Newsletter December 2005

 

My first remarks concern the club Christmas celebrations. I can report with pleasure that members and partners had a really excellent meal at Leodis. A small dispute over extra items on the bill was easily overcome although service could have been more attentive. The food however, was equally as good as the company and we thank Ray for all his efforts to organise every little detail. Especially exclusive executive car parking!!

A photograph of the beautiful new arrival in the Djemame household was shown by Karim to general approval.

Within the last month we held the AGM, which was very well attended.  Officers were more or less re-elected en bloc but these details can be checked with the minutes. We were pleased to have Liane with us again.

What other significant things have happened through November. Well, Gold is flying as are stock markets around the world. (A little bit of inflation doesn’t hurt. Or does it?) Quite a change from October. However 2005 seems to be setting it’s own unconventional trend. How far can markets go? Again, we shall see, perhaps it is only an end of year bull arriving a bit early. Some bulls say that 2006 will be a really good year but aren’t they in danger of being carried away on a tide of euphoria? Certainly the movements in Japan suggest the end of deflationary troubles for them but I wouldn’t bet too heavily on other markets keeping this pace up for much longer. There seems far too much underlying bad news for seemingly endless upwards progress. The UK has been buoyed by loadsamoney from Europe leading a M&A frenzy. Now Euro money has just got more expensive this activity may not have endless funds at it’s disposal.

On our market, commodities, mining and housebuilders have led the charge. With Persimmon expected to secure entry to the FTSE 100 on the back of the successful bid for Westbury creating a much larger capital entity but helped also by the Treasury seemingly set to make REITS a reality. The two factors sent Percy into orbit and the property sector also made big gains from REITS too.

Strong markets usually obtain when there is certainty in the air but which of the several factors is it? Maybe investors believe that the next rise in Fed interest rates will be the last of the cycle but I doubt we have seen the last in Europe. As usual the UK seems to be between the other two zones but will uncertainty with our rates cause problems down the line. If house prices remain steady as they are. Maybe the MPC will feel they have done what is necessary in the tightening line, helped, of course, by fuel prices, which will take a pile of money out of our pockets in the next twelve months.

UK energy markets are a bit sticky. Fuel for cars has weakened in price but home heating will stick us all with rather unfriendly bills in the New Year. Ray and I have a friend at badminton club who works at a large brickworks. They have laid all men off until Xmas and stopped producing bricks because of the huge spikes in spot gas prices. If  repeated round the country it will have a dire effect on manufacturing.      

Individual stocks where we have an interest are generally stronger, particularly BHP, Merrill Lynch World Mining, MITIE and Synergy. But others are giving a little cause for concern. Hamworthy has announced a funding placement which brought temporary price weakness just after we made our most recent purchase but another buy at this level would reduce our average price and hopefully lead to good returns over the next year or so.

Our worst prospect is Langbar and we shall be lucky to see any return from that direction. Today’s news is no improvement on recent announcements and a protracted legal process looks likely.

In the festive spirit I have two tips. Barrie Bluck from Redmayne Bentley and member of the other club says that Vodaphone will be a buy at under 120p, if it gets there. Also an important little bird whispered to me yesterday that C&W is a buy. I am sure that Mourad and Tony will have something to say about that. But careful consideration should be given in this case after all the company is purchasing it’s own shares at around 119p (year high is 164.75p) and the dividends are good. Next major report due Mar 31 2006. and it might be receiving lots of extra energy from Energis and our pals.

Other general news showed 230 companies made new highs last week as against 30 (including Voda and Deutsche Telecom ) making new lows. The Global equity Index of the world has risen  8% this year so any  indices doing better than that has been a good home for investment in 2005 so far. Europe and the UK have reason to be fairly satisfied on that account.

Compliments of the season to you all and Happy Investing as always.

 

ML December 5^th 2005

Acknowledgements to Daily Telegraph and FT.