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Global Economies

As predicted last month the FTSE 100 is showing itself prone to bear rallies only to be followed by further collapses as it lurches down in the direction of 5000. The rally from end March to mid-May was a very false dawn. This weeks news about tumbling house prices with no buyers in the market will not help.

So many emerging economies are now experiencing galloping inflation which will likely exacerbate inflation in developed economies. The two v’s namely, Venezuela and Vietnam seem to be vying with each other to top the inflation league.

Interest rates are predicted to edge upwards but at present there is little certainty about anything. It seems that few people believe all the bad news is in the public domain yet. Even the banks are not above eking out further bad figures as the summer months pass. Some analysts even predict that housing problems in the UK will not return to last years situation for 5 years or more while credit and banking difficulties will persist for up to two years. It seems a whole new ball game has started and no one can see the end.

A recession is more or less confirmed it is just a matter of time before figures will be issued to justify the gloom. Then the pain will begin. Cash is definitely king. Equities look cheap but aren’t necessarily so.

In a way the weakness of the pound against the Euro may be a blessing although it will jack prices of goods and services so hurting inflation prospects. I would not be surprised to see the UK suffering stagflation as possible ways of controlling the situation are severely constrained. Mervyn King, the Governor of the Bank of England is certainly very gloomy about future prospects. Today 1st July sees another big fall on FTSE with Dow also looking suspect.

UK Economy

No good news on the horizon for Banks, Housebuilders or Retailers so really it’s a case of wait and see while grinning and bearing it.

UK Politics

Gordon will soon turn round to look for the knives in his back. Will he last until Christmas? Doubtful, although if he calls an election it will be a case of no party wanting to win in the current whirlwind that engulfs all economies.

UK Stocks

New Highs last week were 21 (inc AIM 4) substantially outnumbered by New Lows at 280(inc AIM 86 and inc 73 Investment Cos). The worst figures I have seen for a long time. These figures again show how smaller cap firms are being affected worse than larger. Significant new lows were big housebuilders (inc Percy[for the second month]).But Barratt which is in hock up to it’s neck is really causing much of the trouble itself with the untimely bid for a peer last year. There were very few sectors untouched by the carnage, but what can you expect with the Dow dropping well over 400 points in two days. In the UK leading sectors were Ind Metals, Oil Equ and Servs and Mining out of 6 rising sectors. 41 sectors have by contrast now fallen this year with Leisure Goods now down 32% and Gen Retail down 31%!! All figures since Jan 1st.

Mobius investments

As the markets tumbled Mobius found itself with some shares which were succumbing to the all round weakness. The club took a decision in June to avoid sectors which were exposed and look for more defensive stocks. Meanwhile we would hold fire while the strategy could be employed in selection while we retained a strong cash balance. Indeed there will be a time to employ this cash when markets settle .However far ahead that may be? We will be researching value stocks in preference to growth stocks.

The buoyant oil price has helped to keep JKX flying high and after a blip about 10 days ago it is over £5 again.

My personal portfolio is looking a bit haggard. Recent falls in Percy and Ashtead (in spite of recent positive trading results) as well as a catastrophic fall in Tanfield have put me on the back foot. Fortunately some of my recent purchases like Low and Bonar, JKX and Pressure Technologies are holding onto their gains for now at least.

Club Membership and Events

At our last meeting Shalini Vohra and Sameer joined us for another meeting at which she asked us to fill in a questionnaire she has designed for her Doctorate. All members were pleased to help and duly completed their effort.

Martin Longman - Acknowledgements to Daily Telegraph and FT.