Summer's been good for us at The Right Side. We've been pretty much on the right side of the markets, despite their storminess. I hope you've had some success.
But now, it's cold, wet and windy. Slippery brown leaves are already making my driveway here in south London messy and treacherous.
Autumn is upon us. And in terms of the markets, autumn always makes me wary.
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This time, bankers are whispering about another Lehman's moment. That could happen. But don't get sucked into thinking this is a rerun of 2008.
The trades that looked good back then aren't the ones that made money during the summer meltdown (except shorting the banks, that is). The world has turned and we need to keep up.
Three trades to see us through the tough times ahead
As well as building-up a cash-pile, three ideas helped keep my portfolio upright over the summer.
Our emerging markets play, Ashmore Global Opportunities, has hardly flinched, despite the huge general sell-off in equities.
Gold, of course, has given us some astonishing gains.
And our short on the UK banking sector has provided a great hedge against the Footsie's downdraught. Well done if you were in these positions.
Today, I want to run through why these trades have worked so far and why I think they're still good as we head into autumn.
Let's look at what we're facing.
Don't be fooled by sovereign debt
The US and much of Europe's debt has been downgraded. Yet quantitative easing (QE) in the US and forced purchases by the ECB have propped up the debt markets. But surely this can't last.
Investors have learned a valuable lesson over the last couple of years. Iceland paved the way. When the people don't want to bail out their nation's bloated bankers, they can vote in a new government and stick two fingers up at them.
And if you think that was a one-off, just look to Ireland. They, too, signed up a new government that is finally making creditors pay for their mal-investment. Bank bondholders are not so much taking a haircut as getting skinned.
In Greece, too, government debt holders have suffered and it's likely to get worse for them. And now the guillotine is being greased up for Italian and Spanish sovereign debt holders.
Investors have surely learned that they cannot simply hide under the skirt of big Western governments. That's why many are looking to the emerging markets for sanctuary.
Emerging market government bonds and businesses look attractive. But for private investors, getting exposure at sensible prices is tough. That's why I like the Ashmore Global Opportunities investment trust (LSE: AGOL).
Towards the end of July, I recommended buying the stock at £8.05. Today, the price is down 1.8% at £7.90. That's a great result when you consider the FTSE 100 has fallen over 11% in that time.
During 2008 this stock got smashed. Yet this time around, it's barely flinched. That says something about how the world has moved on.
In the event of further stock market turbulence, I expect AGOL to continue to protect your money, as well as providing some upside potential.
Next up, a look at the currency markets.
Why I think the world's safest currency will stay strong
Before 2007/2008 the world was a different place. At least for the bankers it was.
But then, all of a sudden and without warning, the rug got pulled from under their cosy feet. Money stopped flowing around the system. And money is the oxygen of the banker.
Dollars poured back to the States. "Sell everything" "get my cash back into dollars!" And the sophisticated bankers headed for Swiss francs.
But the currency world has moved on. The Swiss have politely told investors to hiss off they're fed up with the strong franc hitting their exporters. And dollars don't look quite as cosy now that US debt has been downgraded.
So where does that leave investors sitting on wads of cash? Well, many are heading to the only currency that is nobody's liability: gold. I expect more of the same as we head into autumn. Stick with your gold.
But don't expect the authorities to pull another rabbit out of the bag. Remember, this isn't a rerun of 2008.
No more stimulus for the moment
Last time around, the politicians and central bankers got together and in the words of Gordon Brown, they "saved the world".
Car scrappage, boiler scrappage, VAT scrappage. All of this to crank the economy into life and it probably had some effect.
But does our coalition government look like it wants to increase its overdraft on such fripperies? Not to me it doesn't.
And in the US, there's a legal obstacle. It's called the debt ceiling. They've barely got enough cash to pay for their welfare state; how will they find cash for more voluntary stimulus?
Then there's QE. I've made my views clear on this. I don't think we'll see it back for quite a while. At least not this side of the pond.
Mervyn King is rightly concerned about inflation squeezing our living standards. QE devalues the pound and stokes imported inflation. Unless Europe starts printing, the Bank of England will have to sit tight.
The only other reason to start printing money is if the markets go seriously down. The authorities are not about to put in a pre-emptive strike to bolster the markets at current levels.
This leaves the banking sector vulnerable. QE is, after all, a sop to the banking class. Last time around they received their QE bonus as well as new funds from government. New funds were either soaked up in bad debts, or squandered on more casino-style investing. But at least bank bondholders and shareholders got a reprieve.
This time around, I expect bondholders to get hit. And you can't hit bondholders without first skinning the shareholders.
Christine Lagarde, the new head of the IMF, seems to be on the same page. She says banks must raise fresh capital. And if you expect investors to put up new cash, then you must expect existing shareholders to get stiffed. That's how the game works.
Shorting the banks has been a real money-spinner so far and I think there's life in it yet. Find out more about shorting this rotten sector here.
Gold, AGOL and short-banks. These are three ways to keep your portfolio upright as we head into what could be an eventful autumn.
This article is taken from the free investment email The Right side. Sign up to The Right Side here.
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AGOL yearly performance since launch (December 2007): 2007 -2% | 2008 -28.9% | 2009 -6.3% | 2010 +23.9% | 2011 +0.06%
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