Investments: Supply and demand
Last week I wrote about the ‘rights issues’ I’ve been involved in on the stock market. A large amounts of shares were issued in Premier Foods and so the supply has increased. The price is dropping and I suspect it’s mostly small investors selling.
I have invested in a number of things in the past few years including Zopa and the return is still quite good. I decided this week that I would sell Royal Mail Group as the price continues to drop. The fact that the government is being criticised for selling the shares too cheaply is just a coincidence of course. They have no control over the regulator. Do they?
The political considerations are always important when you’re investing. Often the ‘spin’ about recovery can stimulate demand, but the underlying facts still suggest the economy has a lot of problems. Rising house prices in the south of England might be good for estate agents, but doesn’t help the young people in the North who need a job. We have seen some tax cuts this month, but we have also seen tax rises. We haven’t seen a lot that will stimulate exports or increased production.
My investment in Premier Foods looks good, because I see them spending money on advertising and promoting their products through social media. That will stimulate demand and so that should lead to real growth in sales and to genuine profits. I think those shares are grossly undervalued now and so I’m willing to take a risk on them. Many companies are increasing efficiency and so it is those people who run Britain’s companies and actually do the work that will bring the economy out of recession eventually.
I have invested in banking too and that is an industry that has gone through a difficult time. We still have an inefficient banking system. I think many branches will close down and we will see banks within other premises. Like banks within supermarkets and banks offering more services via ATM’s and the internet. I haven’t been in my branch for years and tend to post cheques through the letterbox that need to be paid into my account. I suspect that soon I’ll be photographing them and uploading the photo to their website. Branches are needed for business, but far fewer than we have now. Banking halls where different banks share premises and offer intense competition because they are all under one roof could become more popular too, especially in our cities.
Looking at what might happen in the future can help us make better investment decisions. Peer to peer lending like Zopa is here to stay and I see a revolution in banking beginning too. Other things like graphene could play a part in my investment strategy and so too could devices that connect to the internet and other internet dependant businesses.
The stock market can be frustrating, especially this month as it has been all bad news, but it can still bring good return for taking a risk. People willing to take a risk and invest in the future of Britain should get some reward. It would be better if everyone had an opportunity to invest rather than just the rich and powerful. We need the markets more accessible to more people. That could create demand and more money would be invested in the future of industry and commerce rather than property and help to prevent property bubbles.
In the meantime, I’ll keep checking the markets and making decisions on investments. I’m no expert, in fact it’s a steep learning curve. This past month I’ve learnt a lot about rights issues. I think in the next few months as summer arrives in Britain there will be a different mood and different things happening. I can’t predict what will happen in the markets, but with less demand for oil and gas and more demand for summer tee shirts and ice cream. Who knows what might happen? It could all depend on the weather. Everything from snow at Easter to a 3 month heat wave has been forecast…
What do you think? Please share your thoughts in the comments box. You can also follow me on Twitter.