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Sorry for the delay but my wine and sun holiday in Spain was very taxing. I realise you have all been waiting with bated breath for the latest from my pen so here goes.

Certain trends are continuing which may not bode well for the rest of the year. You will remember that most pundits tipped 6110 as the end of year target. Only May, and we have flirted with that figure already. What is really happening? Gold is trending up. Commodities still hitting highs. Dollar falling but major stockmarkets still pushing higher. Interest rates in US, Euroland and UK all set to have at least one more raise. Can the powers that be extinguish inflation without pain? $64000 question. I hope they can but Bernanke the new lad on the helm of the Fed may need to keep wearing his sou’wester just in case. It sounds as if Central Banks may wish to have a breather after this round of rises just to ponder whether further rises later are strictly necessary The passage of time may just allow the heat in economies to dissipate gently.

Just to emphasise the point about possible weakness going forward. Anthony Bolton head of Fidelity Special Sits has hedged his fund forward against a fall in market and Merrill Lynch say we have reached the top (temporarily). Talk concerns a certain dark cloud seen in the candlesticks over the last 5 days. I did also notice that some long contracts in the commodity markets were struck at much lower levels than current prices.

My conclusions are that a small hiatus in or out of the market might lead to a substantial pullback on the major exchanges. It may therefore pay to keep the club cash pile in hand, and even realise a profit on another holding, since nothing may be gained by investing now and opportunities might well be rosier later. Uncertainty in the UK political sphere will not benefit the FTSE in the short term either so watch out for those stormier waters.

Some sectors are still leading the charge and are responsible for much of the apparent market strength. Miners, Basic Materials, Oil Equipment, Industrial Metals and General Financial are still forging ahead. Consumer related sectors are the weaker ones and with energy extracting more of our take home earnings out of the spending equation and council taxes still on the rise most families must be feeling the pinch.

Which brings Mobius to consideration of Debtmatters. Bob has posted the toolkit and my considered opinion is that it is a good investment for the foreseeable future while also being one of the better players in the sector. I would prefer to look for an opportune price close to 330p. Value is difficult but the long-term income stream looks an enticing prospect.

The club portfolio is inching up with uv at 106.45 at the last count. We agreed to take a profit by selling our MITIE holding but I hope that if it declines significantly in the coming months we should re-invest. A good share on an overall rising trend. Having sold at 199p it has mocked us by moving up to 210p.

It was a sickening to see one of our recent sales(Tribal) swiftly move back up to the 220 area after our S/L sale, also Hamworthy after a little weakness has moved into safer territory. Retail Decisions causes concern as it has exhibited weakness for a number of weeks. Synergy just continues on the right side but has recently looked a little brighter.

Our mining shares are still continuing to raise their game so forming the strongest portion of our portfolio. Nice to see.

Mobius is to host a joint meeting with another club on 17 May. I expect it to be just as interesting and advantageous to both sides as our first joint effort with Notton Sobs. Perhaps we shall end up with an umbrella organisation formed to cover a group of West Yorkshire clubs. Who knows?

Regarding 3i. On Friday 5 Merrill Lynch issued a bullish note. It moved the stock to it’s Europe 1 list saying that the company has lagged the market after a very positive pre-close statement at end-march. It continues to say that this unjustified performance has turned a cheap share into a clearly undervalued one. The stock is now trading at a substantial discount to our 12 month price objective of £10.80. In our view, even this understates the company’s real worth, as it is in the early stages of a multi-year re-rating. 3i immediately rose 42.5p to 936.5.

ML May 10th 2006

Acknowledgements to Daily Telegraph and FT.