(These figures are generated from the recorded trades to be found on our web site)

COMMODITIES - UP 24.52% gross + 1.93% gross on uninvested cash

This was an area of choice for 2008. The CRB commodity index rose steadily up to the 30th June 2008 then turned down and fell over 50% throughout the rest of the year. The most difficult of all trading periods is at major turning points and so it proved to be with 11 losses and only 10 profitable trades. However our trading disciplines saw us through by making the most of our profitable trades and restricting our losses despite the high market volatility. This high volatility also induced us to sharply reduce our gearing in April. Our techniques also showed their effectiveness by limiting our trading later in the year as the market entered a narrow trading range presenting few opportunities and a greater degree of risk…a great year under the circumstances.



















BONDS/GILTS/CURRENCIES (Defensive) - UP 8.69% gross

For many years our defensive stalwart has been inflation linked stocks. 2008 turned out to be an unusual and surprising year with the expected steady progress until September when 'wham' an unusual record breaking fall of 13.5% was suffered. Our highlight of the year was that we took profits at the exact top of the market in September. Our holdings of Bunds later in year boosted our returns to an acceptable level. However overall, I am a little disappointed as I feel we could have done a little better here.



















UK EQUITIES (Ungeared) - UP 1.49% gross + 1.3% grosson uninvested cash

Stock markets have crashed with most portfolios being decimated. In this environment not surprisingly this investment area has proved to be the most difficult to control. Control being the essential feature throughout the year with the market falling into October and thereafter settling into a difficult trading range. The extreme volatility was a serious problem with our stop losses on occasion being blown away by massive daily moves. We also found great difficulty in placing stop losses within our strict confines and lost many favourable trades due to this inability to protect the downside. From July the general political climate worried us that 'shorting' could be outlawed overnight which could have left us exposed to cataserophic consisquences if we had to cover our positions unexpectedly. This threat meant we ceased 'shorting' just as the market was about to fall.

Our Great Defence strategy always takes precedence over expected undue risks and have served us well over the years. Admittedly an opportunity was lost here but our disciplines are paramount giving us control even in the worst of environments. In the event we suffered 10 losses with 8 profits but kept the ship steady whilst the world saw their wealth dissipate even to the extent where millionaires were literally seeing their wealth disappear overnight. They went to bed extremely wealthy and woke up broke…can you imagine how horrendous this would feel. Following our techniques such a scenario is impossible. I am more than pleased with the results but only when comparing them with others where in the vast majority of cases heavy losses were suffered.



















US EQUITIES (Ungeared) - Down 5.04% gross+ 1.3% gross on uninvested cash

The remarks for the UK Equity market also apply in full to the US market. However we probably overtraded here with 23 losses and only 14 profits. The small loss was made possible as the losses were well controlled.



















Since my being beaten to a pulp at the commencement of the 1972/75 Bear Market neither my subscribers nor myself have suffered from any Bear Market since…in fact profits have been evident in each bear run. 2008 has been no exception for those who don't cherry pick but spread risks around the markets.

Examples being in 2008

AN AGGRESSIVE PORTFOLIO +11.96% gross
(50% Commodities + 50% UK/US Equities)

A BALANCED PORTFOLIO +7.66% gross
(50% UK & US Equities + 25% Commodities + 25% Defensive)
(Ungeared apart from commodities)

A DEFENSIVE PORTFOLIO +8.69% gross
(Bonds + Gilts + Currencies)) (Ungeared)

ANTICIPATING THE 2008 BEAR MARKET

I entered 2008 with substantial ammunition to anticipate opportunities and problems for the year…and it didn't look good. The delegates at my November and December 2007 special seminars had been introduced to the keys on how to assess expectations for 2008.

The November 2007 presentation was entitled 'Is the time approaching for a major reversal?' As the future looked ominous the object of the seminar was to learn how to make friends of panics and crashes. This was followed by two seminars warning of the dangers for 2008 with reasons supporting a severe bearish view so that preparations could be made to live through an unusual and stressful environment.

This bearish view was then supported by a January fall in the stock markets allowing the January barometer to signal a bad year.

I reported the following on the 21st January 2008

"So here we are nearing the end of January… support is being shattered, buyers are nowhere to be found and we only have one small share which is rising! We are heavily into cash. Now is the time to plan for the big opportunity.

One of the great disappointments of modern man is the lust for immediate gratification and the lack of concentration to withdraw, study, plan and only then act. This is particularly relevant to the investment business.

2007 was a time for reflection especially when the January effect suggested a sideways move for western markets. January moves this year are ominous for 2008 with the US having experienced the biggest one day drop for the last 25 years.

Menacingly the informed buyers are still selling..

Our commodity trading has been returning substantial profits of 20%+ pa over the last few years. There would still seem to be further opportunities building up for 2008.

Our pension plans are 45% in cash and 55% Inflation linked stocks which could again be increased shortly on a move into new high ground"

By the end of January the future looked bleak but we liked the look of equity short opportunities, commodities and index linked stocks.

THE METAMORPHOSIS

The next eleven months proved to be the most devastating investment period since the 1929 Wall Street crash falling in line with our fears for 2008. In fact it developed far faster than anticipated and in the process pillaged the world's investors. Yet as the devastation took its toll we strolled through the mire protecting ourselves with our immutable disciplines and in the process managing to generate reasonable profits whilst others suffer. In consequence our results place us at the very top of the world's investment advisers.

For the rest, horrendous amounts of wealth have been lost, probably for ever, with much more to follow. These losses were unforeseen by the so called fundamental professionals leading to investors savings, pensions and happiness devastated by this inability to anticipate the future.

It was generally suggested that the managers of Hedge Funds are the elite of the fund management industry, perhaps this is now being re-appraised…even so very few can match Gann Management. There are certainly a few with exceptional ability but even the top boys are unable to compete with our performance over the years. Since the zenith of the markets in September 2008 Hedge equity funds have lost approx 40% whilst the best sector (relative value) has lost approx 20%.

Of course after the thunderous crash of Madoff it has to be accepted that all performance figures have to be seriously questioned due to the thick fog surrounding most of them. This is an accusation that cannot be levelled at our results as they are comprehensively reported day by day to our subscribers and the rest of the world can examine them, after a 3 month period, supported by past charts and audio comments. They are open to full scrutiny on our web site and can be inspected from as far back as 2000 by clicking on 'Total Transparency' on the front page. There's no fog here just total openness as you would expect from a group of naive boys from the North and one ancient antique…there are no sophisticated fancy Dan's here making 2 & 2 into 5, in Madoff's case 1 & 1 into 75billion…surprising how naive are the sophisticated. I prefer being simple!

LESSONS TO BE LEARNT

Once again it has been proved that investors almost to a man including the financial professionals find it impossible to deal with anything other than rising markets.

Our basic philosophy of a Great Defence and not a Great Offence is more appropriate than ever as those who ignored risk in their submission to greed over the past few years now find themselves in desperate straights. This army of unfortunates were swept into their demise by attractions created by Institutional promises developed to dupe and transfer wealth from the gullible public to the greedy middle men. For the past three generations I have warned about investments in large funds due to their total lack of liquidity. I have perpetually lectured against trusting the Big Names and have always insisted that the bigger the name the bigger the con. Think of 'Citi' Bank and the rest of the 'have beens' And what about Warren Buffett and his much trumpeted Berkshire Hathaway. In November of last year the valuation of the fund was equal to the valuation in 1998 which had then followed by a further 50% collapse. From September of last year the fund collapsed by 45%. If this was my performance I would be out my ear but because of his 'name' nothing is heard of the shambles.

When it comes to the established Institutions the chart below clearly indicates the inability of these institutions to deal with Bear markets. The reason is that money invested with Institutions is always in a precarious position perpetually hanging on the edge of a cliff. The facts show that the bigger the name the worse the risk. You must understand that in bad times they are illiquid much the same as the current housing market. When you need your money the most you can't get at it…and things could get far worse than it is today.

















As Schultz suggested in his book Panics & Crashes find yourself a fund run by a 71 years old doddering idiot…they have the experience that counts. I am 71 in May and I have 55 years experience in this business and that has surely been clearly demonstarted over the last 12 months.

If I was you, I would contact us today, for this year could be much worse than last year ... we can then prepare for the great opportunities to unfold!

If you would like a personal word whether you are a subscriber or not, please feel free to ring me on

0161 285 4478.

Regards,

Fred Stafford