Where is your money - Feb 2007?

ionapaul

Any one else find it very hard to decide where to invest in the current economic climate? I am wondering where / what everyone is invested in at the moment - no need to mention specific stocks or funds, just in general.

Up until late 2006 I had about 30% of my net worth invested in US stocks (technology stocks I feel I had a good grasp on where they were headed and which did exeptionally well for me in 2005 and 2006), but have gotten so spooked at the idea of a dollar decline that I have sold all dollar denominated equities - with two exceptions. As a dollar decline hedge and for various other reasons, I have put 15% of my net worth into Gold and Silver ETFs. These haven't moved so much over the past 6 months.

I have held two FTSE traded stocks over the past two years (so both Sterling denominated), one of the largest retailers over there (and in Ireland) and also one of the largest insurers. I bought both of these stocks primarily for the impressive dividends they were paying at the time - the insurer paid twice what Northern Rock Demand Online paid - obviously I hoped for modest capital appreciation as well! I lucked out with both, the insurer currently up 110% on my purchase price and the retailer about 45% - also obviously, now the dividend is much lower and currently is a little lower than what Northern Rock pays. I am now starting to get very worried about the possibility of a weakening of Sterling, and even a devaluation, and so am contemplating selling both stocks - even just to lock in such an impressive capital gain, it makes sense?

I also have about 10% of my net worth sitting in my brokerage account in cash. The bulk of my net worth is in a Northern Rock Demand Online account, with about 4% in a personal pension account I set up late last year (my only pension account). I have no property and have never owned property, being one of those people who have been saying it is frightenly over-valued, particularly in Ireland, for the past few years. Wish I had bought back in 2000 though! I despair at having so much money sitting in an account that is not beating inflation, and so losing money every year but.....where else? I just can't see, as I am pessimistic about the world economy, the US in particular and the direction of the dollar and sterling, and the Irish property market (and its closely linked stock market) really terrifies me.

Anyone else feel the same? Where is a good area to invest in in early 2007? Those who are as pessimistic as I am (if there are any!), where / what are you looking at to preserve your wealth in case of a global downtown?

hmmm

I share your pain, I've been feeling very negative for about 6-8 months now, but didn't reduce my positions much and am up about 15% since. I hold a lot in cash (too much for my liking). I'm holding what cash I have spread across Irish and non-Irish banks (very paranoid about the Irish economy).

I'm continuing to dribble cash into index funds (mostly ETFs), but with very little enthusiasm. I'm picking some individual shares where I feel they are undervalued, but very little to choose from. Gold is a commodity I don't understand, so am staying away from. Oil/Sugar are some commodities I'm thinking of investing in.

I have bought some US shares, but in general I agree that the US economy has issues. What I have bought are US shares with strong international exposure.

I'd welcome a big crash as it will allow me to use my cash to buy assets cheaply. The longer this never never world of a worldwide property bubble continues the more I have to lose when it does collapse. The big problem right now is people are underpaying for risk in all asset classes I see (people buying property in Bulgaria, piling into Chinese shares etc).

Mountain Ape

I wouldnt hold my breath for a global down turn. There is a perfect storm out there for equities and commodities. (Interest rates, private equity deals, record corporate earnings). For the last few years hedge funds and vulture investors have been looking forward to a downturn and consequent default on corporate debt borrowed by private equity investors. They have raised huge funds but their performance have been pityful.

Jump on the bandwagon but invest long term. Warren Buffet recently admitted that Berkshire Hattaway would have delivered an extra 15% if he had never sold a stock.

PDelux

That is interesting because i hold the majority in cash too, at the moment. I sold most of my US stocks relatively recently because of the euro-dollar. Was waiting for a lower entry point to buy some semiconductor stocks in the US because i find them very predictable.(maybe i am biased cos i work in the industry)

I can see both sides, with the negative you might have most of your money on the sidelines and miss out on opportunities elsewhere, but being too positive and following the money, in China, US , whereever, you are vulnerable to something like the fall yesterday.
But then again, yesterday it looked like everything was down, major indices, Gold, Oil..
At the time of writing Shanghei was clawing back 4%, rest of asia down, so it is very volatile. I had heard chatter about a fall in China last week on another message board for a Chinese stock i own but didnt think it would affect Europe and US as bad... i mean the biggest one day drop since 9/11!

I find it strange though that you would be negative on China but positive on oil. I would have thought the China stock market and oil would be linked , i.e. slower growth in China, less demand for oil(and possibly gold) but then again the speculators have to put their money somewhere.

Maybe the best strategy it boring diversification??

Sonderval

The sell off in China was precipated by the government taking measures to clamp down on speculation in the market. Too my best knowledge, the Chinese Economy is still growing pretty significantly and thus their demand for oil will not be abated. Nobody is saying anything about a recession.

Diversification is always the safest bet if your not sure where the train is heading Or bonds!

BendiBus

Sonderval wrote:

Nobody is saying anything about a recession.

I think Alan Greenspan is. But I don't think that's unusual for him.

PDelux

The sell off in China was precipated by the government taking measures to clamp down on speculation in the market. Too my best knowledge, the Chinese Economy is still growing pretty significantly and thus their demand for oil will not be abated. Nobody is saying anything about a recession.

That's exactly the point. The Chinese economy has been described as 'overheated' and the
expectation is that they will take steps to slow the economy, therefore lower growth level
implies less demand for oil.

Greepsan was talking about a recession for the US in 2008 but that's ages away:)

Sonderval

Less demand, but not less consumption, and thats an important point. I consider some of the bigger cap Oil companys to be good value at the moment, but thats just an opinion Wish I had more cash to invest!

Re: Greenspan, I much prefer Bernanke's handling of things. Todays comments from the Fed were re-assuring.

2008 is what, next year? Thats crazy long time away

PDelux

I consider some of the bigger cap Oil companys to be good value at the moment,

I definitely agree with that.

Time Magazine

Sonderval wrote:

I consider some of the bigger cap Oil companys to be good value at the moment, but thats just an opinion

I've just spent a few weeks doing an econometric analysis on the BP share price over 25 years. It's extremely sensitive to the price of oil at higher levels (it's fairly non-responsive in days of $10 a barrel).

Basically, there's a 1% for 0.9% relationship between them (a correlation of coefficient of 0.9 for the nerds). So if you think the oil price is going to rise, I'd say invest. If you think it's going to fall, I say steer clear.

Who's good on the old middle-Eastern politics?

PDelux

Ibid, it would be interesting if you compare it to other oil companies and see if there is a strong correlation. Then see if a stronger company emerges from the group, for example, when the oil price rises the stronger stock rises more than the others, when the price falls the stronger stock falls less than the weaker ones. In a hypothetical situation then the stronger stock could be bought and a weaker stock shorted so that profit could be made
regardless of whether the price of oil falls or rallies.
I read about this kind of trading on some other website.

hmmm

PDelux wrote:

That is interesting because i hold the majority in cash too, at the moment. I sold most of my US stocks relatively recently because of the euro-dollar.

Looks like our cash call was correct Any ideas on a re-entry point? Personally I think we've a long way to go yet - the market thought the US had gotten out of jail with its property bubble but the really rotten underbelly is now beginning to show its face. Not a good time to be in US (or large US exposure) banks & financials.

The company also had $2 billion of credit with UBS, Europe's biggest bank. That financing is good through September 2008 and $1.5 billion was outstanding as of Sept. 30. Goldman Sachs Group Inc. and Credit Suisse Group gave New Century credit-line extensions. Other backers include Bank of America Corp., Barclays Plc, Bear Stearns Cos., Citigroup Inc. and Deutsche Bank AG.

Sonderval

That subprime-mortgage meltdown is nasty, but I think the market isn't hugely driven by it.

What are peoples opinions on this downturn/correction? An excellent buying oppertunity as its still a bull market? Or are the bears finally taking control and we're heading south?

Now, once commodities decouple from equities and start heading uphill again, I'll be back in the saddle

PDelux

I suppose it's wait and see time... but at the time of writing I am seeing all green in Europe and all but one green in Asia.

I have been watching Anglo Irish before the fall in the market so i think it could be a good entry point now. Look at the 1 year chart below, seems to be bouncing off the 100-day EMA. Could be a reversal of the slide, i'll wait and see.
http://stocks.us.reuters.com/stocks/charts.asp?symbol=ANGL.I&WTmodLOC=L2-LeftNav-10-Charts

As for the US, McDonalds(MCD) and Coco-Cola(KO) have had a good run the past year. MCD has pulled back to its 100-day EMA, could reverse from here. KO has fell to its 200-day EMA and looks like a reversal there too...but its wait and see.

PDelux

The moving average doesnt seem to be showing on the chart when you select the link in the last post, but you can just select it and set to 100.

On that point, anyone know any good charting websites that show Irish shares and allow you to overlay technicals?

hmmm

I have been watching Anglo Irish before the fall in the market so i think it could be a good entry point now.

It strikes me that AI is a leveraged play on property, so I wouldn't touch it with a bargepole

As for the US, McDonalds(MCD) and Coco-Cola(KO) have had a good run the past year. MCD has pulled back to its 100-day EMA, could reverse from here. KO has fell to its 200-day EMA and looks like a reversal there too...but its wait and see.

They're good solid long term performers (KO more than MCD imo). I'm watching US homebuilders index as a potential investment, investors running in fear which is a good sign but a property price crash does not automatically mean a homebuilder crash - much of it is already priced in, plus they can afford to cut prices.

PDelux

It strikes me that AI is a leveraged play on property, so I wouldn't touch it with a bargepole

I meant to mention this too but forgot earlier. The best times for the Irish banks are probably over because of the slowing of the property market. In the paper the other day I think they were alluding to this when they mentioned the case of some people borrowing 7 times their salary...ie the banks are desperate to lend more money to keep their high profits.
Good point about Anglo though is that they are starting to expand more outside of Ireland.

PDelux

A couple more for consideration are:

Terrace Hill (THG.L)
http://uk.finance.yahoo.com/q/bc?s=THG.L&t=1y
I've never invested in anything related to property before though.

H&M(you know the clothes shop!) HMB.ST
http://uk.finance.yahoo.com/q/bc?s=HMB.ST&t=1y&l=on&z=m&q=l&c=
Relative new comer to Ireland and expanding in Germany I believe.

By the way, Etrade is starting a new Global Trading service in April i believe. They are talking about $20 trades.

Ridire_Dubh

China took a hit. It will rebound. Might be a time to buy? Check out some of their equities that are traded on offshore exchanges. For example, Magistic Car is traded on the NYSE. Don't come after me if they tank, you make your own investment decisions. But if they rebound big time, you can buy me a Guinness at boards beers.