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As we bask in the unaccustomed sunshine or beaver away in air-conditioned offices we might perhaps ponder what is going on and where will it end?

The hapless CEO of Betonsports is temporarily (would you trust yourself to US justice?) stuck in the USA and our recent investment is looking rather tarnished for the time being. In the Middle East the summer just got a great deal hotter and we must all have sympathy for the innocents who are caught up with little or no safe havens.

Stock markets round the world seem to have turned upwards again with a forceful showing to close July. Interest rates are still wobbling with opinion divided on the direction of the next move. The USA and Eurozone seem to be in for at least one more rise, probably this month. In the UK the pips are starting to squeak and many groups are calling for a halt to rises but I fear they will have to go higher, sooner rather than later. The building boom in the US and Euroland which has been fed by low cost money has created large amounts of debt for many people and in some cases only the interest is being repaid. Where consumers find themselves sinking then the increased repayments are now eating into disposable income as rates reach what most people will hope is the top. Given the indebtedness pervading several countries and populations it is hardly surprising that things still look shaky beneath the shiny facade of new property and vehicles. The reverberations in the sub-prime market in the UK may be a sign of serious problems ahead.

The other problem for consumers is the high cost of energy, the bills for petrol being a weekly nightmare but electricity and gas bills are just as unpalatable and more rises seem inevitable in future at least until the supply situation eases. Oil has been around $73 for a month with little sign of drift.

On the commodities markets copper seems bubbly while off it’s highs but the miners having regained some ground are not the flavour this month.

The US economy is showing early signs of what may prove a sharp slowdown. Much depends on what happens to interest rates but the housing market is definitely showing the strain. To help our own stock market we may have to fall back on that good old standby, Merger & Acquisition activity. Certainly there are still plenty of rumours doing the rounds, and many sectors are crying out for consolidation.

Part of that consolidation helped us to take a useful profit on Retail Decisions and although it has moved higher since our trade we should not be sorry to take have taken that profit when it offered. Our other shares, particularly, Debtmatters and Hamworthy, are all showing good profits and moved up nicely with the market last week. Delta is wallowing just now but hopefully will turn up soon. Langbar and Betonsports are of course suspended and a resolution in both cases could be some way off. Our most recent purchase in the mechanical portfolio, Robert Walters Associates, is marginally down but again we hope for encouraging news before long. As a result of the decision last meeting to sell Synergy, we took another sizeable profit as we have done in the past with this particular share. This trading activity means that the club is still well placed with cash and opportunities will be targeted for future trades. Club members are actively looking at nuclear clean-up opps and other possible targets in the Debt servicing field. Both sectors are considered to have good growth prospects.

Ashtead my long term favourite is languishing a little due to taking over Nationsrent, a peer, in the US. It looks a good fit but is so large relative to Ashtead itself that a rights issue is in the pipeline and so I shall certainly stump up for my share of that. If the US economy is to weaken then it may prove a bad time but the deal is said to be earnings enhancing from the 2008 full year. Synergies and sales of unwanted trading sites which are in each others backyard might make things a little rosier in the interim. Who knows, a bigger wolf might come round to eat the whole tasty morsel. All the best at this holiday period.

ML July 31st 2006

Acknowledgements to Daily Telegraph and FT.