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Not much seems to have changed this month apart from a significant strengthening of major stockmarkets. Most have hit new highs or multi-year peaks. Investors can feel a little bit happier but should they be more confident? Somehow I think that October may turn out to flatter before deceiving, even if the deceit shows up in November or later.

Inflation is still haunting us. Central banks are keeping the lid on it by maintaining the cautious stance of relatively strong interest rates. It is thought that the US may hold rates for a few months until the future outlook becomes clearer. In the UK more rises are in the pipeline and it seems certain that two minor increases will be imposed over two or three months when hopefully the top will be reached.

Key but opposing factors such as; Chinese and Indian growth, with associated demand for commodities driving prices higher, falling house building rates in the US with sliding GDP(much worse than expected), softening oil prices and not least soaring credit demand (which has barely twitched in response to rising rates) are all looking a little dodgy. Movement either way in one or two of these factors might easily signal recession. Again we have mixed signals in UK property pricing. The wealthy seem to be stoking soaring prices in London and the south-east while markets are subdued elsewhere. Overall it appears that mortgage lending is firmer but we are now entering the winter season which is often quiet.

Positive factors have however been at work during the company reporting season. Here and in the US it has been a success with 70+% of firms exceeding forecast profits.These historical figures may not have borne the effect of increased energy costs for a full reporting period. One or two giant mining companies openly stated that costs were significantly higher going forward, so preparing investors for some less exciting news ahead. Markets took those reports in their stride and the said companies regained much of the ground lost since May. BHP though is still well off the peak. Rio Tinto on the other hand is to boost it’s share buy-back program by $3bn which should maintain the share price for the foreseeable future.

Overall October did not live up to it’s unfortunate image as a danger month but I should not consider that all problems are over. Sectorally there is lots of action in the telecoms arena throughout the eurozone. Voda, C&W and BT, just to mention UK stocks, are very buoyant just now but all Euro telecoms rose to propel the Eurofirst 300 index to 5 year highs.

At the last Mobius club meeting, the club made several decisions which will result in a movement of assets from cash into investments even if we do not like the look of the market or fancy the toil of a toolkit. One investment causing some interest is the newly formed semi-systematic portfolio. Although a number of prospective investments are highlighted by sieving methods already used by the club, a voting system allows members a weighted vote, ensuring that they can boost a share they ‘like’ and damn a share they don’t. We have yet to see the results of the first foray into this portfolio but we should soon know which share of five came out top.

In the mechanical portfolio where we already have five shares with £1000 invested in each, we already show signs of success. We made one unfortunate choice which involved Betonsports which of course is not likely to repay the investment. The other 4, in welcome contrast are joining the general market rise with Delta leading the way. After a period in the doldrums with a large stock overhang Delta has climbed quickly in the last month or so to stand nearly 20% up, at a twelve month high.

The recent meeting also saw members agree to increase the Hamworthy holding. Reasoning that a solid company that we were familiar with would be a sensible way of investing some of our cash. The chart did not look overbought although all members were not totally convinced.

Looking across my personal and fairly widely spread portfolio I see that general market movement and variations in sector performance has been beneficial for me. I have been pegged back by mining and commodity weakness but helped by banks, telecoms and merger and acquisition activity (or often pure speculation). I am standing my paper losses in Subsea which has no good news to report yet. Live on in hope.

ML - Acknowledgements to Daily Telegraph and FT.