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The return to normality #financefriday

Major banks posted losses this week. They shored up their balance sheets following the 2008 crisis so will survive this crisis but what of other major companies? They will need to raise investment and as the banks reassure shareholders that they won’t lose out so other companies will have to reward their shareholders for their investment.

the return to normality

Call on investors

Most large companies will have to use reserves or call on investors to invest more money. Where will the money come from to pay a return on that investment? The only answer seems to be price rises and so we can expect inflation in the years ahead. We can also expect austerity but both austerity and price rises should be spread over many,  many years. Paying for covid should be a long-term aspiration, not a short-term one.

Stock Market

This week investors became aware of the need to ‘pay for covid’ and the effects of the budget were considered and so the stock market was more subdued. I’ve been considering the US market but it is quite different now to the UK market. Low-interest rates seem to have US investors willing to accept lower returns on stock market investment and many corporate investors are now looking at riskier assets like cryptocurrencies. I’m watching to see what the latest stimulus plans do to US share prices. I’m expecting the price of Bitcoin to crash yet again too. 

AIM

I’ve made investment mistakes over the years and the major ones were investing in the AIM (alternative investment market). Yesterday, my shares in Scirocco Energy were boosted by some good news about their investment in Helium One. Maybe all is not lost after all? My other AIM investment is Immupharma which, as always, looks promising but never delivers. Both investments are worth holding as I hope for the unlikely to happen and they come good!

eToro

My recent investments via eToro are modest but showing a small profit. I find investing interesting and it helps keep me sane in these trying times to watch the markets. My 30-day gain on eToro is close to 5%. Strangely enough, the losers are the pharmaceutical companies AstraZeneca and GlaxoSmithKleine, which is surprising in a pandemic. My paper profit on eToro has been cut further by the pound appreciating against the dollar this morning. It’s up to 1.40 and I wait to see what stimulus will do to that currency pair too. In theory, the pound should strengthen further with stimulus but I think that might already be priced in.

Oil

Oil is going out of fashion but the oil price continues to rise. Demand is still reduced but supply seems to be matching demand more now. When the world starts to get back to nromal the oil price could soar as many US oil wells have been mothballed. OPEC could take advantage of the situation and keep production limited. We have hit $60 a barrel, will it hit $100 a barrel again? I wouldn’t be surprised.

The return to normality

The return to normality doesn’t look too rosy. I suspect we will have austerity and rising prices. There are calls for pay rises for NHS staff but I suspect the government will resist that and offer them their sincere thanks and support instead. The white elephant HS2 will go ahead and maybe a Boris Bridge to Northern Ireland from Scotland. Our ‘new normal’ might just be a bit abnormal…

 

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