Page 48 - DIY INVESTOR MAGAZINE - NOVEMBER 2018
P. 48

 THE GREAT BRITISH TRADE OFF: Y2Q3 HUMBUG UPDATES ON A DIFFICULT AUTUMN FOR EVERYONE
This autumn has been difficult for me along with just about every other investor in the UK I would say.
No two ways about it, the world order is changing; for most of my lifetime the US has been the dominant power both economically and militarily, but as this century has got going it’s obvious that the power is leeching away from America to China.
According to the International Monetary Fund (IMF) the US is still the world’s biggest economy at $20.4 trillion, followed by China at $14 trillion - the UK is a tiddler by comparison, coming in at $2.94 trillion behind Germany and Japan.
As a side issue, that we’re still the fifth largest economy in the world is a testament to what fine business people we are, if only our politicians were half as competent, we’d still be a world power and wouldn’t have a country that’s falling to bits around us. Anyway, back to the plot. The Chinese are catching the Americans quite quickly, Price Waterhouse Cooper (the business consultancy) believe that the gross domestic product (GDP) of both China and India will have overtaken that of the US by the year 2050.
President Trump however has other ideas, given that he campaigned for the presidency on the slogan ‘make America great again’.
Can his policies halt the relative decline of America in relation to China and India? My guess is not in the long run as size matters and there are more Chinese and Indians than there are Americans. But in the short term I think his trade war with China will inflict more damage on them than it does on him.
SOME STOMACH-CHURNING VOLATILITY THIS YEAR. THE RECENT CORRECTION WAS REALLY QUITE NASTY
Whether you think the guy’s wonderful or you’d like to see his head on a spike really doesn’t matter, it’s what the markets think and since the trade war started the Chinese market has suffered more than the American one.
But the trade war, Brexit and all the other world stresses and tensions allied to the fact that this is a very old bull market have made for some stomach-churning volatility this year. The recent correction was really quite nasty.
I buy, sell and hold positions based purely on what my charts tell me to do. I have discretion in my system to override them in certain circumstances (more on that later) but I try hard to trade what I see, not what I think.
I had a really good run early this summer but as my charts began to signal that the moves were coming to an end, I sold down and went into cash. At one point in the early Autumn I was only 10% invested.
AT ONE POINT IN THE EARLY AUTUMN I WAS ONLY 10% INVESTED
DIY Investor Magazine | Dec 2018 48
This example shows exactly how I operate; it is a chart of the Baillie Gifford American Fund which I exited on the 24th of September for a profit of £1337.




















































































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