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Gann Management Ltd- Celebrating 28 years of
continued success!
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Telephone 0161 285 4488 | Fax 0161 494 6432 | Email
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25th October
2007 |
A SIGNIFICANT REVERSAL!
Following our
overall strategy of Great Defence we rushed into cash to avoid any serious
downturn in the markets thus ensuring that our clients as always would have
avoided the suffering of a potential Bear market. It is little understood that
as markets rise they become technically more and more dangerous. This
necessitates a quick exit strategy together with a widening of risk if the
effects of a major turndown are to be avoided.
As the markets
stabilised our analysis provided a myriad of opportunities some of which were
missed due to our inability to place close exit points, this being a major
discipline of our Great Defence strategy.
However, from our defensive
cash position we were able re-position ourselves fairly quickly. We are now
fully re-invested with an international spread in the most attractive areas. An
asset allocation approach is not our way due to our experiences of the
1970’s when asset allocators and their clients were pulverised by
Britain’s worst ever stock market crash. We allow the market itself tell
us where we should be even down to a total cash stance and do not tell the
market what it should do by placing assets into pre-determined areas no matter
what the circumstances.
The markets have now dictated to us that we
should be repositioned with a wide spread in mainly specialist areas with some
interesting consequences which look especially exciting at this time.
The markets have directed our investments into the following areas:-
GOLD MINING
In the Gold share field we
hold Hecla Mining, Kinross & Asa.
NATURAL
RESOURCES
Our analysis of natural resources has drawn us into
BHP, US Steel, the Venezuelan mining company Buenaventura together with I
shares for Natural Resources and Global Materials. We also have a holding in
the London based mining business Kazakhmys whose principal business is the
mining, processing, smelting, refining and sale of copper and copper products,
including cathodes and rods.
EMERGING
MARKETS
Positions have been taken up for South Korea, Brazil,
Latin America and Canada by using I shares.
ENERGY
We have accumulated an interesting selection of
energy related stocks outside the usual holdings such as BP etc. They are the
Italian oil company Saipem, the wind system company Vestas, the oil and gas
exploration company Apache and perhaps most significantly the Swiss company
Syngenta, specialising in research and development of the agribusiness now
being related to energy supply.
SECTORS
The software sector has been isolated as an area
of potential. The recent crisis was based upon the problems in the credit
market and appropriately our analysis has honed in on Aon Corp which
specialises in among other things risk management for credit problems.
THE FUTURES MARKETS
There are a number of futures
positions in Silver, Gold Bullion, Crude Oil Sweet and Platinum.
All
the above are currently in positive positions following our retreat into a risk
free environment of just a few weeks ago. Although all investments. have
substantial potential for profit, as always, each investment is re-assessed
daily to ensure that we should continue to accept the risks involved. As
always, we will not allow our clients to find themselves deluged by collapsing
prices which history tells us is not too far away. The last Bear market was 7
years ago…historically very significant. However, more of this in our next
‘Where to from Here?’
In choosing advisors and managers the
only sure way is to ensure that the manager has a successful longer term
record. Then wait for a correction in performance before entry. It is not wise
to follow a successful run for all good runs are followed by some degree of
weakness. On these grounds it is now time to consider Gann Mgt…but act
quickly for there is either a last ditch crazy spike up due or the bear market
will be upon us.
October 2007 - Updated
25/10/2007
As promised in my recent WTFH here are
my thoughts on today’s market philosophy.
There has been a
great deal of money lost during 2007 mainly in the credit field. However
investors who have held on to stocks have so far been spared any pain but the
present nature of the markets could be lining up for an agonising blow to be
dealt investors. As for ourselves our main thrust is to affect a great defence
rather than go out on a limb at this time. Cash is king with short term
excursions into interesting markets such as commodities, gold, natural
resources etc.
Markets have moved erratically within this years trading
range. Even if we break into new high ground there will still be a disturbing
tone to the markets.
The seven year chart under shows the current
position of the FTSE 100 starting to mirror the movements in 2000. Gann
commented that after a seven year period things tend to repeat. Also rising
markets rarely last for more than 5 years which signals some danger this year
but more likely next year.
A further Gann indication of trouble ahead
is that the July/August fall on the market was the largest and fastest fall
since the lows of 2003. This also warns of trouble ahead.
The question
is whether we are seeing a repeat of the 2000 trading range followed by a
market collapse. This view is supported by the informed buyers not
participating in the present market rally.
There is much to suggest
caution and limiting investment to short term trading only and swiftly moving
into cash when danger looms as it did recently. This we achieved with great
efficiency leaving cash on the table to pick up assets at much lower prices as
the break into a downtrend this time was narrowly averted. This proves our
ability to move quick and protect when the markets do turn and once again our
clients will avoid the pain of the next bear market and enjoy the benefits of a
falling market. Over my many years in the markets this ability to avoid danger
has led to subscribers avoiding the agonies of all bear market collapses.
Indeed substantial profits have been enjoyed…non better than 2001/2003
where 250% spread betting profits were pocketed.
AND NOW
FOR THE BIG PROBLEMS
It is a statistical fact that investors
enter markets late in their upward development and leave far too late in a
falling market. The tone of investment philosophy at the moment is very
comparable to that of the year 2000/2001 where investors were trumpeting their
unrealised profits and experienced advisors had their emphasis on protecting
capital and were scorned. In fact most managers who got it right lost their
jobs before their move into cash proved to be well founded.
I well
remember delegates at our seminars in 2000 expressing their delight that they
were outperforming Gann Mgt. When I asked them where their capital was then
invested they invariably replied that their so called profits were unrealised.
We only ever show results of realised gains. A year or so later most were
astounded by the way in which their profits had disappeared along with a
substantial chunk of their capital.
The worst consequence of this
level of depletion of capital was that investor’s confidence is shattered.
This, as always, was at a time when substantial profits were available on the
downside followed by the pickings from the inception of the next bull market.
Indeed most consider the markets are nothing short of hell on earth but several
years later they are there once again repeating the same old mistakes. After 53
years in the business I am perpetually astounded by the short term memory of
most investors and their ability to repeat the same old mistakes over and over
again.
The theory behind the seven year cycle of tops is that after 7
years investors have forgotten the lessons of the previous highs. This
year’s movements to date have a similarity to the pattern of 2000 as shown
on the FTSE 100 chart. Informed buyers are still ditching shares and have been
for some time as they did before the 2001 crash.
This is the time for
extreme vigilance and patience coupled with an intense effort to readjust
investment strategies away from buying equities to ‘shorting’ with
expansion into the commodity and other currently unfashionable fields. Gann
Mgt. is fully equipped to assist here.
It is an interesting statistic
that those managers who lead in rising markets are ill equipped to deal with
the vagaries of falling markets and invariably find themselves bottom of the
performance tables if indeed they have a job at all. The answer is to avoid the
rising stars and look for the long term professionals with sustainable track
records through thick and thin. Of course, I would say that wouldn’t I?
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