Don’t ask directions from somebody who hasn`t been where you are going.

Posted on 3 October 2016 by Douglas Chadwick

I do not know about the rest of you, but I feel that we are entering totally unknown territory in regard to politics, religious unrest, and the world`s economic stability. It all seems to be unravelling at the same time and where is the steadying organisation which can put its hand on the tiller and steer us through the oncoming turmoil? I just cannot see the likes of Trump/Clinton aligned with Putin and the European Union improving the situation in the Developed World. I can maybe envisage China, India and the Emerging Far Eastern countries forming a “go it alone” economic block, but who knows what will happen? Today we are just spectators who will eventually become participants in the possible forthcoming accident. I have to say I feel ashamed for feeling so pessimistic about the future. After all, science and technology is about to gift us with free clean solar energy and sufficient supplies of potable water. Medicine is about to extend our life span and eradicate many of the nastier illnesses. Agricultural developments will mean we can feed ourselves and limit the number of people who go hungry. Robotics and Artificial Intelligence should allow the world`s population to decline rather than increase, as dangerous and repetitive mundane work is handed over to machines. Good as all of this might sound; the unanswered question is still, how will we get to this Promised Land? Where is Moses? The above is all relevant to the view that we take on our personal finances. Recently a subscriber, who has had a remarkably good run in the last six months, making in excess of 27% on his ISA portfolio, asked me what he should do as he was alarmed for the near future and could no longer see any rising sector opportunities. I suggested that he could not do worse than examine two of Jesse Livermore sayings;

• The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even amongst the professionals.
• It is enough for the experienced trader to perceive that something is wrong. He must not expect the tape to become a lecturer. His job is to listen for it to say “Get out!” and not wait for it to submit a legal brief for approval.

I believe that if Jesse Livermore was alive today he would be out of the market and in cash. He would be relaxed and sleeping at night whilst waiting for the market correction to take place. As a matter of interest if the subscriber that I referred to above took his portfolio into cash for the next twelve months he would still be making an 18% annualised return. I would not mind some of that! In these circumstances cash can be regarded as a genuine sector. On a lighter note, you may be aware that the Bank of England has released £430 billion of Quantative Easing into the U.K. economy. These numbers are just mind blowing and I find them difficult to envisage so I have turned them into something that I can imagine. A £1 coin is 2.5mm thick and the distance to the moon is 384,400 kilometres. By my calculation that means Mr Carney`s £430 billion represents 1,075,000 kilometres and is 2.8 times the distance to the moon. It might have been nicer if he had taken the £430 billion and used it as “helicopter money” and given every man, woman and child in the country £6615! These are numbers and thoughts with which to conjure.  Please point out any errors in these calculations and I will issue a correction.