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US Inc. v UK plc – a Tale of Two Charts

March 27, 2023

There are still people who ask me why I am so focused on US shares and do not do more with UK shares. Well, read on below and you will see why. The US stock market is a treasure trove of the greatest growth shares the world has ever seen. The UK stock market is – not. The disparity is a devastating indictment of the pathetic anti-growth, anti-entrepreneurial fudge the UK economy has become and if Sir Boring & Totally Useless himself, Keir Starmer, wins the next election as presently seems probable things will no doubt go from bad to worse.

Overview

What are we threatened with, new wealth taxes, higher inheritance taxes, higher capital gains tax. Be still my beating heart; as a would-be entrepreneur I cannot take more excitement. Talk about needing the last high achiever to turn off the lights before they leave. What planet do these anti-aspiration people live on.

But then this is a country where the bien-pensants sneered at Liz Truss because she tried to cut taxes as though that was the action of a lunatic. Really! Well let’s see what two very different stock markets think about what has been happening and how brilliantly successful, or not, UK policy has been.

Over the last quarter century the UK stock market as measured by the FTSE 100 index has gone from 6,959 to 7,405, a rise of 6.4pc. Drum roll, set of the fireworks, shout it from the roof tops – 6.4pc in 25 f***ing years.

Over the same period the Nasdaq 100 has risen 3.42 times. I cannot do the comparison for the FTSE 100 but since 1985 the Nasdaq 100 is up nearly 119 times! Does anyone believe that the FTSE 100 has come anywhere near such a performance? We are stuck with Dobbin the Donkey while the US has found itself a Ferrari.

The statistics for the Nasdaq 100 mean that if you find a US stock which has climbed 100 times since 1985 you would probably think that was good going but actually it has underperformed the index. And this is not just the stock market. It is the real world. There is an energy and excitement about the US economy which is wholly absent in the UK and across Europe.

I voted for Brexit because I thought it might be the chance for the UK to develop some of the fire and excitement driving the US. For one brief heady moment with Liz Truss, I thought, wow, here we go but no the dead hands reached out from the underworld and dragged her down. It is enough to make strong men weep.

Nobody gives a stuff about economic success in the UK except to pull the tall poppies down if they can. Much more important is a how-many-angels-can-dance-on-a-pin debate about whether a heavily muscled man with a penis can become a woman just by saying so. For God’s sake, you could not make it up.

QQQ is an ETF which tracks the Nasdaq 100

Bearing in mind that in order to beat the Nasdaq 100 since 1985 a share needs to have risen 120-fold it is clearly tempting to avoid the risks of individual share selection and buy an ETF that tracks that performance directly.

QQQ shares have recently given a Coppock buy signal and as we can see on the chart below previous Coppock buy signals have worked well. This is also a buy and forget investment particularly if you take a long term view and, ideally, have the funds to add to your position, every month, year or whatever.

QQQ3 for adrenaline junkies

Now we come on to the way I like to invest. Buy QQQ3 and the effect of three times leverage and daily rebalancing turbocharges the performance of QQQ and our Ferrari becomes a Saturn rocket.

Look at this baby. Even allowing for the meltdown in 2022 the shares are up 25-fold since December 2012 v a fivefold increase in QQQ. If you can stand the volatility on this one or better still capitalise on it by regular buying what a performer!

It takes a hell of a share in an individual company to beat QQQ3 but there is a qualification to that statement which I want to discuss below.

QQQ v QQQ3 more complicated than I thought

QQQ3 is amazing but you can only buy it in a share account so you get all that built in leverage from three times plus daily rebalancing which is explosive but there is something you don’t get.

If you buy QQQ in a CFD or a spread betting account and they go up this creates free equity which is available to be invested on the same five times leveraged basis. This means that the straight performance comparison could massively underestimate what could be achieved by investing with leverage in QQQ or any other ETF or individual company share.

This is why I do both. I have leveraged ETFs in my share account but I also try to pick hot, sexy shares for my spread betting account. I have largely abandoned my CFD account because of the advantages of investing tax free with spread betting that might become even greater if Sir Boring & Totally Useless wins the next election.

Since I treat all investing as a game I see it as competition between my share account (leveraged ETFs) and my spread betting account (leverage plus aggressive reinvestment of any gains).

What is always important to me is that whatever I invest in should have explosive potential. I don’t do boring investments and nor should you at least with that proportion of your funds that you allocate to Quentinvest.

Share recommendations

QQQ Buy @ $310.50

QQQ3. Buy @ $76.5

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