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Global Economies

Well, just when I thought events were calming down, more crises seem to turn up once a week or so. What next, one might say? Expect the unexpected. In other words take steps to try and secure ones own position. Cleave to cash or near cash. Gold, gilt edged stocks, safe accounts etc. and spread assets into different havens. Watch and hope and change stance a s necessary. Steer towards long term stable democracies.

A look at history will tell you that economic slumps have far reaching socio-economic consequences. Sometimes these take years to unravel but savage wars have sometimes resulted. New tensions have surfaced in Japan where fears of Chinese muscle flexing are evident. Hence the strength of the dollar even while its banks and carmakers are in economic straits and its budget deficit is horrendous.

Expect a further round of interest rate cuts from all economies especially UK and Europe which may have a big impact on currency trading if not already factored in.

Expect also more extreme worries as pension fund assets look less likely to be able to support their large numbers of pensioners.

UK Economy & Politics

Opinions are hardening on the political front but Cameron has lost his lead over Brown due to the apparent perception by voters that Brown is strong in the economic field. He has indeed been depicted in the media as a safe pair of hands to hold the country together as world unease buffets us all. Another month or so of collapsing pound and declining jobs and house values is likely to reverse the popularity trends. A surge in the polls has made New Labour think it would be politic for Brown to call a spring election in 2009 but in reality it seems more likely he will hold until May 2010 when he is compelled to do it. I think I can safely tell him that things will be worse then than now but he probably hopes differently.

The pre-budget report was a damp squib and only some portions of the populace will feel any benefit. Many indeed will be worse off even if they are in steady employment. The shame of it all is that we have so many workers in non-productive public sector jobs which the productive part if the workforce (mainly private) are supporting.

Expect more extreme worries as pension fund assets look less likely to be able to support their large numbers of pensioners. The only sound pensions may prove to be those with copper bottoms such as government backed packages. Meanwhile companies will have to stump up more capital to support their private schemes as investment values decline across the board.

Currencies

For the whole month since I wrote the pound sterling has been under pressure. Rates in the UK were reduced by more than predicted and are likely to be reduced a further one percent next week. Even the Eurozone is predicted to drop it’s rates by the same amount. All these movements from every industrialised nation will make currencies more volatile than usual although re-alignment will eventual stabilise movements. Leveraging is still unwinding worldwide as funds and individuals reduce exposure. However, governments are ramping up borrowing in a big way and the likely end result will be unstoppable inflation. Not a pretty sight.

Commodities

These have maintained their downward movement. Less economic activity has brought cheaper oil and all commodities have followed suit. End result will be a longer recession and possibly depression. Forecasting is difficult but current emerging statistics suggest the worst is yet to come.

UK Stocks

All stock markets are registering volatile trading. Days of large declines are often followed by huge one day rallies. Last week indeed had major markets up 12% in a single week. Short-term traders will have made big bucks. In spite of some encouraging movements worries persist and trading is not for the faint hearted. The FTSE 100 dipped again to around 3800 but soon regained it’s poise. I do not think it should be trusted as there is no good news to support higher prices.

New Highs last week were 24(thirteen of which were gilt edged), still outnumbered by New Lows at 257 (inc AIM 108). These totals are very similar to last months. There is one sector in positive territory after 11 months have elapsed (namely nonlife insurance). 24 sectors are down more than 40% with the FTSE 100 is down 33%. Notably some companies where mobius have shown interest in the past have hit new lows; UMECO, Hogg Robinson Group, and Vislink [not including AIM].

Christmas does not look too encouraging unless a rally develops in the next couple of weeks. One positive sign amongst all the gloom is director purchases of their own shares, which are extremely buoyant over the last couple of months. These include the following shares which mobius club has had a past interest in; 4imprint, Centaur media, Davis Service and Menzies(John)[not including Aim]

Mobius investments

Not much to report but hopefully we can begin to consider 2009 as the year of investment and I look forward to the challenge. (This is what I wrote last month and the same applies).

Social events

The club held a very enjoyable Christmas meal at the Gray Ox. All enjoyed the company and Mourad’s camera will live to tell the story. Next meeting is the 2008 Agm and will be held on Dec 10. It was postponed from November because some key members had to miss.

Martin Longman - Acknowledgements to Daily Telegraph and FT.