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Global Economies and markets

The rally continues although momentum may have weakened slightly over the last week or so. The FTSE 100 finished yesterday below 5000 after its best quarterly percentage rise ever. Is this the sign of the bear getting his revenge. News about economies worldwide is mixed with China seeming to have restocked and possibly steadying a little. While depending on the reports emanating from individual developed economies one can take ones pick of which trend you believe. No doubt that house prices are fluctuating in the US and UK and even firming somewhat, but on low volumes. Retail figures are just as volatile. A constant stream of new figures, such as these might persuade you that all our troubles are over or conversely that a mighty fall in stocks is going to occur imminently.

The Baltic Dry Index was moving lower for much of August and has continued to fall almost uninterrupted through September. It flirted with the 2000 level but is now at 2357. Latest moves have seen a bounce over the last week from what may be another bottom. The previous weakness can probably be linked to lower activity in China.

UK Economy & Politics

We are now in the party political conference season. With New Labour’s jamboree in full swing, an off the cuff comment by chancellor or ministers can easily upset markets. True, they are in a pickle and seem to be promising the electorate anything in the hope of winning a capful of votes. I believe their goose is cooked and no amount of window dressing is going to save them at the polls. They may have thought the scrappage scheme would magically engineer a fantastic recovery but while assisting companies it must soon end, and the VAT loosening will soon be reversed too.

House prices and new house sales are in many eyes the key to many problems in the economy. Statistics show that house prices to earnings ratios have reduced in the last 12 months, even so, they are above the long term average. This fact, suggests that house prices may have further to fall as the cycle may not have unwound fully yet. One company countered that argument by stating that skip hire had risen by 38% suggesting that at least some families were upping sticks. Or does it mean people are improving not moving. An incontrovertible fact, is that lending is increasing although still lower than last year.

Commodities

Gold has been to the top of the mountain (over $1000) within the last fortnight and scaled the peak again on Friday 2nd. However reports suggest it may be high relative to it long term valuation. Oil has settled in a narrow range between $65 and $75 a barrel. With Friday’s price close to the lower end. In spite of OPEC’s reduction in quotas, supply is still pre-eminent in the marketplace. Interestingly, Russia’s output in September averaged over 10m bls per day which took the country to top spot above Saudi Arabia which is constrained by OPEC cuts.

Currencies

Sterling has continued its bout of weakness which Mervyn King defined as helpful for our trading balance. The powers that be are pinning hopes that trade, tourism and the economy as a whole will seize the day and make the most of the respite to improve our standing. The US$ and Yen have both been sent higher by the latest depressing payroll data.

UK Stocks

The FTSE 100 has demonstrated its ability to climb a wall of worry and easily scaled the 5000 level. The latest reality check has brought it below that level again. I will go still guess that a pull back will occur, somewhere between October and November.

Again this week there were only three new lows while new highs were buoyant at 25 (inc. 6 gilt edged). The general story of September as a whole was the much greater proportion of risers throughout.

By contrast to the summer months only eight sectors are in negative territory for the year with 21 sectors acheiving plus 20% since Jan 1st. The FTSE Small Cap index and the FTSE 250 are up 53 and 40% respectively. Difficult to credit perhaps.

Mobius investments

Mobius have continued to sit on their hands over the holiday period. The next meeting has had to be rescheduled for October 6th so little has been decided about new investments in the interim. Hopefully we will have a good attendance and can make some good decisions to consolidate our 2009 gains.

Our portfolio has taken on a much more promising look recently with a couple of shares in elevated territory and others, merely positive and maybe it would be wise to take some profit considering that the market might reverse and erase current gains.

I took a useful profit on some Ashtead shares at 94p when they touched a 12 month high of 96 pence two weeks ago. They have since fallen about 10% and it is possible I will repurchase although I had wished to invest in Pressure Technology with a portion of the proceeds. Pressure issued interesting results which sent the SP soaring, rather upstaging me. My efforts with Persimmon were OK, in that I realised a large profit but later they continued to rise and I was disappointed to be out of that positive run. Now, at a lower level I may again try to jump on the rising escalator. For the moment, it is watch and wait for opportunity. With Surgical innovations, debt free and issuing a positive interim report I took chance to increase my holding substantially while reducing my average buy price.

Happy investing to all. I have booked my train for the World Money Show in London on Oct 31st. See you there perhaps.

Martin Longman - Acknowledgements to Daily Telegraph and FT.