Over 6500 | 4 (21%) |
| 6000 ish | 9 (47%) |
| less than 6000 | 4 (21%) |
| Less than 5500 | 2 (10%) |
So overall it seems as if people are a little cautious about prospects for the market at the moment, with the majority going for a slight fall to around 6000. This closely mirrors the fall in the actual market this week.
So if you are going to invest, it would seem that you might save your shirt by going short on shares rather than just buying in.
However, I was in the 21% who voted for under 6000. if things carry on this month with continuing low volumes and falls in the Dow Jones and NYSE on fears of the US mortgage market failure, then the 'floor' of 6000 is in danger. We have already seen a 400 point drop in the last month.
Add to this that September is historically a terrible month for investors (see 1929 and 1987), because a lot of long-term investments have to be renewed then by the Institution's like pension funds. If these risk averse institutions see weakness in the stock markets then they switch their investments into Government treasuries and bonds; by taking money out of the main market the share prices can suffer huge corrections and a bear market sets in.
Anyone out there still a bull or are we all bears now?
Slicker - i'm a medium term bull. This is a healthy correction of an overheated market. But the fundamentals are still roaringly strong. Protectionism is still a dirty word (though gaining popularity in the US, sadly), China and India are still firing on all cylinders, rates are still low (tho they will have to rise, possibly to 7%) and earnings are still strong.
ReplyDeleteFinally, and most importantly, at a forward PE of 12x, the FTSE is very fairly priced. Stay out during September and then dive back in in October.
Getting on in years so i use the National Savings vehicle for my investments.
ReplyDeleteBoring but sound and i can sleep at night!
Interest rates are on the up so doing quite well.
I'll bear all this in mind, CUS, when I make my first thousand.
ReplyDeletePommy - Interesting to hear that, I was at lunch with people today who were looking forward to the credit crunch and bear market for all the opportunities it would provide for them.
ReplyDeleteNice to see a Bull out there and your position re the 12x ratio i sound.
How will corporate profits hold up though as the interest rates increase on all their debt?
Ken - Safety first and you will always make some money that way.
ReplyDeleteLordy - a BEAR eh?
Hmmm. Peeks head around corner and decides he will look stupid if he says anything
ReplyDeletetip toe away.....
Don't be silly N. I am far more frightened at yours sir!
ReplyDeleteI voted 6000ish.
ReplyDeleteI hope I'm right and you're wrong, not because I own shares, because I'm human.
What's this bear market stuff then? Short sellers?
ReplyDeleteI shared a bottle of some rather nice Kiwi wine down Harry's bar in Mayfair once with a, let's say well off, short seller I met on a train when I lived in London.
I must admit, having drank in the city before, I much prefer these Toff aristo short-sellers than the rude wankers you meet in that indoor market thingy (what is it Leadenhall or something).
I hope they do make some cash, they are polite.
How will corporate profits hold up though as the interest rates increase on all their debt?
ReplyDeleteWhat debt? Corporate balance sheets are the most underleveraged for decades. that's why the private equity guys are bidding so high!
I'm Bearish for the short-term but I think there will be a reprieve after that, I wouldn't call it a correction exactly. More an early warning tremor of "Christmas Bear to come".
ReplyDeleteHave a look at Brad Setser's recent report to Congress. I have no idea what will happen by Christmas, but at some point soon it's either a slowdown or a crash.
ReplyDeletehttp://theylaughedatnoah.blogspot.com/2007/08/more-on-brad-setser.html
I agree with Wolfie. All that liquidity currently being squeezed out of home building, bond funds, mortgage companies etc in the US will be desparately looking for a new home. Some of it will end up in the UK causing shares to rally in the short term. But not for long. The economic situation in the US will hit everyone. Where the market will be at the beginning of September is not nearly so important to where it will be at eoy.
ReplyDeletePeople talking about the sub-prime calamity in the US are consistently forgetting something. The only reason these debts turned sour is because LARGE NUMBERS OF US CITIZENS CAN NO LONGER PAY THEIR MORTGAGES!!!!
Now you can say to me "Oh, but US employment numbers are quite good - I don't see a big problem here" but the fact is that welfare is so poor in the US that people don't go unemployed - they lose their well paid job and start working behind the counter at MacDonalds. Not to mention the fact that the US government is desperately expanding the public sector to keep people off the register. In the end there are fewer people in real wealth creation in the US and we are going to see that in the numbers in the next quarter. The US is headed for a major recession, and when the US catches a cold the rest of us go down with flu.
China and India firing on all cylinders? Well they only sell to the US so how are they gonna manage that when Uncle Sam can't pay its own bills?
Forward PE of 12x? Well stop extrapolating the graphs - they have a tendency to unravel when a major market correction is taking place. And trillions of dollars of debt unravelling is just the kind of market correction that will unravel those healthy PE ratios.
The only question is just how big is the slump going to be. I'm betting on late 70s size but some are predicting 30s style global disaster and I can see where they are coming from (in which case a small farm, fully paid for and some shotguns and ammunition might be a better bet!).
some great stuff here by all. very inciteful.
ReplyDeleteif only we could all predict the markets I guess we could blog full time....
Interestingly, the price of farm land has been rising significantly over the last year despite the price of farm produce continuing to fall. It seems that more people are interested in getting their hands on the means of food production - with city types being in the vanguard. I wonder if the demand for shotguns has increased too?
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