Gerry Celaya, describing himself as a small Aberdeenshire sheep farmer, addressed the STA at May’s monthly meeting yesterday. Needless to say Gerry, who used to be a board member of the Society, is no ordinary farmer with a BA and an MA in Economics and having worked for many years as a technical analyst for large financial institutions before founding Redtower Asset Management. Over time he has developed a system of ranking asset classes and their subsectors, an excellent way to think when allocating resources in a multi-asset landscape. I’ve always ranked currencies like football league tables, but Gerry takes this a lot further, with scores up to plus ten for those rallying and minus ten for the bombed out; graduations for those in between. He also explained that traditionally a balanced portfolio tends to hold 60% in equities, 20% in bonds, and 10% each for commodities and cash.
Stressing the need for clean, reliable and sourced data, he outlined his current thinking on a few key markets. Seeing the UK as poised between the US and its wish to raise interest rates, and Europe where the ECB has just embarked on Quantitative Easing, he looked at benchmark ten year gilt yields, and the way the yield curve has steepened over the last 20 days, and how the two’s/ten’s spread at 100 basis points is at a key juncture. He sees sterling strengthening against the Euro to £0.6500-£0.6600 because of these dynamics.
In terms of commodities he believes gold is still in a very long bear trend and is simply sitting on support at current levels. On the other hand he is a lot more positive on London Metal Exchange copper (and some other base metals) where the downtrend since 2011’s peak is probably over. Similarly for Brent crude oil where the rout that started July 2014 is complete and the market should recover towards the $80.00 per barrel area.
But don’t take my word for it. Look out for the video of the talk which will be posted shortly in the member’s area of the STA website by clicking on this link: