Hooray! 2016 is upon us, and has provided us with the worst start to a year ever recorded on the London Stock Exchange. “Marvellous!” I hear you say, “Buying opportunities!” Broadly, I am inclined to agree. I see little point in crying into one’s choice of small libation, bemoaning the fall in share prices. If such falls have so dramatic an effect on an individual, then that individual should not have been invested in shares in the first place. Continue reading Keep Calm and Carry On Investing
Tag Archives: stock markets
Looking for Answers
As I write this article, the FTSE is a little over 6000, pretty much as it was when I was writing for the last issue of The Whistler. Not that interesting in itself, but having been down by some 400 points in the 2 months between, it shows the volatility – to which I referred in my previous article.
There are many factors involved in what moves the markets, but recently eyes have turned to Greece. The markets are not worried about Greece, the country; nor particularly about Spain, Ireland or Portugal (the so-called PIGS). What does concern them is the affect that the problems in these countries may have on the banking system within the Euro-zone. The Governor of the Bank of England, Sir Mervyn King, summed it up by saying “the direct exposure of any of the British banks to Greek debt is negligible. The unknown is anyone’s indirect exposure. It is nigh on impossible to trace the tree all the way through – what happens if a British bank has lent to a French bank who has lent to a German bank who has lent to an Italian bank who has lent to a Belgian bank, which is about to go under because it cannot take the losses on its portfolio of Greek debt?” The answer is that no-one knows.
Continue reading Looking for Answers
Finding your Way
I have had the good fortune, in the last month or so, to meet with a couple of Fund Managers from ‘boutique’ investment houses. They each spoke eloquently and robustly for the best part of an hour, one on ‘multi-asset’ investing, whilst the other concentrated on Japan. There was a phrase that was used, which was particularly relevant – not just to one country – but to many. The phrase was “the Stock Market is not the Economy”.
Continue reading Finding your Way
Economic Weather Set Fair?
Well, here we are, Whistler time again, and it seems that the summer has eluded us! The evenings are starting to draw in, and there is a slight chill in the night air. Yet, the trees are heavy with the fruits of autumn. Yes, there is something of the Equinox about the financial markets at the moment. Equal measure of good and bad news, those foretelling a long, cold, winter; those revelling in the joys of picking the fruit to pop in the brandy, and looking forward to Christmas!
Little by little though, economic indicators continue to improve. Despite the dark spectre of unemployment, still we have seen increased mortgage lending, and yet more (if small) increases in the major house price indices. The Bank of England Base Rate has consistently been held at 0.5%, though on the negative side, there has been another rise in the number of house repossessions (albeit smaller than predicted by many). The rally in the UK stock market, to which I referred in my last article, still has prices on a rocky sort of plateau; a situation that I still feel may well be the case for the remainder of the year, and probably the first quarter of the next. Volatility (within a certain range) has been very much a feature of world markets recently, and there will be opportunities for profits to be made, but probably not to any great degree for the smaller, long-term investors – we will probably have to wait for a while to reap our rewards. Markets are still at a reasonable level, on a long-term scale, and still worth dripping money into, but the fire sale valuations that we saw in the early part of the year, that provided us with such bargains, are gone until the next crisis scenario arrives.
Just time for an update on the mortgage market: there is still a weekly increase in the number of schemes that are available and in the percentage (slightly) of the purchase price that they will lend. Rates of interest are gradually getting less, but the profit margins made by the lenders remain high. (It seems that, in their business anyway, “the customer is not the King”). The Treasury has thrown billions at the UK’s financial institutions, but it seems to have been spent, predominantly, on bolstering up their own balance sheets, and ensuring that their executives maintain a healthy bonus.
Stop press! As I put the finishing touches to this piece, I am thinking back on a meeting that I had today with a Director of one of the country’s leading fund management companies who commented that “it feels like a Bull market again”, the Footsie 100 index is up over 40% from its recent low – to over 5000, talk of bids and mergers abound and, to cap it all, we are just starting to enjoy the first days of an Indian summer. It is easy to get lulled into a false sense of security at times like these. I, for one am packing an umbrella, just in case!
David Foot
Trying to Look on the Bright Side
“Here we are again, happy as can be. . . ”, as my dear old Dad used to sing, when we were setting off on our summer holidays. Well, you could be excused for thinking that happy days are here again, if you read the right papers, or listen to the right radio stations: the ‘Footsie’ is up by something approaching a thousand points since my last column, mortgage approvals up by 19% in February and 16% in March and the Nationwide’s house price index actually rose in March! Years of experience have taught me to not to get too carried away, when things are starting to go well. In fact, I am less optimistic about the short-term future of the UK stock market, than I was when writing my piece for the February/March issue, when I said “when things are looking bleak, it is usually a good time to invest”. Not that I am pessimistic about markets, I still feel that many stocks and bonds are undervalued, but just not as cheap as they were. Many other economic factors are still negative, and there is a lot of bad news that needs to work its way through the system. Unemployment will go up, and house repossessions with it, and they will not be the only ‘bitter pills’ that will have to be swallowed. But ever the long-term optimist, I continue to believe that – barring earth shattering events, this year will be a positive one for stock markets.
The much predicted rally in bond markets doesn’t seem to have manifested itself yet, but more industry luminaries seem to be ‘putting their money where their mouths are’ and investing in quality bonds and bond funds. With some funds offering running yields of 10 – 15% the potential for some capital appreciation (with income reinvested) seems to far outweigh the potential risks. While I am on the subject of risk, yesterday, I met up with the manager of one of my favourite ‘protected growth’ funds. He was updating me on the roll-out of a higher risk, multi-asset fund (also designed and run by him) but I had to congratulate him on the success of his low-risk fund. It was designed to provide 100% capital protection; yet the units in the fund are up by over 6% since the launch in December 2008, a very creditable performance indeed.
Now just a brief few words on the recent Budget. The major impact is on the taxation, and pension tax-relief of those who earn in excess of £100,000 a year. A lucky few, most will think, who have probably already assessed the impact of the new rules. In the absence of any more notable events in the meantime, I shall give a summary of the most important budget proposals in the next issue. Until then, make the best of these ‘interesting times’.
David Foot
westhillwhistler.com 