisisanotherreasonwhypastperformanceisnotconnectedtofutureperformanceandwhyrandomnesshasthekey

roletoplayintheshortterm,butnotthelongterm.Inanyeventit’sbestnottocountyourchickens.

Andhereistheportfolio:

Nowtheinvestmentindustry

isbackfromholidayitwillbeinterestingtoseewhathappensnext.

FYI,LeadingLightwontheStLeger,sothestockmarketismeanttorallynow.WhatdidIsayaboutpastperformance?Hopefullythisparticular50/50willcomeupinourfavour.

PreparingforaDrop17September2013

It’sasuresignthatacorrectionisaheadwhenthingsgotoowell.Beforeacrashyoucangenerallyfeelitcomingwhentherubbishcompaniesonthemarginof

themarket,thetiddlersatthebottomofAIM,suddenlystartexplodingupwards.Thisisthefireworkdisplaythatsaystroubleisahead.

Aniceextrastrongrally,however,isn’taportentofdoom,justanindicatorthatatopiscomingintoview,atleastforabit.ThisiswhereIthinkwearenow.Weareatleastataplateaux.SoI’mwaiting,preparedforabitofadropnow.

ThemarketisboundtogoabitwildiftheFederalReservedoesordoesn’tcutbackinpumpingatrilliondollarsayearintotheUSandworldeconomyviaQE3.However,whoknowstheshorttermoutcomeletalonethelongtermone?Theendofzerointerestrateswillbechoppy,butinthelongrungoodnewsforequities.

Whenthemarketisbullishthebigcapsdon’ttend

tofallmuchwhenthereisbadnews,converselyinabearmarkettheyfalloutofbedattheslighthiccup.

ThismorningfindsInvescoandAsosinthesinbin,anindicatorthatthemarketisindeedfeelingbearish.(AsIwriteInvescohasbounced2.5%backsothissuggestwehaven’tnecessarilyenteredseriousbearterritory.)Sothedaysaheadwillbelikelyglum.

ThebigactionisinForexatthemoment,whereinasensenotmuchishappening.YoucanpracticallyseetheagreedlinesinthesandfortheG8currenciesparity.Whilethiscontrolissuccessfullyinplace,thenthelessermarketsshouldbeingoodform.Currenciesaretheseniormarkets,followedbybonds,thenequities.Stabilitycomesfromthetop.

Wewillnotsellthe

portfoliounlessIbelievetheworldisabouttoend.Thathappenedin2008.Isoldagainin2010butitturnedoutthatIneedn’thavebothered,eventhoughitseemedforaboutayearlikeagoodidea.Ithinksellingoutisaveryrareoccasionandthenonlyafterabubbleandatthepointbeforeoraroundabust.Itcan’tbeonawhim.Youhavetoknowwhyyouarebailingandithastobea

massivereason.Idonotthinksucha

futureisaheadofus,fortheforeseeablefuture,butthatdaywillcomeandwewillmostlikelymissit.Icaughtthelasttwoearly(2001,2008)butgettingthreeoutofthreeistoomuchtoask.

OutrageousSpreadStopsMeBuying25September2013

WenearlyboughtanothersharetodaybutIputmyfootdown.Ithada10%spread.That’sjustanoutrage.Ihad

mybrokerringupthemarketmakerandtrytodoadeal,butnoluck.ItisjustascandalthattheUKmarketcanhavesuchspreads.Itisn’tanewstoryofcourse.InthisinstanceIrefusedtomakethemarketmakerrich.Wecanwait.

Meanwhile,thespecimenportfolioiswibblingaroundat1.38%up.Idon’tlikethemarketrightnow,itfeelstoppy.However,Itryto

forgetthesethoughtsbecausegutfeelingisnoguide.

MeanwhileI’mexperimentingintheUSmarketandIambuildingamulti-currencybigcapportfolio.It’saveryinterestingtaskandnotoneIclaimanyskillin.TheUSendofitismostinteresting.Americareallydoeshavethemostamazinglybentmarkets.

IhavebeenfollowingBlackberrycloselybecauseit

isaclassicvalueplay.TodayitdeliveredmeanexpensivelessoninUSshenanigansanditissuretobeacheaplessoninduecourse.Ican’treallyexpressmyanalysisofthesituationwithoutriskingdefamation.However,itilluminatesthejunglethatistheUSmarketandIthinkI’mgoingtoenjoymylivefireexercisesinit.

Meanwhile,asthemarketisinhiatusIamleftfeeling

confused.HowcanShellbesocheap?Itisandthreatenstoremaincheapforever.IsaythisbecauseIhaveboughtitonmanyoccasionsontheobviousobservationthatthecompanyismassivelyprofitable,paysahugedividendandisonalowP/E.YetIalwaysloseafewpercentandendupsellingitforonehousekeepingreasonoranother.

TheonlythingIcanthink

is,thecompanyisjusttoobig.It’sanelephantthatcan’tjumpbecausemarketliquidityisnotbigenoughtoliftit.It’sthesamewithExxonintheUS.YetcompareShellandExxonbalancesheetsandfundamentals.TheysuggestthatifShellwasExxonitwouldbetwicethemarketcapitistoday.Thatdoesn’tsmackoftheefficientmarket.Butattheextremesthe

efficientmarketbreaksdownandperhapstoobigissuchanextreme.

IscratchmyheadsagelyasifIknowthat’sthereason,butlookingatUSstocksthrowsopenawholeworldofconfusionthatcaneasilyleaveyoudoubtingyoureyes.

Tesla,forexample,makescars,$400millionofthemandthecompanyisworth$20bln,50timesitssales.It’sworthabout30%ofFord’s

marketcap,whosell$134,252millionofcars.Fordisworthroughlyhalftimessales.Soa$1ofTeslacarsisworthtothestockmarket$100dollarsofFordcars.ItisasifaTeslacarsoldfor$40,000andaFordfor$400.

Clunk,mybraincrashes.Butyoucan’tsitonyour

laurelsandmakemoneyfromwhatyouknowyouknow,youhavetokeeppushing

yourinvestingasfarasyoucan.

Multicurrencyportfolioinvestmentisfascinating–frustrating,butworthmastering.Thetroublewithitisit’sextremelyinfluencedbycurrency;andcurrencyistechnicallyimpossibletopredict.Make20%onyourdollarstocksandhavethedollarmove20%downandyouhaven’tmadeadimeorinthiscaseapenny.

So,forexample,ratherthanbuildjustadollar/sterlingportfolioIshouldaddaeuroleg.However,Ijustknowtheeuromustfall.(That’safallacybutIcan’tfightit.)Isimplycan’tbeartobuyallthoselovelyFrench,GermanandItalianvaluestockswhenIcanseetheyaregoingtobeheldincrateringeuros.

Howeverthisisalljustgibbering,becausethereis

littleelsetodobutwait.

TheMysticArtofInvesting27September2013

Alotofpeoplethinkinvestingisoccultknowledgeandtherecanbeanelementofthat.Knowledgeispower,

soifyouknowmoreyouwillmakemoremoney.Sohereisabitofoccultknowledgeformyreaders.

ThisisPrometheanWorld,

oneofourmorecontrarianpositions.Let’sforgetthenarrativeandlookatthepriceactiontoday.Thisstockis5%butourportfolioshowsalosstoday.Thatcouldstingifyousold.

Sothisiswhathappened.ThespreadexplodedonthelastminuteoftradingsotheBIDprice,whichyousellat,fellby0.25p.Thenthesharewentintoauctionand“uncrossed”,themomentthe

auctionpriceissettledat18.25.IfyouwerebuyingonaRSP,theautomatedsystem,orperhapsviaaspreadbettingplatform,thispriceactionwouldsetthepace.IfthatwasdoneonpurposetoaffectRSPorspreadbettingtradingitwouldbeanillegalmarketmanipulation.However,that’sanotherstory.

Whatyoucanseeisthatyourbuyingandsellingprice

isheavilyinfluencedinthisandmanyotherstocksbyeventslikethis.Assuch,asaninvestoryoushouldavoidtheopenandcloseinilliquidstocks.

Thisparticularcaseismoreinterestingstill.Thesearethetrades:

Someonemade£40onthistrading£2,000ofstockand

madeus5%on£1,000(£50)ifonlythebidhadn’tfallenoneminutefromtheendofplay.Thisisaninefficientmarketatworkandariskyonetoo,atleastintheshortterm.Thatmightsoundbad,butactuallyinefficiencyandriskiswhereprofitinthemarketlives.Themarketwillpayustomakeitmoreefficient.Itturnsoutinmyexperienceitwillpayusquitealot.

Hereishoping.

TheMarketisFalling!2October2013

Fornowatleast,weareinabearmarket.Whatwehopetoseeisourportfoliofallinglessthanthemarket.Thenwhenitrallieswehopeitwillrisemore.Thisistheratchet

thatmakesusmoney.Aspredictedinanearlier

piece,thefinalmomentsoftherallywereindeedalignedwithwhenthemarketwaspretendingIwasagenius.WearenowinaperiodwhenIwillbeadunce.WhenIfeelparticularlycleverandthegeniusquotientisrunninghigh,thatisalwaysasignofamarkettop.HubrisandNemesishavebeenatitformillennia.

Beingadunceisnotsomuchfunbutweneedtoembracethecycle.

HowlongthisbearwilllastIdon’tknowbutitshouldbenearingapotentialturnaroundpoint.YoucanseethisontheDowclearly:

IusetheDowbecauseit’scleareronitschartandtheFTSEwillfollow.Butalwaysrememberchartlinesarenotdestiny.Theyarejustframesofreference.

Meanwhile,thestrongpoundisinteresting.Clearly,somethingimportanthaschangedandthepoundlookssettoriseandrise.Thiswon’tnecessarilybebadfortheFTSEbecauseifyouownsterlingequitiestheyappreciateindollarsandeurosautomatically.Assuchhotforeignmoneycomesknocking.

Bearphasesareofcourselessexcitingthanbull

marketssoIapologiseinadvanceifIgoalittlequietifthingsstaylikethis.I’lltrytoentertainbutnopromisesorwarrantiesgiven.OfcourseassoonastherallystartsI’llbecrowinglikeanyself-respectingpundit!

Goodjobwedidn’tsellinMayandbuy15September.Asasideissue,Octobersusedtobeawfulintheolddays,soweshouldbearthatinmind.

IfyouarewonderingwhatIthinkabouttheUSgovernmentshutdown,myopinionisit’sajoke.TheUSdoesn’tneedtoraiseitsceilingatall.

Why?Wellthisisn’tinthepress,butit’ssimple.TheFederalReservehas$1.5trillioningovernmentdebtonitsbalancesheetboughtduringQE.Ifitretiredthesebonds,thedebtwouldfallbyasmuchinstantly,freeingup

theceiling.Thereareplentyof

reasonsnottodothisbutnoneworsethandefault.Assuchthewholethingisnonsenseandthemarketknowsit.

AtthislevelQEisveryfrighteningifyouthinkaboutit,whichiswhythisoptionisneverbroughtup.However,ifyoudon’tbelieveitistruethenreadhowGeorgeOsbournegotbillionsbackin

interestthetreasurypaidtheBankofEnglandonthegiltsitboughtduringQEandyouwillseethisoptionisreal.Fascinating.

It’saBearMarket4October2013

Wellhereweareinabearmarket.Inthelastcoupleofyearstheidiotsofthemediahaveredefined“bearmarket”asonethathasfallen20%.Thisislikedefiningafuneral

asanaccident.Abearmarketisone

wherethemarketisfalling.Thisisausefuldefinitionasitsaysthetrendisdown.Thenewdefinitionisuselessasitsaysthetrendwasdown.Themarketcouldbedown30%havingturnedandnowberallyinghardandthenewdefinitionsays,“weareinabearmarket.”It’senoughtomakeyouweep.

Bearmarketmeansthe

tendencyisdown.Thiscanbeforallkindsofreasonsandthereareafewrightnow,includingthemarketbeinghighandtheAmericangovernmentbeingclueless.

Meanwhiletheportfolioisbackintheredagainbyasmidgen.Wearelosing£36overallincludingexpenses.Hereisthechart:

ThisislikelytogetworseandIwouldbesurprisedifwedidn’tendupinthedumpsagain.However,wesimplycan’tknow.Thisisinvesting.Youtaketheroughwiththe

smooth.Thethingtorememberismarketsturnfastontheupside.Sointwotothreedaysyoucanmisshalfofabounceback.

Ifthemarketcorrectswewouldexpectoursharesnottodoasbadlyasthemarketastheyarealreadycrunched.Thisiswhatnormallyhappens.Wewillsee.

Youonlyhavetoseeourperformancethisyeartoseetheimpossibilityoftimingor

atleasthowfastthingscanturnaround.

ThemainriskcurrentlyispoliticalandUS-centricandthereisreallynothingtobedone.Politiciansareaprimeclassoffoolscapableofdoingunbelievabledamageiftheygetexcitedenough,leavingnothingcertain.

MeanwhileIwasonCNBCyesterdayinAmerica.BeforemeontheshowwaszillionairebondkingBill

Gross,laterthatafternoonCNBCinterviewedPresidentObama.Notbadcompanybutwhowastheoddmanout?PresidentObama,ofcourse,ashewastheonlyonewhoseenterpriseisclosedforbusiness.

TalkingoftheshutdownintheUS,nooneisconsideringtheFedandQE.TheFedhas$1.5trilliondollarsofUSdebt.IftheUSgovernment–ofwhichthe

Fedisineffectpart–wastocancelthat,therewouldbenodebtceilingissue.IbelievethisiswhatwillhappeniftheUSactuallygetsneardefault.Assuch,thisisjustapoliticalwarbetweentwosidesofadysfunctionalandnowmalfunctioningdemocracy.Itisjustadistraction.Themarketpanicseasilyandthehotmoneyisrunningforcoverintheeuro.

However,timeslikethis

requirealongholidayonanicebeachwithacocktail.Thereislittletobedoneexceptlookforvalue.

ValueinvestorsrightnowmightbetemptedbyAlbemarleandBond,thepawnbrokerswhohavecrashedinthelastdaysby80%.Hereisthechart:

IntheolddaysIwouldhavebeenalloverthis,butinthedaysofpre-packadministrationsforskimpyreasonsIwouldn’ttouchthiswithatenfootbargepole.

ItookapuntonHMV.It

wentdown.Whatdoyouknow,theyjustreopenedtheirflagshipstoreonOxfordStreet.ClintonCardswasanotherrecentinstancewhereshareholderswere,astheysayontheBBs,“shafted.”

RememberNewStarandGartmore?Businessesstillintact,managementhandedoutfatslicesofthenewequity,shareholdersobliterated.IfyougobackfarenoughMarconiwasthe

templateforthiskindoffinancialslashandburn,anditwillcontinue.Assuch,avalueinvestmentmustwithstandbeingabletobestolen.Wethereforeneedtodoasmelltestondeepvalueinvestmentopportunities.Albemarledoesn’tpassit.

Sadly,whenthereisaUSplayerorprivateequityintheframe,itisnotagoodsignthattherewillbeaturnaroundforthebenefitofthe

shareholders.

AlbemarleandBondBouncingattheBottom4October2013

FunnyhowwementionedAlbemarleandBondearlier

today.Well,itbounced50%.Holdon–inthethreeminutessinceItypedthatit’sfallenbackto35%up.Youcantradethisstuffbutit’snotinvesting.

Whydothesecompaniescollapseandrallylikethisattheend?Well,firstoffifyouareshortthisstockfromhighup,youdon’twanttobeshortwhenthecompanyissuspended.Ifyouare,you’relockedintothatpositionfor

maybeayearwaitingforyourmoney.Meanwhileaspreadbettingcompanymightlockupyourprofitstooorpicksomeweirdpriceforsettlementetc.Assuch,shortersdon’twanttobetheretothebitterend,theywantoutbeforethedeath.

Thisshortcoveringoftencausesthesebigspikesbutblinkandyou’vemissedthem.Sometimestheyneverhappenandwhenthe

companygoesunderyoulosethewholevalueofthestakeyoutriedtocatchthebouncewith.It’sultrahighrisk.

Meanwhile,thesharehasan8%spreadsoevenbuyingincostsyou8%ofyourstakeandyou’vehourstocatchaprofit.I’mtoooldforthatkindofmadnessandhopefullyyouaretoosensible.

USDefault–Don’tPanic!11October2013

I’mtellingmyselfIshouldhaveperhapswrittenlotsofblogpostsaboutthepotentialUSdefault.However,Ihaven’tbecauseweareinvestingandthelastthingI

wanttodoisbuildalevelofpanic.MypositionwasthatMonday14OctoberwasthedaytodecidetoholdorfoldasthatwasafewdaysfromnextThursdaywhentheballoonintheorycouldgoup.TheonlyreasonfortheUStodefaultisbecausetheywanttokillthebeastofgovernment.Asmostpoliticiansofallhueslovethegovernmentwhichtheyrun,thiswasunlikelytohappen.

Secondly,Obamacansimplysay,“tohellwithyou”andprintmoney.

Soratherthanwritelotsof“willthey,won’tthey”stuffthecorrectresponseislethargy.

Thethingis,themarketknows.Orputanotherway,Obama’sbodyguards,brother’saunty’smotherknowsasdoestheequivalentupanddownWashington.Assuch,themarketismakinga

goodestimationoftheoutcome.Themarketsaysdon’tsweatit.

SotodaytheRepublicansblinkedandthemarketshotup.

However,complacencyisnotalwaystheanswer.Whatarethesignsofterribleeventsahead?

Inawordthemostdangeroussignis:silence.Silenceiscausedbydenial.Thebanddidplayonafterthe

Titanichittheiceberg.Equitiesdidn’tcrashafterthebondmarketfroze,eventhoughthereactionshouldbeimmediate.Ifpeoplearescreamingaboutimminentdisasterthenchancesareprobablylow.Iftheymerelychatterabouttheicebergandthaticeisonthedeck,thenheadstraighttothelifeboats.

Thisnonsenseisnotoverbutdefaultlooksveryveryunlikelynow.Thismeansthat

notgettingtooexcitedwastherightcourseofaction.Arealdefaultwouldhavebeenasleastastraumaticasthecreditcrunchbutit’snotgoingtohappen.

Meanwhilebackattheportfoliothisiswhereweare:

Soweareflatonceallcostsaretakenintoaccount.

ThenextfewdayswilldetermineiftheUSmadnessisresolvedandifitiswecan

hopeforanicerally.Meanwhilewearebusilydoingnothinglookingfornicecheapstocks.

MyBuyingIsOnHold16October2013

ThereisnowaywearebuyinganystocksuntiltheUSdefaultnonsenseisover.Inmyheadadefaultwillcauseacascadeofmarketdisjuncturethatcanonlybe

bad.Themarketissaying,

“don’tworry.”Iwouldtakenoticebutitissayingitwiththemarketequivalentofabullhorn.FranklyIdon’tunderstand.ItlookstomeliketheUSgovernmentisgoingtosailpastthenotional17Octoberwithoutadealandthenalongtowhateveryoneagreesisdisaster.Butthemarketssay,“don’tsweatit.”Ifeellikehangingupmy

marketguruhat.Currenciesarecalm,

commoditiesarecalm.Marketsaren’treallymovingmuch.Areweintheeyeofthestorm?Ican’tseeweare.It’salmostcomicaltowatchmereadingallthenewsandconstantlycheckingallthemarkets.Whyisn’tthemarketresponding?EvenUSbonds,whichwillbedefaulting,areplacid.Yetinthepoliticalforumit’schaos.

WhatdoesthemarketknowIdon’t?Themarketsaysthisissueisa“nonissue.”Howcome?

Sothisiswherechartscomein.Theyhavethestorysofar.Soyoulookatthechartsandtrytofixthestorytothefacts.Thisismytake:Theupcomingceilinghasmadethemarketfallheavily.ThatwasinSeptembertoearlyOctober.Butthesolutiontoitwasnotbroadly

knownbythosein“theknow”untilaboutaweekago.ThisfixissomekindofObamagovernmentaledict.Ifthehouseandthesenatecan’tsortit,Obamawilloverruletheprocesswhendefaultisverynearlyreal.Ifnotwe’dbe13,000ontheDowalready.Soevenaspoliticalgridlockisinplace,defaultisn’tgoingtohappen.

Alternatively,themarketisindenial.Itissayingit

can’thappen.Ifitiswronganditdoesthemarketwillcrater.However,itmightbeaslowcollapseliketheoriginalcreditcrunchwhichbeganinlate2007andcametoacrescendointheautumnof2008,thebestpartofoneyearlater,andthebottomthefollowingMarch2009.

ButdoallmarketsfoldorisitonlytheUSbondmarket?Rightnowit’sunfathomabletome.So

maybeitisforthemarkettooandweareleftscratchingourheadastheUSlumberstowardstheabyss.Anabyssitcan’tfallintOOOOOooooooooooooo............(poooooooof).

Meanwhilewearemakingmoneyandbackinthebluebyasmidgen.

DefaultCrisisAverted–WeWereRightNottoPanic17October2013

TheUSdefaultsituationcertainlylookslikeaclassic

lessonforthevalueinvestor.Wedidnothing.Thennothinghappened.Itwouldhavebeeneasytobailoutlastweek.Howscarydoesitgetwhentheworld’sleadingeconomydashesheadlongintoapotentialeconomicabyss?Butwedidnothing.Welookedatthestockchartsoftheworldandwesawacalmpicturesowesaid,“wellsomeoneknowsnothingisgoingtohappen.”

Themarketwasright.Tolistentothemedia,disasterwasa50/50chance,nottheoneinathousandthemarketwaspredicting.

Sowedidn’tlose5%ofourportfolio’scapitalbysellingonlytobuyitback.Wedidn’tmisstherallywhenthemarketknewthingsweregoingtobeOKwhichralliedwellbeforethenews.WearestillbasicallyinthedarkasIwrite,butthemarketwasn’t.

Totheaggregateofthemarkettherewerenosurprises.OnthescaleoftheimpactofadefaultbytheUS,nothingmoved.

PersonallyIthinkObamahad/hasanaceinthehole,whichwasknownbythebigplayers.Ifdefaultwasgoingtohappen,hewouldpulltheaceandtherewouldbenodefault.Therearemanygetoutofjailfreecards,theeasiestbeingtheFed’sabilitytobuythedebtcomingdueandtoretirethe$1.5trillionoftreasurydebtitholdsandhencebringdownthenetpublicdebtposition.ButI

don’tknow,I’mjustguessing.Barrydoesn’tcallmeupanymore.However,somebodyknewsomething.

Thisisthecoreuseofcharts.Itletsyoureadthepast.Sometimesthatcanbeuseful.

Sowesat“pat”andnothinghappenedandwesaved5%ofourcapital.Thatisanothertoughaspecttoproperinvesting:remainingcalm.

MeanwhileBankofIrelandissittingpretty.Iwillpokethatstockaroundshortlyandestablishwhetherweshouldkeeponholding.Irelandisdefinitelyontheup.AsakindoflastmanstandinghowhighcanBankofIrelandgo?

MeanwhiletheFeddidn’t“taper”lastmonthasexpected,butIMHOthatwasbecauseofthe“USdefaultpossibility.”Nowitmight

taperasthisriskeventispassed.Assuch,expectbumpsahead.Nothingnewtherereally.

SpecimenPortfolioUpdate22October2013

Hereisanupdateofthespecimenportfolio:

Thisisequivalentto2.1%on£17,124investedatthelowbidpriceincludingcostsofcommission/stampdutyofabout3%.Soyoucouldtackon5%ormoretocoverthat

andifyourtradingcostswereloweroryourunitsizehigherthiscostpercentagewouldshrink.

Forexample,ifyouhada£10atransactioncost,youwouldsave1.5%.Ifyouboughttwiceasmuch,£2,000,atthesamecostyouwouldsaveabout1%.

CostsareveryimportantbutI’mchoosing£1,000becausemostprivateinvestorswillbebuyingin

thesesizes.Alsoifyouneedtobuy30stocks,thenthehurdlesuddenlygoesupfrom£30,000,to£60,000.

Thesehurdlesarehigh,buttheyarepifflingincomparisontothoseenduredbypeopletradingtheircapital,sayonceamonth.Youdon’thavetothinkaboutthecommission,onlythespreadtimestwelvetoseehowmuchprofittheyhavetomaketoevenstaystill.Of

coursetheydon’tstaystill,theylosetheirmoney.Sothecosthurdleonthisportfolioishigh.Youcangetbrokersthatwillmakeyourcostssignificantlylower,butIdon’twanttodothatinthisportfolio.Theideaistokeepitreal,notideal.

Thisiswherethelegacyportfolioisat:

Alltheconstituentsofthespecimenportfoliogointothelegacyportfolio.Atsomepointinthefuturetheywillbethesamething.Youcanseethesimilartrend,butthe

legacyportfolioismatureandhasdifferentlevelsofexposuretocertainstocksbecauseithasitswidediversificationofover30shareswhichallowsgrowingcertaincompaniesbeyondoneequallump.Herearetheconstituents:

Thisisthelegacyportfolio:

Itisinterestingtoseethe

impactofbuying£1,000andsignificantlymoreofastockinthetwoP/Ls.SobuyingadecentchunkofWalkerCripsmeans1.59%moreprofit.ForbigcapLandSecuritiesitmeans1.12%.Howeverthereisnogoodusingwishfulthinkinginthemarket.Thechargesarereal,evenifnotoptimal.Sadlyrealityisnever“bestcase,”soI’mhappytobeconservative.

Whoknows:by

Christmaswemayhaveturnedinadecentperformance.

Newsflash:Northamber24October2013

WeboughtNorthamberat38p.

Netassetsover80p.Couldn’tgetmorethan5,000sharesat36p.Triedforaboutaweek.Bitthebulletonthe

price.Whatanonsense.Moretomorrow.

TheFrustrationofBuyingNorthamber25October2013

It’smaddening.IwroterecentlyIwantedtobuya

stockbutcouldn’tgetapricethatmadesense.Wellyesterdayweboughtit.Thepricehascomebackintheorybutithasn’thelped,inpracticeIhadtopaythroughthenose.

ThecompanyisNorthamber.Inanutshellithas80p+innetassets.Weboughtitat38p.Gooddeal,you’dthink.However,thespreadis/wasinsane.Thespreadhasbeen33-36p,let’s

callthat10%.Thatisanoutrage.Butitgetsworse.Wantmorethanbuggerall,it’s38p.It’sintherecord,astwotradesonThursday,Ibought20,000shares.

Whooooopy-doooo!Nowthepriceis35-38p.

Basicallythemarketmakersappeartohavenoshares.Theymaywellbeshort.(ButIdoubtit.)Assuchthemarketmakersaresimplystranglingthemarketforthis

company.It’sagoodcompany,I

willmakeafewcoppers,buttheprocessofbuyingstockisridiculous,amarketmalfunctionandamassivepricegouge.Itisalsoannoyingthatitisnowinthespecimenportfolio.

Firstlyitmightprovehardforsomereaderstogetanyiftheywanttofollowon.Secondlyitwillimmediatelyshowupintheportfolioasa

thumpinglossasthebidofferspreadissohuge.LastlyIhategettingrippedoffbythemarketmakersfullstop.(£7,500ofstockshouldnottaketwoweekstobuyandshouldnotspikethemarket.)

However,itisintheportfolioforgoodreasontoo.Icouldn’tbuyitformylegacyportfolioandnotincludeitinthespecimenportfolio,asovertimetheyaremeanttoharmonise.It

alsofitsoneofmyinvestmentrules:ifyoucan’tbuyit,itislikelyagoodbuy.Itisasolidcompanyandafatdiscountandthereislikelytobeafatprofitinitovertime.

NonethelessI’mgalled!!!!

Asofyesterday,beforethisbuy,wewere3.27%upatanall-timehighafterpilesandpilesofcosts.However,thisbuywillchipsomeofthisprofitoff.Anotherreason

tosigh,butthisistherealgame.It’slongandfrustrating,whichiswhyfewplayit,butultimatelyveryfruitful.

MeanwhilePrometheanspikedonanupdate,thefirstpositivereactiontoanupdatethey’vehadsinceforever.I’malreadyloadeduponthisinthelegacyportfolioandI’mrubbingmyhandswithgleeinexpectationsofgreatthingsahead.I’malsotryingnotto

topuponitasIalreadyhaveenough.Greedisbad.

SoI’vejustenteredtheNorthambertradeandthatchopsafull0.8%ofouroverallportfolioperformance.GoodjobwehaveaportfolioisallIcansay.NowIcouldcheatthenumbers,becauseIcouldsay,Icouldhavebought£1,000ofthisstockat36p.Butyoucan’t,itisnow38pbid.AlsoIdidn’tbuy£1,000worth,Iboughtmore,

soIdidn’tgetthatpriceeither.Itwouldmakethenumberslookprettierforsure.InsteadI’mshowingworstcase,abuyat38pplusfatcosts.

At36pandacurrentpriceof36.5p(themid-pricebetweenbidandoffer)Icouldsuggestwhatageniuswearetobemakingmoneyfromthegetgobutactuallywearebookingawhopping10%lossonitinstead.Soyou

seehowrealitycanberadicallydifferentfromslickpresentation.Wedon’tneedbaloneyor“slippage”assomecallit.

Butwhyputourselvesthroughallthis?Whynotjustwalkaway?Well,I’mhappytotakesomepaintobuy81pofassetsfor38p,inalongestablishedcompanywith60%ofitsmarketcapincash,payinga2%+dividendandamanagementgoingback

forever.Thechartlooksgood.

Classicallyweshouldselloutwhenthereisa30%+profitonthetable,forthisisaclassicvalueinvestmentshare,butwhoknowswhatwillpanoutexactly.IsaythissoyoucandecideforyourselfwhentobailandnothavetowaitformetotellyouI’mout.

Apartfromthewholeprocessbeinggalling,itis

alsoawindowontothefascinatingrealitiesofthemarginsofthemarket.Insummary,themarketisbrokenforthiscompany.Assuchthepriceiswrong,inthiscasefartoolow.

Bytakingthepainandrisk,themarketpresentsusalucrativeoffer:assetsonthecheap.SoreallyIshouldbehappy,butnonethelessI’mnot,I’mstillgalledanddisgruntled.

Howisthatforbeingungrateful?

PortfolioUpdate29October2013

Aquickupdate.Wehitover5%profitontheportfoliotoday(Mondaymorning)andcametorestatcloseat4.4%up.That’s£790.23profitafterentrycostsandspread

on£18,154ofstock.Icannowclimboutfromunderneatharockandshowmyface.AttheselevelsI’manaveragehedgefundmanager.

Thisisthecostofthespreadonourstocks,asoftoday,todemonstratehowhighcostsreallyare:

Wehaveclimbedthiswalltooandabout3%ofcommissionandstampduty.

Soineffectweareup10%onthestocksthemselves,butasfarasthecashresult,upabout4%.Don’tforgetthestampdutyselling.However,ifyouusedasupercheapbrokeryoucouldpopanother1%ontothecurrentprofits.Ifyouboughtinsize(say£5,000pershare)youcouldprobablysaveanother0.25-0.5%.

Fornowasfarasprofitsareconcernedweareajunior

partnerwiththegovernmentandmarketmakersandthebroker.However,thingswillgetbetter.Thelongerweholdthelowerthecoststoprofitratiowillbe.

Wearelookingtomake30%onaverageperaveragetrade,perhapsmore,soovertimethefiendishcostsofentrydiminishasapercentageofreturns.That’stheplan.

ButI’mrepeatingmyself.

Hereisthechartofperformanceasifwehada£30,000portfoliopot:

Asluckwouldhaveit,thegraphisshowingahigher

figurethanIbelieveitshould.(HavethosecrazyADVFNengineersbeenatwork?I’llgetthatlookedat.)

However,youcanclearlyseetherollercoasterwe’vebeenon.AnyonejoiningusattheendofJulywhodivedinwouldbewellup(roughly20%)andthinkmeafinefellow.Whoknows,ifthiscontinuesImightmakethefullidiottogeniustransformation.Butthatisin

thelapofthegods.

Thisistheperformanceofthespecimenportfolio:

Thisrallyreallyiseye-

popping.Longmayitcontinue.However,afterwe’vetakentheroughwiththesmoothafewtimeswewillreallyseewhereweare.Mytargetcontinuestobeaprofitof25%,butanythingover15%ismorethanrespectableandanythingover25%isgoodfortune.

However,themarketwillhavetomotortogetupanywherenear15%,butifitcando20%infourmonths

almostanythingcanhappen.

WhichWayistheMarketHeadingNow?5November2013

Isaythisalot.Allyouneedtoknowinthemarketis

whetheritisgoinguporgoingdown.

Sowhichwayforus?Onthefaceofitthemarketshouldbenearitstop.TheFTSEisat,andaround,all-timehighs.It’sasafebettosay,“It’sgoingtofall.”HoweverIdon’tthinkitis.

Inanyeventwedon’treallycarebecausethelongrundealswithmostcorrectionsandmakesthemirrelevant.Unlesswethought

acrashwasimminent,thereisnoneedtoworryaboutaslump.Slumpshappenandhappenoften,butthereisnoimmediateriskofacrash.

Ithinkthatthistimeisdifferent,differentthatisfromthelasttwelveyears.(Thoseofyouwhoknowthismemeshouldrecognisehowbullishitisformetochallengeit.)Ithinkweareinabullmarketforseveralyears.Thisisanotherreason

whywearenotgoingtosweatthetwistsandturnsofthisbullmarket.

Ofcourse,that’snoreasontobecomplacent,butIdothinkthechancesofamassivemultiyearrallyarenotafool’smusings.ThenextfewyearswillbehistoricfortheEuropeanandUSmarkets.(HoweverIdoreservetherighttochangemymind.)

MeanwhileintheUS,a

situationinthemarketsisdevelopingthattomeisaclassicinvestmentopportunity.Firstly,I’mnoUStradingguru.TheUSmarketisdifferent,moreviolentanddefinitelybi-polar.However,thissituationgivesmeachancetoexplainbeforetheeventaclassiccontrariansituation.Imightberightorwrong,butforesightisaboutforesight,nothindsight.

ThecompanyisBlackberry–ResearchinMotionasitusedtobecalled.Themotion,however,hasbeendown.Youcouldn’tfindamorereviledtechcompany.Onthefaceofit,itisadeadcompany.Youcangoreadingthemediaandyouwon’thearagoodwordforthecompany.AppleandAndroidhaskilledit.Blackberryisnow$6ashare,halfwhatitwasafewweeksback.Downfrom$225

in2007,$75in2010.Ihavejustonethingthat

saysit’sabuy.72millionsubscribers.Atthreeandabitbillionofmarketcapthatisroughly$50asubscriber.Acablecompanyversionofsubscribervalueis$2,000.Youcanrunthenumbersofmanysubscriptionbusinessesandasubscriberisworthhugelymorethan$50.$1,000asubscriberisrunofthemill.ThatwouldputBlackberryat

$70ashare.Sothesubscriberbaseisamassiveplus.

Thentherearethemassivewritedowns.Theserecent“kitchensink”writeoffsgivemanagementlotsofroomforfutureprofits.

Butthehomerunis,NewManagement.Notonlyhasthenewmanagementraised$750m,itisnottheoldmanagement.Ihopethatmakessense.Evenachimpthatdidnothingbuteat

bananasinthecornersuitewoulddobetterthanthepreviousgroup.Soanynewgroupwillbepositiveatleastforayearortwo.Thenewmanagementgroupcontainswhatlooksliketherightstufftoo.That’saplus,plus.

PutallthistogetherandBlackberryisaclassicturnaroundsituation.LikePace,likeTrinityMirror,likeFlybeetc.Ithasallthefieldmarks.

Icouldofcoursebewrong,itmightworklikethisintheUK,butnottheUS,butifyouaregoingtotryandtradetheUS,thisisthekindofgifthorsecontrariansituationthatbegstobetested.SoIwill.

Meanwhiletheportfoliosarefuttlingaround,sonotmuchtoreport.

InvestingisEasy–butDifficult7November2013

Icangetguiltyaboutmyblog.SometimeIfeelIshouldwritemore.However,thatwouldriskmeburbling

emptymusings.Eventhoughthebloghasstocktipsinit,I’mreallytryingtohelppeoplelearnhowtoinvestproperlysotheycandoitthemselves.

Investingisnothardatatriviallevelbutthefactpeopledon’tdoitatteststhatitisinfactverydifficult.

Whetherinvestingishardoreasy,inanyeventhyperactivityislethal.Yetsittingpatonyourpositions

forweeksandmonthscanbenervewracking.Howdoyoutellifthemarketisabouttogohorriblywrong?

ThethingmostpeoplewoulddotogetafeelingforthestateofthemarketistolookattheFTSE100chart.Doestheindexlookgoodorscary?

Iwouldlookatthischartandaskdoesthechartlooklikeitistrendinginawaythatisstable.Whenyoulookatthischartyouseeperiodsofsmoothnessinthedaytodaychangesandperiodsof

crazinessasperJuly2011.Thisistellingyouastory.

Crazinessisvolatility.Volatilityisameasureofmarketuncertainty.Thecrazierthechartswingsthelesscertaintythecombinedplayersinthemarkethaveofwhatisgoingonandwhatwillhappennext.Ifthemarketissmooththereiscertainty.Sosmoothrisesareaveryreassuringsignthatgoodmarkettimesareahead.

However,theFTSE’sdaytodaytradinghasallsortsofrubbishinit.Itisnotapurestockindex.Itisonlysharesbutthosesharesarenotsimplytradedbecauseoftheircompanies.Theindexisusedtohedgethingslikecommodities,interestrates,forexratesandforeignmarketsliketheUS,JapanandGermany.SoifoilgoesmaditwillmesswiththeFTSE100.Why?Because

investorsmightwanttobelongpound,sowillbuytheFTSE100asaproxyforpoundversusdollar.

TherearealsoFTSE100ETFsandmoreinterestingandnoisy:FTSEFuturesandoptions.

PeopleusingtheFTSEasaproxyfogsupthepictureoftheequitymarket’strend.Thesehedgersarelikebabesatachurchservice,theyinjectanelementofrandom

chaosandconfusion.Soinaperfectworldwewouldwanttowatchanindexwithnonoiseinjectedintoit.Anindexwithoutafuturesoroptionscontractdraggingitaround...Andhereitis:

It’stheFTSEsmallCapindex.Noticehowsmoothitis.Heretheyaresidebyside:

Iusethesmallcapindextoguidemeonthegeneralmarkettrendasitdoesnotgetsmudgedaboutbymanyexternalfactors.IfyoulookattheFTSE100andaskyourself“whereisthemarket

going”youmightbeleft“ummingandahing.”Thesmallcapchartsays,“I’mgoingupinastraightline.”That’saprettygoodindicatortohave.Assuchthesmallcapindexisyourfavouritetipster,akeysecretweapontotellyouwhetherthetrendisyourfriend,orabouttobite.

Currentlyitislookingprettygood.

FlybetotheMoon12November2013

FlybeisupagaintodayandasIwriteweareup122%.IntheolddaysasavalueinvestorI’dhavesoldyesterday.Thesedays,however,Iletthesesituations

rideandrise.Hereiswhy:

Flybefloatedin2010atover300p.Therehasbeenlittleornodilution.Whywouldn’ttheyrecoverfully?Thisisaboldstatement,butevenhalf

wayis150p.Flybewouldbenearer£10ashareifitwasvaluedlikeRyanairorEasyjetonasalesbasis.

Sotimetostaygreedyfornow.AsIstartedtowritewewerealso9.5%upoverallbutit’spulledbackto8.8%.That’salmostrespectable.

Flybe–TheMissingPost13November2013

Becauseofthevagariesoftheinternet,yesterdayablogpostgotlostintheether.ItwasmeantforTuesdaymorning,insteadonlythefollowupwentup.Belowistheblog

thatwentAWOL.I’minJapan,where

Abenomicsisboostingtheeconomytherestrongly,butthefightagainstdeflationstillrages.However,themorningoftodayis–becauseofthetimedifference–stillyesterdayinEurope,sotimingworkbetweentheUKandJapanisabitgoofyformynewsletter.

Iwaskickingmyselflastnight,havinglefttheoffice,

becausemyworkcouldn’tgolive.ThenIrealised,thekeythingis,timingisn’timportant.Weownthestock,wewillbeholdingthestock.Theimportantthingiswhy,notwhen.“Youcan’ttimethemarket,”theysayandthatisgenerallythecase,soit’simportantthatyoudon’thaveto.Theefficientmarketcoveredmyarse,AGAIN.

Sohereisthedelayedpost:

Well,Flybegaveusanicepresenttoday.Up44%.FlybeisaclassicasfarasI’mconcerned;itwillbeabigwinforus.

Thisiswhereyoumightask,“whynotbuymore?”Theansweris,“Imightbewrong.”

Hardlyanyonewhohasacaraccidentwillsay,“ahitwasmyfault.”Likewise,manyinvestorshavenevermadeaninvestmentmistake

intheirlife,evenifprofitsescapethem.

Imakemistakesallthetime.Itisinevitable.

Thereisawholetheoreticalframeworkforhowtoinvest.Theseincludegamblersruin,whichsays,bettoohardandyouwillbewipedoutevenifyouaremainlywrong;and,ofcourse,portfoliotheory.Ifyouwantedtogodiggingyoushouldlookatthe“Kelly

formula,”fromwhichyoucanbeoptimalinyourpositionsize.

However,let’snotknockourselvesout.Ifwelikeashare,webuyit.Wedon’tfillourboots,weneverputourselvesinapositionofhavingtoworryaboutbeingwrong.

IfFlybewentbust,wewouldnotbetoobadlyaffected,inthesamewayAvocetisapain.Eventhough

Avocetturnedoutbadlywearestillup7.5%.Thisisnotashoddyreturn,especiallywhenthereisroughlyanother4%ofcostscovered,equatingtoa11.5%return.7.5%isrespectable.Wewilldoubleourmoneyeverytenyearsatthatrate.However,I’mnottoohappywithit.15%ismytargetandwhoknowswherewewillbebyyearend.

Hereissomefunwithnumbers:

Whilewestartedthisportfolioatthebeginningoftheyear,wehaven’tbeeninvestingthewholetime.Ifyouweighttheportfoliobytimeweboughtonaverageon17May2013,roughlysixmonthsago.Assuchwehavea15%netannualisedprofit.However,thisismoreanexampleofaccountingtricksthanreality.

Rightnowweareup£1,361onthe£18,154we

haveinthemarket.SonowIdon’tlookstupidanymore,fourmonthsafterlookingadunce.Thisisthecorelessonofmyblog.Consistentstockpickingusingadiversifiedportfolioisarecipeforinvestmentsuccessandlongtermwealthbuilding.

It’sstillearlydays,butafterarandomrockystart,theportfolioisstartingtogettraction.Hereismyperformancechart:

Meanwhilethelegacyportfolioisupover100%now.

Flybe–It’sComplicated13November2013

Well,well,theFlybesituation“thickens.”Therecentsharesurgeseemslikelytobeasuccessfulattemptbythecompany’sbrokertounloadthelate

owner’smajorityshareholdingtothecity.AsIreadit,offthecuff,themajorityshareholderwasthefamilytrustofthelateJackWalker,ownerofBlackburnRoversetcandfounderofFlybe.

Thisishowthiskindofthingcango.Newmanagementwantstostepthingsup.Oldpassiveshareholderswouldratherliketonothaveallitseggsin

onebasket.Newmanagementzipsaroundthecitytowhipupsomeinstitutionalinterestforaplacing.Oldshareholderinformedsomethingmightbepossible.Oldshareholdernamesitsprice,“takemeoutinonegoat‘therightprice’orI’llniggleyoutodeathandbealooseholderdribblingstockintothemarket.”Brokersandmanagementgetapremiumpricebecausethatwaytheinstitutionscangeta

fatslabofstockandbeinfortheridethatthenewmanagementpromises.

Ifthatiswhathashappenedthat’sgoodnewsindeed...Butyoucanneverknow...it’sacheapstock,sothepriceshouldriseovertime.

It’sbettertokeepitsimple.

PortfolioSuddenlyShowsaLossThankstoVolex14November2013

Themarketisgettinglively.JustasIwasenjoyinganicelittleprofitontheopensuddenlybang,thereisaonepercentpluslossshowing.Volexblewup!Thisisacheapcompanygoingthroughructions.

CEOsreallyshouldn’tstartofftheirstatementswith,“Volexisafundamentallysoundbusiness...”Itbegsthequestion,“whosaidVolexwasn’tasoundbusiness?”

Theyhavekilledtheirdividendandhaveaboutayear’scashatthecurrentrateofcashburn.

Thereportisfullofcorporatespeakgobbledegooktoo.Inawaythisisgood.Ipreferacompanytobecheapbecauseofmanagementconfusionthananythingelse.Andtypos:

“–Approximatelyone

thirdofGrouprevenueandtobeheadquarteredinSiliconValley,California;”

Nowthesethingshappen,butacompanywith£500minsalesandadvisersshouldbeabletocatchthat.Likelynoonewantedtolookhardatthisstatement.Sothiscompanyisofficiallyamess.AsIhavewritten,thecompanyhasjumpedfroma

lowof81pto89pandisdown-21%.

MeanwhileFlybehaspopped5%andhelpedtofillinthedivotmadebyVolex.Sucharethejoysofaportfolio.BackatFlybe,wefindfromthetraderecordthattheinstitutionsboughtinat70p.TheyincludeSchroders,AberforthSmallerCompanies,PolarCapitalEuropeanForagerFundandQuantumPartners.“Lucky”

oldthem.Thelegacyportfolio

explodedtoday.TrinityMirror’sInterimManagementstatementwentdownastorm,spikingthestock12%.IreallyhateholdingoutformoreprofitthanIalreadyhaveonthis,265%,butthelessonofthepastishangontofatprofitsinrecoverysituations.HavingboughtCapeat13.5pandsolditat34pandthenwatcheditgoto

285p,thelessonisletaprofitrunandrun.LaterIboughtCapeat30pandsolditat200,notbad,butitthenwentto600p.AsCaptainKurtzsaid,“Ohthehorror.”

SoI’mhangingontoTNIbecauseifitwasDMGT(DailyMailGroup)itwouldbe450p.Thatwouldbenice.Idonotexpectmyresolvetoholdoutanywherenearthatfar,butI’mfocusingontheupsidefornow.

Don’tBuyMiningShares.No,Really,Don’t!15November2013

IhavetoadmitIwanttothrow£500downthedrain

andbuyTalvivaaraforthesheerhellofit.Thehistoryofthiscompanypushestheboundsofincredulity.(Excusemyuseofirony.)It’stradingat3pasIwrite;itwas600pacoupleofyearsago.

IwouldurgeallmyreaderstoreadtheirRNSsinceday1.Thisishowyoucaninvestinacompanyandturnyourwealthintoashes.Canthisstorybeanythingbutaconfectionfrombeginning

toend?Iwroteabookabout

miningfraudcalledTheTwainMaximbutinrealitymyfantasyismuchmorecrediblethanthestoriesthatlittertheLondonmarkettheselastfewyears.

Talkingofwhich,Avocethasjustannouncedithasboughtbackitshedges.Justhowtheseweremadetobesoloss-makingisnotaquestionworthbotheringwithasmost

goldminershavesomehowmanagedtogettheirminingcostsuptobetween$1,300-$2,000anounce.

OhlookTALVisnow3.3p,I’dhavemade10%...let’ssellout,atleastinourmind’seye!

MeanwhileAVMisup7.8%.

Iwillprobablytattoomyarmwiththefollowing:Don’tbuyminingshares,youcan’trelyontheirannouncements,

presentationsorreportedfacts.

Tradethem...youmightaswellgotoMonacoandplayroulette...Russianroulette.

StatusUpdate19November2013

Wearesatatroughly6%profit.Thisisthecurrentlayoftheland:

Thisisrankedinorderofheroesandvillains.Theyareactuallyallthesame.Hopefullyinvariousstatesofrecovery,thoughIadmittothinkingAvocetwillnever

comegood.However,youneverknow.Risk=reward,risk=uncertainty,uncertainty=reward.Thissoundsunlikelybutitamountstothemarketpayingyoutotakeariskanditpaystothetuneofyourappetiteforrisk.Sadlythatonlyworkswhenthereisnoskulduggeryandofcoursethereisquitealotofthatabout.Evensothisshouldbecompensatedfortoo,butImustsayI’malittlesceptical

whenwegettoofarintothebadlandsofrisk.

Onethingaboutriskis,itmustberisk.Atthemarginofthemarketsthereisnorisk,onlycertainty,certaintyofloss.Wetrytostayclearofthosebutwewillmakemistakes.

MeanwhileI’mwatchingRSAandPetrofac.RSAisespeciallyenticingbuttobeclear,Ihatetheirlongtermchart.Thereissomething

wrongwithit,it’stoospikyandrangebound.Thereisnothingquitelikeitinthewholemarket.Thisisaredflagforme.

RSAvLgen:

I’minterestedinPetrofacasIhaveitdownasatakeovercandidatebutwheneverIdipmytoeintoit,Itakealoss.Thisstocktoodoesn’tfeelright,sooffinmypunting

accountithasmenursingaloss.

Idon’ttalkmuchaboutmypuntingaccountbecauseitistheretocrashandburn.Itssuccessinthelastyearisdowntothebigrallywearein,titanicanddangerousleverageandaseriesofhugebutluckypuntsontheNikkeiandeuro.I’mhavingsuchapuntonNikkeilongrightnow.

I’vetakenmyoriginal

stakeoutnowandasmuchagain,soIcansayIdoubledmymoneyinthisaccount(evenifitdidtakenearlytenyearsoffiddlingaround)sotheremainingfourstakesaretheretocontinuetheprocessofkeepingintouchwiththewildarsedtradingcommunitythatlovestogoallin.IntheendtheyareADVFN’s“meatandpotatoes”soitbehovesmetoridethatrollercoasterandletmywinningsride.It’s

akindofmasochism.Themarketfeelskindof

expensiverightnow,butI’mjustsittingandlettingthingsdevelop.Imightdosomehousekeepingshortly,butI’mtakingitslowasslothpayspremiums.

Whoknew?

BubblesaretheUltimateHighRiskTrade21November2013

Mostpeoplethatgetintoinvestinginsharesdoso

naïvely.Theyjointhegamethinkingoftradingtowin,andbuyingtenbaggersandothersuchdreams.Mostblowtheirmoneyfastandleave.

Ioftenwonderifpeoplearesorecklesswhentheystartoutbecausetheyareusedtoautomaticallygettingpaidforworkandareunfamiliarwithlosing.Inmostpeople’sexperience,ifyouloseyougetreimbursedthroughinsuranceor

compensation.Actuallyflatoutlosingyourmoneyisnothowmostoftheworldworksforpeopleinthemodernworld.Wherethehellismummywhenyouloseyourshirtonacrazystock?Bythetimemostbeginnersrealisemorecautionisneeded,it’stoolate.

Meanwhile,fortheseunfetteredhighrisktraderstheultimateattractionisthebubblestock.Theydon’t

thinkit’sabubble,ofcourse,butthelastthingtheywoulddoislookatthecompany’sfinancialfigurestocheckforasanevaluation.Afterall,everyonesaysit’sgoingtothemoon,itisonitswayandnothingcangowrong.Sadly,bubblesareonlybubblesaftertheyburst.

Sowhatdoesabubblelooklike?It’sallinthecharts.Remember,chartstellyouaboutthepastandinthe

caseofabubble,abubbleinprogressisabubblespottedandhopefullyabustavoided.

Thelatestbubbleouttherewas/isTesla,thoughithasprobablyseenitsbubbleburst.However,itscurrentstockchartperfectlydisplayswhatabubblelookslike:

Ifyoueverseeachartlikethis,youarelookingatabubble.Rememberitwell,becauseifyouareunluckyenoughtobeholdingwhenthebubbleburstsyoucan

seriouslyhurtyourcapital.Unless,ofcourse,youarediversified,whichourportfolioisincreasingly.

InthemarketrightnowI’mfeelinghesitant.TheFTSElooksbearish.However,IbelieveJapanisabouttogoballisticandthiswillblowthroughEuropeanandUSmarketsandmaybesetoffanotherstagetothisrally.Wehavehadanexcellentruninthelastfew

weeks,soahiatusorevenacorrectionwouldbeallpartoftheflow.

MeanwhileI’monthelookoutforanewstock.Sofar,nothinggrabsme.

TheMarketFeelsUnsteady26November2013

Themarketfeelsprettyshakytome,buteverytimeIthinkthis,itrocketsup.IdidcutoutmyNi225tradeearlier

thismorningthough,asyoucan’taffordmanysurprisesifyouuseleverage.Butwearen’theretogamble.

Weare6.2%up.Hopefullymyinertiawill

letsomeofyousavinginvestorscatchupwiththecurrentselection,butImustsayI’dliketobuysomesharesbutinsteadImustsufferennui.Sothemarketsarematchingmostpeople’sinvestingreality.Ithastogo

slowly.NormallyI’dbelooking

tobuyshareslikeDeLaRuethatdumped10-20%butthesehaven’tbeenbouncingquickly,insteadtheysimplylanguishforanindeterminatetime.IuseDLARasanexamplebecausetheybouncedbacktodayagoodmonthaftertheirfall.Deadcatsnolongerbounce,itseems,butinsteadwaitforweeksbeforeleapingup.

Meanwhile,forsomethingworthwritingaboutI’mleftlookingatPromethean.Tomethechartlooksfullofimminentpromise.Ihave,however,beenwrongforalongtimeonthisstock,sowewillsee.Thereisareasonablechancethestockwillmove,butthat’spermypersonalchartingideas.

Butwewillsee.UKandUSmarketsare

toppy,butinanewera,withmarketsriggedbyQE,youjusthavetohangtough.

NotMuchActionRightNow2December2013

It’shardtowriteaboutstockpickingwhenthereisnotmuchtopick.Wecouldbetryingtoplaynonsensestocks

likeTalvivaarabutthatwaymadnesslies.

Thecorrectwaytogoaboutthatinmybookistoopenaspreadbettingaccount.IuseIGIndexalotbecausetheirplatformissolid.Dropinsomemoneythatyouarepreparedtolose.Thenletoffyourgamblingsteamintherewellawayfromyourinvestments.Don’tmixthetwo,becauseitwillpolluteyourresultsandyou

willsoonlosesightofyourprofitsandlosseswhichisdisastrousforyourmotivation.

Youwilllikelyblowyourgamblingpotprettyquickly.Ifnot,welldone.However,yourinvestingportfoliowillbumblealonggrowingandgrowing.Atsomepointyourinvestingportfoliowillbelargeandyourpuntingaccountstillmeagre.

Tradingishard,investing

iseasy.WhenyoucanmakefatreturnsonyourinvestingyoumightbereadytotradebutIthinkyouwillseethatstartingwithtradingisdoomedtofailure.

LastnightIwentlongpoundveuroandI’monthebrinkofjumpinglongontheNikkeiagainifitbreaksfree,butI’mjustflirting.Tradingprofitsaretemporary.

Therearethreetypesofgamesaccordingtotheory:

zerosum,negativesumandpositivesum.

Zerosumgame:Thismeansforeverywinnerthereisaloser.Itisbettingonaheadsortailscoinflipgame.Thereisnothingtobelostorgainedinthisgameinthelongrun.Playersaregoingnowhere.Whyplaythisgame?

Negativesumgame:Everytimeplayersplaythenetresultislessthanthey

startedwith.Let’ssayit’slikeaWorldWar.Intheendeveryoneloses;thelongerthegamegoesonthegreaterthelosses.Onlyageniuscanactuallywin,andprobablynotmuch,becausetheavailablepooltowinfromisbeingdrainedasthegamegoeson.Thisishowallgamblinggameswork,andalmostallmarkets.(Thisiswhytraderslose.)Theonlyonetowinisthemechanism

drainingthegame,ieabrokerorinacasino,thehouse.Therakeorcommissionisthenegativedrain.Youcannotwinthisgame.Donotplay.

Positivesumgame:Asthegameisplayedsothepotentialwinningpotrises.Economiccompetitionisanexample,orfarming.Asthegameisplayedresourcescometothegameandaddtothewinningpot.Everyonecanwinatthisgameunless

theyarehopelesslyoutmatchedbythecompetition.Thisisthestockmarket.Companiesgrow.Youcanplaythisgameandwin.However,thepositivesumisimportant.Ifit’s7%ayear,thenyoumustspendlessthan7%playingoryoutipthegamenegative.Thisiswhytradingfailsandinvestingwins.Weplaythisgame.

Trading=7%–manycommissions&tradingcosts=asignificantloss

Investingoverthreeyears=7%+7%+7%–onecommission&tradingcosts=adecentprofit

Sotradingandinvestingaredifferent.However,investingcanbeveryboring,butthatiswhyithastopayincashnotentertainment.

DeadQuiet10December2013

I’mnotsurehowI’mmeanttowriteanexcitingblogwhenthemarketisdull.Itisdeadoutthere.IthasbeenmyobservationthattheUKprettymuchstopsinthecityandatthetopechelonsofbusinesson5December.This

hasbeenthecaseaslongbackasIcanrecall.

It’sapoorshowinmyopinion.Itusedtobethattheslackerelitewouldreturnon15JanuarybutinthelasttenyearsorsothepaceofbusinessseemstoremainlowtillearlyFebruarywhichleavesmebelievingthattherealreturndateisnotuntilthesecondmonth.Itseemsschoolholidaysareholidaysforallandthesummer

appearsExeatforallthetopmanagersandtheirbosses.

Soifyouareseriousaboutbuildingabusinessyouareleftwithonlyabouthalftheyeartododeals.Thisgoesforthecitydealstoo,ofcourse.ThisiswhyIspendsomuchtimeintheUSandAsia–youhavetogetaboutifyouwanttokeepbusy.

Sadly,theUSisgoingthesamewaytoo.Theoldideaoftendaysholidayayearisfast

eroding.AsAmericasyncsupwithsocialistEurope,worklifebalancesforthericharegettingasimportantasfatpensionsforpublicemployeesandhand-outsforthelumpen.

Thusspakethegrumpyspeculator.

Let’shopetheIndianandChinesesoonsufferthesamemalaise.

Sobelowarethestatusofthetwoportfolios,thelegacy

andthespecimen:

Thelegacyportfolioisingoodshape.Havingbeenopenedthrough2011-2012

it’sabout115%upincludingsignificantlevelsofprofitstaken:

Andthespecimenisstillloiteringaround5%profit.

I’msomewhatdisappointedeventakingintoaccountthefatcosts,butreallyitwon’tbetillthistimenextyearthatwecancallajudgementandeventhenitmightbeanotheryearorsobeforethetruecoloursofadiversifiedportfoliobegintoshowthrough.Investingisalonggame.

Youcanseehowthelegacyandthespecimenchartsareroughlythesame.Ifyouzoomintotherelevantdatesyoucanseethemmoveinsimilarways.Thestronger

performanceofthelegacyportfoliocanbeputdowntoitsoverweightpositionsinwhattheinvestmentbankswouldcall“convictionstocks.”Theyaretheonesheldinmultiplesize,likeTrinityMirror.Ithasbeentheperformancesofthosestocksthathavecatapultedthelegacyportfolio.

However,youneedafullportfolioofabout30stocksbeforeyoucanstartfattening

certainpositions,asifyoudon’twaittillthen,amistakepickingaconvictionstockcanbehorrendoustotheinvestmentpot.

Asitis,these“convictionstock”positionsarehorriblyoverweightnow,soIshouldreallychopthemback.ButI’vebeenfocusingonrunningwinnersoverthelastfewyearsandamactuallyaggressivelytryingnottosellconvictionstocksthat

suddenlymaketheturnfrom“dog”tostar.Ihaterunningmyprofits,butincertainmarketsyouhaveto.

IntheolddaysIwouldreligiouslydumpsharesthatmade30%androtateintonewopportunities,howeverwiththedearthofcompaniesIlikeandthetendencyofsharestorunandrunI’mstickingtomygunsinstead.

Themarketisnotaboutbeingrightallthetime,but

beingflexibleenoughtobeabletoadapttobeingwrongandstillpersisttocapturetheprofitsofbeingonbalancemorerightthaninerror.

Youknowyouareboredwhenyoustarttowaxphilosophical.MeanwhilewesitandwaitfortheSantaRallythatprobablywon’tappearthisyearthankstothestrongautumnrally.

Rollon2014.

DiversificationistheWaytoGo12December2013

It’softenoverlookedbutkeepingtrackofaportfolioisapriority.Ratherthanflashytradingtechniques,financial

hygieneisimportant.Youhavetodoconsistenthousekeepingonyourinvestments.Moneyhasahabitofevaporatingifyoudon’tgiveitattention.

Assetsarelikenicemohairjumpers–leavethemlyingaroundandbeforeyouknowitamothhaseatenitfullofholes,orworsesomeoneshrinksittoasizeonlyyourwifecanwear.

SotodayIwaskeento

buyFirstGroup.Itlooksterrificfromatechnicalandvaluepointofview.AquickcompareandcontrasttoStagecoachisenoughtogetmeexcited,andwithrecenthistorytakenintoaccountitwouldmakeagreatbuy.Butwealreadyhaveapileofit.Sowehavetoholdoff.Wehaveenough.

Havingtoomuchofasinglestockisbad.Themoreyouconcentrateyour

portfolio,thebiggertheriskofabonecrunchingloss.Biglossesputpeopleoffinvesting.Soinpracticetoomuchofagivenstockrisksputtingtheinvestoroffinvestingforlife.Manypeoplesufferthisfateandarethereafterdoomedtokeeptheirmoneyondepositatthebankforlittlereturn.

Theextremeendofbuyingtoomuchstockisriskingsocalled“gambler

ruin.”Simplyput,ifyouweretoputallyourmoneyinonestockthenflipitintoanother,thenanother,onedayyourlatestselectionwillunexpectedlygobustandyouwillloseallyourmoney.That’sahardfact,thatatsomepointyouwillmakeabigmistakeandlosethelot.It’sjustamatterofwhen.

With30stocksthiscan’thappen.Youcouldsuffera50%crash,youcouldlose

30%ofthecompaniesinyourportfolioinoneslump,butevenstill,theyearswillseeyourinvestmentportfolioswell.That’sthecorevalueofdiversification.

That’swhyyoushouldalwaysaimfordiversificationevenasyoursuccessesandfailurespullyourportfoliooutofshapeandunbalanceit.

Butdon’tbetoofussedandjustpushgentlytowardskeepingyourportfolio

balancedovertheyears.Withinvestingtimeisonyourside,thereisneveranyrushtodomuch.

WhyBuyRSA?13December2013

Smallisnotbeautifulininvesting.TodayweboughtintoRSA.It’soff18%.ItsIrishoutfitisimplodingandisboundtobeascandal.RSA’sCEOfortenyearshas

quit.Thedividendisgoingtobecutbythelooksofit.

Ibuythisstuff.Why?Thetradeis:Willthiscompanygobust??Ifnot,itwillrecover.MybetisRSAwillwobblealotbutinayearortwobebackwhereitwasbeforetheseproblemscameout.That’sapproximately50pon80pfromhere.Theremightevenbeanicedividendstreamalongtheway.

However,Iprobably

shouldwait.Forthelegacyportfoliothiswillbethefirstbuy,perhapstheinitialoneofseveral.Forthespecimenportfolioitwillbetheoneandonly.

Youcan’ttimethemarket,soonbalanceitshouldn’tmakeanydifference,butbeingstuckwithbuyingonlyasinglelumpofsuchapositionfeelsmorenerve-rackinginthespecimenportfoliothanfor

thebiggerlegacyportfoliowhichwillhappilyploughinifthepricefallsmore.

Butanywaywearein.However,Ihaveafatreservationandit’sthis:Thelongtermchart:

Thisisfiveyears.That’saveryunnaturallookingchart.YoumightnotseewhatIsee,butaftermanymanyyearsofchartwatchingyoudevelopaneyeforwhatisexpectedandwhatiswonky.

ThisisLegalandGeneral:

Aviva:

Thesearepropercharts.Theyhaveproperrangesandpropervolatility.RSAlookscontrived.

ItwastheweirdnessoftheRSAlongtermchartthathasputmeoffRSAasit

suggestedaninvisiblehandhadbeenatwork.Invisiblehandsarenotourfriends.Butbuyingsharesisabouttakingrisks.SoafterthisfauxpasatRSA,wearebettingonasuccessful–ifpainful–comeback.

Thisiswhywehaveaportfolio.Wearepreparedtobewrong,abletotakealossandthereforeabouttopositionourselvesfortheprofitsofbuyingwhenother

arepanicking(rightlyorotherwise)tosell.

MayTheOddsEverBeInYourFavour16December2013

IsoldtheRSAatopentoday.Iveryrarelydothis.Itlooks

liketradingandIsupposeitisbutwewentintoinvestandhavebeengivenanopportunitytotakeasupernormalreturn.

Themarketisallaboutrisk;riskversusreward.Riskandrewardarealltimebased.Ifthetimeelementismassivelyinyourfavouryoushouldbankyourprofits.Thisissuchacase.

Youcanstandbythecliffedgeforaminutewithalmost

nochanceoffallingtoyourdeath.Doiteverydayfortenyearsandyouwilllikelyfalloffatsomepoint.Youwillbeextremelyunluckyforashorttimeinthelongterm,sobecarefultostaybackfromdisaster.

Theoppositeis:ifyouareextremelyluckyintheshortterm,bankit.Thisisthecasehere.

Thisisnotvalueinvesting.However,hereis

thetheorybehindthismove.Thereisalwaysahorizonofprofitthatifyoucrossyoushouldbank.Itisliketakingabetwiththeoddsinyourfavour.Whenithappensyoushouldtakethebet,banktheprofitandkeeptakingnewbetsonthesamebasis.

Grosslyspeaking,theexpectedrangeacompanymovesisafunctionofthesquarerootofthetime.Hereisaverycrudeexposition.

Statistically,shareswillmove,astimepasses,withinthezoneofthebluelines.Thisissubjecttoallsortsofothervariables,likeforexampleinterferencefromreality.

Theserangehorizonsgive

youasteerastowhatcanbeexpected.Ifyourperformancegoesoutoftheseboundariessomethingisup.Aconsequenceis,ifyouarehopingforaprofitofsay30%inthreeyearsfromashare,butyouget12%ondayone,youcanthinkaboutbankingyourprofitimmediately,becauseyouhavegotthelion’sshareforlittleexposurerisk.

Indicativemaths:

30%profitinthreeyears30%profitin1,000days1,000daysroughly30squared30%/30=1%aday

Sowegotroughly12%andwebailed.AsIwritethepricehasdropped5%fromwherewesold,soperhapsothersinthecityarethinkingthesame.However,thedecisionisnotallmaths.

AsIsaidinmylastpiece

I’mnottotallycomfortablewithRSA,soanunexpectedbouncebackisanotherunsettlingfeature;Ilikemysharestobehavethemselvesinlinewithhowcompaniesrespondinsuchconditions.Onlyoneintwentycompaniesmakeanintradaycomebacklikethis.

Anyway,I’mafraidofwitteringtoomuchnarrative.Webuygoodcompaniesgonebad,sowebought.It

bouncedbackfastandwegrabbedafatprofitbecausewewerehappierwiththemoneythantheposition.Toomuchrationalisingcanbecounterproductive.

IfRSAfallsbackinthefuturewewillthinkaboutre-entry.

Itmademechucklebecauseoldstylebrokersdon’tchargeasellingcommissionifit’saquicktrade,asanencouragementto

speculateyourfaceoff.Howkindofthem!Sowesavedanexitcommission.

Sowebought1,226RSAsharesfor£1,027.5andsoldthemfor£1,145.51afterallcosts.Thisleavesusjustshyofa12%profit.

...backtoinvestingdammit!

I’veGotthePortfolioBlues17December2013

Damnandblast.I’vegotaproblemwiththeportfolio.IfIwasalittleslickI’dmakethemostofittobumpupthe

returnsonthespecimenportfolio,butthat’sagainstthewholeethosofwhatI’mtryingtodohere.TokeepitrealI’mtryingtobemorethanfairinrunningthereturnsoftheportfolio:

I’mtakingallthecostsonthechinintheportfolio.I’mnotusingthecheapestbrokeroption.I’mnotvaluingthe

portfolioatthe“currentprice”butatthe“bidprice”whichistheoneyouhavetosellat.I’mtryingtoavoidhypewhereverpossible.

NowIhaveanotherproblem:illiquidshares.IboughtArcontechyesterday.Orrather,Itried.Isimplycouldn’tgetenoughformyself.Iendedupwithamessy£2,000worth.What’s

more,itdrovethepriceup17%.Igotmineat0.136(trade6on16December2013)andimmediatelypushedthepriceup.Withinminutestheofferwas0.16.Youcan’tbuyatthepriceIbought,notevenclose,norcanIasIwouldbuymorebutnotat0.16.

SoI’mnotputtingitintothespecimenportfoliobecauseifmyreaderstriedtofollowtheywouldbeskinned

alivebythemarketmakers.Sodon’trushintothisshare.Theofferisbackto0.15now,agoodexampleofwhythisstockisnotgoingintotheportfolio.

ThisisfrustratingasIwantthespecimenportfoliotobecomethelegacyportfolioovertimebyosmosis,andglitcheslikethiswillmakethisprocessimperfect.Arcontechwillgointothelegacyportfoliobut

notthespecimen.Atthislevelit’sjustabitofnoiseinthelegacyportfoliosoitwon’tdistortitbymuch.

Anyway,feelfreetowatchthisstock.Ithasalongandtorturedhistoryandnowhasnewmanagement,risingcash(fornow)anddirectorsbuying.

Ifyouownenough,andthat’smany,ofthiskindofstock,theresultshouldbegood.Thekeyistobuyinto

outoffashiontiddlerswhichactuallyhaveabusiness,notcompanieswithplentyofdreamsbutnosales.Itisunfashionabletothinksalesareimportantbutthenwebuyunfashionableshares.

MeanwhileI’mnotaddinganynewmicrocapstothespecimenportfolioastheyaresoilliquidIhavetroublebuying.IfIthinkastockistooilliquidIwillmentionitasIhavewithArcontech,but

Iwon’tputitinthespecimenportfolio.Itellyouaswego.

WhydidIbuythisstock?Arcontechhasareasonablesalesprofile,itisinthefinancialexchangetechnologybusinessandisbasicallyvaluedatnil,£2mon£1.8ofsales.ItusedtobecalledKTSandI’vekeptaneyeonitovertheyears.

Ithasdirectorsbuying.Directors’buysareanexcellentsign,subjectto

specialconditions.WhenIsawthesebuys,forexample,Iimmediatelycheckedthecompanyforlow/nocash,asdirectorscaninjectmuchneededcashthiswayintoacompanyonthebrinkofimploding.However,thecompanyhasasolidenoughcashbalance,soIdecidedthedirectorsfanciedtheprospectsof2014,whichiswhyIboughtsome.

Arcontechistotalrisk

becauseasIfoundoutyesterdayithasnoliquidity.Noliquidityisalwaysaworry.SothefactIcouldgetnexttonothinginstockisironicallyOKbymebecauseIdon’twanttogetlockedintoashareIcan’tsell,ifandwhenitdoesgoup.Soasprinkleofitintheportfolioisfine.

Illiquidityalsounderlinesthecasethatthisisdefinitelygoingtobealongtermhold

andwhoknows,Imightgetthechancetobuymorewhen/ifitfallsback.It’saruleofmicrocapstoneverchasetheprice,sadlythemarketmakerswillgougeyouforallyouhaveifyouletthem.Asatinypartofabigportfolioastocklikethisitmakessense,butasabigpuntitwouldbetheroadtoruin.Thisiswhyaportfolioissokey.

...andonwego...

WhyAnOfflineBrokerCanPay18December2013

Aquickupdate.Iwasragingaboutsmallilliquidstocks,

namelyArcontechandhowit’sverytrickytoplaysuchcompanies.Thishasthrownupafurthercoupleofsmalllessons.Icouldn’tgetmyoriginalsmallorderfilledandthepricewentimmediatelyfrom13.8pto16afterIboughtonlyatinyamountofshares.

Sowhattodointhissituation?Firstly,thepricewentupbecausethemarketmakersdon’twanttoplay.

Theydon’thaveanysharestosell.Inthesecircumstancestheyslamtheofferpriceup,butnotthebidprice,creatingamassivespread,whichkillsoffinterest.Thepricemaywellfallbackafewdayslaterwheninterestwains.Thiswillenablethemtogettheirstockbackcheaply.

AssuchIleftanorderwiththemarketmaker,goodfortheweek,totryandmakeupmypositionfromtinytoat

leastsmall.Loandbehold,yesterdayeveningamarketmakermatchedmybidandIgotthestock.Thisremainstinyamounts.

Sothisiswhatyouneedtodoifyouwishtoplaythemicrocapminefield.Leaveanorderwiththemarketmakerandwait.Ifyouaren’tfilled,sobeit.Don’tchasetheprice,ever.Thesharepriceofthesemicrocapsisartificialandfragileandcontrolledby

themarketmaker.Thesecondlessonis,if

youareusinganofflinebroker,itcanoftenpaybecauseyoucandothiskindoftradewhichisimpossibleonline.

On£1,000ofsharesthisisan£87saving,takingtheoffertohavebeen0.15.Atthe0.16pricetheofferhitaftertheinitialbuythatimprovementamountstoa£160saving,ie16%.That’s

huge.Assuchmynon-cheapbrokerjustrecoupedthecostofalotoftradesbybeingabletopokethemarketmakerandleavemybidwiththem.Anonlinebrokercouldnothelp,withanonlineserviceyougetatakeitorleavethequote.

ThisiswhyIuseaphonebroker,becauseagoodonesavesmemoremoneyinpriceimprovementlikethis,thanIwouldsaveusing

onlineexecution.Meanwhile,Arcontechis

stillnotinthespecimenportfoliobecauseanyonetryingtobuywillhavethesamenonsensetodealwithsoitisnotpracticalforallbutacoupleofmyreaderstomirrorthistrade.

HowWillTaperingAffectEquities?24December2013

Theyearisdrawingtoaclose.UStaperinghasstarted

andagainstmanypundits’bearishpredictionsthemarketrallied.

Investorsoftenhaveaproblemunderstandingderivativevalues.Taperisone.Taperisnotcancellingmoneyprinting,itisslowingtherateofgrowth.It’snotthesameasstopping,it’snotslowing,it’sasecondorderthing.Taperslowsthegrowth.Moneyisincreasinglessfast,butit’sstill

increasing.Nextyearwillbeheavily

affectedbytheperceivedimpactofdeceleratingaccelerationofmoney,buttheworldwilldojustfinewithoutit.

QEisreallyjustreplacingmoneylostwhentheprivatesectorstoppedcreatingmoneysupplywhenthecreditcrunchimploded.Moneyisnotonlygeneratedbygovernment.Forexample,if

youhave£1,000inasockandyoutakeittothebank,thatwillgenerateanywherebetween£8,000and£20,000ofnewmoney,becausethebankwilluseitasadeposittolendmultiplesofthecashyoudeposited.

Youcandothisbycreatingmortgages,carloans,inventingnewfinancialinstruments;thisisthecorepaperchaseofmoneysupply.

Sowhentheprivate

sectorversionofthemoneyprintingpressbreaks,oceansofmoneyandwealthgetvaporised.ThroughQEgovernmentshavebeenputtingitback.Whentheprivatesectorspinsbackup,theirmoneysupplywillreappearandwithluckQEwillbepulledback,buttheeconomicbalanceremain.Fingerscrossed.

Thekeyquestiontomeis,canwereallybeinanew

equityeraasIpredictedthistimelastyear?Thechartslooksimplyamazing!TheDowinparticularhasbrokenthroughtheroofofitsultra-longtrend.Thismeanswecouldbeinforamazingtimes.NowI’mnotgoingtoleverupandgoforbroke,butit’stimetoacknowledgethat2014couldbeamazing.

Forexample:whenIboughtlotsofTrinityMirroronaveragearound40p,I

plannedtoselloutat90p.AsIwasbullishwhenithitthatIonlysoldsomeandleftthecoreholdinginplace.Iplannedthentosellat120p.Thatcameandwentasmygeneralconfidenceheld.Isold10%thisweekatapproximately200pmakingbackhalftheoriginalstake.I’mstillholding90%becausemyconfidenceishigh.Butthisisrareforme,Idon’tliketohavesomuchofmyprofits

andportfolioinoneplace,soconsequentlyI’mrelyingonthebigpicturetokeepmeinsuchanaggressiveposition.Thebigpicturelooksgreat,butmyinnatecautionisrathertwitchy.Canthistimereallybedifferent?

Well,thelastfewyearshavecertainlybeendifferent,sowhynot?

MeanwhileonChristmasEvethespecimenportfolioisup6.8%aftercosts,roughlya

percentbetterthantheaveragehedgefund.Thisincludesa5%costloadoffatbroker’scommissionsandvariousnastybid/offerspreads.Thesewon’taffectusonthesesharesnextyear,soweshouldbag11%ifwehavethesamekindofperformanceinthenexttwelvemonths.ActuallyI’llbedisappointedifwecan’tdobetterthanthat.However,themarketdoesn’tcarewhatI

feel,itwilldowhatitwilldo.Meanwhile,Happy

Christmasandaprosperousnewyear.

OurFirstSale30December2013

WesoldBankofIrelandtoday.Thishasmadeusa76%profit.Ithasbeenhigher.

WehaveboughtLloyds.Wewanttohaveabankand

inthelongtermLloydswillhit150p,possiblysoonerthanlater.Banksarehorriblyopaque,soIresorttohandwavingtoexplainmyreasoning.

Bankshavebeenverycheapbecausetheyarepariahsandasabove,opaque.Howevertherewillbebanking.Sothequestionofpickingabankisstabilityandrelativevaluation.

Iresorttosales.Hereare

thekeyexamples:

Myideaisthatallthesecompaniesarebanks.Theydobankingstuff.Theonlydifferencesare:dotheyhavefinancialskeletonsabouttorisefromthetomb,aretheybeingnailedby

regulators/governments,dotheyhaverobust/clevermanagement?Everythingelsewillbeblurry.Profitmargins,assetsetcareallsoopaqueyoumayaswellsayonamediumtermmovingaverage,theywillbefungible.

So“SalestoMktcap”isaclearishindicatorofvaluation/upside.Themarketcouldberightaboutthevaluation,butifyoubelieve

bankswillberecoveringoverthenextfiveyears,youneedtoridethecheapest/soundest.

Rightnowinmybookthat’sLloyds.Barclaysisstillmiredinscandalandseemstohavebiggovernmentgunningforitsscalp.RBSishorriblymiredinpoliticsandSantanderissimply“incredible”tome.

SothatleavesLloydsinthepurplepatch.I’mitchingtobuyRBStobehonestbut

yousimplycan’ttrustpoliticiansnottoutterlydestroyvaluesoI’mhesitant.

Quickchartcheck...

NotabadtrendonRBS,butratherindeterminate.

Lloyds:

Lloydsgivesaclearun-noisytrend.Rightnowitisresting.Ifitbreaksup,itcouldbe130pin2015(Alakazam!!!)...Sorry,just

can’tresistthehocus-pocusofcharts.

BankofIreland:

Creditcrunchandneardestructionofthiscompany

suppressescurrentaction.

Let’szoomin:

SimilartoLloyds.Whatspoilsthepicture

formeforBankofIrelandis

therescueofBKIRbyUSfinancialinvestors.Isimplydon’ttrustthem.Theyaresatonafatprofit,nowatagoodvaluation.TheywillsellandwhentheydotheywillpindowntheupsideforthestockforanextendedperiodevenasIrelandrecovers.

Meanwhile,Lloydshasa30-40%upsideifitcanregainparitywithHSBCandSTANandalltheupsideofaUKrecovery.OfcoursetheUK

governmenthasawedge,butthatisabsorbable.Lloydsalsoseemstobetheleasthatedoftherescuedbanks.

ThelegacyportfolioalsosolditsBKIRandalreadyhasLloydswhichitholdssoitwillhelptheportfolioharmonisationprocessaswell.

Wewillbuy£1,000worthandbankthebalanceforanewpurchasewhenitcomes.

SharesThatPayDividends7January2014

Ilikedividends.Foronething,youdon’thavetoworryaboutthemlikethedailychangesinprices.They

come,theysometimesriseorfall,butyouprettysoonforgetaboutthemunlessyouhavethechequesthemselvesdroppingthroughtheletterbox.

Ifyoutradecrazystocks,dividendscanfeellikefreemoneyifandwhentheyappear.Mostcrazypuntingstocksdon’tpaydividendswhichisnosurprise,butatradercanendupwiththemsometimesbyhappyaccident.

Foratrader,dividendsareararething.Notforaninvestor,however.

I’vejustcalculatedthespecimenportfolio’sdividendsforlastyearandtheycometo£88.34.It’shardlyabonanza,butit’sacurryfortwo.SoasIwriteweareapproximately£2,000uponapproximately£18,000thatweputintothemarketoverroughlyayear.That’snotbad,butnotamazing

either.About10%wouldbeconsideredfabulousincertainquartersbutnottome.

However,Iamnolongerwearingtheduncecap,eventhoughtheNobelprizeforstockpickingisstillnotonthehorizon.

Havingsaidthat,ithasbeenaveryinterestingexerciseformetostartaportfoliofromscratchatasmallsizetosufferalltheissuesasmallinvestormust

facewithcostsandspreads.Thereisalsotheissueoftherollercoasterprovidedbythemarketwhenyouarebuildingupaportfolio.Investingisnotasmoothprocesstobeginwithandthatmakespersistingtoughwork,especiallyifthereisabearmarketalongtheway.

Sohereweareatthestartofanewyear.TheUSmarketisboomingandnearbubbling.Thislikelymeans

thereisaslumpoverthehorizonsomewhere,soI’mpreparedforaknockbackcomethelatespring.

Yetwhoknowswherewewillbethen,wecouldberidinghighornot.Youaresimplyleftguessing.Theonlythingtodoistolookforcheapsharesandbuythem,thenwait.Wewillcarryondoingso.

TodayweboughtShell,£1,000worthasusual.Shell

isasboringasastockgets.Shellischeap,ithasbeenforever.Why?Ihavenorealidea.Alltheoilcompaniesare,fromExxontoTotal,bigoilislowP/E,inShell’scaseunder9,anditpaysafatdividend,inthiscase4.9%.Shellisnotgoingtomakeusrichovernightbutit’sacheapstock,whichiswhatwebuy.Ifwesnap20-30%wewilllikelysell.Thatmighttakeayearorthree.Itisalsoanice

bitofbluechipstodge,givingtheportfolioabitofbackboneinbadtimesanda5%dividendyearinandyearout.

We’reInTheMoney8January2014

Theysaymoneygoestomoneyandthisisindeedthecase.HavingsoldBankofIrelandandasmallblockofTNImylegacyportfoliohasachunkofcashinitandIhave

addedtomyWalkerCripsposition.

Icandothisasthelegacyportfolioisfullydiversified.Mypositioninitisalsoabitonthesmallside.Astheportfolioisroughlyup120%intwoyearsIneedtouseprofitstogrowpositionstokeepthembalanced.

Itisremarkablethatthetwoportfolioscanbesosimilarandyettheperformancebesodifferent,

butthekeyisthestellarperformanceofTrinityMirror,LloydsandRM,overhalftheperformanceinthreestocks.Thisalsomakesthisportfoliofragile,becauseshouldthesestocksdumplikeMothercaredidtoday,thenthepunishmentwouldbesevere.

Wecan’tweightourportfoliointhespecimenportfoliobecausewearen’tdiversifiedenoughyet.After

anothertwelveshareswecanthinkabouttakingbiggerpositionsinsomeshares.(Wealsoprobablydon’thavethecashreservestogoloadinginahurryandIdon’twantmyreaderstogethopelesslyleftbehindbyafastacquisitionofshares.Iwantreaderstohaveachanceoffollowingtheaction.Watchingisonething,doinganotheraltogether.)

Soaftermoaningaboutexpensivebrokinghereisa

goodexampleofhowanexpensivebrokercanworkoutcheap.TheWalkerCripsofferpriceis46,butmybrokerwrangledwithamarketmakerandgotmemystockat44.75.Great.Letuscallthata2.5%improvement.Thatistheapproximatecostof3commissions.Ofcourseitmeansthebrokerhasstockhewantstoshift,butthisisnotatrade,wewillbeholdingnodoubtforages.

ThisremindsmewhyIlikephonebrokers.Whentheyaregoodtheyareverygood.Theycan’treallydothisonbigcaps,butonminnowstheycanreallyscorebigonthebuyingandsellingprice.Onlineshopssimplydon’tofferthat.Italsoworkswellwhenthemarketblowsupbecausethebrokercanalwayscallahumanandtrytodoadeal.Youcanalsocallfromthetrainandnot

worryaboutgettingcutoffbytunnels,ordroppingyourPCoffaboatintotheharbour.Sometimesyougetwhatyoupayfor.

Overallthemarkethasbeenrainingmemoney...thisiswhenIgetnervous.Whenthemarketlovesyouit’stimetoworrythatthepartyisover.

Fingerscrossedthatitisn’t.

WhyWeHoldFirstGroup9January2014

SowehavealotofFirstgroupwhichweboughtbeforetheirwild/weirdrightsissue.Whydidwebuythis?

It’sasimplecalculation.Letusimaginethatallbus

andtrainbusinessesarebroadlythesame.Assuchthereshouldbeasimilarvaluation.Abusticketortrainticketisfungible,sosalesshouldbevaluedroughlythesame.Solet’slookatthecompetitioninthissector:

Sofor£1ofFirstGroupyouget£4.2ofsales.TobeinlinewithNationalExpressorStagecoach,FirstGroupwouldneedtotriple.OfcourseNatExpressandStagecoachcouldcrumble,butyouseethesimplelogic.

Whatcouldmakea

companysolowlyvalued?Badmanagementand/oraneedformoney.TherightsissuefixedthatandanewChairmancouldbetheshakeuprequiredtothemanagement.

Thisdoesn’tmeanFirstGroupisgoingto£5.Itjustmeansthereisplentyofupsideifthecompanydoesn’timprovethingsworse.

Hereisthechart:

ThisisStagecoach’schart:

NotehowStagecoachwentfrom£3to£1andFGP£6to£2inthesameperiod.

Nowyoucandrillalotdeepertotryandgetconfirmationthatthisisnotamadidea.Therearebalance

sheetstoanalyseandstatementstoread,butit’sbesttostartwithaglaringobservationlikethesalesvaluationabovetostarttheprocessofresearch.Thismightthrowuplotsofuglyreasonsnottobuy.However,withagoodselectionofglaringanomaliesinthemarketthereisnoneedtogetclever.

Keepingitsimpleisthebestwaytogobecause

temporarybutextraordinaryreasonsforsharestobecheapultimatelygoaway.

PortfolioUpToday15January2014

ItendtobeverybearishinJanuary.Thisyearisnoexception.However,themarketischuggingalong.SowhileI’mfeelingbearishtheportfolioisupover£100

today.Itisofcoursemost

people’sdreamtoliveofftheirportfolioandthattakesalotofcapital.Ifyouareanaveragehedgefundmanageryouarebringingin5%,soforthosewishingtopullin£100,000beforetax,youneed£2m.Tohave£2mincashisaniceplacetobeandmostpeoplecanonlydreamofit.

Ifyouwereaimingat

15%,whichIconsidermybaseline,thatnumberisabout£650,000.However,15%isahighbar,evenifyoubeatthatyearinyearout.Butitisdoable.

Thisismuchmoreattainableandanyonebetween20and40hasafairlygoodchanceofbuildingthatkindofcashpotupby65,iftheybuildaportfoliodiligently.However,savingistoughasthereis

alwaysaponytobeboughtoracartobesavouredorakitchentobefitted.

Itwillbeinterestingtoseewhereweareattheendofthreeyears.Iwillbebuyingasifthereis£30,000inthepotandmayaddtothecashalittleinyearthree.

Wehaveactuallyneeded£19,348tobuildtheportfoliosofarandifwehaddoneitthiswaywewouldhaveafewhundredsintheaccount

spare.Weareup£2,209

includingdividends.Wehaveeighteenshareswithanothertwelveorsotocome.

Another10%wouldofcoursenotbetooshoddybutIwon’tbehappyunlesswegetclosetomy25%target.However,thismightprovetrickyasthemarketdoesfeelwellpricedand25%istheoreticallyanextremelyhighhurdle.

Thisiswheretheportfoliolies:

ForgivethecolumnorderaswiththirteenwinnersversussixlosersIfeelIshouldputmybestfootforwards.

IhaveputanorderinforanewadditiontotheportfoliobutIhaveleftanorderwiththemarketmakersome2.5%belowtheoffer.IftheyarereasonablethenIwillupdateyou,ifnotthena“poxonthem”–wewon’tbuy.Thereareenoughstocksinthemarkettoawaittheright

pricefortherightshare.

InvestingIsLikeGardening23January2014

Well,nowwearestartingtolookclever.Weareup£3,134.76onthe£19,348wewouldneedinthebrokerage

accounttodoallthetradestodate.That’s16%,in261daysofthemoneybeingatrisk,ieonaveragetimeinvested.Annualisethatandit’s24%perannum.

Butyoucouldsay,wellIstuck£30,000inanaccountaboutayearago,sowhatismyreturn?Thatwouldberoughly10%,alsonotbad,butmostofthemoneywasun-investedforthatperiodand“safe”satincashina

segregatedaccountatthebroker.

ButIcouldadd,“well,we’vegotabout4%costspaidfortoaddontothereturn,includingthebrokerandthespread,soactuallywe’remaking28%or14%dependinghowyouwanttolookatthecapitalyousenttothebroker.”

ThenyoumightsaythecostshavetobepaidandthenIwouldpointout,we’ve

effectivelypaidupfrontandifweholdforthreeyearsthosecostswillbedefrayedbytheeffectsoftime.

Andthenyoumightsay...

Well,wecouldgoonforever.

Wecansaycategorically,rightnow,weare£3,134betteroffoneighteenstocksweboughtathousandpoundseachof,in2013.Soinanyeventmyduncehatisoffand

themortarboardisoninstead.Thatisnice.Ihavedefinitelyjustifiedyoursubscription.(NB:goodadvice.Neverconfuseyourbrilliancewiththeeffectsofabullmarket.)

SohereisthechartofourperformancetakenfromtheADVFNportfolio:

Prometheaniscurrentlydoingsomeheavylifting,up80%forusmostofwhichhasbeenoverthelastfewdays.

Flybeisup128%andDartyisup56%.Inmy

opinionthesestockshavealongwaytorunifthebullcontinues.

Thequestionformeis,whattobuy,andtheanswercurrentlyis,nothing.Nevermind.

IwantedtobuyEssendonaweekorsoago.ImentionedIrefusedtobegougedbythemarkettobuyastockbutdidn’tsaywhich,wellthatwasit.Theywanted,ifIrecall,46pona5pspread.

That’sobscene.Nowthebidofferis59-64p.(Sigh.)

SowasIsmartorstupidnottobuy?Idon’tknow,butI“feel”youshouldneverplaygameswhenthemarkethasallthecardsandyouhavetogrovel.Groveltobuycanquicklyturnintogroveltosell.Irefusetoplayagainstsomeonewhoisdealingfromaloadeddeck.However,lettingthisstockgodoesrankle.

Sodoessellingashareandthenseeingthestockrunawayupwards,likeBankofIreland.

Yetthethingtorealiseisthatinvestingisnotanexamwhereyouaimtogetalltheanswersright,itisanactivitylikegardeningwhereyouhopetoendupwithanicegardenwithfineplants,lawnandvegetablepatch.Youhavetodigandchopandsow,enjoytheprocessand

seehowitturnsout.Noplantissacred,noresultperfect,thereisnohopeofcompletecontroloftheelements.

Whenwestartedwedidwellforabit,thenwewentdown20%likeaballoonwithaholeinitandnowweareup15%,allinaboutayear.Thefirstsixmonthswerelikegettingbeatenup,thecostshurt,thespreadshurt,themarketbeatonus.Whyplaythegameatall?

Thenthemarketturned.Withabsolutelynochangeinstrategyourresultimproved35%.(That’s35%fromthe80%trough,whichisactuallya44%improvement.)

Youmightsaythemarketdidn’tchangemucheither.

Thisisakeylessonaboutinvesting.Youmustkeepploddingalongandovertimeyouwilldowellifyouarebeingsensibleanddiligent.

Wehaveathesis:buy

cheapcompaniesinadiversifiedportfolio,usingP/E,salestomarketcap,directorsbuysandchartstoselectcandidates.Wesimplystucktoit.

Overtimehavingasuccessfulmethodbecomesthesatisfyingpartofinvesting.Youknowallthosepeoplethrashingaroundchasingthenextbigthingarewastingtheirtimeandmoneyandcomingunstuckandyou

dowellbysimplypluggingawaycarefullyatyourmethodanditwillmakeyouanicepotofwealthoverthelongterm.

Itisnicetoseetheportfoliobegintosproutasitshouldandseethefruitsofpatiencestarttoform.At10%ayearyoubegintogetrichslow.At25%annualised,it’snotsoslow.Buttheterritoryishilly;tomorrowwemightbeadunceagain,

butintenyears...

TheMarketisinaCorrection30January2014

Well,thebullmarkethadtogetcheckedandhereweareinthecorrection.Whoknowsifit’soverorjuststarting.

Therearelotsofinterestingissuesaboutthesekindsofthings.Oneisthateveryonewantstoidentifyandblameacorrectiononatrigger.Thattriggerisbestifitisaperson.However,marketsdon’tneedavillainorevenasolidreasontofallexceptthattheyhavegottoohigh.Amarketslumpislikeanavalanche,allyouneedisplentyofsnowandasteepslope.Therestisinevitable.

Thisavalanchewaslikelycausedbytwothings.

AcreditcrunchinChinacombineswiththeiryearendtraditionofsettlingbillsaroundthelastdayoftheyear.TheChinesewillhavebeenpullingcashoutfromundertheirglobalmattressesandthishashitequitiesandcurrencieshard.

ThesecondistheFedwasgoingtotaper.Thesedayscentralbanksmakeitvery

clearwhattheyaregoingtoannounceaweekorsoaheadoftheofficialnews,sothatnobanksarecaughtout,theycanmakemoneyoutoftheinsiderinformationandtherebyspreadtheshocksoonthedaynothingmuchhappens.Thisiscalledadvancedguidance.Ifyougotthisinsideinfoandusedit,you’dbeslammedinjail,butthemsthebreaksinthenewrealityofinterest

manipulation.Interestratesareagrand

manipulationandallmarketsfollowthem,soitmakessensetosmooththeireffectsbylettingthemajorplayersknowyourintentearly.Sothewaytowinthegameforusistorunalongwiththemarketbecauseyouknowit’snotrandomanymoreandbigmovesdaysbeforebignewsismerelytheearlyreleaseoftheinfo.Assuchyoucanride

thewave.However,weare

investingandlikeadeepseafish,weshouldn’tcareaboutthestormabove.Onlyoccasionallydoweneedtoswimfastandswimawayfromwhatisgoingonabove.Thisisunlikelytobesuchatime.

ThelegacyportfolioistakingsomepunishmentasTrinityMirroristakingabeating–it’sdownover20%

anditsoutsizedplaceintheportfolioismakinganastyhole.Shouldn’tcomplainastheresultsthusfarhavebeenwayoverthetop.

Inthespecimenportfoliowearestill£2,800uponroughly£19,000used.Notbadforaboutayear.I’mnotgoingtobotherwithallthedifferentcalculationsIcouldmake,butIcallthis15%.That’s5%takenand10%running.

TopofthepopsisFlybyup101%,thenPrometheanWorld83%,thenDarty61%.Ididn’texpectsomuchofDartythisfast,butyousimplyneverknowhowyourpicksaregoingtopanout,yousimplyhopeforagoodaverageresult.

HereisthechartastheADVFNportfolioshowsitasifyouput£30,000infromday1:

Forallthebumpsofthelastfewdays,thischartmakesthepicturelookserene.Whichisthewholepointofaportfolio.

I’mimaginingthatifwegetaslumpthenwewillbuy

threeorfourstocksinclosesuccession,butwewillhavetowaitandsee.

IfChinadoesn’timplode,whichisthelikelyoutcome,thingswillgetbacktonormal.Asfarastaperinggoes,theUSisstillpumping$60billiondollarsofQEintotheworldeconomyeverymonth.Thatremainsagianttailwind.However,youcan’ttakeanythingforgranted.

Interestingly,theUSjust

issueditsfirstfloatingratetreasuries,asignofthingstocomeandanexpectationofrisinginterestratesandperhapsinflation.

Meanwhilethebestresponsetoallthisistogobacktosleep.Investingshouldbeboring.

TheDiversificationRule31January2014

OnWednesdaythelegacyportfoliowaspummelledbyabigdropinTrinityMirror.Thisportfoliohasmuchtoo

muchofthatstockinitinmoneytermsbecauseTNIstartedoutatthetopendofmyportfolioallocationandthenwentballistic.Assuchitisperhaps20%oftheportfolio’svalue.Thismeanstheportfolioisnotasdiversifiedasitcouldandshouldbe.

NowI’mlefthavingtodecidebetweenmyopinionoftheshareandmybeliefinthetheoryofdiversification.

Itisnotahappyplaceforaninvestortofindthemselves.

Ishouldatleastsellhalfoftheposition.Ihavesoldabout12%asIwroteearlierbutthatisnotenough.

TodayTrinityMirrorralliedandputallthelossesback.

ThepainandpleasureofthiswhipsawisnotgoodforinvestingbutI’mleftholdingbecauseIbelievethereisalargeupside.Myfearand

greedareatloggerheads.WhatImustdothereforeisconstantlywatchandkeepmakingtheholdorfoldcall.Itisunsatisfactorybutsincethemomentofbecomingundiversifiedinthisshare,theprofitshavebeenverysolidandrewardedmyrulebending.Breakingrulesisdangerous,buthavingnoneatallislethal.

Nextweekwillbeagoodindicatorofwhetherthisnew

bearmarketwe’vebeensufferingisallaboutChinaandtheFedtaperorsomethingelse.IfitwastheFedandChineseNewYearthemarketswillrallyastheseeventspass.ItislookingtotheupsideasIwrite.

Nowyouwillhearmesayfromtimetotime,tradingwon’tmakeyoumoneybutinvestingwill.Youmayoccasionallyhearmesayyoucan’tmakemoneytrading

too.Butthat’snotstrictlytrue.Lookatthischart.It’syesterday’sFTSE:

Canyouseeanythingtotradethere?Ifnot,don’tworry...

evenifyoucan,youwouldn’tliketheprocess.

NowhereisthechartofHSBCtoday:

Seethetradenow?ThisiswhatIusedtotrade.Iwould

betagainstthesuddenrocketsanddramaticcollapsescausedbymalfunctions.HereIwouldshortHSBCatabout670.Youhavetobeveryquickbutitcanbedoneifyouaresetupforit.

ThisfatfingertradecausedthespikeintheFTSEyouseeabove.Someonemadeahashoftheirtradingcomputeralgoand>>BANG<<lostamillionortwoinafewseconds.IfIstill

tradedthiskindofthingIwouldhavemadeabout£2,000inthreeminutesofblindterror.Youcouldmakealargeramountifyouhavethenerveandcapital.Trytogoshort£1millionofHSBCandyou’dmake£50,000.Butremember,youhavemomentstorespondandnotimetochecktoseeifHSBCjustgotabidinfromsomeone...

Themarketpaysyouto

makeitmoreefficientandwhenthingsgohorriblywrongitpaysyouwelltotaketheothersideoftheerrorandmakethingsrightagain.

Buttodothisyouhavetositandwait,andwait,andwait,andwait...Thenwhenlightningstrikes,inaninstantmakeabiggamblethatsomeonemadeabigerror.Theresultisoftenafattradingprofit...Anoccasionalbiglossandfairly

bigstomachulcers.Itdoesfeelheroic,but

ultimatelythereismuchmoremoneytobemadecompoundingaportfoliothanscalping£2,000hereandthere.Astimepassestheinvestmentportfoliogrowsanditgetseasierbutthetradingprofitsstaythesameandtheboredomandstruggleisalwaysthesamedayinandout.

Whoneedsthestress?

Tradingisnotalifestyle,it’sapathology.

Don’tPanic!7February2014

Whattodowhenthereisacrash?Sell,ofcourse...

No.Thatisthewronganswer.That’sreallyannoying.Youreallywanttosellwhenthemarketgoesbearish.Itfeelliketherightthingtodo.Butitisn’t.You

onlyselloutifthethinkit’snearlytheendoftheworld.Forexample,ChinaisabouttoexplodeinarevolutionorazombieplaguebreaksoutinLosAngeles.Otherwise,grinandbearit.

Hereisachartofmy2008portfoliowhichIsoldin2010.(Thechartisalittlecrankybutyou’llseetheresult.)

Isoldoutatjustover100%profit,whichwasstellar.ButIcouldhavegoneonholidayinsteadandputonanother150%.

Itlookedsensiblefor

aboutayear.However,intheendthemarketshoweditwasjustaswelltosittight.

YoucouldsayIwassafeforalargepartofthedip.SothatwhenIre-enteredaboutayearlaterI’davoidedallthepotentialharmandforthatmatterpaperlossbutsellingandbuyingisanintangiblecostallitsown.

Thepointis,uglymarketslikethecurrentoneshouldbeseenonlyaspotential

opportunitiestobuystockscheapiftheyreallydotank.UnlessthezombiehoardsaredestroyingLondonorNASAhasspottedameteorheadingourway,donotliquidateyourportfolio.Continuetobuycheapsharesandsellthemwhentheyarenotcheap.Trytoblockoutallelse.

YouwanttohearthatFrenchConnectionshotup20%todayandknowwhy.

Theansweris:it’sacheapstockanditshouldgoup.Thisfeelunsatisfactory,whereisthenarrative?

TherewasafunnycartoonIreadyesterday.Onecharactersays:“We’vegotareleaseofmorerandomeconomicdata.”

Theothercharacterssays:“Let’sworkwithittomakeanarrativethatexplainstoday’smarket.”

ThisishowIviewthe

market.Insteadofnarrativewe

buycheapandsellnotcheap.Theonlytwoquestionswehaveiswhatischeapandwhenisitnotcheap.Onadaytodaybasisthereislittletodoandnotmanystoriestotell.

TheArtofDoingNothing12February2014

Wecontinuetohaveanicerun.EventhoughI’mbearishandthemarketisjitterytheportfolioisgoingupnicely.

Thisiswhysittingonyourhandsissuchagoodinvestmentattribute.

Wemadeourfirstbuyon11December2012andasoftodayourportfoliohasbeengoingfor295riskweighteddays.Wehaveneeded£19,348tomakeallthebuysnecessarytomirrorit.

Wehavea£3,977.57profit.That’s21%.SowearenowinthezoneIexpecttobeinandthejourneytherehas

beenunexpected.Whetherwewillbeupor

downfromhereonthe365daymarkisanothermatter.Wecouldhaveacrashoramanicboomandprobabilitysayits50/50wewillbenobetteroff.

InanyeventI’veearnedyoursub.However,I’mnottoosureabouttheentertainmentvaluerecently.Makingmoretendstobeboring.

Meanwhile,backinthemarket,I’mlookingcloselyatBarclays.Theywillbeabuysometimesoon.Theyareontheradar!I’malsotoyingwithagoldplay.IshouldlockmyselfinacupboardinsteadbutinmystupidpuntingaccountI’vebeenpickingupasplashofgold.

Thishasbeenquiteprofitableinthelastcoupleofdaysbutitcouldswingaroundsuddenlyandbiteme.

Ithinkthereissomegoodinflationarynewsaroundthebendandthelastfewdayshasbeenaidedbytheinsidershearingitfirst.Wewillsee.

IncrazypuntinglandIwentheavilylongNikkeiwhichthenfoldedfurtherblowingmystop.Itthenfell600pointsandIrefrainedfromjumpingin;nowitis800pointshigher.I’vedecidedNikkeiisnowtoodangerousandtheoutcomeof

bankofJapanvsAbeistoohardtoknow.Suchistheshortlifeofaspeculator.Happily,IkeeppuntingdowntoasideshowtokeepmyhandinwiththeanticsofmostofADVFN’susers.

Meanwhile,Icanjustsitbackanddonothingonmyinvestmentsandmakehaywithoutawhisperofadrenaline.(Thisisnotstrictlytrue,butyoufollowmydrift.)

Thisisthechartofourportfoliosprogress:

(Notethisisplottedasifyouput£30,000inanaccountfromday1.Ifyouhad,not

thatIsuggestedyoudid,youwouldbe13%upwithover£10,000sloshingaroundincashintheaccount.)

Sowhatnow?Notmuch.Keeplooking

foropportunities.Sitbackandrelax.

Meanwhile,IthinkIwillstartpositingsomeofmytechniques,justtokeepyouentertained.You’veprobablylearntallyouneedtobynowandifyoudidn’tyoucould

buymybook101WaystoPickStockMarketWinnersfornuppenceforyourKindleonAmazonandlearntherest.

IthinkIneedtogoonacourseforpressuresalesmanshipinthemeantime.AtthemomentIamtemporarilyaninvestmentgenius...tomorrow,whoknows?

WhyIamDabblinginGold14February2014

Ofcourseyouareabsolutelyboredwithmesaying,“Wowwearemakinggoodmoneyaren’twe?”Iwouldbetoo.

Profitsfromriskareboring;itislossesthatdrivethebulkofexcitement.Wewanttomakemoneybutprettysoonthedesiretogamblecanovercomethisgoal.

Youmightnotagreebutitismyobservationthatgamblersgambletolose,it’stheemotionalloopcausedbylosingthatdrivesthemon.Itiseasyforpeoplewhoarepreparedtotakeriskstobewaylaidbytheurgeto

gamble.It’saslipperyslopeeasilyslipperyslopeddown.

Consistentwinning,ontheotherhand,iskindofdull.Assoonasagameisawinningone,itbecomeswork.

Ifyoutoldadegenerategambleryouwouldpayhim£300totravel200miles,walkalongway,thenstandinacoldwindyfieldallday,he’dlaughatyouandneveragreetodoit.Tellhimtogo

toPontefractracesandgivehimabusticketandhewouldbeonhisway.

Soanyway,ratherthantalkstock,let’stalktechniques.Thebelowisthechartthatmademebuyalittlegold.Thisisthecharttoday:

ThisiswhereitwasyesterdaywhenIsawit:

Tomeitlookslikeithasmadeasolidbaseforthelastsixweeks.Thevolatilityhasdied.It’ssneakingitswayup.

Itlookslikeit’soutofthetrend.Certainlyoutofthisone:

Ialwayslookoutforatrendreversalwherethevolatilitydiesandthepathisslowlybutsurelyupwards.Thechartneedstosay:thetrendlookslikeit’sover,somethingelseisup.Nowthatdoesn’tmeanithaschangedbutitswingsthechancesyourway.

Idothinkgoldistoolow.SoIamlookingforasignaltoreverse.Icantakepositionsandgetstoppedoutaswrong.Idon’thavetobe

right.Ijustneedtobemorerightthanwrong.

Achartisallabouthindsight.Iliketosay,itpredictsthepast.Ausefulpastisonewheretheuncertaintyhasdiedaway.Thenyouhope,allthingsbeingequal,thenextmovesdefineanewdirection.

NowI’mdefinitelynotsayingbuygoldbecausethisblogisnotatradingblog.I’msimplytryingtoshowyoua

techniquetolearnforthefutureandyourowninvesting,becausethisworksforcheapcompaniesjustaswellascrazycommodities.

StopPress:Petropavlovsk14February2014

BoughtPOG,Petropavlovsk,frommysickbed.Can’tresist.UpdatefollowsonMonday.

BuyingGold17February2014

IhavetheswinefluinTokyososorryforthisramble.WeboughtPOG,theunpronounceableanddifficulttospellPetropavlovsky.It’sarealgoldmine.It’sdown90%inthreeyears.Itsauditorassureusitdigs$1bningold

ayear.Goldisflyingandthechartslookgoodforthecompanyandthemetal.

Allthedeepvalueisinmining,butthensoarealltheprofoundcrooks.I’veswornoffthesestocksbutIhavetotakeapinch.

Thisisthepoweroftheportfolio.Withtwentystockstheworseitcandoishurtus5%.Soifitdoesimplodeitwilljustbethisyear’sAvocetmistake.

...backtosleepforme...noLemsipforoldmen.

ThePortfoliosareStrong18February2014

Yesterdaywasamassivedayforthelegacyportfolio,addingnearly2.5%.Thespecimenportfoliowasstrong

aswell,asyou’dexpect.Wearenowmaking£4,320onjustover£20,000(£20,196accordingtotheADVFNportfolio).IhopereadersareunderstandingthatIcanbebearishandholdandbewrongandmakemoney.

Thegoldenrulesofinvestingare:buycheapsharesandsellthemwhentheyaren’tcheap.Nothingelse.Thetrickybitisjudgingcheap.

Timingthemarketisimpossible.Well,atleast,soverydifficultyoushouldnotattemptit.However,ifyoudotrytotimethemarketyouwillwinsomeandlosesome.Likelyona50/50basisbutyouwillblowyourmoneyoncosts.Iliketoreiteratethisbecausesometakelossesasakindoftragicbutheroicthing.However,theyarelosingmoneytradingbecausetheyarejustpayingtheir

capitalawayincosts.Ourcostsofgettingin

andoutareabout4%onaverage,soeverytimewejiggleourpositionsitcostsusdear.Youwillbleedyourselfwhiteinbrokeragecoststryingtotimethemarket.Itwillalsoputyouoffthestockmarketentirely,becauseit’snofuntobewhipsawedbyrandomness.

Sothisistheridesofar.Recallhowhorribleitfeltto

beafoolatthebottomofthischartandhowcoolitisrightnow.

Thekeythingtorememberisourluckortechniquehasn’t

changed,themarketjustcaughtupwithourthinking.Wejustgotintooearlyineffect.Butthat’sOK.Youcan’ttimeit.

Thisisthelegacyportfolio:

It’salmosttoogoodtobetrue.However,youcanrevisitthisportfolio’sperformancesincethisblogwasstarted,seetheconstituentsandthevarious

updatesandmarvelattheresult.Longmaythisperformancecontinue.That’s175%profitoverroughlytwoyears.Callita60%yearlycompoundingreturn.

Ibelievethatthisisunsustainable.Istillthink25%isthenumberforyearlyprofitsandthat’sahugehurdleandtheseresultshavebeencreatedbyexceptionaltimes.

PerverselyIalsothink

thereisalotmoretocome,soIhavetoshrugandthankmygoodfortune.Realise,however,ifthisbullgoesonforafewmoreyearsit’sgoingtogetrough.Volatilityisgoingtoexplode.

Meanwhilewearewatching:

RSAforafurtherfallTateRollsRoyce

ThesestocksareallfragileandiftheytakeafattumbleI’llbetemptedtograbsome.Barclaysisalsoworthwatching.Ifittoofellheavily,tosay170p,I’djumponit.Meanwhileit’swaitandsee.

SmallCapSpreadsareaDisgrace20February2014

Ifindmyselfsellingstockoutofthelegacyportfolio.ThistimeitisCenkoswhichbaggedanice115%profit.

I’mstartingtobuildupapileofcashtherenowwhichisirritating.

Becausethesizewaslarge(actuallytinyreallyinthegalacticschemeofthings)Ihadtotakeanextra1phaircuttosell.Thisisthesoberingrealitiesofsmallcaps,thatyouareatthemercyofthemarketmakers.

Theregulatorsshoulddosomethingaboutsmallcapspreads.Arcontech,whichI

refusedtobuyforthespecimenportfolio,isaperfectexample:it’sup50%fromwhereitwasboughtbutwitha10%spreadandwithatinymarketcap,itwon’tbeaviableshareforanyonewhofollowsthisblogtoputintotheirportfolioasatinynumberofbuyswillspikethepriceupandafewsalescrushitbackdownagain;meanwhilethemarketmakerswillbeskinningmyreaders

for10%.AsforEssenden,now

bid/offer65/72,thereareplentyofmorefishinthesea.(OKyes,itisreallyannoyingbutyouhavetostickasmuchasyoucantoyourrules.Asoftenasnottheseshareswillpullback,inthiscaseitdidn’t.)Ifyoulookcloselyyouwillseethepriceshotup12%onabout£8,000oftrading.Soimaginetryingtosellafewtensofthousand

poundsofstockintothe10%spread.Ihazardtosaythatthepriceisatbestfragile.

Althoughtheportfoliosarepoundingontheprofits,Icontinuetofeelbearish.Ofcourse,theMayslumpisjustaroundthecornerbutIdon’tthinkitisthat.Themarketisnotcheapanymore.Itisnotexpensiveeither,butI’mgoodatcheapandnotcheapmakesmenervous.

Ifthemarketkeepsgoing,

asIthinkitwill,I’mgoingtohavetolookatmoresketchyreasonstobuysharesratherthanmakesimplecallsagainstmarketfashion.I’mOKatthatbutI’dprefertobuydogsharesandwait,thanhavetostartputtingonmyspeculatorhat.

However,ifweenteraboombubblephasewearejustgoingtohavetobuytheleastexpensivesharesandletthemarketdotherest.Itis

notsodifficult,itisjustnotmypreferredgame.

Meanwhile,I’mstartingacuratedlistoftomorrow’sdogs,soIcankeepaneyeonthemall.Forallthetalkofbuyandhold,andleavingstocksaloneandcomingbackinayeartoseehowyou’vegoton,thereisI’msureapositiveprofittobehadwatchingsharesclosely.Youshouldn’tpouncetoooftenbutunlessyoukeepwatch

youcaneasilymissbothbuyingandsellingopportunities.

Soonthe“inthedoghouse”listis:

BGGroupDeLaRueGamesworkshopG4SLadbrokesMorrisonMothercareRollsRoyce

RSASainsburySercoTate

Iwouldn’tbuyanynowasIexpectthemtopotentiallyfallheavily,oratleastsomeofthem.Iftheydo,thenI’llwatchthemcloselytoseeifanygetintoverycheap-land.

AsIamcurrentlybearish,I’mnotgoingtotakeanyrisks.Wecanalwaysbuyin

theMayslumpifandwhenitcomes.

PrometheanandFlybe21February2014

SoyesterdayPrometheanannouncedithadsoldkitto10,000USclassrooms.Thishasspikedthepricenicely.MoretocomeIbelieve.

Prometheanisaninternet,

educationaltechnologycompany;dammit,itshouldbevaluedattentimessales...Sadlythatwouldmakeit£7ashare,not38p.AhtobeonNASDAQnowthebubbleishere.

TheotherbignewswasthatFlybehasraised£150mtogetonwithitsbusiness.Thisisthenewex-EasyJetmanagementatwork.£55mofthisistocomefromatwoforthreerightsissueaimedat

existingshareholders.Crudely,theexistingshareholderswillbeleftwithhalfthebusinessinreturnforstumpingup66%morecash.Ihavemixedfeelingaboutthis.

TakingtheslowboattoChinathenewmanagementshouldbeabletogetFlybebacktoitsIPOvalue.That’satriplefromhere.It’srisky,but1unitofcapitalhasagoodchanceofgetting500-600%returnorafurtherriseofroughly180p.What’snottoloveinthat?

Nowwiththenewmoneyraisedthesameresultcutsthatintwo.150p.Butwait,let’saddthecashontothat,

roughly65pandmaybewecanhopefor200p.Sowe’vegonefromamassiveupsideofafurther280pupsideon1unitofrisk,toan80pupsideon1.66unitsofrisk.Icanfeelalittlecheatedatthat.

Thisis,ofcourse,whythecitygobbledup£150mofFlybewhenitcurrentlyonlyhas£85minoutstandingshares.Itsmellsabargain.

Themanagementwillsay,“looklet’scrackon,lookat

EasyJet,ithasa£7billionmarketcapandtheloathedRyanair£10billion.Thiscanbeusinfiveyears,soholdontoyourhats.”Clearlytheshareis£150mlessriskynow,butit’sstillabitgalling.

ItmustbesaidifFlybewasvaluedlikeEasyJet,evenafterthisdilutionitwouldbeworthcloseto£5,butit’snastytoseetheupsidecutinhalf,justbecausethemanagementwantstogohell

forleatherandthecitywantstoeatourlunches.

Butwewillpickuptherightsandwewillploughon.IntheendIbelievewewillbecryingallthewaytothebank.

FlybeRightsIssueGivesUsaGoodProfit25February2014

ThecityappearstoliketheFlyberightsissue.Thisis

good.Whilewemighthavelikedthelongtermupsidethathasbeentopslicedbythismoneyraise,wearestillsatonaniceprofit,withafurtheroptiontobuywellbelowthecurrentprice.

Currentlythepriceisatapremiumof20psowehaveapaperprofitof£266ontherights,another26%profittoaddtoour151%.

I’mgoingtotakeuptherightseventhoughitmeans

puttingupanother£1,465.Wewillendupowning4unitsofFlybeinrelationtowhatwebuyasabaseunitforamemberoftheportfolio.Wewillgrinandbearthatfornow,thoughwemighttopsliceatsomepoint.

Ineffectthecityhasvotedinconfidenceofthenewmanagementbysigningupforsuchabigrightsissueandtheywilllikelykeepbuyingupthestockasthatis

whatfundstendtodo.Thisisoneoftheirlittletrickstomakereturns.Theypickwhattheythinkisawinnerandbuyandbuyandbuytheshare,hencepushingthepriceup.Thismakestheirfundlookgood,astheirpicksarerising,eventhoughtheymightbetheonescausingtherise.Sopeopleseethefundhasgoodreturnsandinvestinthatfund.

Sothefundhasmore

moneytoinvest,sothefundbuysmoreoftheirselectionsandupthepricegoesagain.It’savirtuouscircleuntil>>poom<<,suddenlyitturnsintoaviciousone.

ButtheseareearlydaysforFlybesotherisecouldrunandrunforalongtime,regardlessoffundamentals.Whatisnottolove?Assuchwearegoingtosuckuptherightsandhangonfortheride.

Meanwhile,Ihaveanotherstockinmysights.Ilikeit,butit’sawoollyone.Watchthisspace.

Rightnowweare23%up...AndlikeLordByronafterhisswim,Ihavegottheague.

BuyingaHedgeFund25February2014

It’shardtofindoldstylevaluebecausethemarketishigh.Sothechoiceistolookfurtherafieldortodonothing.

NowandagainIwillbuy

acompanydownonitsluckandthedecisionmayjustbetechnical.Thisoneis.HereisthethreeyearschartofManGroup:

It’sahedgefundwith50

billionundermanagement.It’sinthedoghousebecauseitsfamousfundhasn’tbeendoingsowell.Mainlyonesuspectsbecausetrendfollowinghasn’tbeensuchacleverstrategyrecently.IcouldbesarcasticabouthedgefundsbutManisfamousandwasillustrious.

Hereisthesevenyearchart:

NowIreallyliketheflatperformanceatthechartend.Itsays,“it’shardertofallanyfurther.”

Overthelastfewyearsit’shappilysatat£5andagainat£2.50,thoughright

nowit’s84p.Wellweknowwhathas

gonewrong.Themarket.Wealsoknowchangeisuponus.ManhasblamedQEforitspoorperformanceandwithtaper,thecomingmonthswillgiveitachancetoprovethisidearight.Wewillsee,butinanyeventitwon’ttakemuchtodeliverusa50%+profitandifthepricebreaksmuchbelowitsrecentchannelthesharewillbegivingusa

warningsomethingelseiswrongbesidessimple“marketconditions.”

Soonemorepieceofdiversificationtotheportfolio.

ManGroupBringsProfits28February2014

SowewereluckywithManGroup.Sorry–Ishouldsay,IwasbrilliantwithmyselectionofManGroup.Weareup17%onthispickinacoupleofdays.Theyearend

figureswereobviouslybetterthanexpected.

OK,sowewerelucky.ButtoparaphrasethegolfinglegendGaryPlayer,“ThemoreIinvesttheluckierIget.”

TodayweboughtSerco.TheyhavehiredanewCEO,RupertSoames,whowasthehighlyregardedCEOofAggreko.Itbendsaruleofminewhichis“donotinvestinpoliticalfootballs,”but

I’vebeenwatchingSerco,whichischeap,andthisnewsandthesub10P/Ehaspushedmeoffthefence.Thisnewbroomshouldgivethecompanya30%-50%hikeinthenextyearorso,soweareinforthishoped-forrise.Itisnotthesortofspectacularupsidewehavebakedinwithsomeofourpicks,butnonethelessitisirresistible.

Webuywhat’scheapandsellwhatisn’t.

Forthefollowersofmylegacyportfolio,I’vebeensellingoutofTrinityMirror.It’snotthatIfeelitwon’tgohigher,it’sjustthataftera400%riseitisbendingmyportfoliotoomuch.Itstartedoutasahorriblyoverweight10%,sothankstothatfacttheprofitsincethenoverthewholeportfoliohasbeenup150%;butthepositionwasstillflirtingwithbeingbetween20-25%ofthe

overallportfolio.Thisgavemetheheebeegeebees.SoIdecidedtotopsliceit.I’vehalvedthepositionandmayhalveitagain.Ialreadyfeelbetter.

DiversificationisextremelyimportantandI’mnotnaturallycomfortabletorunmyprofitlikeIdidwithTNI,butsometimesyouhavetohangtough.

ReadingtheCharts4March2014

It’senoughtomakeaninvestorparanoid.SothisistheFTSEchart:

Asachartistbelievinginthemumbojumboofchartsyoucanclearlyseethatwearedueadipbackto6,500,ifthecurrentcycleofupanddownistocontinue.

SohowexactlydidPutin

knowthisandtheUkrainianrevolutionsyncupwiththeFTSE???Youarelefteitherscratchingyourheadorbelievinginthe“newworldorder.”Orofcoursecoincidence...“ButasapolicemanIdon’tbelieveincoincidences...”It’satleastveryodd.

Anyway,yesterdaytheportfoliowaskickeddownthestairs£500bythetroubleintheCrimeaandtodayit’s

backup£300.Itisprobablynotoverbyalongmarkbutit’saniceexampleofhowfragileandficklethemarketcanbe.It’sbettertobenumbandjustrollwithit.

InthelegacyportfolioI’vebeenhackingawayatmymassiveoverweightTrinityMirrorposition.It’snowjust25%ofwhatitwas.Whichmeansitisstillabitoverweightat5%orso.However,itfeelsmuch

better.I’mexpectingittogoafairbithigherbutnowtheriskofaportfoliocrackingfallofTNIisgone.Themoneyisoffthetable.

Itleavesmewithabigpileofcash,however.SomeofitisgoingtobemoppedupbyFlybe’srightsbutIkindoffeeltheneedtomopupthiscash,eventhoughIstillfeelbearish.SoI’veaddedtomyTotalProduceposition.Whichwasinitiallya1unit

positionbutwiththebigprofitsinthisportfoliosinceTotalProducewasbought,it’snowunderweight.Iwillslowlygoroundmyportfolioconstituentsandseeifanyneedpunchingup.Thiswillsuckupsomecash.

TherearequiteafewcandidatesbeggingtobesoldbutI’mlettingthemridefornow,becausetheyareasgoodasanyotherstocksIcanfindrightnowtohavemy

moneyin.Valueishardtofind.

Soyesterdayitwaswarbuttodayit’speace.Thisiswhyitdoesn’tdotocaretoomuchaboutthenews.Ifyouarereadingthenews,ithasalreadymovedtheprice.

Onlysomethingmassivelybad,sobigitcan’tbetakeninallatonce,shouldmakeyouthinkaboutselling.Ukraineisunlikelytobeit.

GoingBananas:FyffesTakeover10March2014

Hey-diddle-diatakeover!!!Thereisnothingasniceas

havingatakeoverinyourportfolio.Rightsissuestendtoturnoutwellbuttakeoversareaslamdunkwin.Overtimeweshouldgetalot.

SotheunspellableFyffesismergingwithConchitas,sorryChiquita,andendingupwith50%oftheresultingcompany.Nowhereistherub,themergerisat101pforFyffes.Fyffesclosedat75ponFriday.

Nowitgetsbetter.Fyffes

isgetting50%ofthebusiness(OK49.xxx%butniceroundnumbersarebetterforinvesting)andithas33%ofthecombinedsalesofthecombinedcompany.Bananasarebananasyou’dthink,soineffectFyffesisgettingabiggershareoftheresultby2/1.Solet’ssaythenewcompanyhasavalueof300,Fyffesisgetting150forits100.Thisshouldmeanthatthecompanygetstobe400,

another33%upside.Thenontopofthat,the

biggerresultantcompanymightcatchinstitutioninterestandthatmightaddanother50%.Allthisontopofa38%poptoday.(Wehavea53%profitonthecompanyasIwrite.)Itdoesn’tgetfatterthanthat.Sowearenotselling.

InfactIboughtforthelegacyportfolio.Idoubledup.Wecannotdothisinthe

specimenportfolioaswearenotyetdiversifiedandwhatismoreIdoubledupwhenthepricethismorningwas93.5ponthewaydownto90pashappypunterssoldthismorning.Youwouldn’thavebeenabletocatchthatmove.It’snow98.25psothat’safewpercentmissedforusinthespecimenportfolio,butwearenottradersandwearen’tdiversified,soweshouldn’tthinklikethat.

Sorry.However,letmeexplain

whathappenedsoyoucandothesameoneday.Fyffesisasmallcapandinstitutionsaren’tcrawlingalloverit.Ithasafatspread.Whenthenewscameout,privateinvestorstooktheirprofitsandtherewasnoonetheretobuy,sothepricefelloff.Around9amwhenthemarketsstartedtobeawakeprosandperhapsinstitutions

boughtthestockupuntilnowit’sonlyacoupleofpenceoffthecorrectmergerprice.

Butinvestorsshouldbeblindtothisnonsense;wearesatona53%profitwithmoretocome.Happydays.

Interestingly,wearenow313daysintotheportfolioonariskweightedbasisanditisnottill1June2014thatwewillhavehadourroughly£20,000inthemarketforayear.

Rightnowwehavea£5,394profitonatotalof£21,226invested/inplay–that’s25.4%profit.ThisiswhereIhopedtobewhenIstartedthisnewsletterbutIcanassureyouIdidn’texpecttobedown20%+thislastsummerandbeherenow...butintheendyoucan’tpredicttheswingsofthemarket,youcanonlyholdontoatechniqueyoubelievebringsyouresults.Andhere

theyare.

IsThataBananainYourPortfolio,orAreYouJustPleasedtoSee

Me?10March2014

Thenottotallyefficientmarketlookslikethis:

Soyoucansayforarelativelyilliquidsmallcapshareittakesfourhoursforthemarkettogetthepriceright.Thisiswherethetradermakeshismoney.Whilethemarketandinstitutionsare

wakinguptheyhaveachancetomakesomemoney.InthecaseofthisluckytraderwithJapanesejetlagthat’sabout18%onanicechunkofchange.Ishouldsellonthebasisofafatquickprofitbutthissharehasa50%chanceofa100%upsideoverthenextthreeyears,soIhavetohold.

Inefficientmarketsatworkcanbecausedbythingsliketheconfusioncausedbya

stocklistedintheUKineuros,asisFyffes.Whatisworse,trytradingthiswhennooneknowsthetickerandnoonecangettheFsintherightordertofindtheshare...secondsoflagturnsintominutes.

Getthecurrenciesupsidedownandyoucanbeinapickle.IfyoualreadyhaveyourspreadsheetinplaceforaFTSE100companywiththisissuethenyouwon’t

haveanyproblem,butforasemi-obscuresmallcapyouaregoingtobedoublecheckingalotbeforeyoupuntanamountofcashonthemispricing.Asitisthereareonly1,500,000sharestradedtodaysotherearen’tmanypeoplewhowanttotakethatmuchriskinthisfatmispricing.

Butanyway,“kerching”forallofus.

MorrisonsTakesaFallSoI’veBoughtIt13March2014

TodayMorrisonsannouncedtheiryearendandtheprice

immediatelydropped10%.Weboughtaclip.OrratherIboughtaclipforthelegacyportfolioandwethereforemirroritinthespecimenportfolio.Thisisprobablyabitearlyforusbutwearemirroringtoattemptatleast,overtime,toharmonisethespecimenportfoliowiththelegacyone.

However,IwilllikelybuymoreMorrisonforthelegacyportfolioasitmighthavea

longwaytofall(ormaybenot.)

Underthehood,Iveryhappybecausealltheothersupermarketstankedtoo.Thisisafantasticsignal.Itprovestomethatthecityisgoingzombieonsupermarketsandthereisagoodchancesupermarketsharepricesaregoingtogetstompedintothegroundoverthenextyearorso,offeringafabulousopportunitytogetinbigata

ludicrouslycheapprice.Ifawonderfullycheap

bottomisreachedIwillloadupandmakeakilling.Iwillacquireasthesectorfalls,feelingforthatbottom.ThisMorrisonsbuyisafirstdabatthat.

Asbeginnerportfoliobuyerswedon’thavetheluxuryofsomeonewithabigportfoliowhocankeepbuying,butevenso,Morrisonsiscurrentlycheap,

withafatdivvyandlowP/E,soitfitsourcurrentcriteria.

Webuycheapandsellnot-cheap,soonthatbasisit’snotaterribletimetobuy.However,theremaybefarbettertimestobuyinthefuture–andwhoknows,perhapswewill.I’mjusthappybecauseIthinkawholesectorisoutoffashionwhichistheengineofstupiditythatfeedsme.

TheMayDipIsComing19March2014

Ihaven’tfeltbullishallyearbutforthefirstsectionofitthemarketkeptmakingmemoney.That’sthekindofwrongIliketobe.Ifyoucanbankfancyprofitsbeing

wrong,it’sthesortofwrongyoucanbottleandsell.

Idon’tfeelanymorepositivenowandMayiscoming.Wearegoingtogetthumped,Ifeel,butnotseeingwhenthehammerwillfallmeansyoujusthavetobepreparedtosuckitupwhenitfinallycomesoutoftheblue.

I’mnowabout20%incash,whichisnotreallythatbigacashpile,butI’mnormally100%inequities,so

itdoesleaveanicechunkofsocalled“drypowder”foranyslumpthatmightshowup.IfthemarketdivesIwillinvestthatmoney.

Notonlyistherenotmuchvalueoutthere,therearealotofcompaniesthatareexpensive.Thiscanbeastrongsignalforalargecorrectiontobeonitsway,exceptifthemarketisgoingtogointoaboom;itmightsimplykeepgoingupagainst

alllogic.That’sthefunnything,I

thinkthemarkethasabigchanceofgoingbullishlyapeandfranklyI’mnotusedtodealingwiththat.Idon’tdoboominvesting.Boomsandbubblesareaboutakindofsystemicpressurethatdrivespricesmad.Theyarecausedbyfinancialalignmentsthatcauseeclipsesoffinanciallogic.Well,actuallytheymakeperfectsensebutyou

havetostartsketchingequationsanddrawingcurvestoillustratethemandintheendtheyrepresentthepartofacurvewhenthecalculusgoeswhatthemathematicianswouldcallnon-linear.InplainEnglish,themarketgetstoodangeroustoplay.That’snothereyet,butit’sareasonablepossibility.

Themostlikelyoutcome,however,iscorrectionandthat’sfine,wewillbuythe

dip.Ifthisistobe,it’sclose:nolaterthanJune.Butaboomwillbeveryinteresting/trickytogetright.

Ididfineinthedotcomboom,butsodideveryone,ittakesnoskilltogolonginabubbleandmakemoney.It’sthegettingoutattherightplacethattakesluckandskill.

Forexample,anacquaintancedidwellinthedotcomboom,becausehegotrunoverinacarparkbya

van.HisfriendshelpedhimclosehispositionswhilehewasinICU,justbeforethemarketimploded,sothatdarkcloudendeduphavingasevenfiguresilverlining.

IdidOKinthedotcomslumptoobutthatmighthavebeenluck,sofranklyI’mnotsurehowI’mgoingtohandleamassivebullmarketifwegointoanewboomandbubble.Hangingonforgiantprofitsisnotreallymystyle

eventhoughI’vebeenworkingonthatskillsince2008.Perhapswehavealreadyboomed,nowwilljustbeabubble.It’sveryimponderable.

However,I’mnotweddedtothistheory.Investinwhatyousee.Theworldhasnoneedtoagreewithme.It’sthecoldsuperegothatmakesmarketprofitsnottheegocentricidthatthinkstheuniverserotatesaroundthem.

Thefactis,peoplearegettinggreedyandthereforeI’mgettingscared.ButI’mgoingtositpatandjustmakesureI’mkeenonwhatsharesI’mholding.

Meanwhilethisiswhereweare:

I’mexpectingtheportfolioto,atbest,gosidewaysfromhereforabit.(Thisisthechartpresupposingwestartedwith£30,000ofcashintheaccount,whichofcourse

noneofushave.)Butthatmeanslittle.You

can’tpredicttheshortterm,Iconstantlyremindmyselfofthatsimplefact.Intheshorttermthemarketisrandom;onlyinthelongtermdoesyouredgeturnintoprofits.

Soinconclusion,agonisingisjustawasteoftime...Butit’ssodifficultnotto.

BettingonLadbrokes20March2014

Isimplyhadtodoit.We’vebeenwatchingLadbrokesandwaitingforadiptogetin.Well,todayithappenedwhenGeorgeOsbourneslappedthegamblingstockswithsome

moretaxes.Weseemtohavegotnear

thelowofthedayat1.369butsadlythisprobablyisn’tthebottom.That’sbecausethemathssaythechanceofhittingamarketbottomisoneinten.Anotherreasonnottotry.Butforafewhourswelooksmart.

Ladbrokesisaunfashionabledog.Andweliketobuythose.OK,sowedon’tlikethegeneralmarket

rightnowbutwearetryingtoignorethat.Bargainsarenottobehadongooddays.

Hereissometechnicalreasoning.Ladbrokesisatthecheapendofthemarketbutitisinanestablisheddownchannel:

Wearenotgoingtofightitbybuyinganythingbutthebottomofthattrend,ietodayaftera11-14%drop.Thelongtermlowisnear:

It’sasectorthing,notjustLadbrokes.

See,thepatternisthesameforWilliamHill,onlythevaluationisdifferent.Soitistimetothinkaboutgettingin.

Again,wedon’thavetheluxuryofbuyinglowerdown,ifitgetscheaper,butthat’s

oneofthedisadvantagesofbeingintheearlystagesofbuildingaportfolio.However,itdoescomeoutinthewash.

Thereisapparentlya6%+dividendinthepipelineifthecompanymaintainsit,whichwouldbenice...butbigdividendsarealwaysTBA(tobeannounced)andcangetsavagelychopped.

Essenden,StillRighttobeWrong21March2014

RememberwewantedtobuyEssendenbecauseitwascheap,butdidn’tbecausewecouldn’tgettherightpricefor

evenasmallpositionasthespreadwasmassive?Ifmemoryservesmeright,itwasaround40p.Afewweekslateritisnow95p.

Thisisgallingbutitisstillrightthatwedidn’tbuybecausetheliquidityisnotthere.WhenIbuyastockIhavetorememberthatmanypeoplearereadingmyblogfortipsandwillbuytheshare.Thatmeansingeneraltheremustbeenoughshares

ofthatstockinthemarkettoatleastgivemyreadersachancetofollow.Ifthereisn’t,itisgoingtobebadforthosethatpilein.

Iwilltrytoavoidsharesthatgivenohopetoreadersofafairinvestment.Thisiswhywedidn’tbuyEssenden:becausethespreadwasunfairandevensmallbuyingriskedbendingtheprice.Acertainamountofliquidityisrequired.

Rightnowwedon’thaveanythingtooilliquidintheportfolio,exceptmaybeNorthamber,whichisalittlebitlowonliquidity.

Howeverinteresting,Iwilltryandavoidmicrocapswhichdonottradeinenoughsizetobeabletosupportareasonableamountofbuyingorsellingwithoutgoingmad.Thereisnopointbeinginashareifyoucan’tgetoutwithoutbeinggouged.

Microcapscanbeagameof“findthelady”andthatdoesn’tworkoutwellfortheplayer.

TidyingUptheLegacyPortfolio26March2014

I’mlighteningupalittleinthelegacyportfolio.TrinityMirrorisalmostgone...downto10%oftheoriginal

holding.SoIambacktoamuchbetterlevelofdiversificationinthatportfolio,whichisnowawashwithTNIprofitsincash.IwilluseitifwegetaMay/Juneslump.

IhavelighteneduponRMjustalittle.Again,thepositionwasoutofhandwithprofitsandnearmyinitialtarget.ItcouldgoalotfurthersoIjusttop-sliceditabit,sellingdown20%ofit.

Thestupidpuntingaccountisn’tdoingsowell.ItseemsthatIamnolongerinfavourwiththegamblingGods.Ithasn’tbeenhitthathardbutwhateverthetradingmarketpsychologyis,Idon’thaveitrightnow.Imightjustcloseallofthatandforgetitandleaveallthatfreemoneyforgamblingtojustsittherecollectingdust.

Sohavingwrittenthat,Iclosedmygold,stop-lossed

therestandnowIcanleaveitbeandforgetthisexists.Thethingwiththisaccountisthatafteranexcellentstringoflucklastyearthereisasignificantamountofmoneythereandusingitcanbeadistractionfromthemainevent.Itisinterestinghowasmallamountofspeculationcanbetotallydistractingfromthesensibleinvestingofeven100timesmoremoney.Thisisyetanotherreasontoavoid

messingaroundwithspeculation.

Meanwhile,thisiswherewearewiththeportfolio.Nothingdramatichashappened:

However,I’mstillnervousasarabbit.

Wedon’thaveanyofPremierFoodsbutthisisaninterestingsituationrightnow.PremierFoods’pricehasslumpedsincetheannouncementofanunderwrittenrightsissueof£353million.Thepricehasbeensmasheddowntowardsthe50prightspriceasnodoubttheunderwriters/overburdened

holdersdumpthenewstockforaprofit.Thatseemstomakethestockcheapandthereforetempting:

However,thebalancesheetsucks.Thisisthepre-deal

balancesheet:

Note£404mofnetassetsincludes£1,300mofintangibleassets,sonettangibleassets=-£896m.So£353mincashbringsthatdowntoa-£566m...let’scallthathalfabillionpounds.

Nowthecompany’ssalesare£1.7billionsothe£500mholeisaboutfourmonthssales,whichdoesn’tsoundtoobad.However,thecompanyonlymakesaround

£50inagoodyearandwhenitlosesmoneyitloseshundredsofmillion.Since2004ithaslostatotalofroughly£600m.FirstGroup,incomparison,madepre-taxofoverabillionpoundsinthesameperiod.

Sothat’swhywearen’tswooping.Ifthesharepricegoeswaylow,whichitlikelywon’t,wemaygoforit,butit’snowhereneartherenow.

Themultilevelrights

averageoutat80p,asthecompany’ssharepriceshouldbe,afteraresultantrecalculationofthepre-announcementvaluation(itwasaround160patthetime)of89p,ifyoucaretofiddleaboutwithaspreadsheet.

Thesharehasnowfallento68p.Thisis18pabovethecheapesttrancheoftherightswhichis50p.Whichissomewherebetween12pand20ptoocheapifyouareto

believetheunderwriters.Butwedon’tlikeit!Ijustcan’tseehowPremierFoodscandigitselfoutofitsbalancesheetholewithoutanothersuchraisedowntheline.Thebalancesheetremainsbrokenandwetrynottobuysharesintrulybrokencompanies.

Meanwhile,thecompanyborrowed£500mat6%,whichforacompanythathasmadenomorethan£58minanyoneyearsince2004

whilelosing£400mand£259min2008and2011,isquiteatrick.Itwillkeepthewolffromthedoorforcertain,butnotforever.

Myguessissomewheredownthelinethecompanywilldiluteagain.Ican’tseehowitcouldavoidit.Itmightsellassetstopaydownthedebt,butthat’snogoodforus.Itwouldneedtosellbusinessattwotimessalesto“getoutofdodge,”butwitha

marketcapofone-sixthofsalesbeforetherightsissue,thatdoesn’tlooklikealikelyresult.

Venturecapitalcreatesdisasters,forexampleHMV,byguttingthehostcompanyofcapitalandthenrelistingthehuskbacktothepublicandthesamekindsofinstitutiontheyboughtthecompanyfrominthefirstplace,ataninflatedvaluation.Assuchbeware“private

equity”IPOs.IftheycouldstripanymoreassetsoutofthecompanybeforeIPOtheywouldhave.Itleavestherelistedcompanyontheveryedgeofsolvencyandverynearlydoomedtofailure.Itshouldbeacrime,butitisn’t.Whopays?Pensionersthroughtheirdeprecatedpensionsandanyonemistakenenoughtobuyshares.

Inanyevent,nowisnot

thetimetobuysharesinsuchanuglysituation.Sowehaven’t.

AGoodDayForThePortfolio31March2014

Thereisalimittostoicinvestmentandthatisdefinitelypassedwhenthestockyoudidn’tbuybecause

ofevilmarketmakers’sillybidandoffergoesup150%.Forus,thisisthesorrycaseofEssenden,whichwepassedataround40pandisnowover£1.

However,thiswouldhavebeenthestoryalotin1999duringthedotcomboomandcrash.Sometimestherulesofthegamechangeandyoulooksilly.Theychangeback,though,soaslongasyourtechniquemakesyoumoney

youshouldsticktoitandletrandomshorttermaberrationsruntheircourse.

IamofcoursegnashingmyteethasItype.

Backtotheportfolio:Fridaywasaverygoodday.Wemadearound2%.Apparentlyitissuchdaysthataccountformostoftheprofitsofaportfolio.Thisiswhygettingoutandjumpingbackinissodangerousbecauseyouhaveatendency

tojumpinaftergreatdaysandbeoutwhentheyhappen.

TheauthorsofthisprofitwereFrenchConnectionandSongbird.

SongbirdisCanaryWharf;thecompanyhasamarketcapof£1.6billion,soIsimplylookatCanaryWharfandthepricetagandsay,“hey,we’regoingintoaboomandabubble,whatisCanaryWharfworth?”Citypeopledon’tlikethiskindof

no-brainerthinkingbecauseanyfoolcandoitbutonFridaythecompanyannounceditwasdoingreallywellandlettingwashot.Itjumped14%.

Meanwhile,moreintriguingly,FrenchConnectionjumped9%,probablyonanInvestorsChronicletip.Theycouldgostraightto£1fromhere,whichisaclassicallystupidpredictiontomake.Whether

theydoornotwearealreadyup104%andnowImentionitup42%onSongbird.

Wenowhavealittleover£22,000inthemarketandsomeofmyreadersmightnothavebeenabletoinvestthatmuchandbeworriedaboutbeingleftbehind.Theansweristhatovertimetheywillcatchup.Imakenogoodorbadchoices,theyareallthesame,theresultisafunctionofaveragesandovertimeyou

willgetthesameaverages.Itwilljusttakeyoutimetocatchup.Theonlydifferenceinoutcomewillbeafunctionofvolatility.Thefewersharesyouhavethewobblieryourresultswillbe.

IfyouonlyboughtAvocetyou’dbedown89%,orifyouhadonlyboughtFlybeyouwouldbeup153%,butit’sallpartofthesamespectrumthathasourreturnsinandaround25%per

annum.We’veriddenthatwave

ofvolatilitytogethereandIcouldn’thavedesignedabetterexampleofhowyoucaninvestinasimplewayandgotoa20%lossthentoa25%profitallinayearofslowlybuildingupaportfolio.Prettysoonthespecimenportfoliowillbecompleteintermsofinitialconstituentsandwewillstarttopumpupthesizeofour

positions.Thatis,ofcourse,ifwedon’tgetacrash,whichwillslowusdownsomewhatifithappens.However,itwon’tstopusevenifitdoeshappen.Wealreadyhaveinprofittheequivalentofmostofthedamageofanormalcrash.

TheSongbirdConnection31March2014

Sotodayweareupnearly3%again,drivenbySongbirdandFrenchConnection.

Thelessonisunderlinedthatevenwhenyoufeelbearish,donotsell.Youhave

tokeepholdingbecausebuyingcheapstocksisacompletelydifferentthingfromtryingtotimethemarket.

One,buyingcheapshares,youcandoandtheotheryoucannot.Youcan’ttimethemarket.OnlybreakthisrulewhenyouactuallyseethecometentertheatmospheretokillalllifeonEarth.Donotdoitbecauseyouthinkitiscoming.

I’mstillnegativeonthemarketbutIhavemadenicemoneyinthelastfewdays.Mymoodtellsmenothingaboutthemarket.Mygutdoesn’treadcharts.Iwillberighthalfthetimeandwronghalfthetime.

Thisiswheremygoldminer’saxiomcomesintoplay:ifyouthinkit’sgold,itisn’t;ifyouknowit’sgold,itis.

Iwillparaphraseit.Ifyou

thinkit’sgoingtocrash,itisn’t;ifyouknowit’sgoingtocrash,itis.

“Knowing”issodefiniteyoucantellthedifferencebetweenbeingcertainandsimplyworrying.

PortfolioSpringCleanContinues2April2014

I’vedonealittlehousekeeping,addingdividendsintotheportfolioandgettingtheFlyberights

correctlyaccountedfor.Thisiswhatwefind:Wehaveinvested£22,779.59andweare41pshyof£6,000profit.Thismeansweare26.4%up.

1Mayisthefirstyearanniversaryofcapitalatriskbutnowwehaveboughtmoresharesthathorizongoesback,soI’mgoingtostopusingitorI’llgomad.

Weare£6,000up,havingputroughly£23,000in,startingroughlyaround

winter2012.Thatisthesanestwaytolookatit.Nowwehaveaproperportfolio,althoughnotwideenoughyet,whichhassomemonthsbehindit,wedon’thavetounpickourperformancesomuch.

That’sprettygoodbyanystandardespeciallywhenallthesmallinvestorprivationsofhighbrokercommissionsandfatbid/offerspreadsaretakenintoaccount.

Meanwhile,Flybeissteamingahead.Itisgoodfor£2,butwearen’tweddedtoanything.

NotBuyingGold7April2014

TheonlythingIreallywanttobuyatthemomentisgoldsharesbutIknowthatwouldbebad.AsacontrarianvalueinvestorI’mlikeaPavloviandog.Iseecertainnumbers

andIwantthestock.However,goldsharesarenearlyimpossibletobuybecausetheirtrackrecordondeliveringonpromisesissolow.

Howcanyouinvestinacompanythatmakesaproductthatwentup400%inadecadeyetstilldidn’tmanagetoturningreatprofits?IsupposeIwillhavetolookdeeper,buteverytimeIconsideragoldmineand

begintoreadtheiroldnewsflowI’mhorrified.However,thePavlovianinvestorlooksatthenumbersandstartstobark“buy.”

EverybodyI’mmeetinginthecityistellingmehowtheypredictedtherecovery.Thatmakesmenervous.ButwhileI’mbearishrightnow,I’mmassivelybullishaboutthenextfewyears.

OurperformancesaysIshouldbemorerelaxedbut

it’llsoonbeMayandthenifthemarketdumpsIwillstakeclaimstomyseer-likeprescience.Alongbearcanhavehiscakeandeatit.

Thisisthecurrentstateofprogress.(Asif£30,000wentintheaccountfromday1.)

Don’tforgettotellallyourfriendstosubscribe.

FastenYourSeatbelts...14April2014

Ididn’twriteanythingforthebloglastweek,becauseI’vebeentoBostonataninternetconferenceandthenonholiday.

InmyleisuretimeIama

treasurehunterandalovelyrolledfieldawaits,sothiswillbeshort.

I’mconvincedweareinforanastycorrection,infactwemayalreadybeinit.Thequestionis:sellorhold?Theansweris:HOLDandstoreupcashtobuyatthebottom.

Idon’tseea2008althoughwemaygeta2011-styledip.Isoldoutin2011andfeltquiteclevermissinganastycorrection.However,I

didn’taddmuchonmyreturnsbydoingso.IstillhavethatportfoliorunningonADVFN.Hereitis:

(Noteitissobigandstarted

solongagothechartprocessstopsbeforeitreachesitsendpoint,hencetheendspike.)

SothislooksquitecleverandIwasreopeningatthebottomthatOctoberforthelegacyportfolioIshowhere.However,forallthateffortIprobablysaved5-10%andtheriskofmissingthenextboatwasmuchmoreimportantthanthat.

FYI–thisportfolioisnow3.5timesthesizeofits

originalinvestment,orputanotherwayhasmade2.5itsvalueinprofit.That’shugebyanyone’sstandards.However,itisjustabout25%ayear,mytarget.

Mypointis,eventhoughtheportfoliohadafallowperiodforoverayear,itstillperformedexcellentlywithoutliftingafingerafterApril2011.Thisiswhatbuyandholdisallabout.

However,havingstudied

thisabit,whathappensistheportfolioconcentratesintoafewbigwinners,soovertimetheportfoliobecomesundiversifiedandthereforefragile.

Thisisthebenefitofoccasionalpruningthatbuyingandsellinghas.Itkeepstheportfoliorobustanddiversified.Butthatportfolioconcentrationtakesmanyyears,soit’sofalmostacademicinterest.

Anyway,pleasefastenyourseatbelts,weareabouttoputourresolvetothetest.

BTW,theADVFNUKInvestorShowwasahugesuccesslastweek.TrytocomenextyearandI’llhappilyshakeyourhands.

PortfolioProfits14April2014

Thismakesaneasyblog.Let’scrowabitbeforethemarkettumblesandwealllookfoolishagain.IrememberwearingtheduncecaplastsummersoI’m

makingthemostofusdoingwell.

HereistheFTSE:

Itopenedat6,748inJanuary

2014,itisnow6,642,that’sdown-1.57%.

Hereweare,uproughly£4,000on£24,000,16.6%,orifyoustartedwith$30,000incashatthestart,12.5%upsincethenewyear.

Wecanfeelgoodaboutthatandholdthethoughtasthecomingweeksyankusaround.

AccordingtothedoomstersatZerohedgethisperformanceoutstripsthebestUSHedgefunds(bar4bythelowestestimationofourperformance.)

InanyeventwearedoingOK.Whenthecorrectioncomes–anditalwaysdoes–thetrickistofalllessthanthe

marketandrallymoreonthebounce.

Sofarsogood,butIcan’thelpfeelingwearegoingtogetaprettystiffcorrection.However,youcan’ttimethemarket,somygutshouldbeignored.

MeanwhileWalkerCripshadgoodresultsandshotup25%.Thiscouldgoalongwayifweareenteringaboom.Soliddirectorsbuyingveryencouraging.

AquariusPlatinumRightsIssueShenanigans23April2014

Sowehavemorerightsissuefunandgames.Thistimeit’s

atAquariusPlatinum.Thisisthedeal:ownone,

buytwoat14p.ThepricebeforethedealopenedonTuesdaywas40p.Sothisisthemath:

(40+14+14)/368p/3

22.66pisthevalueoftheresultantshare.SotodaythesharepriceofAQPopenedat23pandclosedat23.5p.That

lookslikeahorriblelosswhenyouopenADVFN,howeveryouhaverightsto2sharesat14p.ThesearelistedasAQPN,theNdenotestherights.Thesearevaluedat9.35palthoughthroughoutmostofthedaytheywere9.6p.

Soyoursharesarenowworth:23.5+9.35+9.35=42.2p.Soweareactuallynearly5.5%betteroff.Whoopie!

However,wehavetocoughupanextra:4,000x14p=£560.

Butitdoesn’tstopthere;wehaveacoupleofweeks(until9May)todecidewhethertochipthecashinorselltherights.IfthepriceofAQPwentuptherightswouldgetmorevaluablebutiftheywentdowntherightswouldstarttofallinvalueaccordingly.Nowtomorrowsmallinvestorsmightwake

upandgo:“darnIdon’thave£560spare,”orbiginvestorsmightsay“apoxonyourhouse,”andselltherights,whichcouldwellhammerthemintotheground.

However,intheoryafterthedusthassettledAQPshouldbeworth22.66psoiftherightsandsharepricetankedthethingtoconsiderwouldbetobuythemup.(Ifyouhaveastomachforthat.)

Whatwearegoingtodo

istakeuptherights.Wearen’tgoingtodoanythingfancy.Frommypointofviewminersaretawdry,loucheandsordid,sorryImeanthighrisk.Andweneedalittlebitofthatintheportfoliobecauseifwecanspotthe“lowrisk”inthepackthefuturewillbringfineresults.

Ifyouaretemptedtoomuchbyminingstocks,readthis:http://www.amazon.co.uk/Brett-

Kebble-The-Inside-Story/dp/177007306X.Thatshouldhelpcalmyourfervour.Amazingstory.Theex-CEOofEidosgotmixedupwiththisminingfellowand,eh...disappearedforgood.Youcouldn’tmakeitup,norwouldyouwantto,nordoyouneedto.

Anyway,wewilltakeuptherights.

WearenowinabearasfarasI’mconcerned,forfour

tosixmonths.Hopefullyourbeatendownportfolioofcomebackkidswillmissalotofthepain...butwewillsee.

Abearwillgiveusopportunitiestobuy.Thisismoreimportantthanyoumightthink.

TheBearNecessities24April2014

Weareinabearmarket.Itwilllikelylastafewmonths.

Howcanwetellthedifference?

Itisodd,butthemoststrikingdaytodayfeaturesof

eachintuitivelyfeeloppositetothereality.ThemarkethasjumpedhardonoccasioninthelastweekortwoandthatfeelsBULLISH.However,it’sbearish.Sharpjumpsandslowslidesarebearishandslowrisesandsharpdropsarebullish.Itdoesn’tsoundright,doesit?

Herearetheexamples:

Ifyoukeeprepeatingthispatternyouseehowthemarketrises.

Thisisabear:

Themoveagainstthetrendissteeperandmoreextremethanthetrend.Thesharpestmoveisthegyrationawayfromthetrend.

HereistheFTSE:

ThroughthislongBULL,youseethefallsaresharperthattherises.

IfthefallsandrecoveriesarethesameyouareinneitheraBulloraBear.Youcanelaboratetoyourheart’scontentbutthat’sthecoreofit.

Rightnowwe’vebeenfallingsteadilyandgettingsharprecoveries.

Hereisanexample:

ThistellsmeGSKisinabeareventhoughit’snotreally

goinganywhere.NowthePharmatakeovercircushasbegun,it’sinterestingtonotethecompany’sunderlyingtrendisbearish,eventhoughthepriceactiondoesn’tshowthat.Itdoesn’tmeantomorrowitwon’tchange,butthefirstorderofplayininvestingistoknowifyouareinabullorabear.Therestisdetail.

Meanwhiletheportfolioisbasicallychurning:

YoumayhavenoticedQuindellandIofinacrashed.Ihopeyoudidn’thaveany.Asos,whichIshortedinmystupidgamblingaccountafterChristmas,(itwentup,I

closed,itslumped)hasalsodivedrecently.

(Ionlyhaveonestupidpuntonatthemoment:longpoundveuro.Themarketdoesn’twanttocuddleuptomethisyear,soI’msulkingandnestlingmypileofill-gottenprofitsuntilsunniertimes.)

Whydopeoplebuythesestocks?Ilookatthemarketcapandlookatthesalesandthat’senoughforme.These

companiesdonothaveacureforcancerorthelatestsexytechwidgetontheshelf.

Yetsayyoudoabitmoredigging.Howdothesecompaniesmakeinvestmentsenseapartfromwithinthenarrowboundsofthefinancialequivalentofmagicalthinking?Theirmarketcapsdonotmatchtheirenterprises;inabadway.Theyaretheveryoppositeofthestockswe

buy.However,ittakeswaymorefaithtobuyacrazysmallcapthatrocketsthananestablishedbusinessthatstepsinapileofhorsemanure.

Iknowpeoplelaughatajokewhenthereisalaughtracktopromptthem.Dopeopletradeinthesameway?Idon’tunderstandit,tobehonest.

Somepoorspeculatorwasyesterdaydamningshortersfordestroyinghispension

investedinQuindell.I’mjustastonishedanyonewouldputthemselvesinthatpositioneveninShell,letalonesomenoname,newventure.

Yethostsoftradersseemtobetotallycomfortabletoput£10,000ormore,ofwhichtheyhavefew,intoacrazilyhighriskstockoftenmakingunlikelytooccurpromises,withnotrackrecordetcetc...onwhichtheystandtolose£5,000

instantly.Ifyoueverfeellikedoing

that,DON’T.

Welcome,NewSubscribers28April2014

ADVFNranapromoformynewsletterandasaconsequencewehavequiteafewnewmembers.Welcome.

Interestingly,someoftheemailwegotbackafterthemailoutwerealongthelinesof“25%????Haha,isthatall?”

OvertheyearsIhaveheardthattimeandagain.20-25%isjustnotenoughtosatisfyspeculators.Thetroubleis,Ihaveyettomeetonewhohasanymoneyorisn’tintheprocessofpouringwhattheydohaveintothepocketsoftheirbroker.

IfoundedADVFNin1999.Soletussayfifteenyearsago.Ataround25%youmultiply£30,000toaroundamillion.Atahigherrateyou’dbeincrediblyrich.At100%youwouldhavetensofmillionsinprofits.IthinkitissafetosayADVFNdoesnothaveasingleuserwhohasmanagedtoachieveanythinglikethat.

Ofcourse,becauseofthemathematicalprobabilitiesof

trading,somemakeafortuneANDloseit.Ihaveseenthathappenafewtimes...butmakeafortuneandkeepit,I’mstillwaitingtoapplaudthat.

Ofcourse,wecantakeastepbackandseeabiggerpicture.Whoistherichestmanintheworld?Why,it’stheworld’smostfamousinvestor.Therichestspeculatoris?Doyouseeanysuccessfuloldtraders?Search

for“traders”onGoogleandsummarisethearticlesinyourhead...youwon’tseealotofhappyoutcomes.Dothesamewithinvestor.

However,myreadersprobablyalreadyknowthiswhichiswhytheyreadmynewsletter.Theydon’twanttobethenextWolfofWallStreet.Theyaren’tseekingquickrichesorthe“thrill”ofspeculation;theyjustwanttogettogripswithbuilding

theircapitalthroughsuccessfulinvesting.

25%ayearisnotjustagoodresult,itisanexcellentresult.Itissohighthatitmakesmeabitnervousmentioningit,eventhoughI’vegotthatreturnconsistentlyovertheyears.Thepastisaveryuncertainguidetothefuture,soeverysuccessfulyearisauniqueachievement.Approximately25%annualreturns

compoundedisthesameresultthathasmadeBuffetttherichestmanintheworld.

However,becomingbillionairesisnotwhatwearetryingtodo.Wearetryingtobuycheapsharesthatinduecoursewillgoupandmakeusaniceprofit.Thewealthbuildingwillcomeastheproductofthat.

Inthefirstyearofmynewsletterwehaveachievedthat,evenwithabackground

ofhighcosts.I’mhappywiththeresultingprofitsbutthemethodandtheviewpointismoreimportant.I’mkeentofocusonthefishingrod,notthefish.

Inthelastyearwe’vecoveredhowtobuildaportfolioanddonesostepbystepinawaythatanyonecanemulate.Thatprocesswilltakeanotheryeartocompleteandthenwewillbefocusingontohowtomaintainone.

Thiswillactuallybelessdullthanitsounds.

Manymightthinkthesharetipsthattheportfoliocontainsarethehighestvalueitemofmynewsletter/blog/whateveryoucaretocallit,butagainIfeelit’sthemethodthatiskey.Stockscomeandgobutsuccessfulinvestingisaconstantprocess.

Goingforward,thetideofthemarketisgoingtoebb

andflow.Somedayswearegoingtomakemoney,somedayswearegoingtolose.Wearegoingtohavegoodluckandbad,greatpicksanddumbpicksbuttheoutcomeshouldbesimilaroverthelongterm.

Whenyoureadthenewsletterfrommyfirstpostonwards,youwillseewelookedprettystupidbythemiddleoflastsummerandprettycleverbytheNewYear

andyoushouldseeforyourselfIdidnotchangemyinvestmentstanceevenonce.Thereisnohindsightonshow.Seeforyourselftheprocess,gettheinsights,seehowit’sdone.

SoI’dliketowelcomeagainmynewreadersandthankallmysubscribersforreading.2014isgoingtobefascinating.

AstraZenecaSharePriceUp15%28April2014

I’minCaliforniaandshouldbeasleep,butcheckingtheUKopeningbeforeIputmyheaddownInote

AstraZeneca,amemberofthelegacyportfolio,isup15%.ClearlyitisfeltthatthetakeoverofthecompanybyPfizerison.Well,Icanunderstandwhy.

“Youcan’tcompareapplesandoranges,”sotheysay,butasaDilbertcartoonpointsout,youcanastheyarebothfruit,theyarebothfromtrees...etc.

Ilikethatbecauseit’samethodthathasmademe

quitealotofmoneyovertheyears.I’mtoldit’snonsense,youcan’tcomparetwoextremelysimilarcompanieslikeforlike.IjustlaughasIcountmyprofits.

ThefirstinstancewasVodafonevOrange.RememberwhenOrangewaslisted?That’salongtimeago.ApoundofOrangesaleswasabout20%ofapoundofVodafonesales.NeedlesstosayOrangewentupandgot

takenover,stillonthecheap,butIbaggedafatprofit.

SoletustakealookatAstraZeneca.Whoshallwecompareitto?GSK?Whynot.“Applesandpears,”nodoubttheanalystswouldsay.I’dreply,ifyousawbothcompaniesfromaspaceshipyou’dthinkthemthesame.Professionaldetailmongershategeneralisationsofcourseorelsethevaluedisparitieswouldbethere.

HopefullythisURLwillworkforyou:http://uk.advfn.com/p.php?pid=uk_compare&btn=s2_ok&symbol=LSE%3AAzn&symbol2=gsk&s2_ok=OK

Ifnotyoucancomparethetwocompaniesintwobrowsersorwhatevermethodyouliketousetoputbothcompanies’fundamentalssidebyside.

Balancesheetsareroughlythesame,salesroughlythesame,evenprofitsovera2-3yearperiod

aresimilar,althoughtheyareabitchoppy.AZNisworth£58billion,GSK£81billion;eventhoughAZNhasbeenrisingfastinthelasttwoyearsandGSKhasbeengoingsideways,thereisstillabigdisparity.Itwasroughly2:1asfarasIwasconcerned,thatistosayGSKwasvaluedattwiceAZNpoundforpound.

HavealookatBPandShell.Thereisasimilar

disparitythere,withBPsignificantlymore“expensive”inmybookthanShell.It’snotasfatasAZN/GSKwasbutitstillsticksout.

Sokeepyoureyesoutforthiskindofthing.Tomeit’sglaring.ApparentlytoPfizerit’sglaringtoo.

OfftobedIgo.

SercoSlumpShowstheImportanceofDiversification30April2014

Dagnabit,IforgettoputSercointheportfoliotrackingonADVFN.

Theresultshowswhydiversificationisimportant.EventhoughSercohasdiveditdoesn’tmakemuchofamessnowwearestartingtobediversified.

Sercojustplummetedbecausetheyaregoingtohavearightsissuebythelooksofit.Thenewbosswhoisnotinplacejustyethas

obviouslyhadtimetolookunderthehoodandprobablyhadtoswallowhard.Wearepluminthethickofrightsissue-landatthemomentbutthat’sfine,rightsareopportunities.

However,theplummetsinceweboughtSercoisstillquitealot.About25%.Ifwehadthreestocksthiswouldcreaseourperformance.Aswehave22,itisonlyafleshwound.Youcandivide

25/22.Diversificationevenwith

andperhapsbecauseofthegenerallyrandomnatureofthemarketmakesourlifesomuchmorecomfortable.Badluckorerrorsgetflattenedoutassometimestheyworkinyourfavour,othertimesagainst.

MeanwhilePetropavlovskisliningupforarightsissuetoo.(Notetoself:don’tbuyanymoreminingstocks.I

don’tcareiftheyareonallmyfilters,theyarenotpropercompanies.)

Soafteralltheseannoyances,includingSerco,wearehere:

Notmuchdramatobeseen,atleastyet–butthereisthe“SellinMay”slumppotentiallyjustaroundthecorner.

That’swhyIgoonandonaboutdiversification.Withoutit,youaregoingtohaveahardtime.

TheDogsListofSharestoWatch1May2014

I’veaddedCarclotomydogslist.Thisisgoingtobeagreatbuysometimeinthefuture.It’snotinthedustbin

yetbutthemarketseemstowanttothrowitthere.Icanpracticallysmellthebloodlust.

ThismighttakeayearoreventwobutIneedtoputitonthelistsoIdon’tforget.

Thissituationishardtoguessbutintimeitwillflatlineorsomethingelsewilltriggeranentry.Maybeitwillnevergetthatlow,butthedoglististheretokeeptheopportunitiesontheradar.Theyare:

Someoftheseonedaywillbeintheportfolio,somewon’tmakeit.

WinningwithFrenchConnection6May2014

ItisoftensaiditisthewinnersthatmakeyouthebigreturnsandforusthisisFrenchConnection.Wenow

havea185%profitonit–thatistosaywehavenearlytripledourmoney.

InthelastfewdaysourprofitshavecomefromFCUK,counteringgenerallossesinwhatremainsabearmarket.

WeareinMayandI’mexpectingsomehardweeks,butofcourseagoodgroupofstockswillbreakthefall.Withasolidportfolioyougodownlessandupmorethan

therestofthemarketingeneral.Weshallsee.

ThisistheFrenchConnectionchart.Ilovethiskindofpattern:

Itsimplytellsastoryof

populartounpopulartopopular.

Where’stheceiling?WhoknowsbutIthinkitcouldbeafairwayhigher.

Wearestillapproximately25%up.

TakingaCrazyPuntonBarclays8May2014

InthecauseofdisclosureIboughtsomeBarclaysinmycrazypuntingaccount.Hereiswhy:

WhenIlookatthischart,IseesomethingchangedinearlyMarch.Sincethenthechartismovingdifferently.

Chartstellyouaboutthepast,notthefuture.Alwaysrememberthat.Therestis

speculation.Inoticedthisbecause

BarclaysjumpedtodayandwhenIsawthatchartIwent“Hummmm...”That“hum”wentlikethis:

1. Somethinghaschanged.2. It’sgoingup.3. OhlookanRNSsaying

we’vechangedstrategy.4. Icanputatightstopon

thisWAP“wildarsedpunt”andletthisrally

run.

I’mwritingthisbecauseIknownoneofmyreaderswillbeabletoresistlookingatchartssoit’sgoodtosharesomeT/Anowandagain.ThisisanexampleofpracticalcommonsenseT/A,withnomumbojumboinsight.

Theorysaysthatchartreadingisrubbishbutinmyexperienceifyouslingout

theBollingerbands,movingaverages,RSIsandthelike,chartscanbeusefulifyouusethemtoexplainthenarrativeofthepastthenthinkabouthowthatmightpanoutinthefuture.Ifachartdoesn’tscreamatyouthough,forgetit.

Meanwhile,asIwrite,FrenchConnectionjustshotup...

AlsoSupergroup,whichwedon’town,gotsmashed

20%andbounced10%.Iusedtotradethiscrazystuff.Youmakemoneybutyouloseyourconstitution...it’ssimplybadforyourhealth.

Imagineyouhave£100,000ofthisonleverage:

andsayyouboughtinat1150onthewaydown.Givesmeindigestionjustthinkingaboutit.

Ialsonoteitslongtermchart:

Thisiswhywebuycheapstocksnotstockswitha27P/E.Theseglorystocksaregettinghammered.(That’soff25%.)Wearen’t.

TheMarketisFlat13May2014

“Meh”isthenewyoungfolksword.ThatisjusthowIfeelaboutthemarket.It’snotgoinganywhereforus.Themarketisjustsloshingabout.

ItmustbesaidI’malways

downonthemarketinthenewyearanditmustbeunderlinedthemarketisoftenreallysoftinthenewyeartoo.

Hereweare:

ItjustfeelslikeI’mwaitingforanastycorrectionbutitmightnotcome.Rightnownothingisgoingonandthatmakesithardtowritemuch.

Petrofactookahit,which

wasinteresting.ThisisastockIalwaysgetwrong.(Ithappens.)Itwasinterestingtoseeittakeapunchtothetemple.

RSAconsolidatedtoboostitssharepricequotient,ifnotitsvalue.Apparentlyit’smeanttomakeinstitutionslikeacompanymore.Ridiculousiftrue.Ialwaysputitdowntoinstitutionalcomputersnotlikingtoomanyzeroesto

printout,butintheeraofExcelyou’dthinkthatkindofproblemlonggone.

Anyway,thiskindofwindowdressingstillhappens,soit’seitherawasteoftimeandmoneyoracrackintheefficientmarkethypothesis.

GoingBananas14May2014

IboughtsomemoreFyffesforthelegacyportfoliotoday.Beingabletogrowpositionsisanotherbenefitofbeingdiversified.Youcanbuilduplumpsofasingleshareasyou

seefitwithoutthefearofmessingupyourportfolioifyouhavemadeanerror.

FyffeshasagreatmergerdealgoingonwithChiquitaanditmayfallthroughbecauseoffearsofabananamonopoly.Thatwouldbetemporarilybadforthischeapcompany,henceweaknessinitsshareprice.

Googlecanmonopolisethewholeinternetwithimpunity,butheavenforbida

Vulcandeathgriponglobalbananas.Thereisarisksomecluelessbureaucratwillstepinandsavetheglobefromevilbananaoligarchs.

ButaccordingtothemagazineEurofruit(Ikidyounot)“ChiquitaFyffeswillhaveamoreseasonedmanagementteam.”Itwillalsohavetheworld’sleastspell-ablecorporatename.

Iliketheprospectofthecombinedcompany.Thisis

whyIhaveboughtmore:ItfeelslikeacheaperoffertobuyashareIlike...thisisvery“WarrenBuffett-ty!”

Therightpriceis105-110andIwanttoholdtheshare

forthefutureofbananasupremacy,sowhilethepriceissoftI’mgoingtobuymore.Apologiesforthefruitpuns,butitisnicetobuysomesharesafterwhatfeelslikealongpause.

AnotherreasonforbuyingmoreisthatwiththedramaticincreaseoftheportfolioIneedtoboostthepositionsize.Withthelegacyportfoliowithover20%incashknockingaround,

awaitingthephantomMaycorrection,achancetoputalittletoworkpunchingupsomepositionsiswelcome.

Meanwhilenotalothappening.

HereComestheSlump16May2014

Wegotabsolutelysmashedyesterday,Thursday15May.Ofour£6,000inprofit£1,000wentpooof!IthinkthisisthestartoftheMayslumpbutwewillknowin

thenextfewdaysforsure.Allthemarketdogswent

up(supermarkets)andthedarlingsslumped.Thisisasignofhedgeclosing.Thisinturnisasignoftheclosingoflongtermpositions.

FrenchConnectiondropped15%andFlybeswooned,buttherewerebigfallersalloverthemarket.

Thepresssaiditwasgrowthfears...Blahblah.(Notethatacoupleofmonths

backgrowthfearsmeantmoreQEwhichmeantarally).

Anyway,herewearewiththeslumpunderway.FTSE250isoffanother200pointstoday(Friday)andallthewhiletheFTSE100isn’tmoving.(Atleastataround11.00amwhileI’mwritingthis.)Thisfeelslikea“riskoff”wherethebigplayersmovefromhighrisk/highreturnideas,intoboring

safetyplay.ItcouldjustbetheFedis

abouttotaperagainandalltheir“uncles”havegotthenod.Overallwedon’tcareaboutaslump,it’sshortterm,impossibletotimerightandwillwashoutbyautumnandwewillhavesomenewcheappicksintheportfolio.

Sobraceyourselfthough,herecomethedip.(Maybe!)

AstraZenecaTakeoverOff19May2014

Yousayyouwanttoinvestbutyoureallywanttotrade.

SotodayPfizer’stakeoverofAstraZenecaisoff,atleastfornow.AsIspeakitis15%down.I’veboughtsomeasI

typeforthebounce.Thisisoneforthemadpuntingaccount.Thesesuddenmovesareoneofthefewtradingopportunitiesyouwillfindanditisallabouttheinitialover-reaction.

AstraZenicaisamassivecompanyandamoveof15%shouldcreateacountermoveof4-5%.SowebuyneartheawfulopeningandsellsometimearoundmiddaybeforetheAmericansarrive.

Thepatterngenerallygoessomethinglikethis:

It’sthemid-morningbouncewelikethelookof.Nowthescaledoesn’thavetobethis

big,it’stheshape.Itcouldbe:

However,thisisthepatternandit’spatternsthattraderstrade.

YoudoneedLevel2andyoudoneedatickbytickchartifyouaregoingtoplaythesegames.However,rememberyou’reaninvestorandassuchallyoushouldcareaboutistheintrinsicvalueofAstraZenica–andthat’sabout£60ashare.

TheAstraZenecaPunt:ResultsAreIn22May2014

SohowdidwedoontheWAP(wildarsedpunt)on

AstraZenecaonMonday?Prettygood.Recallmyoutlineofhow

itwouldpanoutand/orhowthiskindofthinggenerallypansout?

Wellthisiswhathappened:

Isetmyprofittakeat4,398andleftitalone,butkeptaneyeonit.Sawafatprofitat10amsopulledtheripcord.

Why?

1. Becausedoingthiskindoftradingisjustapain.Therisksarehuge.

2. Ididn’tknowitwouldhitexactlymyprediction.I’mnottheheroofmytradingnovelswhohasbothsteelandcrystalballs.ItlooksimpressivebutwasitobjectivelyaWAG(wildarsedguess)?You

canneverbecertain.3. Alotofmoneyin90

minutesisthesameresultastwiceasmuchin360minutes.(Riskisthesquarerootofthetime.Squarerootof90minutesis9.5unitsofrisk,squarerootof360minutesis(let’sfaceit,uncannily)19unitsofrisk.

4. Investorsflyinprivatejets,tradersgotojail.

5. Realtradingopportunitiesareahandfulayear,investingisallyearlong.

6. Ifyoucanmake25%ayearinvestingyouarereadytotrytrading...butifyoucanyoudon’tneedtobother.

7. Etc...

Butanyway,yousawitlive.RememberthiswasamassiveFTSEcompanygetting

sockedbymajornews...notsomedodgyoutfitwithabatpoomineinAntartica...

MeanwhileI’mstillhatingthemarket,eventhoughit’ssneakingourway.

ReallylikingRDSArightnowbutwehaveitalready.

SummerLullisNoFun28May2014

Ishouldreallylovethesummerlull.Itshouldmean,Iwatchthemarketscloselyinthedarkcolddaysoftheyearsandthenbugofftotheplaygroundsoftherichand

famousinthesummertoenjoymyworklifebalance.

ButIdon’tactuallyhaveoneofthose.IlovemyworkandIlovethemarkets.Sosummerisfrustrating.

Sowhereisthesummercorrection?

LastyearIpositedthatthereshouldbetheregulationbigcorrectionbutifweareinanewequityerawewouldn’tgetmuchofone.Thelatteroccurred.Soisthisjusta

continuation?ItmakessensebutIcan’tshakethecoldfactthatthemarketishighandthereislittledeepvalueabout.However,thatfitsalongbullonequitiesfollowedbyabubble.Youcan’texpectvaluetobeaboutwhenthereisaboomandbubbleunderway.

Argh!!!Patienceisavirtueetc...Soformethisisthekey

charttowatchinmomentsof

doubtandwavering:

It’sthesmallcapindex.UnliketheFTSEit’snotfullofmacrononsense.Yousimplycan’tusethisindextohedge.

ThisistheFTSE100:

LookatthatnoiseintheFTSE100.Thereasonis,it’stheplaygroundofmacrotrading.FTSE100isaliquidindexusedforhedging

currencies,commoditiesandyounameit.IthasfuturesandoptionsandEFT.It’sboundbythehiptotheworldthroughglobaltradingbehemoths.Soit’sfullofnoiseandhardtoread.

TheSMXisn’t.Itgoesupinabullanddowninabear.It’sagreatindicator.

Thisisthelongterm:

Youcanseetheclarityevenoverthelongterm.SMXsays,“holdonamowe’reonpause,”buttheFTSE,atleasttome,seemstosuggestbusinessasusual.Perhapsevenabreakout.(Really,thatseemsveryunlikelyevenifthechartshowsthepossibility.)

Tomeit’sclearweareonpauseandforthe“rockstar”shareslikeAsositlookslike“gameover”fortheirvertical

rises.Thereareonlyfour

monthsofalovelysummerofeasylivingtogobeforemarketsgetbacktowork...dammit!

OneWaytoPickStocks30May2014

SoyoumightwonderhowIgoaboutpickingstocks.It’samixofbrowsingandusingfilters.Hereisanexampleofonebrowsingmethod.

Ilookedattopmoverson

topliststoday.Ialwaysdobecauseitbringsnamestotheforeandgivesastartingpointforinvestigation.

TodayCaffynsisupafewpercent.Itsfiguresaregood.It’sacarretailer.Ilikecarsellersbecausetheysellalotofturnoveryetareworthabout10%ofwhattheysellagainstabenchmarkof1:1ingeneral.Why?Becausecardealersdon’tmakemuchmoneyastheirmarginsare

waferthin.Itisoddbutunderstandable.

Caffynsissmall,toosmallformeandit’safamilyfirmwhichisaredflagtome.

IknowPendragon,PDGiswaybigger.IalsoknowthatPDGhasmademeoodlesofmoneyinthepast,soIhaveagoodfeelforthestockhavingowneditforlongperiods.

IgolookatPDG.£3.8

billioninsalesfor£430minmarketcap,that’s9:1.Ilikethat.Ithasalsogota10.5P/Ewhichischeapish,butnotreallycheap.TheUKisbooming/goingtoboom,socarsaregoingtosell.Housepricesgoupandpeoplegooutandbuycars.It’sthegoodolebadoledays.

However,Pendragonisnotpainfullycheap.Wearealsointhepre-slumpsummer,asIstillwaitvainly

forthecorrection,sothat’stwoturnoffs.Ilookatthechart:

Pendragonisnotgoingup,it’sbeendriftingoffsinceNovember.

Ofcourseyoumightsaywhydoyoucare?Thereisalwaystomorrowforittogoup.ThisiswhyIcare:

WhatIseeisthis:Pendragontrends.Whenitstendencyis

up,downorsidewaysitkeepsonthatpathforlongperiods.

UnlikeforexampleRSA:

UnlikeRSA,youknowwhereyouarewithPendragon.Pendragongoesinone

directionforlongperiods.Notehowsmoothitslong

termchartis.ThereiswhatIclassascertainty.RSAontheotherhandspikesallovertheblack.Themarketdisplaysuncertainty.

SothemarketappearsprettycertainthatPDGiskindofboringandnotabouttogoanywherebutfaintlydown.It’sayawn,butit’snotcheap,sowhybuy?

WhenPendragonchanges

directionthatwillbethetimetoreconsider,orwhenithitsalevelwheretheP/Elooksirresistible,atleastbelow10.

Soit’sawatchandwait.

ConclusionIwasconsideringannotatingthisbookatvariousstages,butIrealisethathindsighthasnovalueatall.Youcanregretpastdecisionsasmuchasyoulikebutthemarketsshowthatregretsarepointless.Theyarepointlessbecauseevenafewmorerightdecisionsversusmistakeswhenappliedtothefinancialmarketswouldmake

everyoneimmenselyrich.Evenasplashofhindsightwouldmakeusallbillionaires.

Thusmistakesingeneralcannotbeavoided,onlysufferedwithgoodhumour,dammit!

Manysharesgouplikearocketanddownlikearock.Ifwecouldbetippedoffbyatimetravellertojustahandfulofthesecompanieswewouldbetradingzillionaires.

Sadlyitisnottobe.Wemustblindlyfumbleaboutthemarkets,gropingforthefuturewhilewestumbleoverthecobblesofimperfectinformation.

Aswehavehopefullylearntinthisbook,thejourneymightbeunevenbuttheonlydifficultytomakingmoneyinthemarketisdetermination,gritandapositivementalattitude.

Youneedamethod.Youneedtobepatient.Youneedtobeabletoletyourselfbefallible.

Thataside,therestisjust“practicebydoing.”Itiseasyformetosayitiseasy,becauseitiseasyformeinpractice.Meanwhileitappearsthatmanypeoplelosealotofmoneyplayingthegameoftradingthestockmarket.

However,asIhavesaid–repeatedly–TradingisnotInvesting.Fewinvestors,whoinvesteveninarudimentaryandsensiblefashion,losemoney.

Conversely:fewtraders,whotradeinarudimentaryandsensiblefashion,makemoney.

Why?Becausetherewardsfrom

sharesarelimited.Thatlimitissomewhere

around25%ayear.Itmightbeabitmore,itmightbeless,butsomewherethereisathresholdthatisahardlimittotheprofitsyoucanreliablymakefromshares.

Youcangolookingforacasewherethisiswrongbutyouwilllookhighandlowandwhatyouwillfindtocontradictthishypothesiswillbesparseandlikelyunreliable.

Whatthismeansis,ifyou

buyandsellalot,ietrade,allyourprofitpotentialwillgeteatenupincosts.Thisiswhytraderslosemoney.Itisthatsimple.

Imaintaininvestingislikefarming.Youdonotneedmuchofaplottogainaninterestingresultfromyourwork.Itisprettyeasytofarmforaliving.

Whereastradingislikehunting.Youreallyhavetohuntalottofeedafamilyand

therearelimitstohowmuchyoucancatch.Tomakeadecentlivinghunting,youhavetohavealotoffragile,atriskcapital–thinkfishingboats.Intheend,theeasiestoutcometomakeainterestingreturnfromhuntingendsupservingpeoplewhowanttohunt–thinkleisurefishing,gamekeepingetc.–orinthemarkets,beingabrokertotraders.

Thebottomlineis,the

richestmanintheworldtodayisaninvestor.Meanwhiletherearealotoftradersinprison.

Stresstestingthatassertionishighlyrecommended.

Howevereveryonewantstotrade,fewwanttoinvest.Youwanttotrade.Youdo,don’tyou?Well,youcan,withoneproviso.

Letusagreetradingisharderthaninvesting.So

whenyoucanmake20%ayearormoreinvesting,forsaythreeyears,thenyouwillhaveskilledyourselfupenoughtogivetradingatry.Remember,theothersideofthetradeislikelyGoldmanSachsorsomeothertradingCthulhu,soskillisessential.Soput£2,000inaspreadbettingaccount,kissitgoodbyeandgivetradingago.

Ifyoucanmake20%+

investingyoushouldjustaboutholdyourowntrading.Ifyoudon’t,youcanstillbecomewealthycompoundingaportfolioat20%inaSipporISA.Doublingyourmoneyeverythreetofouryearsreallydoesmakeyourich.

Ifyouputthesamelumpsumintoabrokerageaccount,everyyear,at20%compoundayear,youwillcreateapot200timeslargeraftertwenty

years.Putin£1,000ayearandendupwith£200,000intwentyyears.£10,000goesto£2m+.Aftertenyearsitwillbe30timesmore,ie£30,000.Thisisthegameyoushouldplay,notthetradingone.

At25%thenumbersstartlookingsilly.It’sthekindofsillyweallcanuse.SoinvestandBeRich.

Itisoneofthefewavenuesopentoalmostanyonetobecomewealthy

throughdiligence,patienceandhardwork.

Ihopeyouenjoythejourney.

AbouttheAuthor

ClemChambersisCEOofADVFN,EuropeandSouthAmerica’sleadingfinancialwebsite.

Abroadcastandprintmediaregular,ClemChambersisafamiliarfaceandfrequentco-presenteronCNBCandCNBCEurope.HeisaseasonedguestandmarketcommentatoronBBCNews,FoxNews,CNBCArabiaNewsnight,Al

Jazeera,CNN,SKYNews,TF1,Canada’sBusinessNewsNetworkandnumerousUSradiostations.

HeisrenownedforcallingthemarketsandpredictedtheendofthebullmarketbackinJanuary2007andthefollowingcrash.HehasappearedonITV’sNewsatTenandEveningNewsdiscussingfailuresinthebankingsystemandfeaturedprominentlyintheMoney

Programme’sCreditCrashBritain:HBOS—BreakingtheBankandontheBBC’sCityUncovered:WhenMarketsGoMad.

ClemhaswritteninvestmentcolumnsforWiredMagazine,whichdescribedhimasa‘MarketMaven’,TheDailyMail,TheDailyTelegraphandTheDailyExpressandcurrentlywritesforForbes,BusinessMirror,Index

Trader,TradersandYourTradingEdge.

HewasTheAlchemist–stocktipster–inTheBusinessforoverthreeyearsandhasbeenpublishedintitlesincluding:CityAM,InvestorsChronicle,TradersMagazine,StocksandCommodities,theChannel4website,SFOandAccountancyAgeandhasbeenquotedinmanymorepublicationsincludingallof

themainUKnationalnewspapers.HealsowroteamonthlyspreadbettingcolumningamblingmagazineInsideEdge.

ClemhaswrittenseveralbooksforADVFNBooks,including101WaysToPickStockMarketWinners,ABeginner’sGuidetoValueInvesting,TheDeathofWealthandLetterstomyBroker.

Inthelastfewyearshehasbecomeasuccessfulfinancialthrillerwriter,authoringTheTwainMaxim,TheArmageddonTrade,KusanagiandTheFirstHorseman.Hisnewfictionbook,DialUpforMurder,isatechno-thrillersetduringthedawnoftheinternet.

ClemalsowritesfortheADVFNnewspaperandhas

twopremiumnewsletters:DiaryofaContrarianInvestorandBuildinganIncomePortfolio.

AlsobyClemChambersfromADVFNBooks

THEGAMEINWALLSTREET

byHoyleandClemChambers

Asthenewcenturydawned,

WallStreetwasagameandthestockmarketwasfixed.Ordinaryinvestorswerefleecedbybiginstitutionsthatmanipulatedthemarketstotheirownadvantageandtheyhadnocomeback.

TheGameinWallStreetshowsthewaysthatthetitansoframpantcapitalismoperatedtomakemoneyfromanysourcetheycouldcontrol.Theiraccumulatedfundsgavethetitansenormouspower

overthemarketandallowedthemtoensuretheywonthegame.

Tradersjoiningthegamewithoutknowingtherulesareonaroadtoruin.It’slikegamblingwithoutknowingtherulesandwithnoideaoftheodds.

TheGameinWallStreetsetsoutindetailexactlyhowthismarketmanipulationworksandshowshowtoridethepricemovementsand

makeaprofit.Andguesswhat?The

rulesofthegamehaven’tchangedsincethebookwasfirstpublishedin1898.Youcanapplythesamestrategiesinyourowninvestingandavoidlosingyourshirtbygamblingagainsttheprofessionals.

Illustratedwiththeveryfirststockchartseverpublished,thebookcontainsanewprefaceanda

conclusionbystockmarketguruClemChamberswhichputthetextinthecontextofhowWallStreetoperatestoday.

AvailableinpaperbackandfortheKindlefromAmazonUKandAmazonUS.

THEDEATHOFWEALTH

byClemChambers

Question:whatisthenext

economicgamechanger?Answer:TheDeathofWealth.

MarketguruClemChambersdissectstheglobaleconomyandthestateofthefinancialmarketsandlaysouttheevidenceforthedeathofwealth.

TheDeathofWealthflagsupthemilestonesontheroutetowardsimpendingfinancialdisaster.Fromthefirst

tentativesignsofrecoveryintheUKandUSstockmarketsatthestartof2012,tothetemporarydrawingbackfromtheedgeoftheFiscalCliffattheend,thebookchroniclesthetrialsandtribulationsofthemarketsthroughouttheyear.

Collectingtogetherarticlesandessaysthroughoutthelasttwelvemonthsalongwithextensivenewanalysisfor2013,TheDeathof

Wealthallowsustolookatthesetumultuouseventscollectivelyanddrawastrongconclusionaboutwhatthefutureholds.

2012startedwiththeUSeconomyshowingsignsofrecovery,andEuropeanfinancialmarketsrecoveringsomeofthegroundlostduringtheeurocrisis.ItendedwithObama’sre-electionandthedealthatdelayedtheplungeoffthe

fiscalcliffbyafewmonths.Inbetween,theeurozone

crisiscontinued,butnoneoftheaffectedcountriesactuallylefttheeurozone;quantitativeeasingtriedtoturnthingsaroundwiththeconsequencesofthese‘unorthodox’actionsyetunknown;andtheequitymarketsafterthemid-yearcorrectionbecamestronglybullish.

TheDeathofWealthtakesyouthroughtheevents

of2012monthbymonth,withchartsshowingthemovementsoftheFTSE100,theNASDAQCOMPXandtheSSECOMPXthroughouttheyear.

WithanintroductionbyrenownedmarketcommentatorandstocktipsterTomWinnifrithandasummarybytradingtechnicalanalystZakMir,thiscollectionchroniclestherockyroadtripthefinancial

systemsoftheworldhavebeenonandpredictstheultimatedestination:thedeathofwealthasweknowit.

AvailableinpaperbackandfortheKindlefromAmazonUKandAmazonUS.

LETTERSTOMYBROKER

P.S.WhatdoyouthinkoftheMarket?

byClemChambers

“WhyisittheminuteIsellmystocks,nomatterwhichtheyare,rightawaytheygoup?”

MeetJoe,arichbuthaplessinvestorwhomakeseverymistakepossible.Justwhenyouthinkhe’slearntsomething,hefindsanewwaytolosemoney.

Populatedbyrogues,huckstersandfoolsLetterstomyBrokeristheclassic

comedyoferrorsrevivedforanewgenerationthatteachesyoutherulestotradingthestockmarkethaven’tchangedinthe94yearssinceitsoriginalpublication.

“Iwantsomeadvice.NotthatI’llfollowit.”

AidedbytheacerbiccommentaryofNo.1bestsellingauthorandADVFNCEOClem

Chambers,LetterstomyBrokertellsyouwhereJoe’sgoingwrong,whatyoushoulddotokeepyourshirtandhowtoavoidhishilariouserrors.

Stockmarkettipssooldthey’renew:ReadLetterstomyBrokerandtradelikeit’s1919.

AvailableinpaperbackandfortheKindlefromAmazonUKandAmazonUS.

ADVFNGUIDE:THEBEGINNER’SGUIDETOVALUEINVESTING

byClemChambers

Thestockmarketisnotonlyforrichpeople,orthoseintentongambling.‘ValueInvesting’ishowWarrenBuffetbecametherichestmanintheworld.Amethodofinvestinginthestockmarketwithouttakingcrazyrisks,‘ValueInvesting’willhelpyoubuildyourfortune,nomattertheeconomicclimate.Perfectfornoviceinvestors,thebookclearlyoutlineshowtochoosethe

beststocksandhow–thankstotheInternet.Itistheperfectwaytoensureyou‘getrichslow’withminimalstress.

AvailableinpaperbackandfortheKindlefromAmazonUKandAmazonUS.

ADVFNGUIDE:101WAYSTOPICKSTOCKMARKETWINNERS

byClemChambers

101tipstohelpdaytraders,investorsandstockpickerstofocusonwhatcharacterisesapotentiallysuccessfulstock.PersonallyresearchedbyClemChambers,oneoftheworld’sleadingauthoritiesonmarketperformance.Incisive,brutallyhonestandoccasionallyveryfunny,101WaystoPickStockMarketWinnersisaninvaluablemanualforanyonewantingtomakemoneyoutofthe

markets.

AvailablefortheKindlefromAmazonUKandAmazonUS.

Formoreinformation,gototheADVFNBookswebsiteatwww.advfnbooks.com.

http://www.advfn.com/