PORTFOLIO TRACKER
Unless you happen to be an octogenarian, you are now enduring the worst global financial crisis in living memory, and one where the end appears to be moving further away in time each day. Monday last saw panic selling across world stock markets remove $2,500 billion from share values, with the FTSE 100 experiencing its largest points drop ever, and the Dow falling below 10,000 points for the first time in four years. This after Congress passed a bill to allow a $700 billion life-line to American (and some foreign) Banks and Insurance companies, but only after members of the House of Representatives had turned what had been a 3 page proposal into a document over 400 pages long! The markets have a right to question how much ‘pork’ is built into that, and with politicians and bureaucrats increasingly involved in effective nationalisations of financial institutions (did you hear that after the nationalisation of Freddie and Fannie the US is now the world’s largest council estate!), it comes as no surprise whatsoever that market and consumer confidence is virtually non-existent.
No articles from me for the last three months, but that doesn’t mean that there have been no developments in our portfolios – inevitably in the circumstances there have been some big changes. The biggest theme, in the medium risk portfolio, was the significant reduction of exposure to non-Dollar assets. I have been expecting the Euro to be knocked off its overvalued perch for some time now, and the increasing value of the Dollar towards the end of July and continuing into August convinced me to sell out of both the Euro and Sterling. This happened, with small holdings of SAM Water and Smart Energy retained, at the start of the second week of July. The larger parts of the two SAM funds were sold, along with Euro holdings in FMG Rising 3, ING European Materials and Fortis European Utilities, Sterling holdings in Allianz BRIC and Gartmore Pacific, and finally the GAM USD Special Bond, which by this stage of the correction was producing a return of some 1% annually. To my pleasant surprise the total encashment value was slightly higher than total original cost – which is an indication of how much, and how quickly, prices have dropped.
So, we had just under $151,000 in the cash account, time to address the tricky subject of ‘what to do?’ Adding further units of our ‘Steady Eddie’, the Brandeaux fund and buying in more exposure to gold were fairly obvious decisions, and $30,000 of the Brandeaux alongside $30,000 of a Physical Gold Exchange Traded Fund (ETF) were purchased. As a sector Biotech has been doing quite well lately, and is relatively cheap to buy into, so we spent $10,000 on another ETF, the SPDR S&P Biotech. Finally, I thought of consumer staples, the bits and bobs that people buy under all economic conditions, toothpaste, razor blades and so on, and came up with not only another ETF, the Vanguard Consumer Staples ETF ($10,000) which has a 1 year performance of -6% (very good at this time), but also probably the planets largest retailer of bits and bobs and more – Wal Mart. This is the first time I’ve put a share into the portfolio so we’ll see how it goes. One year performance, in these turbulent and brutal times, stands at just below 30% – extraordinary!
We’ve just finished the 5th year of the medium risk portfolio, with that being the first year where a loss was made, of -6.5% since September 2007. The real damage has been done in this year, with a year to date performance of -17.7%, against a backdrop of -23% for the FTSE 100, -25% for the S&P 500, and -32.5% for the MSCI World. Oh, and Shanghai? -56%.
We’ve run out of space and time for reports on the other two portfolios, so I’ll cover them next month. In the meantime lets all hope that the banking crisis is resolved and the markets calm down sometime soon.
