Record Share Discussion Threads

[royce] 25/7/2002 00:02

banks and insurance with gsk,azn but thats only a short term look

[jazza] 24/7/2002 19:54

Deltablues,

Regarding your post #23 - I think you are wrong (no offence).

I believe there are statistics that show over time the balance
of "wealth" that exists in the corporate and consumer sectors.

This balance is not static.


There are periods where corporate profitability is higher than
at other times.

There are periods where consumer wealth is higher than at other
times.

These figures don't necessarily move in tandem.

For example, at the mo the consumer probably never had it so
good (look at the misery index), yet corporate profitability
is quite weak at the moment.


Feel free to disagree,

Justin.

[jl202] 24/7/2002 13:50

Nobody has mentioned TMT Investment Trusts,,

[eurofox] 24/7/2002 13:13

If JPM have been repackaging low grade debt as high grade debt and undertaking unsustainable shorting of gold, watch out for JPM hitting an iceberg and sinking every other bank in sight

[theape] 24/7/2002 12:31

Jobless interests me.

earnings recovery is being achieved by job cuts.

great if these are being displaced into new expanding industries.

If not then corporate earnings recover, welfare payments ( and then taxes go up), and as a whole the economy doesn't expand.

job cuts are great, but without job creation is a suckers rally.

[neptune] 24/7/2002 11:27

In response to the original question, the sector to pick for a recovery is UK clearing banks. These tend to lead the markets down in bad times and back up when things turn. The big FTSE100 banks also have staying power -a big safety factor since nobody will be able to actually pick the turning point of the market.

People are bound to mention TMTs as a recovery play. I'm sure they will recover, but people are giving them undue prominance in the unstated belief that history will play itself backwards. The 1998/9 TMT boom was a one off and upon a secular recovery in the markets today, TMTs are just another sector, nothing special.

[alexx] 24/7/2002 11:04

deltablues - agree with both your statements

the common thread in the markets are human psychology, that's the main key and it doesn't change in a few hundred years

and as for, "economic growth follows stock market crashes", words fail me, history says otherwise

[deltablues] 24/7/2002 10:19

DSS, not sure that's true. The markets were dominated by private investors until the 1950s/60s. Try reading some accounts of the US in the 20s. Admittedly they were standing in broker's offices watching ticker tapes and yelling at clerks instead of clicking away at their computer, but their trading was very similar.

theape/HJB, the cost cutting argument is a fallacy IMO. Since every cost for one company is another company's profit or someone's wage, cutting costs is a zero sum game for the economy as a whole. And there's also the law of diminishing returns to consider - most companies have been at this game for a few years, so they've probably got rid of most of the waste they can identify (and yes, I know there's a lot of waste in corporations that management can't or won't identify!).

[paulismyname] 24/7/2002 09:50

DSS that factor has already been confirmed as fact. An AFX new release yesterday explained that the fall on the dow had, in part, been caused by "mini hedge funds" which was described as private daytraders having complex investment stratergies that in short, (pardon the pun) were daytraders selling the markets short

[hjb] 24/7/2002 08:36

theape - exactly what Terry (Acounting For Growth) Smith was writing in The Sunday Telegraph a couple of weeks ago. He was worried by the number of companies promising better earnings in H2 on the back of cost cuts etc. If everybody's earnings are going to recover because of job cuts ........ well they are not going to recover are they?

[dss] 23/7/2002 23:54

Is there a very obvious factor which we have missed when considering the markets now and indeed how they may recover.

This factor will influence how they fall,perhaps the apparrent" slow death" could be explained by this.

This "factor " is not only at the end of our noses (virtually literally) but has also caused all of this mess in the first place.

And the factor is The Computer/internet.

Consider this;

I.T. has allowed part time traders into the market alongside pro's.We amateurs may have totally obscure buying motivations which mess up the flow of things.

With communication is both fear and confidence.I know quicker of negative sell signals but also can see for myself what is happening without relying on a brokers interpretation.

The amateurs can be influenced by market makers more easily with "tree shaking "etc

Trade sizes are often petty cash amounts implying a lot of amateurs in the market who will also have obscure selling motivations.

To see the wood for the trees do we have to acknowledge that at the time of the last big downturn the private traders did not really exist,nor did computers for Joe public and the associated speed of information.Did we really ought to "extract" the events of the last decade as a bubble/blip accept that we should be "right back where we started from"and trade from there.The experience is over.

In conclusion I can sum up by saying that times have changed but are we still applying old theories to new practices and getting it wrong!

[ashtongray] 23/7/2002 23:42

Lemain:

I remember that time too....you forgot the baked beans ;o)

[martini] 23/7/2002 23:39

LOL yer I know what you mean :)

[lemain] 23/7/2002 23:34

Martini, I have plenty of tinned salmon, pineapple, tea bags, matches and toilet paper... :-)

[martini] 23/7/2002 23:27

Lemain
Ahh well that is coming from a different point in time and set of economic circumstances.
I was assuming the question was asked as of today.
That said I am not saying you are wrong in what the future may hold.
Great this "what if game" :)
M

[andyble] 23/7/2002 22:59

Paulis ..., your portfolio mix may also presumably depend upon how performance is measured, the accounting(s) for same, any performance benchmark(s), any liabilities being matched, degree & management of risk, taxation basis, and etc?

It is not clear if you are asking in the context of one's own portfolio or perhaps funds under professional management.

[fredbear] 23/7/2002 22:57

paul

techs and telcos should fly

IMHO

[ashtongray] 23/7/2002 22:33

paul:

Sorry 'bout my rather flippant comment - its just there has been such an overload of talk about Capitulation the last week or two!

I agree with you re quality mid caps, an area which interests me because these are not over researched like GSK, VOD etc, so valuation anomalies do occur, and of course valuations themselves tend to be more modest/realistic.

I also agree re an element of TMTs for growth potential.

I would differ on the question of bonds tho. These would leave you exposed should the Authorities response to current problems include relaxing the stance on inflation. My preference, which I am pursuing right now, is to look for what are in essence old fashioned value plays - real profits, real & worthwhile dividend yields, low debt, assets, secure market positions etc. It is quite feasible now to build up a portfolio of such stocks with a div yield equivalent to a high quality bond fund, but with real prospects of both capital and income growth as well.

Regards

[paulismyname] 23/7/2002 20:48

Now my own thoughts non stock specific are

50% corporate bonds of both investment and non investment grade

(low interest rates and low inflation favour this type of vehicle)

40% good quality mid cap stocks

(proven business model, proven start up, and potential for broad based growth)

10% biotechnology, Telecoms, and computer software

(exponital growth from a (now) low base)

[paulismyname] 23/7/2002 20:42

Thank you for all the comments, my own views now follow.

Eurofox - interesting, I had not thought of that one, funnly enough I was chatting to somebody in my local the other day, he was making a point about the cost of disposing of fridges under EU regs. Of course support services will quite often do okay under a Labour Gov. Alternative energy, well I would go with wind and wave power it it was proven to be commercially viable

Martini - Disagree with you but only after a great deal of thought. I think there will be consistant long term selling of these stocks due to FRS17 and the tax credit (due to increase to 20% next April) by assuarance companies and pension funds

Jazza - Yes I agree, but you would expect me to (smile)


Ashtongray - Not quite sure what you mean.

Andyble - A complex argument that sems to me to indicate you think some great socio economic change is happening around us. Problem is you need perspective to see that (from a historical view) I agree with you about the tools we have to garner and exchange infomation - but see comments I have made to Martini re big cap stocks

theape - I think we have a better understanding of what causes a thirties type ressession, a globle free market may prevent this from happening, so in my own opinion "jobless" will not happen providing we can learn new trades. Another boom would be curtailed IMHO. As for "profitless" margins will go down driven by a free labour markt worldwide and technology, but again we will need to learn how to work "smarter"

[theape] 22/7/2002 23:18

depends a bit on what sort of recovery it is.

jobless, profitless or a boom.

[jazza] 22/7/2002 22:45

mbbcat,

Not being funny but why should companies not spend
their cash reserves on share buybacks - isn't that
improving shareholder value?

What else should they do with the cash? special divi? acquisitions?


Regards,

Justin.

[ashtongray] 22/7/2002 22:39

Paul: you could also declare this thread an official C-word Free Zone ;o)