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Diary of a Dumb Investor: Diamond’s raspberry in your face
Phew, I'm certainly glad I don't own any bank shares! I think it might be time to buy some commodities though.
Markets
Bob Diamond has been laughing at us. You, me and every other investor. Sniggering behind our backs! Perhaps even blowing big, mocking, spit-spraying raspberries.
He’s not alone. His chums in the banking industry are doing the same, falling face-first into their foie gras porridge with ear-splitting peals of laughter.
He’s probably still laughing even as politicians, journalists and the rest of them call for his head. After all, he earned (well, was paid) something like £17 million last year. To be blunt (children turn away now), he’s probably pissing himself with hilarity at the whole thing.
But, as a victim of the banks’ ongoing looting and pillaging across Britain, I’m not sour. I just want to know how I’m supposed to make investment decisions when I have no clue what's going on in the institutions at the heart of the economy.
I’m glad I sold Lloyds (LLOY.L).
Ditch property, add commodities?
Actually, I think my portfolio is looking a bit risky in general.
Where I stood on Monday: Click to enlarge
I'm thinking of selling my TR Property investment trust, but I'll need some time to get to grips with it. My problem is I don't really get what's going on in the fund (it was a purchased by my predecessor on the portfolio): it's a mix of property investments around the world (lots of it in the UK), which Dumb Investor Mark 1 stuck in the portfolio as a box-ticking exercise ('asset allocation' and all that jazz).
I don't think my dear brother really knew what he was doing.
What's missing in the portfolio, I think, is a gamble on commodities. Citywire ran an interview with a chap called Neil Gregson who says resources stocks are 'bombed out' – what he means is that they've been rejected so thoroughly that they can only rise. And he says long-term investors are buying into these shares.
Of course you don't need to work for JP Morgan to realise that a global economic downturn would give Gregson's theory an indecent spanking. But then I don't fancy my chances of predicting whether China will grow fast enough, the eurozone will get fixed, and the US will overcome its political jiggery-pokey...
Oh, this is all so difficult!
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7 comments so far. Why not have your say?
sgjhaghsdg
Jul 02, 2012 at 13:39
I don't have an issue with buying commodities at the moment, but am not sure I'd sell TRY to make it happen as you already have commodities exposure via BP. Of course, using just one company per sector is always dodgy, which is why I like TRY as it holds UK property directly and European indirectly.
report thisDave P
Jul 02, 2012 at 13:40
Ah, yes indeed. A very strong buy signal.
report thisLee Whitehead via mobile
Jul 02, 2012 at 14:28
I have BP, Afren and Range in my portfolio, so I guess I agree!
report thisBernard Bedford
Jul 02, 2012 at 17:19
On the whole it's a good idea to keep a reasonably diverse portfolio and sell when the market peaks rather than when it's at or near the bottom. Markets, like most measurable statistics, revert to the mean over the long term. (Jeremy Grantham.) We don't know the time scale.
report thismike88
Jul 02, 2012 at 21:02
JPM Natural Resources is a great buy in certain circumstances. I'm a former holder.
Is now the right time to buy? Is there demand now or in the forseeable future for commodities? Investments should not be bought just because the price has fallen sharply. That's totally inappropriate. On that basis DI might as well have stuck with Lloyds.
Let's consider the strategy. DI Mk1 was an active/short term investor. His strategy seemed to be to sell investments that showed a profit and to hold losers in the mistaken belief that prices had bottomed out.
So far DI Mk2 seems to have realised correctly that hanging on to losers is inappropriate.
But I fear he is in danger of falling into the same trap as his predesessor. He is selling losers in order to invest in a trust that has also lost money in recent times and which holds stocks that are unlikely to increase in value due to low demand for commodities worldwide.
What precisely is DI Mk2's approach? Is he saving for the short or long term or is he merely trying to outperform his fictional brother? If he's in this for the long term then a commodity trust would be a great buy but the short term nature of this series of articles suggests otherwise.
report thisJames Park
Jul 03, 2012 at 08:02
One comment is exactly right. How can you make investment decisions when you can't trust the people running these companies?
report thissgjhaghsdg
Jul 03, 2012 at 08:41
Why do we need to trust those running the companies when we have such honest, hard-working, and reliable auditors and regulators?
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