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Talk about manic markets! A massive fall then a massive rise!

At the rate they are going it is like the virus was a nothing really and what's the problem?

Elecosoft -

Is all this for real? Still hoping I'm going to wake up, none of this has happened and I am back to enjoying the Xmas rally!

Talk about manic markets! A massive fall then a massive rise! This is still on as I write.

After taking virus fright and tanking like crazy, the last few days have even been crazier on the upside.

The American market seems to be gung ho, seemingly now ignoring all the bad news and only concentrating on potential good news.

At the rate they are going it is like the virus was a nothing really and what's the problem?

As they say markets can remain irrational on the downside or upside longer than you can stay solvent.

My thought? I am following it gently and very cautiously. Which means nearly all the ftse shorts were stopped out and profits banked and I've been cautiously dipping my toe back in. But I am staying in a lot of cash. If there is any bad news at all virus wise current greed and fear of missing out on a rise could turn into asecond wave of market meltdown. If you buy too much it can be quite hard to ditch shares when they are tanking.

Reasons to be cautious: The problem is we've never had this happen before - and it's a bit difficult to make any real decisions until the game plays out some more. After all we don't know when things can re-open, planes can fly, businesses re-start. The longer it takes the longer the economy will take to recover.

What is the current market pricing in? Some of the bad news? All of it? What about further down the road?

Is it time to buy now, stick stuff away at cheap prices and wait? Or is there still a wave of downside to come? If only we had a crystal ball.

For now it simply seems sensible to me to stay in a lot of cash and await developments while perhaps putting small money into some real bargains.

Yes there are obvious looking bargains. Maybe things will get back to normal quicker than we think. But then? The market looks forwards and maybe after a quick rise it will go: "Hang on look at all the job losses and the closures and think about the tax rises coming.." We could see a quick recovery but then sudden further downside. I am thinking: time for patience. If you get stuck on the wrong side of a wave, more serious damage could be done to portfolios. So why not relax and see how things play out a bit first? If going in just buy small for now so it is easy to get out.

I've nibbled a little at a few shares that have come down so much that they are hard to resist for small money at least.

AB Dynamics (ABDP) has more than halved since its peak and for the first time in a while trades on a reasonable rating. This tester of cars has got a very decent niche and at depressed prices I am thinking stick away now in the isa for a year or two. I am only nibbling at shares that have a good cash pile and AB does, at over £35m. It says it is not sure how the virus will hit its markets but it is not worried about the components it needs for now. Given self driving cars is the next big thing one can easily imagine the share doubling again in time and perhaps even getting bid for. In the meantime it isn't going bust!

 Thanks very much to follow up seminar delegate Vikesh who pointed out something interesting on the website of TP Group. (TPG)

https://www.tpgroup.uk.com/news-insights-events/case-studies/2020/local-oxygen-generation-in-the-medical-sector/

It is looking at using its own systems to provide oxegen producing capabilities for hospitals. I've bought some here - it is an interesting smaller defence company which seems to keep winning contracts. It got an extension to its European Space Agency contract to end 2022 and in March got a £7m loan which secures its finances for the time being. In February it got a £5m Ministry of Defence contract. At under £50m it is just at the bottom of the value of companies I would usually buy but I think there could be potential 50pc upside from here with patience.

Andrews Sykes (ASY) released a very decent statement - with the floods hitting the UK badly its pumping equipment was in demand. It expects to do its second best year ever. It says virus problems have not affected it too badly so far and it has a big cash pile of £28m to see it through anyhow. Nice longer-term tuckaway.

ITV has been badly hit by the virus as advertising becomes hard to come by and filming of many shows has had to stop for now. Upside

I suppose is there are a lot more viewers around stuck at home. Despite the virus hit at this depressed price ITV looks like a decent recovery play. It's well under half the price you would have paid for it just a few months ago.

If I was Amazon or Apple etc with load of cash this looks like a good time to swoop and snap it up. I reckon any bidder would have to pay 70% plus over the current price. I bought some at a nice depressed price and also bought some live at yesterdays online spreadbetting seminar. 

A small share that has been battered is K3C but at the depressed price I snapped some up. It is right on long-time support and there could be massive upside. it just reported and said it is pleased with current trading and confident in its balance sheet.

All its three brands have been showing positive trends. It quickly took short term measures to combat the virus. Management took pay cuts and with furloughs costs have been reduced by 70pc. It has £7m in cash reserves, no debt and an experienced boss who has managed business recovery before in the 2008 melee. 

I have also bought some Elecosoft (ELCO) This one has just announced some very nice figures in its statement with debt eliminated and now in net cash. It has changed swiftly for the virus with face to face meetings transferred to online for now.

Online seminars!  April 15th is sold out but new date April 23rd mail me at [email protected] for details. For beginners and improvers. They say there has been significant increase in demand for hosted and mobile training and support services as well as reducing costs. Looks like another with patience that could provide decent upside. I picked up some Begbies Traynor (BEG). Sadly we are heading into an environment where insolvencies are likely and that would help it. It also specialises in trying to turn struggling companies around so surely it is going to have a lot of work to do Its staff is working remotely and it says it is in a strong financial position. Looks like a potential winner here, even if there is another downwave. It is surprisingly volatile and best picked up on weakness.

US share Zoom zoomed but then started to fall back which was picked up by the stop loss and a nice profit banked. The short in the AA has done so well that it is probably time to bank some of the gains. After all at 16p even if it went bust I only have another 16x profit to go and if it does go bust I would have to wait some time for the payout.

So kept a small amount open but sold some live at the seminar yesterday , well I mean bought them back so for the website it is a profit of £6,325.

In real life shorting of the AA over the last three year has made me well over £40,000. My guess is many buyers of this never used stops so bought from 300p downwards and never sold. Anyone who doesn't use stops would have seen their portfolios decimated.

Those that did would have come out with much smaller falls and now have cash pile to come back in. Have a look at your favourite tipster/ BB writer or Twitter expert. Bet they have hardly ever sold anything at a loss but only sold stuff at a profit? Now figure out why you rate these guys. 

Elsewhere some hopeful, bargains picked up last time have gone great guns, Computacentre, Telecom Plus, Avon Rubber, Qinetic. I've stayed with most of the shorts - they've done so well but might stay there for another potential downwave.

I think this is an interesting comment piece from The Telegraph:

The fate of global markets will be decided very soon. The first big batch of antibody results from any credible country will be the inflexion point. 

The cacophony of the ‘model wars’ - with academic experts contradicting each other daily, and sometimes themselves - will give way to hard data. We will have a clear sense of how many people have already had Covid-19 and whether or not there really is an iceberg of asymptomatic cases below the visible tip. 

Stock markets will soar, oil futures will come back from the dead, and credit spreads will flatten overnight, if the sampling suggests that huge numbers have already been infected, and therefore that we are well on the way towards herd immunity - as explored by the Oxford ‘Gupta’ study last week. 

It would imply that the death rate is far lower than dire tail-risk estimates and therefore that it is no longer necessary for governments to take out the exorbitant insurance policy of lockdowns, with all economic havoc that they cause.

It would be the ‘just-like-flu’ scenario after all, or near enough, and countries locking down their populations could change tack.

We would then be looking at an explosive V-shaped rebound. The rocket fuel of monetary and fiscal stimulus already in place, or committed, would meet pent-up demand. Capital Economics said a benign outcome would lift equities 30pc by the end of the year.

Emmanuel Cau from Barclays says the point of “peak panic” has already passed. “Our base case looks for a quick macro recovery into 2021. The earnings recession should be brief.”

Michael Wilson, Morgan Stanley’s erstwhile equity bear, says it is time to “buy the dips”. The US Federal Reserve has rescued corporate bond markets from their own folly - as he sees it - and averted a long-due ‘Minsky Moment’ for leveraged finance by invoking emergency powers to buy private debt. Monetarists are flagging an “inflationary boom”.

But such exhilarating optimism supposes that antibody tests do in fact come to the rescue. What if results show surprisingly low infection rates at the other end of the scientific spectrum? It would imply that the five-fold increase in mortality rates seen in Italian Covid hotspots, compared to seasonal averages, are not anomalies that can safely be ignored.

We would then be looking at a global economic ‘sudden stop’ dragging on until a vaccine arrives, with disruptive on-and-of lockdowns that make life impossible for business, and a second viral wave in the autumn for good measure. This would exhaust emergency stimulus and crystallise contingent debt guarantees worth trillions of dollars. It would push the Western and Chinese economic systems to the brink. Markets are not priced for that outcome. 

Monica Defend and Didier Borowski from Amundi say the bad scenario would see “full debt monetisation worldwide”, a cascade of defaults, and “a long period of financial depression”. That sounds about right.

Interesting piece there from the paper.spreadco.com/nakedtrader still performs very well in volatile markets,.

 They kept their 0.8 FTSE spread  I also just asked and despite interest rate cuts it will continue to pay 2% interest monthly on free cash balances up to £20k.  

SEMINARS: NEW ONLINE FROM YOUR HOME!

 NEW OVERFLOW DATE: BEGINNERS/IMPROVERS SEMINAR APRIL 23

 (April 15th seminar is sold out)

Venue: Your pad!

Again all I would cover at a hotel including psychology, how to screen for shares, using level 2, supply and demand, how to value in a time of uncertainty, and loads more all live from the markets and using my real accounts.

If interested mail me at [email protected] with "Apr OVERFLOW seminar" - 

In the future when grandchildren say: "Did you really use actual cash in those days?" You'll say: "Ah my child you will never ever now the deep joy experienced when putting on a jacket you haven't worn for a year and discovering a £10 note."

 Furloughed Easyjet staff have turned to new careers as "Panic buyers for you". They have called it "speedy hoarding" 

Next email will be April 30 (later than normal due to online seminar)

Stay safe ... stay well. Good luck.

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