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Global Economies

Well G20 came and went. Perhaps more remembered for the unfortunate death of a passer-by while boisterous demonstrations were taking place in the City. The actions taken by World leaders are ongoing and possibly much good will spill from the worlds largest economies to the smallest but it will take months if not years for all the effects to mature and manifest themselves. In spite of the eclipse of Chrysler and the stumbling of other motor manufacturers around the globe stock markets are bursting with spring bonhomie. They have enjoyed an eight week rally but it may all shortly go into reverse I believe. The rally has largely been bank based. It seems that there is a lot of relief that nationalisations will not ultimately be necessary and those that are partly government financed will emerge unscathed at the end. Certainly with some banks up more than 100% over this short period some investors seem to believe those problems are over. The preponderance of banks in the FTSE 100 is enough to ensure a large response by the index.

There is a strong dichotomy of opinion between the diehard bulls who believe that a new bull was born on March 3, and the chartists who are looking at their trend lines and believe the FTSE 100 will visit 3000 before 2009 is over. As usual time will provide the answer.

Some fear the US bank stress test results which have been delayed until later this coming week. but FTSE World Index rose 11.3 % in April, the strongest monthly gain since Jan 1987 although that turned into a bad year for equities.. Global equity yields have fallen for about 12 months but there are still poor forecasts for earnings growth during 2010, this with a backdrop of high domestic and government debt. Cyclical stocks have outperformed defensives this year by 36%, the biggest outperformance for 25 years.

The Vix fear index is much more hopeful than it was. Gold has retreated off it’s highs and the US dollar is stronger all round. Sterling is very weak against major currencies but this seems to be helping our exporters to weather the storm. Having had a good run, the Baltic Dry Index showed signs of its previous weakness but after declines in April it starts May in a more positive frame of mind and is rising towards 2000 again.

UK Economy & Politics

POur government seems in terminal decline, lurching from one embarrassing episode to another. Not helped now by swine ‘flu which may not turn out as deadly as feared but nonetheless has the capacity to cause big local problems particularly for Mexico at the epicentre. Naturally many in the population worry about their own safety and the possibility of the virus touching people near them and affecting family or friends.

Amongst government personalities there is a great deal of in-fighting and surely it cannot be long before a stalking horse is put forward to challenge the prime minister. Is he the only one who cannot see how lame he appears? In fact statements to the effect that he has ‘LOST IT’ look right on target.

The budget came and went with typical ‘cane the rich’ policies which New Labour will come to regret I feel. Of course having spent so much in past years and needing more resources for the ‘black hole’ they had to look at further money raising opportunities so turned to measures that go down well with their core vote. They will need more votes than that to survive. 12 months maximum to the next election. I can’t wait.

Currencies and rates

Rates are now at their lowest for years in all countries and there are only a few more steps to bring them all practically to zero. Soon the Eurozone is expected to drop theirs another half a percent. The pound sterling is holding well below its last few years position vis a vis the dollar and Euro. This trading advantage has had little effect yet but may help us in the later part of 2009. IT wiil make Brits less likely to holiday abroad and may persuade Europeans and Americans to come for a holiday. Let’s hope we have a good summer. We shall need it.

Commodities

Most commodities seem to be marking time. Demand is muted and oil particularly seems to reflect the lack of stimulus from industrial demand. Mining and resource shares have recovered but certainly it is not because of increased sales but probably because of reduced costs. It is at this stage of the cycle when mines are mothballed, while some go into development mode, using labour and effort that would normally be on production.

UK Stocks

Highs at 17, outnumbered lows at 4 this week on the exchange. Industrial metals have now leapt +223% and are joined by Tech hardware, +51% and General retailers +48% as the highest risers since New Years Day. Who would have thought that the retailers would rebound quite so strongly.

Mobius investments

Mobius bought another share, Shanks Group, on beauty contest vote at last months meeting and also made a decision to buy Persimmon provisionally, if its price reduces to below 350 mark. Due to recent market strength we are also showing an increase in our asset levels which is a pleasing sign.

We have decided to move our main bank account to take advantage of more flexible terms at the Co-op and hope to be able to manage our fund transfers a lot easier in future. Hopefully this will prove a wise decision but it’s taken a long time to arrive at a consensus

Shell has declared an increased first quarter dividend, even as pre-tax profits collapsed. Shell and BP operate like twins and both increased their debt to finance increased dividends. We should reap the benefits of this investment over the coming years having picked them up at a weak point in the cycle and should not regret it.

Martin Longman - Acknowledgements to Daily Telegraph and FT.