The premise behind the ZYX Change Method is to build positions before the change is widely recognized. The diagram illustrates the point.
Our macro positive call on United Kingdom is based on the changes in the United Kingdom entering the second stage . Now is the time to build positions to generate highest alpha.
In due course there will be wider acceptance in UK that the country is not as rich as they thought. UK is also likely to become less internationalist, less European and more inward looking. We are beginning to see early signs of the shift from Royal Navy and Foreign Office budget cuts.
Our strategy will be to build positions on dips in the market. Those interested in hedging UK positions may consider selling short developed markets on bounces . All developed markets are showing high correlation and this is not likely to change over the next five years.
One interesting and convenient vehicle to build positions for American investors is the etf EWU. EWU has a large weighting of BP stock. Those with a positive view of BP over the next five years may benefit from this large weighting.
For the purpose of tracking our performance on this call, we will scale in five percent of the full position at a time on every major dip. As always, we will pick the exact points using extremes in negative sentiment and extremes in our proprietary technical indicators.