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Last month markets were looking stronger with new peaks around the world. Currency readjustment and weakening of the US economy has seen a fallback during November. As expected the UK raised interest rates and it is still uncertain what the future for rates will be on either side of the atlantic. It may be 50-50 at present but as usual the US holds the key. If the FED gets desperate they may buck the trend and lower them after a few months respite. No one is quite sure yet, whether the last two years of rises have yet done enough to squeeze inflation out of the system. For the UK it is reasonably certain that one more rise will come in 2007.

In the light of the problems which beset us, gold is re-appearing as the shining light. Gold bulls are again talking in terms of $800-$1000 an ounce (in the not too distant future). Silver itself hit fresh peaks as the dollar fell. Copper and other metals are off peaks although nickel is very high due to delays in major new mining projects and low inventories of the metal. The oil price has risen over the last week to about $64 after Opec sought agreement to limit production while complaining that there were now high stocks swilling around(100m barrels).

Significant factors affecting the US and UK are debt levels and house prices. Taking the US position first, signs are apparent of a big cooling in the housing market although local hotspots remain. While less activity results in lower consumption it reduces the feelgood factor for recent homebuyers especially when significant mortgages are involved and interest rates are still rising. In UK new house sales seem to be bearing up and other property is also fairly buoyant, however there are serious concerns about consumer debt and restrained purchasing on the high street which also point to a downturn here. Perish the thought, but I even saw, ‘hard landing’ mentioned in the press. The first time for many months.

Is there any serious good news to help markets? Well there is. But whether it can continue might be in doubt. Profits are still coming in at or even above expectations and M&A activity is also rampant, particularly boosted by the ‘Spanish invasion’. Nothing better to keep investors both invested and happy. I think that increased costs are going to scupper profits going forward and Eurozone economies will find exporting to N. America less profitable in the medium term as currencies adjust further. Drug and car company shares are already declining.

The club made two purchases recently. One for the semi-systematic portfolio was a purchase of defence firm UMECO. The other was a modest punt on drug company Plethora Solutions stemming from a toolkit presentation by Tony. We all hope for good news about these companies in future especially the latter where good news will hopefully be announced in a few weeks. Experience of mechanical portfolio purchases suggests that it is often a month or two before the SP’s move upward. We need patience. Other shares in our total portfolio are showing good signs of progress especially when new trading updates or results statements have been made. Delta is well up, along with Hyder, Land Of Leather and Robert Walters. Hamworthy is also rewarding our faith in the company.

Sadly, we had to sell Debtmatters when the sector weakened and just prior to the results it fell heavily through it’s S/L. It has bounced back from 228p to 298p spectacularly to say the least but our system could not cope with such volatility.

New highs(77) on the UK exchange last week, included some old acquaintances like Persimmon, MITIE and UK Coal (@414p phew!) but also some newer names such as Hyder, White Young and Green and International Nuclear Solutions.

New lows (24) meanwhile, which I will not dwell on included Tribal and Patientline which both look troubled.

Club members returned to La Grillade for our Christmas meal on December 2nd . It proved a great occasion with good food (especially the steak), some interesting wines, animated chatter and spiced with some fine singing by Jean-Paul. Karim was accompanied by Laura for the first time but not the last we hope..

Unfortunately the club AGM had to be postponed last month. Hopefully we shall hold it on 11th December.

ML - Acknowledgements to Daily Telegraph and FT.