If a ship is to make money for its owner it must be at sea and working, carrying goods and cargo regardless of what weather is forecasted. The captain and crew must have a plan to cope with all eventualities and, when the conditions get rough, they might occasionally have to sail carefully on, and just keep taking the tablets!
So it is, I believe, with investing.
You must have a plan to cope with adverse trading conditions so that your money and investments can be kept safe when markets take a significant turn for the worse. However, the tricky bit is making sure that you are not over-reacting at the hint of danger, rather than making a calculated move when the actual threat materialises. It’s important to keep calm, take a deep breath, and consider carefully what your initial plan was, then you can work out how to keep your investments working and earning you money. Running into too much cash with today's interest rate levels might not be the wisest of manoeuvres, as only the Banks and Finance Houses will get rich.
This year I have to confess that I have committed a cardinal sin. As our more seasoned subscribers will know, I like to have a small percentage of my portfolio invested in technology funds which tend to earn all their money, or at least a sizeable part of it, in America. A combination of Mr. Trump, the huge money printing exercise by the “Fed”, and vastly overvalued company P/Es, convinced me that this market was an enormous bubble about to deflate. A few months ago I exited stage left, reducing my holdings in these funds and moved them into cash.
As a result of this, I missed out on really good growth for the latter part of this year. I had moved at the hint of danger, rather than actual danger itself. I should have waited for the puncture to occur, and then moved quickly, or simply operated a stop-loss approach. The annoying thing is, I have the advantage of weekly Saltydog numbers and could have closely monitored any movement and then moved appropriately. This was a badly misjudged action, but hopefully a lesson learnt.
On a completely different issue, I have recently received an email from one of our subscribers, correctly pointing out that hydrogen (one of my pet subjects) is far from being the green fuel that everybody, including our politicians, believe it to be. This is due to the amount of fossil fuels that would have to be used to produce the electricity to run the electrolysis plants, plus the inefficiencies inherent in the process of converting water into hydrogen. Mind you there’s a similar problem with providing the power for electric car batteries. Where is the juice going to come from to keep them all charged? I do not think that wind and solar power alone will be up to that huge task. It is going to have to come from elsewhere if we are going to “save the planet”.
All of this puts me in mind of a Professor Blin Stoyle who I was fortunate enough to have as my tutor when I was reading Theoretical Physics at Sussex University in the mid-sixties. Back then, he was convinced that the world’s scientists would eventually succeed in creating devices capable of supplying unlimited supplies of cheap, clean energy. It may have taken longer than he expected, but there are now signs that he might have been right!
He thought that it would come from using nuclear fission, fusion or neutrinos that emanate from the sun. Well, for the moment I think we can ignore the neutrino route, but fission and fusion are still on the radar. Fission using Thorium, rather than Uranium, is much cleaner and safer, with much less radioactive waste than most current systems. Admittedly you cannot use the by-product for making nuclear weapons, but I’d argue that’s not such a bad thing. Today there is already work taking place on a proven design to produce small thorium fuelled 20MW reactors, then moving on to 200MW. If successful they would do the trick.
Fusion is much more difficult, requiring materials capable of withstanding temperatures akin to the surface of the sun. Nevertheless, Harwell in the UK, a laboratory in France and another in the USA have successfully conducted trials that seem to show that fusion certainly isn’t completely out of the equation.
With all of the above in mind, my own belief is that in the near future electricity will be generated by a mixture of renewable and fossil-based fuels. The fossil-based fuels will at some point be replaced by some form of nuclear power as the technology develops. If this turns out to be the case, then both hydrogen and batteries will be necessary as stores of energy, but with different end uses. And it will be a much cleaner world.
It also means that there is currently a good reason for investing in businesses that are working in the field of hydrogen creation and its uses. ITM Power and Ceres Power are good examples.
Even better would be finding funds that are doing all of the legwork. I have already talked about Hydrogen One, which launched last month and has already started making gains. There is also another called Hycap, an investment fund soon to be launched. It will be run by a member of the Bamford family of JCB fame. Like Hydrogen One, the declared intention is that it invests into thirty or forty businesses all involved in the production of hydrogen, and / or its commercial use.
Although I like researching and investing in Investment Trusts and individual stocks, I think it’s important to remind you that the bulk of my money still follows the Saltydog Ocean Liner portfolio. I believe that there is security in this approach, but then I would say that, wouldn’t I!
In my ‘thoughts’ articles I like to talk about new developments that have caught my attention and that I believe could provide investment opportunities in the future. I may end up putting some money into them, but it’s only ever a relatively small amount of my overall portfolio value.
I hope that you find my emails interesting, but I’ve got a sneaky suspicion that it just reinforces the old adage that “It is better to be silent and let people think you are stupid, rather than go into print and prove it.”
Best wishes and good luck with your investments.
Founder & Chairman