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Last month I recorded that Chinese stocks had taken quite a pasting and I like half the press thought the MPC might raise British interest rates. Adjustment to the latter did not occur but looks certain to come to pass this week. Will it be the straw that broke the camel’s back or will the British public rein in spending, start to pay off debt and even begin serious saving again. I am sure no one knows what will happen precisely but it is a fact that debt has become a serious problem for many householders and the tide is moving against them.

Although inflation is rising throughout the world, in the US it is thought to be coming under control. Here, it may not be as easy to slay the inflation dragon. Five years ago writers agreed that inflation was dead but surprise, surprise, monetary policy and the quest for constant growth has brought it to life again. It is true that house prices are moderating and there are signs that property deals are drying up as exchange chains seize up. Will these effects bring the economy to the brink of recession? It may be too early to say. Hopefully the MPC will be successful in controlling inflation without serious harm to the economy.

There still seems to be some excess liquidity in the system which is allowing private equity to continue to stoke the market and keep private investors hungry for the next deal. However there have been indications that investors who write in the press are starting to withdraw money from the stockmarket worrying that market falls are imminent.

Heating oil stocks in the US are 40% below last years level which is a worry for the administration and this has taken oil prices to another peak and if paying in dollars you might be quite stressed. The dollar is now at a 26 year low against the pound on expectations of our rate rise after US rates kept steady. Petrol is another Achilles heel in the States because refining capacity is flaky. This is a problem which will not be resolved quickly. Right in the middle of the driving season both Iran and the US are suffering the same problem. What irony!

Commodities remain in the spotlight with lead and copper buoyant while nickel has fallen well below it’s highs of a fortnight ago. Gold and other precious metals are steady.

Closer to home Mobius club has been active with the mechanical portfolios and I also have some personnel changes to report. One of our members, Tony Kaye, resigned suddenly and he will be missed. Hopefully we may soon be recruiting a new member to make up the loss. It is pleasing to report a continuing rise in UV even though we took a small loss when selling two shares which breached their S/L. Persimmon and Northgate incurred a loss of £350 between them. In the past week we also had to sell Lavendon and Plethora. The former was sold for a healthy profit although it had been much higher until very recently. Plethora (more than £500 loss) had drifted down almost continuously since purchase and had been a disappointing investment. Lavendon had been one of our most profitable investments even though only held for three months. It’s profit was probably wiped out by the other three but fortunately the rest of our portfolio is holding up well. Tanfield, UMECO and Hamworthy are doing extremely well and long may they continue their steady rise.

At least we can say that we are selling losers and running winners which is what we are supposed to do. Is it not? In my experience we have never owned such a diverse and lengthy list of stocks and our mechanical rules demand that we remain active in the market. Whether we shall be able to succeed in a declining market as well as in a climbing market will be a test for the future.

On the FTSE Voda and BP two of the largest companies in the UK have been making quite a lot of progress, pulling the 100 share index up between them. In the meantime many weaker shares have become wobbly especially property and housebuilders.

At the end of last week (June 30) new highs (49) were almost balanced by new lows(55). Sectors on the move were Mobile Telecoms +7.3% and Tobacco stocks at +4.3% while losers were Aerospace & Defence -4.4% and Life Insurance – 2.3%.

Selling in May or June did not seem prevalent but one can observe a rather volatile market where from the beginning to the end of one month so much seems to have happened. Where will we be at the end of july?

Martin Longman - Acknowledgements to Daily Telegraph and FT.