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‘Terrifying’

May 2017 Investment Report

 

Stock Market Warnings

Paul Tudor Jones is an American investor and hedge fund manager who Forbes Magazine rank as the 120th richest person on the Forbes 400 and the 22nd highest earning fund manager. ‘Terrifying’ is the word that he used when describing how central bankers should feel about the value of the S&P 500 relative to the size of the economy.

 

The following chart shows the cash flow of S&P 500 companies (ex-financials) after capital expenditure (red line) compared to the payouts to shareholders from those companies (the combination of the two blue bars). For the last four years companies have been paying out more than they have been earning and they have been borrowing money to enable then to do so. According to some, we should have been participating in this charade. When this happened for a few years in the early 2000’s and again in 2006 to 2008, on both occasions the stock market fell by approximately 50%. The same risks apply to the overblown property market (45% above average for rental property according to The Economist) driven by further excessive low interest debt and over speculation.

 

 

 

Gold

The following chart shows the gold bull market of 2000 to date compared to that of the 1970’s.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following chart from stockcharts.com shows the similarities between the current market trend and that at the beginning of the bull market in 2001.

 

 

 

 

Gold Funds

The following is a technical chart from stockcharts.com which shows in the top left hand corner a potential bullish price objective of 67.5 from a current price of 21.81, representing a potential gain of 209.5%.

 

Bullish price objective: 67.5

Current price: 21.81

Oil

The following chart from stockcharts.com shows in the top left hand corner a bullish price objective of 99.0 compared to a current price of 48.97, representing a potential gain of 102.2%.

 

 

 

Current Price: 48.97

Bullish Price Objective: 99.0

 

Commodity Funds

The following chart from stockcharts.com shows in the top left hand corner a bullish price objective of 452.0 compared to a current price of 341.5, representing a potential gain of 32.4%.

 

 

 

 

 

 

 

 

 

 

 

Bullish Price Objective: 452.0

Current Price: 341.5

Katie Martin, FT

‘As Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch, put it in a recent quarterly note, normalisation from a 5,000 year low in interest rates, a 70 year low in fiscal stimulus across G7 nations, an all-time high in the US stock market versus the rest of the world, and a 75 year low in bank stocks, is ‘unlikely to be peaceful’. He advised clients to buy gold in anticipation of ‘potential manias, panics and crashes’….

 

Gillian Tett, FT

‘…Bridgewater, the world’s largest hedge fund, has decided that modern populism has nine defining

Traits, such as ‘nationalism’, militarism’, and ‘greater attempts to influence or control the media’. Armed with this definition, it calculated the proportion of electoral votes captured by populist candidates in the developed world over the last century. This shows that populism garnered 35% of developed world votes last year – the highest proportion since 1934 when it hit 40%.’

 

John Plender, FT

‘That is not to say that diversified growth funds will necessarily flounder in the coming storm. They have many strengths, the greatest of which is diversification across a very wide range of asset classes. Yet in tough conditions a diversified portfolio may still turn out to be a wide but flawed collection of bad bets. In the diversified growth fund world the sheep are about to be sorted from the goats.’

 

Behavioral Finance

Certainty is a particularly dangerous assumption when it comes to investing. As Voltaire stated, ‘Doubt is not a pleasant condition, but certainty is absurd’.

 

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The views reflected herein are those of Vertis Private Wealth Management Limited and should not be regarded as a recommendation to invest in any one product or service; before investing you should always consider personal investment advice.

                                                                                                         

Where you seek the advice of Vertis Private Wealth Management Limited we continually monitor markets and will advise you where there is a change in the findings of our research and provide advice and guidance on any alterations that may be required to the investment strategy that we have previously recommended.

 

Vertis Private Wealth Management Limited does not accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Investors should be aware that the value and income from investments can rise and fall and that past performance should not be considered as a guide to the future. Your capital may be at risk.