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Global Economies

Plenty of mixed signals are being emitted from various illustrious institutions and distressed sectors and companies. Governments gaily trying to present an encouraging picture, but would you trust them? It all looks too suspicious to my eyes. Undoubtedly there is still plenty of cash out there and it seems to be chasing any likely asset as long as it seems a bargain.

Bail outs by sovereign funds are still in vogue and might well save some Western companies that have fallen on hard times. I can yet envisage Persimmon getting taken over by a Chinese conglomerate.

The US duly lowered rates again while signalling a temporary halt in further moves. Rates in the UK and Eurozone are also expected to fall later in 2008. A cheaper pound will bolster our manufacturers while the strong Euro is causing a slowdown over the Channel. The BRIC economies are feeling a slight sniffle coming on but they have still got enviable growth rates. They may not feel so happy with lots of US dollars in their reserves.

Amid some gloom, the US economy is indicating signs of optimism. Jobs data suggest less jobless but not as bad as predicted. The dollar has rebounded, helped by rate cuts in Canada and the UK, causing commodities to fall. There are still, of course, ongoing moves by the Central Banks to free up liquidity by enabling cash strapped financial institutions to borrow against slightly more risky asset classes. The reduction in stress might be seen in the three week tumble in the gold price, putting it back to where it was 4 months ago

UK Economy

In this country retailers seem to be still having a hard time. It will not be long before the weaker ones go bust and some have already succumbed. Other sectors like Banks are resorting to public money-raising with various rights issues appearing. Seems like a case of ‘you go first and test the water’ but they do not all have the same risk profile. In ‘bank speak’ Tier One ratios are quite varied.

Rights issues will likely be a feature of the next 18 months as companies shore up their balance sheets. Barratt (SP down 70% in 15 months) the housebuilder looks favourite to raise cash in that sector after their £2.2bn takeover of Wilson Bowden last year (a rather inopportune time to buy).

Housebuilders are in the spotlight with net reservations down by two-thirds, in fact one firm reported negative reservations last week with more customers walking away from a reservation than actually confirming them.. The 13 year boom for housebuilders is definitely over. SP’s have discounted the bad news but declining sentiment may still take them lower and who can say when sales will pick up. Buyers cannot get mortgages even if they have deposits and have a house in mind, a distressing situation for all concerned.

The builders must stop investing in both land and new sites to save costs. This action will undoubtedly put lots of labourers and craftsmen out of work.

UK Politics

The political situation with a lame duck PM and voters deserting in droves will be likely to lead to much uncertainty and probable extravagant promises from political hopefuls (inc. New Labour) who wish to form the next Government. Who would wish to do anything so rash? Public finance in dire straits, unemployment bound to rise and cost of living soaring. Not a good situation to inherit.

Commodities

Following various threats to oil pipelines in Iraq and Nigeria the oil price is staying obstinately high although some 10% down. Pump prices are certainly making the pips squeak in the US where they have really hurt consumers

Other commodities have declined as the dollar strengthened.

UK Stocks

New Highs for the week were 45 (inc. Telecom Plus) only just pipped by New Lows of 51. Nine sectors are up since Jan 1st while 38 were down in the same period. Biggest risers were; Industrial Metals +34%, Mining +15% and Basic Materials +15%. Big fallers were; Leisure Goods minus21%, Tech hardware and Eq minus19%, and Fixed Line Telecoms minus17%. Interestingly, in the last week, Leisure Goods rose as did General retailers and there were only four fallers.

Mobius investments

Stockmarket movements have helped our recent purchases. Braemar, Bodycote and T Clarke have all made steady upward movements. JKX hit a high above 500p recently but has dropped back, however we should rejoice that it is still in considerable profit. Sir Percy had to fall on his sword. After some indecision in the club with lack of responses to e-mails it was finally sold.

We are still heavily in cash. Soon we shall be looking at some more of Mourads mech proposals so hopefully we will pick up some more go-go stock. On a personal note I could kick myself for not purchasing our three most recent stock picks. However I still have qualms about the market through the rest of the summer. We may well be experiencing a false dawn

Martin Longman - Acknowledgements to Daily Telegraph and FT.