The Mosaic Global Fund had a -1.17% return for the month of Sept.

Global stock markets continued their falls during September with continued global growth concerns and ongoing turbulence in Asia. US stocks lost the least being down just over 2.5% but with both Europe and Asia experiencing much larger losses. As we wrote about in last month commentary the long expected interest raise by Federal Reserve did not happen with FED wanting to wait and see how the ongoing volatility pans out.

The Mosaic Global Fund made money in our bond positions but not enough to withstand the re-initiated large falls in commodities which negatively affected our now reduced position. Coming into October, due to the continued volatility and negative trends in stock markets globally as well as in, Gold, Commodities, Emerging Markets etc., the Fund will now be fully invested in bonds and cash.

We get a lot of questions in these volatile times. One especially is: why are you exiting these positions (stock market positions) at this stage when markets have already gone down so much? This is a good questions and I will try to explain this in an intuitive way. While it feels like we have now seen a lot of volatility and markets have lost a lot, if we look at it from a historical perspective this is not much more than a blip. At the end of September the US S&P 500 were down in the range of 10% from its all-time high.

When looking back at earlier larger stock market falls, 2008, 2000-2003, and of course going back even 100 years, we see a lot of similarities with the current market activity. Large stock market drops, i.e. bear markets, always start with a small decline after which this small decline turns out to be an initial face of something much larger. I would like to point out that we are not saying that what we are currently seeing is the beginning of a crash since we can’t know this in advance and it is also not important to make money in global markets. What we are saying is that what we know from history is that one of the worst things, if not the worst, that can happen to us as investor’s is that we are pulled down in large market drops (in any market) since we will then lose so much money that some might not even continue investing and for others it takes them years to re-build the portfolio. Our whole purpose with exiting stock markets, or any market for that matter, relatively early, is that we can’t know if we will see this relatively small fall turn into something much worse. There are many examples of this happening – even recent ones. How many investors are now stuck in gold that could never decline but are now down 40% from its peak, commodities with oil losing more than half its value in a very short period of time, emerging markets that are now down to similar levels to what we saw back in 2009 and the list goes on.

This is what happens if you don’t exit markets that are entering down trends in time. There is now way of telling how much a specific market will go down. As it stand at the end of September, the Mosaic Global Fund’s Trend Filter, has now indicated that literally all markets that we are following except for bonds globally are in down trends and the Fund will therefore exit these down trending markets. Could it happen that we will have to buy back stocks for example at higher prices next month – absolutely! That has happened before and will happen again, but contrary to many we don’t see this as something negative, as investors we see this “extra cost” of buying stocks, as an example, back at higher levels as an insurance premium. This insurance premium helps us to avoid losing 50-70% of our Fund value and our Investor’s capital when the next “unexpected” stock market crash hits us.

Please reach out to us on this email, or give us a call on +352 202 033 27, to find out more about the Mosaic Global Fund and how the Fund is managed with our Trend and Momentum Filters. We look forward to speaking with you soon.

To Your Investment Success!

Per-Olov Jansson & the Cardea Investment Team


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