Market Update

For the first time in years, sentiment in the markets seems overwhelmingly bullish.  While I've participated, to some extent in this bullishness since December 2012, I really can't share that overwhelming optimism that seems to exist.  In fact, I think I can pinpoint where this has happened before.

First the good news, I made major investments in some investment trusts on big discounts last year and it has paid off ultra-handsomely.  The JP Morgan trio of UK Smaller, European Smaller and Japanese smaller were all on 18%+ discounts in the summer and autumn of last year, which helped me think counter-intuitively and let the discount help me realise I must be getting a fair deal, despite all the negative sentiment.  Now, Japan Smaller is up an amazing 50% since then, with Euro and Uk managing 30-40%.  Couple that with picking up Henderson Opportunities on a 25% discount and the share portion of my portfolio has zoomed away.

Now the for the not so good news...

Gold is down and the miners have got slammed.  GPM (Golden Prospect Precious Metals) has been a dog.  So there's some of the gains elsewhere gone.  My mistake is I reckon I was too early with that one.  I'll continue the monthly investment because gold will have it's day again, which brings me nicely to the point in history this reminds me of.  In 1977-78, world stock markets flew away exactly the same as they are now.  Furthermore, gold and silver experienced falls and stagnation, many even sold out, so I read, believing the economy was fixed and the boom was over.

It wasn't.  In 1979-80 gold and silver flew into the stratosphere and the miners followed suit.  Shares tanked and remained low until 1982 when someone finally did what needed to be done to restore faith in the financial system.  Right now, I don't see any such person with the same convictions on the horizon.  In fact, all I see are inflationists, Keynesians and a load of gold-diggers in it for themselves.

That's why I think this "recovery" is fake.  Also, where are the dividends to back up this growth in share prices?  The ultimate irony of this must be that a lot of the high payers in the oil and minerals sector are the ones underperforming.  Hence the FTSE has not boomed as it might.

So, don't sell your precious metals.  I won't be selling my shares yet either.  Investment trust discounts on my selections are not narrow enough yet to indicate a market top.  Ok it's never a perfect signal, but it's the best one to go on...