Im fascinated by the FTSE. As far as I can tell it’s a very messed up index and therefore suggests the UK market is equally in trouble. When I think of investing and trading, I break it down into short term trading, Medium term investing/trading and long term investing. The shorter the term the bigger the risk and the higher the return. That what the theory says and in practice it can work out like that.
Having said that if you trade on margin, the medium term seems to be the most profitable horizon or if you are a real sport, hyper short-term trading can also bring in the corn so long as you have the tools, the execution, the time and the stomach lining.
Short term the UK market is in a bullish wave in a strong medium-term bear market.
This is pretty good going as the Brexit situation threatens within down to send the British economy back to the stone age. Clearly unless the market knows that there is a no-brexit outcome, then the effect of a hard Brexit isn’t so bad at least as London listed companies are concerned. It doesn’t take two much optimism to see a break out to new highs from here.
My position is to stick with what you have and wait till April before diving in but hold what you hold till then.
When we pull back to the medium term and long term we also see reason to be bullish.
That ugly medium term bear looks to have had its day and a run to all time highs looks good. This is weird but the Pro-Brexit group would say an interpedant UK will not be hobbled by the hide bound EU with its silly rules and waste and will set free for the UK to buckle down, get on its bike and crack on. It could happen.
The market seems to suggest this possibility.
So lets look at the long term.
What an utter shambles that is. The FTSE is bearly changed in 20 years. The Dow has gone from 10,000 to 28000 in the same period.
Now you can’t blame this on the EU because the DAX has had a great return. France like the UK hasn’t had a good time either. So whatever ails the UK ails France. Germany and the US correlate, France and UK correlate, there is some hidden factor and while I keep searching for the common denominator, I have yet to find it.
Yet things are cyclical. The UK can go up while the US falls. There is meant to be a revision in markets but if its going to take another 20 years to normalise its probably too long a horizon for even the most patient investor.
As such this is the most simple and interesting chart.
Now this is a linear chart but in the era of progress linear means degeneration because growth always produces a log chart as even small percentages of growth creates a parabola that needs to be flattened by de-powering the scale with logarithms. The fact the UK market has been linear for half a lifetime suggests at best malaise but significant relative decline to most other parties.
Brexit supports would suggest the way to change affairs if not to continue affairs lashed to the EU. The revolution will come only by a clean break. This would of course be a revolution.
Whether pulling down the temple on our own heads with Brexit is the solution is pure guess work. It’s a high-risk gambit and it never takes much for such high beta plays from turning sour.
The French had their revolution. Their population was 27 million in 1792, the UK’s was 9 million. Today the French population is 2.5 times bigger at 67m, meanwhile the UK is 66m and has grown 7 times bigger. In this instance it doesn’t take an economist to work out whether the outcome of a short-term violent action or long term development works out best for the mass of society.
The UK market looks sluggish but in the circumstances that is pretty good. If a hard Brexit crashes the market, I’ll be buying heavily. If it doesn’t I’ll ease in slowly. If Brexit goes into more limbo, Ill buy in even slower. All the trend lines are staring us in the face. Now is not the time to fight them. Once Brexit is decided then the time to run against the grain will present itself.