Wednesday 5 May 2010

Mr Market waves at the UK Electorate

Well, a pretty good call to short the FTSE yesterday has helped me stave of disastrous losses to keep them as just hideous. Many of my investments are in high risk AIM stocks and these have all taken a kicking this past two weeks, down 20% in places.

What this shows is that the risky 'beta' type trades are being cut back by the Hedge funds and Prop desks; as well as by the retail investors.

All are waiting to see what is going to happen in Europe with the Greek bail-out and more parochially with the UK Election. I expect plenty of cash is being freed up to short the FTSE 350 if there is a hung parliament on Friday. On the contrary a narrow Conservative win is going to cause a nice 3%+ bounce.

I don't even want to think about a Labour largest party result!

What this does prove to me is that Ken Clarke and George Osborne are correct, despite the catcalls of the ignorant lefties; the market will judge the electoral result harshly. You can see it in the markets already, clear as day.

The lefties might wish this problem away, but that does not change the facts.

What is interesting is the move in UK Gilts, bolstered to good levels (4% interest on 10yrs) by the fact that we are not Greece. These are ripe for a fall if there is a hung parliament.

I think I need to free up some more cash.


ken from glos said...

Please dont even think about a labour win !! Terrifying. Gordon says he will carry on spending.

Anonymous said...

surely the answer is to just ride it out... shouldn't the share investment be long term!?

Steven_L said...

A Labour win? I got talking to some yankee bird on a pub crawl last night that had been over in the UK campaigning for them.

I slapped her really hard on the backside and kind of grinned at her and said "Just become a conservative!"

She wasn't impressed, but it changed the subject to her arse.

Budgie said...

What I really don't understand about the market drop is: didn't the market know about the Greek problems and the UK election already? To only just now discovered that the Greek government lied to get into the Euro; and that Cameron is not a good Tory leader; and that the UK and the PIIGS owe an awful lot of money seems a bit dim, to me.

measured said...

A problem is that, apart from all the other problems, corporation tax rates are a nice juicy target as companies can't relocate very quickly, unlike individuals.

CityUnslicker said...

Anon - The days of buy and hold are long over. Have you looked at the FTSE grpah this past 15 years - huge rises and falls with an overall gain of nothing.

I do not advocate buy and hold at all.

Budgie - Things are getting worse in greece. My view is that everyone thought an EU bail-out would stop the rot. This failure is adding to market worry. Re the election, minds are now focusing on the outcome after the cleggasm.

Andrew B said...

The markets are dropping on uncertainty.

Once uncertainty is removed, they will either completely bomb (lab win) or bounce in the short term.

In the medium term they will do some sums based on whoever wins proposed budget and make a judgment then.