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Global Economies

On the eve of the G20 London meeting (will it be a damp squib?) the world is still beset with worry. Spain has enormous and growing unemployment and has had to fix a bank failure recently. The larger banks like Santander fell heavily and maybe other banks will hit trouble. The US is still having major problems with their giant car makers. It’s government has given one of the top executives the push, while they still grapple for a restructuring solution. Other major economies eg China, Russia and much of South America are in terrible straits and the end game is still not in sight.

In just one month the Japanese carry trade has reversed again so that investors in Japan are again supporting high-yielding foreign currencies (like Australia and new Zealand), while their manufacturing base is wilting. In spite of manufacturing cuts their stock market has been a little stronger.

Some fringe countries like Australia, New Zealand, Sweden and Norway are thought to be unlikely participants in quantitative easing which is at present bolstering those currencies. However it is early days yet and it’s effect on the UK and others is not quantifiable as yet.

Last week ending March 27 saw a strong market performance (the second decent bounce in 2009) leading commentators to wonder if the market had seen it’s bottom. However, big falls since then may be the start of the last collapse of this current bear. So it may be sensible to beware of false dawns just for now. It is a good idea to keep in sight the levels for the FTSE 100 of 3400, 3160 2900 and 2685 which I listed last month. All of these marks could be visited and it will be a brave man or woman that calls the bottom. Even so, from an investors perspective shares are at historical lows, so anywhere in the 3000 to 4000 range could be a great entry point to build future solid financial gains.

Having had a good run the Baltic Dry Index has fallen back hard and over the last week it has touched 1600 suggesting that ship chartering is still volatile. It certainly looks as if the 1000 point rise during Feb was a bit premature.

UK Economy & Politics

Another week and another dose of sleaze. Highly likely that the Home Sec. Jacqui Smith is on her last legs as a minister in this government although Mr Brown probably realises he is damned if he sacks her and damned if he doesn’t, so is it worth it? I feel it is another nail in the coffin of this accident prone government. One that always denies any responsibility for the way things turn out.

A worrying sign about the difficulties now infesting the nation’s finances is the failure of the first auction of gilts when the appetite of investors proved not to be sufficient for the full offering. More auctions are on the way so it will be interesting to observe the result.

Currencies and rates

Rates are at century lows and currencies are in unusual juxtaposition. It is also likely that some of the strange currency relationships eg. pound v’s dollar will not readjust for many months yet. Hopefully UK plc and sterling will gain some benefit over the coming months or years. Sadly there are many losers from the low savings rates on offer particularly pensioners who have little protection against rising prices increased demands by utilities or councils.

Commodities

Base metals are still weak although copper had a boost during the month due to increased demand from China. This was considered to be due to restocking. Precious metals have come off their highs while oil has strengthened somewhat-tending to hover around the $50 level. Apparently it takes about 15 months for OPEC cuts to stabilise the markets. Certainly natural gas prices have retreated as demand falters and that may persist for anything up to one year and maybe longer. It would however be unwise to project demand figures far into 2010 when another winter like this one could send demand through the roof.

UK Stocks

New highs were again restricted this month, like last, at 5 (yes five), with lows only 29 of which 19 were on AIM. These few pointers would indicate that the market was becalmed during the week however big moves in bank and commodity stocks had influenced daily shifts.

Sector changes are much the same this month as last month although the period covers 15 months total and “industrial metals” is now showing 132% gain while fixed line telecoms is the biggest faller(minus34%), probably reflecting the BT price crash. Although many punters are being seduced by the greater potential earnings offered by shares v’s fixed income, Bank accounts or Building Societies it seems a bit early to be plumping for shares as the answer to a prayer.

Mobius investments

The Mobius portfolio was augmented again in the past month with a largish purchase of Royal Dutch Shell A following Karim’s mini report and a second bite at the semi-sys selections of Feb . We bought a small tranche of Clarkson which was second favourite from the beauty contest we held. We invested in Shell for income and value and it is good to know that Shell intend to increase dividends in line with inflation over the next year or so.

Martin submitted a similar mini-report on Persimmon and suggested a purchase at between 300 and 350 pence where it currently stands. Unfortunately nobody has yet supported a purchase in spite of the good news about renewed interest in the house market and a big jump in mortgage applications during Feb/March. I would like to see the club invest £2500 at current price level or lower and put a 175p S/L on ie roughly 50% but hopefully secure .

Martin Longman - Acknowledgements to Daily Telegraph and FT.