As goes January so goes the year

I really hope not

Apparently the January Barometer has a good track record of predicting the rest of the year. I really hope not, as I had a disastrous start mainly due to Cakebox but somewhat balanced by the c 60% cash levels. Went mainly cash towards the ends of last year and more weirdly the trading account has been in a deep sleep since early December last year mainly because every trade was going wrong so I just stopped completely. Sometimes you just have to know when to stop or even quit altogether. My strategy for this year remains to reinvest the long term pf during this correction with a mid long term view and take the holdings from 3 currently, to around 10 fully invested focusing on UK small cap growth co’s.

Distribution ( big boys selling ) has been a problem since April-May last year, it was something that I noticed myself as most of the good news were being sold into. In the medium term the stock market winners are all about whoever is best at understanding and discounting the future earnings and macro effects as far in advance as possible. The best example I can think of is BOO, the fashion e-tailer who benefited massively from the lockdown and then the macro difficulties just killed its margins. The penny dropped with me in mid 2020 when the markets rallied hard and I didn’t really understand why, as the covid fears were still real. But it was simply the Central Banks. And now this turned into the biggest risk to the markets this year. The Fed went from “transitory” to “transitory for longer than anticipated” to outright panic into raising interest rates way faster than anticipated. When they pump liquidity into the markets it’s easy, everything goes up. But the opposite is also true and because it’s so difficult to quantify this inflation risk, I think the markets will remain difficult, with the multiple contraction narrative and value investing remaining in fashion. No matter how good a company is, when the panic sets in the selling becomes indiscriminate and this eventually turns into opportunity.

I’m sticking with CBOX although not averaged down any more shares yet. I think it’s more prudent to wait for the dust to settle, simply because it doesn’t matter what I think. It also matters what others think, and many investors will just bail out and won’t touch the shares purely based on accounting blunder headlines. I hope the management really understand how important that is.