As I sit here on the 9th March 2020 I am watching the news flow, stock market futures and data flow looking awful, and as a result I want to inform everyone who invests with OCM, that we will over the coming days as a temporary measure put the majority of our clients invested capital into Government Debt, Investment Grade bonds, Safe Long term rental property funds and Strategic bond funds, so your capital is as protected as we can be for now and we draw a line under the market meltdown and sit safe on the shore.
Every portfolio will eventually be the same and all portfolios will be holding the same assets temporarily as we did in 2008/2009 until we have clarity on the extent of the issues facing the world, economically and the impact of them. All governments can do globally if this demand shock and supply issue continues to stop people working and buying goods, is provide cashflow to failing companies to stop mass unemployment, as Germany has stated this morning, but until we all stop panicking there is nothing that can be done to stop this sentiment driven rout and data getting worse. We will still have oscillations in valuations over the coming days and weeks as we finalise the sales instructed last week as not everything was sold last Friday, and also once we hold the assets we are looking to retain, they will also reflect some volatility as nothing is risk free at this juncture.
Even cash is potentially not safe if this issue gets worse in the coming weeks and months, because although banks following 2008 go through significant stress testing, a fear is, that this demand / supply issue that the world is starting to experience with regional shut downs impacting millions of people at a time, could be bigger and worse than any of the stress tests central banks have forced banks to undergo. Holding cash is not therefore an option until we get clarity on the economic impact and strength of banks to withstand this shock.
Therefore, based on what we see, we believe holding a core portfolio of a very high amount of UK Government and Investment Grade debt is the safest place to be coupled with our holdings of UK long dated leases inside the Time property funds. If we are right and this gets worse, as we expect it to do for at least 4 to 6 weeks, the assets we are investing in should go up, which will provide some short-term relief to this rout. Either way I know I am happier not being fully invested and on that basis none of my clients will be unless they want to be. The risk to us doing this is that the economic data changes quickly and the sentiment turns positive around the future of the global economy which is a risk but not one that we consider high enough to warrant not acting as we are today. We will though monitor this data and continue to keep you informed of what we are doing so you are kept fully aware.
Sorry for this being brief but I am now going to be focussed on executing the changes and your patience will be appreciated and we apologise for what is going to be a worrying time for everyone, but please be happy that we have acted and continue to act in your best interests. We will as always keep you updated during the weeks and months ahead and we hope our actions are appreciated to preserve everyone’s assets rather than just staying invested in this storm, which could be worse than anything for the last 100 years if we all globally do not stop panicking. I absolutely agree that making a decision to protect economies over human life is the world we live in, but what is happening is going to be unprecedented and is therefore a significant event and that requires action to preserve capital, noting nothing can guarantee anything and we just have to take action day by day as we see events unfold.
All the very best and apologies for any stress caused and I hope our actions relives the stress a little.
Jason & Gina
