Since the last update America has resolved its debt ceiling issue. Japan is now ‘growing’ after the Tsunami, emerging economies continues to have impressive GDP growth and the UK is paying less to borrow money that it ever has. The Corporate world, in the main, continues to break earnings records and now have an extremely positive cash position in relative historical terms.

With this backdrop you may have expected markets to be positive and moved on from the financial crash of 2008/9. But the reality is very different. The ‘bad debt’ of that period has still not been purged and sits on bank and Government balance sheets around the developed world. Europe, who essentially blamed the Anglo American banks for the crash have not recapitalised their banks and although they were not responsible for the subprime housing market debacle they may have an even bigger problem with Sovereign debts that look to big to fail and too big to save.

This has meant huge volatility and a market that’s been very difficult to have much confidence in.

What has this all meant for our Portfolios?

All our Portfolios have protection in the form of Gold and Inflation Linked Gilts which continue to do well in the current environment although Gold shares (especially small cap) have underperformed the Gold price quite considerably…..market comment suggests this is just an anomaly which will adjust over the next several months and I see no reason to think otherwise.

There is a move within markets towards Government debt and safer equities together with risk aversion moves away from commodities and energy. Our view goes against some of the market sentiment here. We cannot understand why you would want to own Government debt at record lows where, in many instances, the interest payment is not even covering inflation. We also believe the move away from energy in particular is odd in that with an ever decreasing energy supply and an increasing demand from the developing world, in very simple economic terms, it must drive the unit prices up and make energy companies more profitable.

There have been a few minor changes to the portfolios. For the higher risk portfolio’s we have adjusted the gold position to take advantage of the current anomaly in small cap gold shares. We have added a Trojan fund to most portfolios (a dynamic fund with an excellent track record) and adjusted the medium risk portfolio’s risk down slightly by a slight increase in exposure to higher yielding shares around the world. Our overall view has not changed and we still believe in a diversified portfolio that avoids Europe, Commercial Property, non-inflation linked Government debt and country specific funds wherever possible. Continual protection is provided via Gold and Inflation Linked gilts, steady returns/long term growth from Absolute/Dynamic fund sectors, Agriculture, Biotechnology, Emerging Markets, Energy and High yielding shares from around the world.

Notwithstanding the move to Government debt and away from energy this year our portfolio’s still stand up well to benchmarks. We believe they are extremely well positioned long term and we will continue to monitor individual funds with the view of trying to find the best funds available on the markets today.

Period Ending 16 November 2011