Tuesday 15 March 2011

Risk Off

This is the common phrase used in the City to suggest that things are not looking good and you should be buying defensive stocks and getting out of high risk investments. Certainly AIM and other risk indices are well down on the worrying situation in Japan and the tragic disaster there.

But it is not just Japan, Iran is making incendiary statements about the move of UAE and Saudi troops/police to Bahrain. In Europe we know the clock is ticking on Spain and Greece as to when they default on their debt.

All of these are major global risks and the markets are not going to like them. To be frank, neither to do I; can any readers remember a period when there was so much macro instability in the world at one time?

(I remain an optimist, the Japanese will somehow save their situation from the worst nightmare, the ME will quieten down once Qaddafi wins [gutting!] and Germany will agree a haircut).


Electro-Kevin said...

Its not so much a case of bad times coming as good times going.

Positive enough for you ?

Steven_L said...

So you're saying don't buy things like Xcite Energy now? Whoops, I just bought a little bit this morning (not very much though) as it seemed to be holding up well.

Japan going tits up will be good for Europe anyway won't it? Our exporters will have more pricing power and the reduced demand for raw materials should keep a check on inflation, no?

As for the ME, getting Gaddafi bogged down in a long guerilla war with Islamic militants would be a foreign policy success wouldn't it? OK, so it might be bad for BP, but long spoons and all that.

As for Iran, same applies. Keeping KSA and Iran at each other's throats is US policy isn't it?

Euro debt? They'll monetise a lot of it, being a basketcase is the norm for a lot of these little Euro nations anyway. High unemployment = low wage demands, so it could be good for business (and for cheap holidays).

The two major challenges for the west are still peak oil and our ageing demographics.

Anonymous said...

Yes, instability all around. My Mongolian coal company held up well yesterday, but the wife is in Tokyo. There is no food in the supermarkets, the petrol stations are closed. If they can't get food delivery going soon, then there is going to be a major problem.
Not good.

rwendland said...

Weird times. To see my geeky-techno nuclear interests swimming in a 3% worlds stock market drop!

Old BE said...

I feel as though we are walking a tightrope and at any moment the whole world economy might just fall over and all our savings and jobs will disappear. And yet I can't quite bring myself to take on a bet and either invest in something clever or just spend it. So I just do nothing!

Steven_L said...

BE - could always try betting on England to lose cricket matches?

CityUnslicker said...

SL - You can't buy stocks and shares in amarkets like this without taking on massive risk. However, whenever I am feeling the losses I look at the charts, bad days are always followed by good and often better ones.

I have not sold any of my portfolio despite the big drops as all the co's in it have good reasons to improve over time - perhaps this sad situation has added a couple of quarters to the plans though...

I'd by more XEl at around 300 for sure, bought some a few days ago at 330. On the other hand, is better to buy when you see the upside returning than buy to early into the fall and see a better entry point arive; but I am poor at short term trading so never try it.

Timbo614 said...

Tin Hat [Tick]
Solar panels (small) [Tick]
Battery Check [Tick]
Food Cupboard [Tick]
Sunshine [Soon]
Cash Box check [Tick]
Silver coin drawer [Tick]
Gold jewellery [Tick]
Fuel dependent stocks sold [Tick]

[To do]
Water supply [ ]
Lead roof and walls [ooo..err]
Gun(s) [ ]

Where's the problem :))

andrew said...

Well, oddly enough,

How about a country in the G8 that is incredibly politically stable, has very open and liquid markets, that has a government that recognises it is in a difficult position and is taking steps to reduce it's deficit, and is not part of a currency system that leaves itself open to potentially enormous liabilities through not fault of it's own.

Old BE said...

Canada? Australia?

alan said...

Andrew - How about a country that alienates its closest neighbour and its currency consistency devalues against its closest importer.

Or a country that repeatability mismanages its economy and requires sovereign status to devalue its currency & inflate its debt away.

The truth is a three edged sword.

alan said...

Damm spell checkers - post in haste, repent at leisure :-)

andrew said...

I am sure that if you asked a German, Canadian or a Russian about their economy, they would give answers that have little to do with the rationally evaluated investment opportunities in their country.

It is easy to be negative.

I wanted to try to point out that when you look in from the outside, you see differently- possibly more positively.

In a red queens race, you only need to run faster than 75% of the others to do quite well.

Having said all that, since may '09 all my pension has been split between emerging economies and gold (0% in the uk) and is currently doing ok.

Laban said...

"can any readers remember a period when there was so much macro instability in the world at one time"

October 1962?