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Global Economies

Figures are now emerging from the BRIC economies which show that activity is beginning to decline in those countries due to the slump. Recession is believed to be just around the corner for some countries with normally average growth rates like Europeans but in high growth economies the result could be even worse, at least for the poor inhabitants, even if growth does not actually fall below par. Many expected effects of the downturn have yet to manifest themselves but there is no doubt that politicians are running scared as the electorates turn against them. Understandable really when prices surge for basic commodities such as food and fuel while ones house value takes a plunge. Politicians in many countries were all party to the credit binges we have been encouraged to indulge in.

Inflation has also hit uncomfortable levels around the globe while governments have raised interest rates as high as they dare. I wrote last month about the difficult situation central bankers found themselves in. They continue to wriggle while attempting to stave off the inevitable trauma. They would indeed love to reduce rates to encourage activity which might stave off recession but the option is no longer available. It is thought that the UK will reduce ours before the end of the year but this is not yet a given. These struggles will replicate in most of the World economies and the distasteful medicine will slosh around until sometime next year, seems to be the prognosis. Recent days have seen some pundits issuing really dire warnings. One has to pray that it will not all come true otherwise we will all be in serious trouble. No assets would be safe. Better get some gold coins bought.

UK Economy & Politics

Our government is now in panic. The Chancellor and Prime Minister do not seem to see eye to eye. They have at least proposed some measures today to try and stimulate buying by first timers. The suspension of stamp duty on purchases of houses at less than £175k will however not get many takers (according to mortgage experts) and therefore prove to make more people disgruntled and even less likely to vote them back in.

The Chancellors statement to the press over the weekend was badly received and caused the pound to fall against dollar and to the lowest exchange rates ever seen against the Euro. What is the man trying to do? Maybe hammer the last nail in the coffin of British manufacturing. Actually a low pound would be good for our manufacturers if only Europe was not in recession and unlikely to buy more of our goods at any price.

Commodities

As mentioned last week the end of the commodities boom is probably over for the time being. Geopolitical problems in Georgia and Iran, not to mention others and the hurricane season in the Gulf of Mexico are certainly capable of pushing prices back up but the trend is down. Adequate supply and drifting demand is leading to weaker prices and the SP’s of mining companies reflect this. How long, though, before speculators jump back in to snap up a bargain. M&A activity is still rife in that sector. BHP still wants Rio and others are lining up likely targets.

UK Stocks

Some UK companies are still issuing decent figures close to or even beating analyst’s forecasts. It’s doubtful that they will manage it next year but what the hell? New Highs last week were 39, substantially outnumbered by New Lows at 99(inc AIM 52). Similarly traumatic to last month. It makes one wonder how many Aim companies may founder in the carnage of next 12 months results. This month interestingly more sectors have turned positive since Jan 1st. Numbers are up from two sectors to six, with Industrial Eng top. Another false dawn I expect. All other sectors are negative.

You do not need to be a mathematical genius to realise the significance of these negative trends and their ultimate effect on the wider economy.

Mobius investments

Mobius has just had its September meeting. A good attendance but our investments are currently at an all time low I suspect. We hold a few warrants in Blackrock and our Braemar Shipping which although low and indeed hovering up and down around its S/L has just held in there. Good to see Tom back from summer sailing exploits and Ray not currently required in Denmark.

No members were eager to propose any shares even though the market is off it’s lows. Anything can happen in the coming months and we haven’t reached St Leger day yet.

Sadly, some popular shares breached their S/L’s inc. JKX, Bodycote and Cookson. It will be interesting to see where they go in coming months.

Martin Longman - Acknowledgements to Daily Telegraph and FT.