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Important Information & Weekly Update

March 20th 2020 – Written by Andrew Chorley

Important Information

  • We will be sending information electronically now wherever possible and have invested in software that makes all email secure – this is in advance of valuations and rebalancing at the end of the month

  • We will provide valuations by email early in April

  • We will be sending rebalancing recommendations in the next week or so to be implemented at the end of the month; there will be no changes or new funds it is a simple rebalance into the assets your already hold to keep risk controls in place

  • There has been talk that World Stock Markets could close; whilst unlikely it is not impossible, this does not mean that investments cease to exist merely that they cannot be traded – 15 minute “circuit breakers” that close the market exist there are substantial falls and we anticipate that it would be an extension of this for a period. Since the 9/11 attacks in the US Stock Markets will have secure locations that allow them to continue to operate; in fact little business is now executed on the Trading Floor with most being executed online. Closing major stock markets would be a complex measure though as markets are all interconnected and there are huge options and futures markets that would fail if prices for the assets that they are based on are not available.

Weekly Update

It has become clear in recent days that we are now in a very difficult time; at present we are seeing the human cost and in the coming months, some sooner, we will see the economic cost. Nobody has all the answers and looking to history is giving us a few clues; recent pandemics (with the last 50 years) have lasted twelve to twenty months but they didn’t happen in a World that was so inter-connected; or a World where the largest monetary experiment had pushed interest rates to record lows and stock markets to record highs. We must maintain our optimism that conditions will improve and we can hope that the Global fight against this pandemic will bring Countries together in a concerted effort that will bring long lasting co-operation and not the protectionism of recent months.  We are mindful of the “Known Unknowns” (Donald Rumsfeld ) and in particular Donald Trump’s actions in the run up to the November elections.

At the same time we need to think financially about what can we do to protect our own positions; hopefully we are all well prepared but just like insurance you will only find out how good your preparation has been when a claim is made. Here are some things that we should all think about in the short-term: -

  • Is my emergency fund sufficient to cover costs for 4-6 months – most important for the self-employed and anyone employed in the private sector. We cannot dismiss the possibility that Public Sector workers are also at risk in the medium term and beyond.

  • If I had to cut my expenditure where would I do it? Is there some discretionary spending/savings that I could reduce for a few months if needed. Perhaps this is the right time to review those small, and not so small, Direct Debits and Standing Orders on our bank statements? Inertia and complacency is a risk!

  • Don’t cancel indiscriminately; personal insurances in particular are often the first things to go when belts are being tightened, which is precisely the wrong time to be doing it. Maybe that Sky subscription could be replaced by a Fire Stick? Please don’t dismiss any possible savings.

  • Don’t make knee jerk reactions; taking cash from investments and pensions may have unintended taxation consequences and crystallise losses, to be regretted in the longer term.

This list is not exhaustive; the best advice we can give is not to rush, think things through and give us a call if you are not sure where to start – even if it is just so that we might, with family or others, be a sounding board.

We would also ask that you remember we cannot work miracles or create strategies that always result in a positive return, as investors when all assets are falling in value it is impossible to be immune, in the current climate we are asking our defence to play well.

One of our favourite investment commentators is Meb Faber (Cambria Investments) and these few extracts sum up our views.

  • But with such massively different future possibilities, many investors are wondering what to do…and the answer for most of us is…

  • “Global markets are experiencing large moves up and down today and many investors are freaking out.

  • US stocks declined enough at the market open, 7%, to trigger circuit breakers that paused trading.

  • Investors all over social media are panicking. Because they don’t have a plan.

  • But you do.

  • You put in the work over the past decade. You’ve read our blog posts and books, you’ve listened to the podcast, and eventually, you built a plan. And take note, they’re not all the same plan. But at least you have one so that when it hits the fan, like it is now, you’re prepared. Our investors have read our old pieces for the past 14 years that prepared them for this year. There was the piece on how really big daily stock market moves of 5 to 10% are pretty normal and tend to cluster together, particularly in down trends

  • We also published a piece that demonstrated what assets helped to hedge these big down periods in stocks…. And it turns out, the assets that hedged historically (tail risk, bonds, cash, gold, trend) helped this time too.

  • You mentally prepared for the fallow periods, because you read the piece that demonstrated many assets can go long periods experiencing measly returns but still be worth investing in……

  • You learned to think in terms of decades rather than years by taking the long view

  • Let’s say you’ve read all of these pieces, you’ve listened to the podcast, and you’ve put your plan into place. Congrats! Now you get to sit back, relax, and do nothing. And that’s what I plan to do with my allocation.

EST. 1999