Newsletter August 2005

 

What a storming week this has been! Chartists are saying the FTSE 100 could reach 5350 in the short term (never mind waiting for Xmas)! The bulls seem to have taken the markets, especially the UK, USA and Eurozone, by the nose and are leading them persuasively upwards. However, like the Duke of York’s men we might soon be coming down again. All this excitement seems to have been engendered by a swathe of FTSE companies increasing payouts at the fastest rate for some years, along with hopes of an interest rate cut in the UK and of course any benefits that may come to our economy from the re-alignment of the renminbi with the dollar.

 

On the commodities front most metals are near record highs especially copper. Aluminium, lead and zinc breached resistance levels last Thursday. Platinum is close to it’s LME high while gold hit a July high. Refinery troubles for BP, yet again, have pushed the futures oil price to $61.05. There was talk that refineries, in the USA particularly, are being pushed too hard and this is leading to fires and blasts. (Who knows though whether terrorists are at work?)

 

At the time of the last newsletter London had not experienced the suicide bomb campaign but the hiatus suffered by the capital is certain to affect the tourist trade. Too soon to be sure of the ultimate damage but it will surely be substantial for several sectors in particular the hotel industry. Our domestic economy is already in the doldrums and crying out for the rate cut which is by no means certain to be agreed at this stage. Jobs are being lost in sundry industries, retail sales are weak, as are housing sales and prices. All seem to point to a downturn in activity. But how far, who knows? Another worry concerns worldwide shipping rates which are apparently weakening. Is it a case of more ships available or less cargo?

 

The winning sectors since Jan 1^st have been Aerospace & Defence (+28%), Mining (+24%) and Oil & Gas (+23%). Each sector much higher than last month and the order of batting neatly changed around.  The worst and almost only fallers have been  Household Goods &Textiles (-12%), Info Tec Hardware (-10%) and Steel & Other metals(-7%), somewhat less bad than last month.. Even more shares attained new highs (230) and a few more hit new lows (29) compared with last month. Significant in my opinion was that 111 Investment Companies (including Merrill Lynch World Mining) hit new highs. With all this organised cash pouring in, it could well explain the euphoria on the stockmarket.

 

Our portfolio has also improved over the month with most if not all shares on the up. We have decided on some small additions to our holdings. Firstly we accumulated additional shares in Tribal. Secondly we took a punt on Crown Corporation. We hope that possible gains on the one will not be counterbalanced by losses on the other. If current gains are held then perhaps this month our Unit Value will have edged much closer to £1.

 

At the last meeting it was proposed by Mourad that the club investigate a new method of expressing our annual target. Instead of aiming simply at a higher UV figure or even a percentage increase on the current UV we should aim to beat positively the movement of one of the UK share Indices by an agreed percentage. The All Share Index was thought most appropriate. This action will be discussed further and will probably run for twelve month periods starting as soon as practicable after the AGM. Members of the club have also expressed an interest in more targets for individual shares.

 

 The July club meeting included some innovative features which seemed to have been appreciated by members. Tony presented a piece on his experiences of spread betting, while Bob gave us his knowledge of charting with particular reference to JJ Murphy’s book ‘Technical analysis of the financial markets (part II)’. Watch out for Part I! A proposal from Bob about the organisation of a financial seminar in 2007 to coincide with Mobius’s 10^th birthday was greeted with some interest. Ideas from the rest of the members will be appreciated.

           

ML August 1^st   2005