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Global Economies

Neither high nor low in recent terms, the markets indicate nervousness. The worries that beset the world could be about to get a whole lot worse. After a confident start to last week it all turned pear-shaped. It seems the Fed may be using low interest rates and hang the consequences of inflation. This month they are expected to lower again. One half or one quarter of one percent, it will be an interesting call. We all know that inflation is a difficult dragon to control so the patient may face a terrible time ahead.

The dollar slumped further while the Euro looked impregnable. Doubt it can last. The FTSE 100 again got above 6000 but it wasn’t for long. The available cash seems to be channelled into merger and acquisitions or into the supposed safe haven of commodities. As the dollar slides, commodities are hitting ever higher prices. Gold nearing $1000, oil anchoring above $100 and many metals at a scarcity premium. With supplies being so tight any interruptions like the weather in China or the power supply problems in S.Africa are pushing prices higher. Doubtless speculators are as responsible as any other stimulus.

Two hedge funds, one in UK and one in Florida went to the wall last week. Are they the first of many?

UK Economy

Sector movements are worth watching to see if it aids sensible investing in the current climate. Since Jan 1st eight sectors (including mining, basic materials, industrial metals and real estate {a surprise, that one} have risen while 44 have fallen. The worst of the latter are Tech hardware at minus 24%, personal goods at 19% and general retailers at 16%. No surprises there.

With so much adverse movement over two months it seems the shorters have the upper hand. Long investors might be better advised to wait a few more months until the air clears and more positive signs are apparent. That may not come until the dawn of 2009.

Director’s deals reveal only a couple of interest to me. Firstly three directors of Robert Walters made purchases totalling £600k. Not a bad bet on their own company strength. Well down in price the recent results suggest the ship is on even keel even if this year will not be as good as last. The second is the off-market deals by two Game Group directors who sold £5.5 m of stock shocking the market into a 16% SP fall. Rather naughty making it an off-market announcement. Game is a stock that figured prominently in a Mobius portfolio proposal.

Mobius investments

Good footwork by Anita enabled Mobius to make a handy profit on our first tranche of JKX shares. Having discussed a course of action at the Feb meeting the sale and subsequent repurchase put us in position to repeat the process sometime in the future. We have set a S/L and are keeping an eye on movements. With a share that is very well coupled to the oil price we may use the oil price as the indicator. However JKX is thought a possible takeover target and that would be a lovely bonus for us.

We are still heavily in cash so a start to a new portfolio of Growth shares is welcome. The first proposal, John David Group, looks set to be purchased on Monday 3rd March. This is a retail stock which is not my favourite sector but it does have some strong credentials and it’s current S/P is much lower than it has been. Possibly a bargain. Time, as usual, will tell.

Following the last meeting the club also made a purchase of Persimmon, the first time for many months. Agreeing the buy at about £7 I hope it will prove a profitable watershed for the club.

Having made a pigs ear of my first attempt to write this month’s newsletter by losing it somehow (don’t ask), I am a bit tired of this second effort. So will cut proceedings short and wait for next month’s opportunity to update readers.

Martin Longman - Acknowledgements to Daily Telegraph and FT.