It's the Silly Season and this year it has been marked by financial silliness as debt and spending issues have continued to preoccupy markets on both sides of the Atlantic. Eventually the markets reacted but, like the politicians, seem to have taken a break for now.
Not only do we have the American and European crises to think about, but domestic disorder too. And then there are geopolitical issues like Libya, Syria and the ongoing economic concerns in China and Japan. It's all too much for a bear of little brain like me and I think the best strategy is not to attempt to read situations, but to concentrate on asset allocation and making phased long term buying decisions based on fundamental analysis.
I was surprised last month that markets had not fallen further. Well now they have, and I'm expecting even more when the actual details of government measures in Europe need to be worked out and voted on, but not, of course, banking on it.
On the month, Sterling fell from €1.1428 to €1.1284 and from $1.6435 to $1.6396. UK 10 year gilt redemption yields fell further from 2.90% to 2.45%, marking an historic low. Gold continued to rise strongly to $1788 per ounce, even after a recent pullback. Brent Crude future fell back from $116.3 to $111.15 per barrel, as did copper from $9738 to $9075 per tonne, reflecting global economic gloom. However, the key news is that the FTSE100 fell from 5815.19 to 5129.92 and the FTSE250 from 11552.06 to 9997.10, falls of 11.8% and 13.5% respectively.
Equity Portfolio (-15.88% on year, FTSE all share -13.03%)
I'm trailing the FTAS so far this year, which is unfortunate but not surprising, since I have been trickle buying all through the year. Earlier this month, I could not resist taking advantage of the falls, but have been fairly restrained, mostly topping up on existing holdngs. Hansteen (HSTN), the industrial and real estate company with properties concentrated in Germany and the Netherlands was bought at £0.68. They have risen 15% since then, giving a PE of 11.8 and a well covered yield of 4.4%. They have no short term debt, but I can't see them going any higher for now. I've also increased my holding of Balfour Beatty (BBY) at £2.48. With its international spread and PE of 6.6, this is a construction company I especially like, but it's probably important to remember that the point of maximum pessimism in the building sector may still lie ahead.
In the insurance sector I also added to Aviva (AV.) at £3.18 and Hiscox (HSX) at £3.53, two very different subsectors. I am a bit worried about the former as the metrics now look too good to be true and I have the growing suspicion that they will be revised horribly downwards following revelations of exposure to Euro debt. For the latter, the short term worry is the ongoing sequence of natural disasters, but firming rates should eventually lead to more profit, and recent director buying has swayed my decision here.
Finally, Braemar Shipping (BMS) was topped up at £4.40, too early, since it has now fallen to £4.19. This company is strongly geared to the state of the world economy and tends to rise or fall with that perception, not to mention our old friend the Baltic Dry Index. With no debt, a PE of 7.8 and a well covered yield of over 6%, it looks attractive but vulnerable, and there is no denying the fact that its price is volatile. An alternative is the larger and possibly safer Clarkson (CKN) which I may dip into at some suitable point.
Having flushed away a few thousand for now, it's back to wait and see.
You bought AV. at a better price than I did, and even at the time I was thinking this sucker yells 'value trap' and yet still couldn't resist. Time will tell...
ReplyDelete@ermine, Still not low enough it seems. Somebody's got to be wrong here and I suspect it's us.
ReplyDelete