27th Feb '21 by Edmund Shing

33 comments 3802 reads

Buffeted by a Bond Breakdown

Summary:

New podcast and piworld video interview available!
The commodity supercycle narrative gains traction
US government bonds send a shiver through stock markets
Sector rotation: Cyclical Value and even Banks in vogue!
Small-cap bias continues to pay dividends
Behavioural finance: why investors should learn to meditate...

piworld interview with Edmund Shing: The Idle Investor

I was privileged to record a video interview with Tamzin of piworld this week, which Tamzin has now released into the wild…
(click on the link to watch the video)

piworld interview with Edmund Shing

I have to say, Tamzin is a great interviewer, and both Tamzin and Tim have a great set-up and make recording interviews a pleasure! So thank you for the invite Tamzin, although I still feel that I am not up to the standard of your previous guests...

New podcast out this week!

Perhaps poor timing given the price action of gold on Friday, but I wanted to highlight my latest podcast on the attractions (long-term!) of the yellow metal…
(click on the link to listen)

Time for gold to shine

In today’s podcast, Edmund and Charlotte discuss gold.

1. Why is gold considered as a financial asset to be invested in?

2. What is a realistic target for the gold price in 2021?

3. How does gold compare with other precious metals, like silver and platinum?

4. In practical terms, how can investors buy gold and other precious metals?

Look, I know that the gold chart looks fairly ugly at the moment in the short-term, with the latest leg down being driven by the recent sell-off in US Treasury bonds (more on that below), but I would still refer to the longer-term charts for gold and other precious metals.

Precious Metals still look bullish long-term

WuTHffyvIefg2vtlwn9VjpF6PBZ7YBlqv15auST1HRBc_90je1nKQoX2emyPQEDXpWIwXuAZJCh5OYayRECOoVJiZXeEe9HF0ZVTvGV1ssEeLazLKSEPpqgilFdtI6x3XLNwXu_q

Source: tradingview.com

These remain bullish to me, suggesting that a buying opportunity in precious metals and associated miners is close at hand. Of the three precious metals shown above, I see the most potential for platinum (huge catch-up potential to gold), then silver and finally gold.

As I have previously mentioned in prior Musings, within the platinum group metals space I am also bullish on prospects for palladium and rhodium - note that rhodium outperformed all other precious metals this week, continuing on its astonishing ascent. Rhodium is used mostly…

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Rusty2

27th Feb '21

I also sold out of Jubilee Metals (LON:JLP) recently, I was not happy with the share based payments which looked excessive to me, plus there was quite a few negative comments about the management on another post on here. I hold Sylvania Platinum (LON:SLP) and Tharisa (LON:THS).

William K

28th Feb '21

Many thanks as alway Edmund. Metals and commodities certainly seem to be flavour of the month. I confess bond yield curves leave me cold, but I'm working hard on factoring them into my plans!

The Phoenix

Edmund how high do you think the fed will allow bond yields to go before they try to crush them back down from my understanding they are now back to roughly where they were pre covid so still super low. The problem seems to be that the slightest hint of interest rates going up causes chaos in markets these days so central banks now seem trapped in super low interest rate world where with every future black swan they will have to be crushed down further we will probably be looking at minus 3 per cent by 2040.

Edmund Shing

Hi clarea
Well given the amount of borrowing that the US government has and will continue to require to refinance, I think the Fed is in a very tight spot and will have to act sooner rather than later. They will of course hope that they can talk rates back down, but I think they will have to do quite a bit of bond buying too if rates head towards 2%... Otherwise the impact on the interest cost of debt for the US government will become too high...

You could also look at the likes of Warehouse Reit (LON:WHR) Residential Secure Income (LON:RESI) Gresham House Energy Storage Fund (LON:GRID)

Nope! If I buy oil exposure clarea, I would prefer cash flow-generating exploration & production companies.

Hi SCI20, my pleasure!

100% agree! Actually, I have mentioned Tin in previous Market Musings. It remains one of my favourite industrial metals exposures for exactly these reasons!

Michael Prince

Enjoy your posts. Found your Piworld interview very interesting.

Are you holding these just for the dividends or are you expecting growth too? ($WHR $resi $grid)

Have you looked at $pxc at all? I don't know much about mining companies and struggle to understand them.

Gdawgeedawg

Thanks Edmund. A couple of things that have combined to be a game changer for me in terms of reducing the amount of "doing":

1. Tracking costs of trades (broker fees and any stamp duty) in a diary and setting myself an annual target not to go over

2. Establishing a traffic light system for helping me decide when something is a buy, a hold or a sell. Have attached my current system (green = happy to buy, yellow = happy to hold but don't buy more, red = sell). Shares move into different categories as either their price or fundamentals change - so provides a nice framework for me to ground decision making in.

bullhead

1st Mar '21

when it comes to the longer term outlook for BTL I think the small scale landlord will be pushed out in favour of bigger companies I recently bought Prs Reit (LON:PRSR) a REIT that builds and rents houses for the private rental market it mostly builds whole estates and looks to develop a community

Surrey Steve

Another great article, thank you Edmund.

I am a little worried about confirmation bias given my holdings in Cqs Natural Resources Growth And Income (LON:CYN) Central Asia Metals (LON:CAML) Sylvania Platinum (LON:SLP) and Tharisa (LON:THS) but see these as providing a hedge against higher inflation and bond prices. Other parts of the portfolio are potentially more exposed to negative effects. Hopefully we are both rights on the long term outlook for metals and miners.

The behavioural aspects of investing are always a struggle. Hopefully the more we have them pointed out to us the greater our chance of combatting the negatives. I have started measuring my holding period and have been surprised how short it has been over the last year, but this may be a function of the way markets themselves have performed. I have also started setting "soft" target prices and stop losses which I regularly review and force myself to document not acting on breaches of the stop losses. Perhaps this is like sitting in a room by myself and administering electric shocks!

MichaelFBS

Hi Edmund

Always read your weekend musings and they are always informative and educational. I have asked Stockopedia why I(we) cannot get a reminder email on publication (a la SCVR) but not deal for some reason.

Trying not to be too active is a lesson I hope I will take away from last year but even so I am not doing brilliantly on that front. I calculated that if I had done NOTHING in 2020 (which I think most would accept was a year unlike most) I would have been up 35% as opposed .2%.

Even with the "don't over trade" at the front of my mind I have still managed to do 16 buys and 7 sells and managed to destroy about 2.54% of portfolio value. Mostly by an absurd sale of Best Of The Best (LON:BOTB) in January 4th. My sales always seem to be badly timed to be at the bottom and my purchases at short time highs. That said only five trades in February hopefully I can keep below that in March. That said I wasn't that keen on Reach (LON:RCH) update this morning and can Sylvania Platinum (LON:SLP) really hit 180p/200p without a major pullback? It is hard to resist taking some profits here!

Over the medium term I would like to move to a more coffee can approach and just have say 20% where I am little more short term but don't think I am there yet!

Regards

Michael

Simon Rowan

2nd Mar '21

Hi Edmund. Thanks for your great reviews and research. You definitely stand head and shoulders with other financial journalists. I like WHR a lot. Just made 3 strategically sound purchases in quick succession across the UK after recent placing. The latest being £5 million industrial site 9 miles from Glasgow airport. Decent near 5% dividend. Paul Scott did a small review recently saying it was the kind of company he would like to park some money in once he's made his millions! They sound a bit more ambitious than that to me. Might not be as exciting as a potential multi bagger, but hopefully a solid way to make money, perhaps a little more slowly. Although the sp hasn't exactly been a slouch so far.

Tommy H

3rd Mar '21

HI Timarr

I think that you are describing my "Am I a Numpty or Genius" Folio

I do not like looking at that, other than the recent sale of Novacyt Sa (LON:NCYT) above £10. Now why I did not sell previously, buy back and sell again, probably I should ask the CIA!

Tommy

4th Mar '21

I have been following precious metal prices over the last week and most are down, some considerably such as Nickel down around 20% in a week, what is happening? Silver/Platinium down around 10%. Even copper is down around 5% today. Rhodium is still holding up.

Momoko Miyamoto

they all rose in value too quickly and too soon so an inevitable correction, rhodium is probably alone in having genuine near term supply constraints but even rhodium could fall considering the amazing recent climb it has had.

ambrosia

mining took a battering today, Rio Tinto down a fat wedge. Does this mean the commodity super cycle is off the menu?

hopefully Edmund will discuss on Sunday. Actually he's bound too, isn't he?

Rio Tinto (LON:RIO) was down as it went ex dividend today and it was a large dividend.

But commodity prices were generally down early in the day but some like copper did recover somewhat.

MarkER

5th Mar '21

Thank you very much Ed for your wonderful articles. I have learned much from them and thank you to the other people also for highlighting 'Hindsight Bias'. I now realise that i most definitely suffer from it! (A bit of a lightbulb moment for me). I am quite new to Investing and trading. I've managed to make a modest profit since i started 12-months ago. However if I had simply kept hold of the stock that I purchased last March and then did nothing for the remainder of the period, i would have made almost ten times the amount that i have done! I thought i had done well selling AVCT for a 100% profit in 2 days (20p to 40P), only for it to carry on to the dizzy heights of over 200P. Similar with WMH, SLP, BOO, OCDO...the list goes on. What i have learned from this is that 'Buy and hold' as a general principle, trumps 'Trading'. It just seems to feel better for me. At the very least i intend to hold for much longer periods than i have been doing. The market is so volatile at present though and this is not easy. I completely agree that "Doing nothing" is the most difficult skill to learn.

Market Musings 27/02/21: Buffeted by a Bond Breakdown

Buffeted by a Bond Breakdown

piworld interview with Edmund Shing: The Idle Investor

piworld interview with Edmund Shing

New podcast out this week!

Time for gold to shine

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Edmund Shing

33 comments

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