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Magic numbers? #investments

When the FTSE 100 was over 7000, some pundit was predicting it would crash 20%. That would make it 5600, is that the bottom? Is that the magic number where we can all breathe a sigh of relief? Maybe not…

The prediction does seem to be surprisingly accurate as the FTSE 100 has been bouncing around the 5600 level lately, but I don’t think we can say for sure that it won’t go lower. We can say with some certainty that some foreign investors see this level as ‘cheap’ and are buying. In fact, many investors in the UK are buying. They are also investing in property and precious metals like gold. The gold price has been going up on this demand.

The London property market has been making people easy money too, even members of parliament have been into that. The rise in stamp duty on buy to let in April could change that situation and maybe more investment will go into industry and commerce where it is needed.

Are things about to get better for investors? I think we have to be wary of the safe havens. They are property, gold and those top FTSE 100 companies that everyone thinks can’t go bust. The companies that are too big to fail. We have to beware of making assumptions. It seems unlikely that the government will or even can do another bailout. So the only safe thing to do is diversify as much as possible and then sit tight and maybe pick up a few bargains.

The government’s austerity programme meant many companies lost contracts and others lost sales, so it pays to try to identify those companies and avoid them. I think Tesco will recover but the other large supermarkets are still vulnerable and are losing sales to the discounters.

I have seen many share prices fall and some unexpectedly, like the AA. For many people, breakdown cover is a now a necessity so I would expect that price to recover and maybe there will be some mergers or acquisitions in that sector. We can make a little money on acquisitions, so  it is worth thinking about which companies look cheap and might be a target.

For now, I will watch and wait. I see some progress coming for Solo Oil with its assets in the UK, Isle of Wight and Tanzania looking interesting. We can expect positive news over the next few months and the share price looks really low. I’m expecting the price to soar in the next few months. Verona Pharma is in the AIM market too and developing a new drug which looks promising. I don’t think that share price will soar until a big pharma takes an interest. The same applies to Immupharma with its new lupus drug.

In the short term, ITV looks a good bet as companies increase advertising budgets but I have doubts about their long-term prospects unless they can make use of the internet more.

I have a theory that the stock market can be affected by the weather.When the weather improves, we might see traders coming back from a lunch time of  sunbathing in a vitamin D enriched happy mood with an inclination to  buy. Sentiment does count for a lot, but we can’t predict the weather any more accurately than we can predict the stock market!

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