When the facts change, I change my mind. What do you do Sir? (Attributed to John Maynard Keynes)

Posted on 20 November 2015 by Douglas Chadwick

The Saltydog Investor is just coming up to its fifth year anniversary and what a tumultuous five years on the stock markets of the world this period has turned out to be. Financial problems have continued to plague most countries throughout this time, and to date there has not been any certain evidence of a recovery within the Banking Industry. The European Union is far from a settled and directed community. China has risen as an economic power, and is now facing the problems of establishing a stable and balanced economy. Recent lack of world demand for manufactured products and building materials has produced a slump in commodity prices, resulting in difficulties for those countries supplying these products. Oil fracking in the USA has created a price battle with the established oil producing nations. This has resulted in prices more than halving to the benefit of the users, but not the suppliers. Russia has been flexing its military might to impress and keep in line previous satellite Soviet countries. This has resulted in the Western World imposing trading sanctions which, coupled with the falling oil prices, are wrecking the Russian economy. The above is the stressful environment that the Saltydog Tugboat portfolio has been operating with during its five years of existence. Some days it has seemed that the markets would fall faster than you could do up your shoe-laces, only to see them recover over the following few days. During this time the investment press has enjoyed a field day whilst piling on the pressure and concentrating in rotation from one terminal subject to the next as if it had been riding a financial merry-go-round. Our original intention with the Tugboat portfolio was to try to achieve a relatively safe rolling return after costs of 10% p.a. It was to be a demonstration for ourselves and our subscribers that it was not necessary to have your money stagnating in cash ISAs and the Banks` coffers earning you nothing. This we have proved beyond any doubt, as the Tugboat portfolio has avoided all the major market drops during this five year period whilst enjoying a steady rolling return of around 9% p.a. Unfortunately not the 10% we were looking to achieve, so that is a disappointment. Still, we must not take life to seriously; as we all know, we will never get out alive! It was Voltaire who said that “Doubt is an uncomfortable condition, but certainty is a ridiculous one”. This taken along with the opening title said by John Maynard Keynes is surely a true reflection on the difference between a momentum investor and a “one shot wins” all passive investor. At Saltydog we are optimistic momentum investors relying on our own supply of fund performance numbers that we produce in order to lead us from one rising sector trend to the next. Admittedly in these five years these favourable sector trends have not been particularly obvious or long lasting. Nevertheless we have enjoyed life riding the Slow Property Funds, UK Smaller Companies, India, Emerging Markets, Gold Funds, Gilts, Biotech’s and Targeted Absolute Funds as each sector has enjoyed it`s fifteen minutes in the limelight. The most important thing when looking at your investments is to believe that with care and attention tomorrow can be better than today. The world needs both the optimist and the pessimist. The optimist invented the airplane and the pessimist the parachute.  They act as a counterbalance to each other forcing us to examine whether our glass is half empty or half full. At Saltydog it is half full and we fully intend to claw ourselves back to that target of a 10% p.a. rolling return.