Justin Skyline

It's May Again!

06 May 2016

Justin Urquhart Stewart, Head of Corporate Development

Is the old market maxim of 'Sell in May and go away…and don't come back till St. Leger Day' still valid? Or should investors look to adopt a different strategy given the looming large market events such as June's EU Referendum?

It’s May again!

Oh dear…another one of those tiresome annual market phrases again: "Sell in May and go away, and don't come back until St Leger Day".

As many will recall, this dates back to the halcyon days of lower, slower summer trading whilst the senior traders were off enjoying the London summer social season – from Ascot, Wimbledon, Henley to Lords – then followed by a relaxing holiday in the South of France. Not a bad life…but not anymore.

During this period, volumes fell, prices weakened and trading didn't pick up until that extended holiday season was over, which was usually after the second week in September. In fact, it was as much an instruction to not bother your stockbroker during that time rather than providing you with any investment guidance.

So does it work? Sometimes, but I wouldn't want to bet the house on it. More helpfully though, I think, we can guide investors that in these days of larger trading volumes, not only from private investors and institutions but also, more importantly, from the robotic algorithms of the high frequency trading systems, we are very likely to see periods of quite erratic volatility over the summer period.a useful instruction for the braver, private investor, is to keep a modest amount of cash to one side.

Thus, a useful instruction for the braver, private investor, is to keep a modest amount of cash to one side, just so that you could, courage or foolhardiness permitting, be able to act swiftly when there are sudden falls or gyrations occur. So what could make these happen?

Well, frankly, it could be anything from a Brexit decision through to US interest rate fears or, of course, the erratic and unpredictable behaviour of the spoiled brat and his cohorts about to address their very important 7th Congress of the Workers' Party in North Korea.

A Contra View.
It is always fascinating when you get to see someone bright or brave enough to make a really contrarian call. These days you usually hear fund managers refer to themselves as "contrarian" investors, primarily on the basis that they don't wish to appear dull by following the herd. Of course, if that were really true there wouldn't be a herd, or even two herds moving in opposite directions. In fact, when you look at the range of investments from these managers, you will quickly find that most (quite the contrary to their claims of going against the tide) seem to be more than happy hugging a conservative benchmark along with the rest of the "mooing" bovine collective.

Thus, when I saw reports that Middle Eastern Investors viewed London Commercial property as attractive investments, it caught my eye as all the other reports over the past few weeks have been suggesting otherwise given comments of overvaluations and fears of the Brexit referendum vote. So, good luck to a family office called 3 Associates Capital Management who have decided to invest some £500 million in Central London, not only to take advantage of some of these short term fears, but also to benefit from a weaker Sterling. Could be a good call prior to the vote.

Changing Japanese military signs.
At the end of WW2, the military forces of both of the two main Axis powers were understandably curtailed. Germany’s armed forces were re-organised for domestic operations only and, when finally allowed overseas, assigned to provide logistical and medical support rather than front line operations. That is slowly changing.

For Japan, the Imperial Army was replaced by the Japanese Self Defense Forces, which as the name implies was for local Nipponese requirements and needs. Now however, as part of the more right wing policies of prime minster Shinzō Abe, new security legislation has now been passed that will allow them to participate in peacekeeping missions for the first time versus only the humanitarian missions that they were previously involved in.

Saving the Rhinos.
After all the frustrating efforts to save these majestic beasts, it has almost become an impossible task. However, one bright individual thought of shipping 80 of them out of South Africa to Australia. Whilst it might not be the perfect solution for this tragedy, at least it might provide some form of biological back up if the worst were to occur and the species are wiped out in Africa.

* * * 

And finallyDrugs, bombs and guns are all targets for the police and especially for their highly honed nose hounds. Thus, it may come as a surprise that a team of sniffer dogs set up at a British airport at a cost of £1.25 million has proved to be extremely adept at discovering cheese and sausages. That's the good news. It would appear that they are not so good at finding smuggled drugs.

An inspection of border security at Manchester Airport found that, during a seven-month period, its six dogs failed to find any illegal class A drugs, such as cocaine or heroin.

"The deterrent effect of the detection dogs was difficult to measure, but seizures alone represented a low return on investment, given £1.25 million spent on new kennels and the costs of operating the unit," said the report by the Independent Chief Inspector of Borders and Immigration.

Each dog has its own speciality in detecting goods (such as drugs, tobacco, cash and meat) being brought into the airport illegally by the 22 million passengers who use it annually.

However, while the report found that the trained sniffers had helped customs confiscate 46 kilograms of cigarettes and 181 kilograms of meat, no class A drugs had been seized.

The report said one dog trained to find smuggled animal products had made "multiple accurate detections, but most were of small amounts of cheese or sausages, wrongly brought back by returning British holidaymakers and posing minimal risk to UK public health".

Managers are now examining how better to deploy the dogs! "Walkies" perhaps?

Have a good week!

Justin Urquhart Stewart
Co-Founder
Seven Investment Management

 

Justin Urquhart Stewart is one of the most recognisable and trusted market commentators on television, radio and in the press. Originally trained as a lawyer he has observed the Investment industry for 30 years whilst in corporate banking and stockbroking, and has developed a unique understanding of the market’s roles and benefits for the private investor.

This article represents a personal and light-hearted view from 7IM, and is based on current financial news and events around the world. Its content should not be used for investment purposes and you should contact an independent financial adviser before making any investment or financial decision.

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The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.

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