it is quite interesting in the markets at the moment, everything is very up in the air and lots of traders seem unsure about what will happen next.
I am off out for a few beers with some tonight so will ask for their insight.
Economists (the dismal scientists) as a whole have a bad reputation and a couple of articles this week show why. In effect they like to talk out of both sides of their mouth at the same time (what a kitsch phrase, US phrase! I picked it up last week when I had been 'reached out to telephonically' by a US executive).
Anyway, some of the argument goes around the FTSE 100 being significantly undervalued because the smaller FTSE 250 stocks and AIM markets have increased at a far higher rate and now trade at multiples of 20. The FTSE as an average trade around 12, so in theory they could catch the smaller stocks up and so have some room left to climb yet.
On the other hand say some, the credit crunch is set to bite on the major Private Equity take-overs, making them much harder too pull off as the cost of borrowing goes up. This means that the 'premium' built into the FTSE stocks because of the possibility of take-over should be removed, meaning the FTSE100 should fall.
So whoever is right, the economists as a whole win, with their diametrically opposed models!
My tuppence is that Private equity take-overs could well be replaced, in the form of the Barclay's story ND covered below, by Dubai and Chinese capital. Which means the Stock market is set fair until the credit crunch reaches the consumer at some point probably later this year, early next.