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Investment Notes 2009

  • A Review of our 2009 Investment NotesDecember 2009

    Were we right or were we wrong? We would like to take this opportunity to review our ad hoc Investment Notes presented in 2009 and critically assess whether we were right or wrong, where appropriate. We give a summary below of each note, together with our views on how accurate we believe the note turned out to be and the bearing each had on our portfolio positioning.We would like to start with a reminder of our  Outlook for 2009 document below which was published in January 2009. We will leave it you to judge how accurate the predictions on this first page were.


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  • Is the Party Over?November 2009

    Maybe, but the secret is to keep the music playing! Making money over the last four months has not been difficult.  Equity markets have rallied over 50% since March, Bond markets have recovered, and commodity markets continue to surge (e.g. Gold at all-time highs of $1,100/oz).  Such a strong recovery has certainly come as a relief to all participants; from beleaguered fund managers who took both barrels squarely in the chest last winter.


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  • Pictures Can Tell a Thousand WordsOctober 2009

    Do economic fundamentals support equity valuations?

    The recent equity market rally has come as a welcome relief for many investors. Since hitting lows in mid-March the UK stock market (represented by the FTSE 100 index) has roared over 45%, with a similar pattern repeated across the globe. Many attribute this rise to improving economic fundamentals, whilst others simply to liquidity; too many side-lined investors chasing the market up and maintaining the momentum; interestingly both are true.


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  • A Weaker DollarSeptember 2009

    Dollar  Bears have the upper hand! Is it a coincidence that, as Gold breaks through the $1,000 an ounce level, the US Dollar has fallen to its lowest level against many of its major trading partners in over a year? A report this week has suggested that some countries (particularly China) are, once again, diversifying reserves away from the US Dollar into Gold (and the Euro), thus helping to push the precious metal up to current levels. Statements from the United Nations suggest a multi-national reserve currency.
     


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  • Equity Market RallyAugust 2009

    Will there be a Sting in the Tail? Equity markets have railled strongly since their mid-March lows on optimism that a global economic recovery is under way;  however, in their fervour, are investors actually ignoring the underlying economic fundamentals?  In this note we ask,"Will there be a sting in the tail for equity investors?"


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  • UK Banking SectorAugust 2009

    The Good, the Bad and the Northern Rock! The UK Banking sector bore the brunt of the credit crisis with a number of long-standing high-street names being nationalised.  However a minority, including HSBC and Barclays, resisted the temptation of participating in the government bail-out plan, a decision which now seems to be reaping rewards though at the possible cost of vilification.  In this note we surmise who are the Good Banks, the bad banks and the Northern Rocks!
     


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  • Absolute Return Equity FundsJuly 2009

    Shutting the stable door after the horse has bolted! Between October 2007 and March 2009 UK Equity markets fell around 45%, wiping years of gains from most investor’s portfolios.  The five year bull market for equities had come to a shuddering halt.  The weighting of long-only directional funds (or ‘Traditional Funds and Unit Trusts ’) within most portfolios had grown as markets appreciated. Unfortunately these funds simply tracked the market falls, in a broad sense, and offered no sanctuary for investors during the market falls.


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  • GiltsFace Mounting HeadwindsJune 2009

    Rotation into corporate debt and equity. In the midst of a dramatic economic slowdown and RPI sitting at the lowest level since 1945, the Bank of England has now reduced interest rates to 0.5%, an effective zero-rate policy similar to that which Japan was forced into back in the 90s and which commentators thought impossible just a few years ago.


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  • The Economy Will RecoverMay 2009

    But will it be a V, U, or W shaped? What are equity markets telling us about the state of the global economy since bottoming in early March?  Technically, the scale of the recovery in equity indices, over 25%, has led to headlines declaring the end of the bear market.  If we look at the causal historical link, equities have tended to discount economic indicators by something like 9 months in advance.  If this were to hold true this time, it would appear that the market is telling us that an economic recovery could be beyond any doubt by the end of 2009.


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  • Green Shoots of RecoveryApril 2009

    Will Swine Flu derail the rally? Equity markets around the world have enjoyed six weeks of gains with the UK FTSE 100 index rallying over 20% from the lows reached in mid-March. So what caused one of the most aggressive rallies in equity seen for many years?


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  • The Road to Recovery March 2009

    UK Equity Markets have rallied nearly 15% but is this sustainable? There can be no denying that the latest stimulus plans, announced primarily in the United States, have been welcomed by equity investors.  The FTSE 100 has surged over 14% from the recent lows, but still 15% below year-end values. Likewise, the U.S. has rallied an even more impressive 19%.  However, should we jump on the “everything’s fixed” band- wagon, or alternatively, worry that the light at the end of the tunnel is actually the headlight of the train hurtling towards us?


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  • Obama No Quick FixesFebruary 2009

    Many had hoped that the inauguration of President Barak Obama would ignite investor optimism and kick-start both the US economy and global stock markets.  However during his inauguration week we witnessed one of the most serious losses of confidence in the global banking system which left many financial companies teetering on collapse.  So will there be any “Obama-effect” and how will the new democratic government cope with the worsening economic situation.


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  • With UK interest rates poised to fall even further…Is Cash still King?January 2009

    Volatile and declining equity markets last year prompted many to seek the sanctuary of cash deposits, rather than risk further losses.  Throughout the year, we recommended higher cash levels across most portfolios to both insulate investors from turbulent markets and as an attractive source of risk-free return.  In this process, we have used only the strongest of deposit taking institutions.


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