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Global Economies and markets
A month ago I noted that the markets had fallen badly for the first week in several months 3.8% in UK and 4.1% in US. This last week (ending 27.11) saw a miniscule retreat in the UK and a small rise in the US but tiny movements masked two very big daily falls, in the UK on Thursday and US on Friday both in response to Dubai problems and possible default looming. Current week also bedevilled by sovereign debt worries even in the UK for 2010 (mooted by Morgan Stanley).
Just now, the FTSE 100 seems fairly stable above 5000, in fact it remained above that level throughout the month. However the peak was nearly 5400. This week (w.c. 30/11/09) might be interesting as fallout from Dubai may continue. The UK banks have a lot of exposure –perhaps $50Bn dollars and that amount dwarfs most other countries in fact it equates to about half of the loans outstanding.
Bric and emerging markets were downbeat last week with Hong Kong, Shanghai and Japan down sharply. Japan fell 4.4% while Shanghai was down 6.4% (it still remains about half the level of its all time high in 2007). The Nikkei had recorded 5 weeks of declines in succession (about 1000 points). News that Andrew Bolton is going to return to Fund managing when he plans to launch a New China fund in 2010 will I’m sure bolster the confidence of investors and perhaps Mobius should look in that direction. Vietnam raised interest rates from 7 to 8% and devalued their currency. This might be the first of many.
The Baltic Dry Index was buoyant in the early part of November climbing sharply towards 5000 but it capitulated last week when it to fell sharply to 3974 over the last few days. It is still tumbling (30/11/09)
One unwelcome piece of news was the announcement that there were 522 small banks in the US, in the third quarter, which have unspecified problems. That is up 30% from the second quarter. Rationalisation looms perhaps. All the bad news contributed to a rise in the VIX (worry bead index) index by 21.5% to 24.7.
Many writers are suggesting that a pause for breath is now very likely although December is often a very bullish month so fingers crossed and time will tell.
UK Economy & Politics
The parliamentary knockabout continues but the pundits seem to believe that the Tories will win the election in May. However it is very possible that it will be a hung parliament and that means plenty of worries will surface between now and then about how the important issues of the day will be debated and strong decisions taken. We certainly need some strong government since this one is almost paralysed in spite of their majority.
The Cumbrian floods have not helped the country and the cost to government and insurance companies is likely to be huge.
Commodities
Oil is weakening at the month end due mainly to good stocks in the US and ample supplies. Gold too has been strong and hit a new high on Thursday before falling back slightly on Friday to $1176 which is $100 more than a month ago. There have been some interesting snippets of news about gold.
A shortage of the metal has led to the US mint currently suspending the minting and sale of Eagles. This coin has a face value of $50 but surprise, surprise is worth +$1000, I am led to believe. Cue panic amongst wealthy americans Other commodities have been, in the main, buoyant with occasional stumbles. This has been mirrored in the volatility of mining stocks.
Currencies
The unstoppable rise in the Yen especially against the dollar and the euro has been this months story. It is now at a 14 year high against the dollar and it seems likely that the Japanese authorities will step in soon to rein things in.
UK Stocks
52 week highs and lows were modest again this week. 25 new highs (seven of them gilts) and 11 new lows (of which 3 were gilts close to maturity). Similarly to last month, we had 8 sectors in negative territory and 24 positive at plus 20% or greater. By contrast to the summer months only eight sectors are in negative territory for the year with 27 sectors achieving plus 20% since Jan 1st. The FTSE Small Cap index and the FTSE 250 are up a similar amount to last month confirming that the market is starting to mark time. From my perspective two interesting moves were a new high for Ocean Wilsons (the shipping outfit in Brazil) and ASOS also hit a new high.
Mobius investments
Mobius have held their AGM and decided to increase the limit set on total investment amount. In the latest beauty contest Hill & Smith was narrowly preferred. We were short of readies in the stockbroker account so the invested amount was less than it would have otherwise been. Generally we are looking to restrict our number of shares and possibly add to our favourites if they seem to be doing the business. Mourad suggested we look at some top down possibilities by investing in some different sectors specifically tuned to the future. The current portfolio is still looking promising, with Hills & Smith issuing timely new figures which pushed it’s SP up straight away. A serious bit of bad news appeared this week when Qinetiq gave out a profits warning that gave the lie to the jump in the SP at the end of last month. One or two other shares have been a little volatile of late. It is a regular occurrence for fresh statistics about housebuilding numbers and values to push the housebuilding sector up or down but the future is looking better especially for Persimmon.
Social
This week sees us at the Gray Ox for our Christmas meal. Sure we will all enjoy ourselves. It’s a pity that James Allen our new recruit for 2009 has had to break his ties with Yorkshire but maybe he will be able to attend the odd meeting if he happens to be in the locality for a work appointment. I am sure he is still welcome as a sleeping member for the time being.
May I take the opportunity as chairman and newsletter correspondent to wish everybody the compliments of the season, including those who may not be attending the annual dinner.
Martin Longman - Acknowledgements to Daily Telegraph and FT.