Some thoughts and updates

It’s been 6 months since I last updated, mainly due to other commitments eating up my headspace to even think about this site.  I’ve still been watching my book, with mixed albeit net positive results.  I’ve also changed jobs which has hugely increased my brain’s utilisation.  Some reflections on the past six months:

 

The macro situation is worsening in the developed world.  The Eurozone continue to kick the can down the road, neither US presidential candidate is focused on paying down their sovereign debt, and Iron Ore demand is falling while production ramps up. The less corrupt developing nations will grow, driving aggregate demand for grain as their food consumption habits change, but I doubt their demand for copper will offset a lack of demand in the developed world.  The coalition is likely to win the next federal election, eliminate inefficient programs, and reign in spending.   As the Australian mining boom subsides, I’m anticipating entitled workers everywhere to bemoan a lack of $100k+ jobs, not understanding that the demand for their skills is dynamic and subject to market forces.   Wages will fall but so will prices, so the only people facing financial catastrophe will probably be those who borrowed beyond their means.  I’m playing defense by paying down my mortgage aggressively, building my skills and professional network, and re-evaluating my high-level portfolio strategy.

 

High-level portfolio strategy.  Most of my current book consists of small-cap stocks with attractive fundamentals and a stable business.  Particularly successful buys in this bracket were AMM, BGL and SNL.  On the blue chip front, I bought COH opportunistically when the share price fell to $45, and have profited handsomely.  While I see more upside in BGL; SNL, and to a lesser extent AMM, are getting to the point where it would be sensible to sell down and hold cash for more COH-like opportunities. I’m anticipating a future split of around 50% small cap value, and 50% distressed blue chips.  Stocks on this watchlist include CSL, BHP, QRN etc.  I’ll potentially liquidate my portfolio over the next few months to play stronger financial defense and position myself to take greater advantage of opportunities.  If mortgage rates fall further I’ll be able to take out a fixed home equity loan and load up on equities.

 

Commodities and Precious metals. I believe the 21st century will experience a multi-century squeeze on certain key resources, and the only stock required to capitalise on this is BHP, with their expert management and diversified asset base.  I plan to buy some physical silver in the future, but I believe it will be several years before the bull market on precious metals subsides.  I’ll potentially also invest in single-resource producers during individual commodity lows, such as OZL/PNA if copper falls to $1/lb.