The positive investorOne of the earliest pieces published on this website was called "UK Stockmarket History". The idea was to give readers who were not familiar with investing and financial terminology generally, a basis for understanding what they were likely to be reading about and hearing about as the credit crunch crisis unfolded. Within that background reading was a heading "Choosing an investment strategy" and two such strategies covered were "Value investing" and "Contrarian investing". These two approaches to choosing which shares to buy have one thing in common: rowing against the tide and finding value for money. Attention is also drawn to the recent article on this website called "Going back into equities"
Alan Steel, the founder of Alan Steel Asset Management, an independent financial adviser firm, wrote a piece in the Daily Telegraph cautioning investors to beware the prophets of doom on the basis that the numbers do not stack up. His main points were these:-
Estimates both in UK and US suggest that stockmarkets are 42% too cheap
Corporate insiders are net buyers of shares in their own company
In 1930, the year of the great depression, US GDP fell by 9%, the next year it fell by 6.5% and in 1932 it fell 13%. By contrast, in 2007 the US GDP rose 2% and last year it rose 1.5%
Currently, monetary policy is very loose with interest rates at almost zero
Job losses and mortgage foreclosures are far less than during the Great Depression
Unemployment in the US shows job losses of 600,000, the worst since 1974 but the US labour force is 65% greater now than in December of that year
Advertising is in decline and yet online advertising revenue is booming (the UK business Rightmove has just announced super figures, it is an online housing advertising site the diarys observation, not Alan Steel)
In January 09, experienced investors in the US had 42% on deposit and on the last two occasions when they were at this level namely 1991 and 2002, it preceded the best two years to buy equities since 1987
The average gain in the stock market following an incoming Democrat president replacing an outgoing Republican is 13%, 126 days later.
Of course, any independent financial adviser has a vested interest in persuading you to have a punt, but still, even trying to think positively is a reason to be cheerful not least when the FTSE has dipped to below 4,000 and is less dominated by financials.
jgs- 2009
