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In spite of relatively buoyant exchanges around the world it is clear that problems remain and it seems nobody is divulging which financial bodies are the weakest links. Considering the potentially serious nature of the underlying problems for related entities it is worrying that relatively few sectors are supporting the markets. The strongest sectors seem to be, BRIC economies and mining shares. High prices for commodities like oil, copper et al and the insatiable appetite for sourcing services or goods from India and China are keeping those parts of the World economy strong. Another worry therefore is centred on any downturn appearing in the major consumer nations, particularly the US which could signal radically lower demand for Asian goods. Just now, it does not appear to be happening, but nonetheless analysts will be keeping a watchful eye on World trade trends.
Investors up to now appear to be trying to pick up stocks that show temporary weakness because there has not yet been a rout. The lows of August have yet to be revisited and now it is banks and property, sometimes on company specific grounds which are suffering.
Scanning the financial press it is surprising how many different and widely opposed opinions are being expressed about what the immediate future may hold. Interest rates are being wielded as a rather blunt instrument by the authorities in the US. In desperation they are reducing rates savagely to try and shore up suspect areas of their economy. Indeed this policy seems to be having the desired effect. Certainly employment and job creation is continuing strong but the housing sector is on it’s back, with the lowest sales for many years.
In the UK, the housing market is thought to be at higher risk of painful correction than in the US but there are quite a few differences in problems exhibited by each country. Here we never have enough houses but the property market itself is thought to be wildly overvalued. It is the latter feature which will cause the largest problem. With that in mind I certainly do not mind keeping hold of my Persimmon shares. Commercial property shares however are exhibiting free fall characteristics, suggesting severe lack of demand while some housebuilders like Persimmon are sticking roughly to their long term EPS trend line after the bubble prices of the last 24 months.
Most of the major share markets suffered falls last week, with the US and UK suffering slides of about 2%. Next week might go either way but some analysts think a seasonal rise is on the cards.
Commodities have suddenly changed tack. Oil and gold, both responded to falls in the dollar price by strengthening. Gold topped $800/oz and oil has crept ever closer to $100/bl. Other metals have recently swung into a supply surplus exerting downward pressure on prices. The future looks interesting not that the past has been without plenty of excitement. Many mining companies are at or around high’s for 2007 but costs are becoming onerous again with many exposed as very high energy users.
Our club are steadily adding to the portfolio after a broad sell-off in August when plunging prices forced some sales. Our strong cash position is in my view going to be good for the club as we continue to drip funds into the market each month. Hopefully we can miss the worst sectors but if Creston is anything to go by, we won’t always miss every dog around. True, we supported it and who knows the next move might take it closer to our buy price enabling us to duck out with dignity and small losses (or none). Several shares have done very well especially Umeco, JKX and Senior.
On the social side, we are currently organising our Xmas meal and Bob is organising a new venue in Liversedge. The menu reads well and the gastro pub is sited conveniently between Leeds and Huddersfield so we shall experiment on December 8th and look forward to a pleasant meal in good company .
Martin Longman - Acknowledgements to Daily Telegraph and FT.