Portfolio – where now?
OK – so where do we stand? Gibbering with Jim looking at a precipice of doom or looking carefully at how to turn this into a springboard for growth?
First let’s be clear I have held the portfolio to a loss of 0.15% today. We remain +48% for the year so far – I can afford to take time to think . A nod first to IBD – it was their heads up last night that got my attention – they are my regular Saturday reading and the basis of my screening approach. Everyone should read the Saturday IBD – if only as a robust and thoughtful reference point.
If you followed my recommendations this morning you will have preserved most of your capital, pruning anything vulnerable and buying more gold. It has nevertheless been a day – MA, MSFT, RCII, and V all down by 4% or more.
What next? first recognise what we have been saying for a long time – the US economy is fine, this is all about our mishandling of foreign policy. We have lost the trust of the international community. China will not want to sign a deal with so untrustworty an administration. Iran is pushing at the European disinterest in helping Trump renege on their nuclear agreement and will leverage the Straights of Hormuz. North Korea, Russia and Eastern Europe are all hell bent on Bannon inspired and Trump encouraged nationalism. Johnson is playing his own brand of personality politics in the UK. Add to all this our ill conceived trade and tariff wars and we can expect months of attritional volatility, erosion of international markets and more confusion at home as to what and why our trade and fiscal policies are as confused as they are.
Here’s what we do:
1. Weed out all but your strongest stocks – low p/e, solid dividend, strong growth, no debt and no international dependency.
2. Build your watch lists with steely care see 1. above. If the market falls further some interesting companies start to look worth examining. Make sure you have a short list – it will be useful when the day comes.
3. Overall take pride in having cash on hand to reinvest when the market turns. I have 50% now in cash. I suspect there are going to be several more difficult turns in August – I may add a little to gold but as we are up on the year so far, I plan to sit on my hands and preserve capital at least till the end of the month.
Send me your comments and have a good evening, James.
James is the advisor to Merrill’s King Group Wealth Management Team.