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Global Economies

Nothing is safe and all markets are trying to come up for air. The Baltic Dry Index is languishing in between 700 and 800 a far cry from June last year. This is an indicator of trading activity in commodities, foods, you name it. Reduced trade between economies is a sign of the drastic reduction in economic activity and it affects China as much as the US. It may even be a signal of a long term change in the standings of the great manufacturing powers from West to East some commentators suggest. Employment levels are falling and again will impact China just as it is hurting the developed countries. Many people and families will suffer. As pointed out by Bob Croft at the AGM of Mobius, Need trumps want and many individuals worldwide will have to re-emphasise need and push want back until times change.

Middle East tension has flared and this has brought the oil price sharply up from a surprising low, however the drop in activity and increase in stocks suggests that prices will fall back perhaps below $40 and maybe down to $30 before a bottom is formed.

UK Economy & Politics

The political scene is developing into an untidy scrap with no party gaining kudos or great support. However the economic facts of life are likely to increase pressure on the Government and we can expect more messy initiatives to get spenders out and to protect the weakest as dole queues lengthen. The Christmas effect will soon wear off as factories come to a standstill. Time is needed to bring things back to an even keel and little will change until after next Christmas one suspects. More bad news will follow the current crop of poor results from retailers even though they may be slightly less bad than analysts expected.

Currencies

The pound may have reached its bottom against the dollar and Euro but it has been a hair-raising ride. It’s a whole new ball game for us as consumers and the country as a trading nation. Rates have not bottomed yet although they may fall less fast than before in UK partly because of the fall in the pound. Even so it is considered that rates here will fall close to zero. US rates have hit serious lows and Euro rates are now thought unsustainably high suggesting a further substantial fall. Within a month or three we will probably be in a period with the lowest interest rates, around the globe, ever seen from central banks. Quite unbelievable from 12 months ago. But these are remarkable times.

Commodities

Commodity prices have steadied and mining companies are recovering poise. In fact, BHP Billiton, a favourite of ours is nearly doubled from its low which will certainly be encouraging investors. However there could well be further stock market disruption and new lows might occur. I have noted oil’s price movement above.

UK Stocks

Stock markets have made steady progress since the turn of the year but this bear rally is not to be trusted. Volumes are low as they always are around Christmas and small trades can move the market disproportionately. Volatility still abounds. We can expect many stocks to make new 12 month highs but again caution is required. New Highs last week were 52), still outnumbered by New Lows at 157 (inc AIM 74 and Investment companies 64).

Mobius investments

No change in our investment position but Blackrock Mining Warrants hit a new low last week. Insignificant really and they will likely rise soon in tandem with the mining companies recent recovery. However there was a huge influence from the mega bids which have recently been scrapped (eg BHP for Rio Tinto and Xstrata for Lonmin).

Forecast for 2009

At the AGM, members stuck their necks out by forecasting a position for the FTSE 100 index in November 2009. They range from 5400 from raging bull Mourad to arch pessimist Bob at 3800 with others at 5000 Karim, 5100 Mehrdad and 4800 Martin.

From the FT I have found the following forecasts related to the same index but for end December 2009. Estimates ranged from 5600 high to 3700 low. Thomas Becket 5600, Kevin Goldstein- Jackson 5280, John Lee 5250, Richard Hunter 5000, Justin Urquhart-Stewart 4600, Nick Louth 4300, Dominic Picarda 4000, David Stevenson 3700. Most of these people are contributors to the FT. The percentage variance is huge.

In the Daily Telegraph a further trawl found the following prophets. Gavin Oldham 5555, Annabel Brodie –Smith 4700, Mark Dampier 5000, Julian Chillingworth 5100, Juliet Scholing 4800, Mike Warburton 5500, Mark Harris 4850, Guy Miles 4800, Philip Wagstaff 4600, Alan Steel 5600, Andrew Bell 5500, Ian Chimes 5000, Nigel Cumming 4900, Ken Taylor 4500, Colin Mclean 4600.

The average for all these luminaries including Mobius brains happens to be:- 4886 A small matter of different target dates but there is clear indication that end year forecasts are lower than current level.

Martin Longman - Acknowledgements to Daily Telegraph and FT.