Easy money? #investments
The other day I read that the majority of members of parliament are now landlords and have their money invested in the London property market. It only needs the government to fund a London building programme to burst that bubble. No wonder they’re all scared of Corbyn getting into number 10!
There is easy money to be made in the property market as long as house building is limited and new immigrants keep coming into the country to increase demand. They are even renting out sheds in London. British industry needs that investment, but banks see property as a safer bet and MPs aren’t likely to default on their buy to let loans, at least not for 5 years anyway.
RBS, the bank that leveraged it’s way to bankruptcy and had to be bailed out by the British government is now thought of as being respectable again. One of it’s economists this week warned of a financial crash that could see the FTSE 100 index losing 20% of its value. Where has he been for the past 9 months?
The FTSE was over 7000 last April, but it’s well below 6,000 now. So what went wrong? Since the 2007 crash investors have been looking for safe harbours and not expecting big returns, in fact, many just want a return higher than inflation. So many, like our members of parliament have gone into the property market and perhaps invested in the top British companies, those large behemoths of the FTSE 100. They then became over – priced and so we have been seeing an adjustment back to more realistic prices. The problem is the crash back to realism has been affecting the rest of the market. The good news is, that means there are bargains in the FTSE 250 and other sectors.
Solo Oil finally got the GSA (gas sales agreement) signed this week and will be pumping gas into the pipeline and making a profit at last. So are the champagne corks popping in celebration? No, not really. Many announcements were made about the GSA and it was delayed and delayed, investors lost faith and the share price dropped really low. People who bought then made a quick profit on the GSA being signed and Solo is now considered a short term play rather than a long term investment. The GSA is just the beginning, they have the option to double their stake in that gas field. Long term they can do really well, if they concentrate on the Tanzanian assets and the Horse Hill investment. Horse Hill looks like coming good too with a final flow test.
Tesco was seen as a safe harbour before realism took a hold and the share price dropped like the proverbial brick. Tesco was the bearer of glad tidings as it announced its Christmas sales were up. It looks like the last minute rush to spend in the shops did give retailers a better Christmas sales boost. So on the back of this news from Tesco other retailers saw their share prices rebound too, but for how long?
So what should we invest in now? I intend to keep loaning money with Zopa, that is bringing in 4% which isn’t bad when inflation is nearly zero. I also like the look of banks, which could become more profitable when interest rates rise. Barclays and Lloyds look like they could be good investments at the moment. Lloyds hit a high of around 89p last June and so today’s price of just 66.42 looks quite attractive. It’s a similar story with Barclays down from a high of around 290 last August to just 195 today.
Has the oil price hit bottom? Some people believe it will go lower. When we see companies going to the wall because of the low price, then will be the time to invest in the ones that have survived well. I think Premier Oil could be one that not only survives but expands in difficult times.
That’s all for this week. Good luck with your investments. There is really no easy money for private investors but if we diversify we might make a little when the markets start to recover.