Blog 16.09.2019

By September 16, 2019Food for thought

The bombing of an Aramco oil field and the resultant closure of about half of Saudi Arabia’s oil production facilities is likely to cause the forecast crude oil surplus to reduce or even disappear and be replaced by a temporary shortage. The prices of crude oil are likely to rise. How high and for how long will become apparent next week as too will be the probable effect on inflation which has been steadily declining worldwide as commodity prices declined and wages were kept in check. 

The only “investment” to consistently gain is domestic property. In the long run, this is not good for economies as it accounts for too much of consumers’ disposable incomes and makes homes unaffordable for first time buyers worldwide.

The Fed has a policy meeting this coming week. It is widely tipped that the Fed will make a 25 point cut in U.S. interest rates. Reports are that this is already priced into markets plus another 25 point cut before the year end. I expect another tirade of aggressive twitters as Trump is bound to claim that the “boneheads” at the Fed are causing U.S. economic growth to decline as interest rates are too high.

Will Washington accept China’s offer of an “olive branch” to rollback tariffs and cancel planned further tariffs. In my opinion, it ought to do so, but, in this respect, Trump is unpredictable, and anything could happen.

Re equities – a number of equity indices have now clocked up 4 consecutive weeks of gains:

  • Asia:
    • TWSE – 4 weeks of gains:
    • SHZ – 5 weeks of without loss – many Chinese high tech companies are located in Shenzhen;
    • SET – 4 weeks of gains;
  • Europe:
    • DAX, CAC, Italy – each have 4 weeks of gains:
  • America:
    • INMEX – 4 weeks of gains.

Equity investments:

  • China – due to the likelihood of a Trump eruption, I said if not already invested then markets had already risen too high for newcomers. As it transpired, Trump did not erupt last week but I repeat my view again for this week.
  • HK – riots continue – a no go investment area – its rumoured that property prices could decline by 30% – I’ve heard such scaremonger forecasts before, and they never materialized.
  • SET – ok – there was a small gain.
  • EEC – equity indices were again higher last week on stimulus by the ECB. I expect positivity to continue provided that the flash PMIs are not shockers:
    • 2 of the EEC equity funds which I mentioned last week (ABEEMAA and JGAPEOL) each had a very bad week due to inexplicable fund management’s pricing of the funds – see my separate report on this. The long term price performance stats are still amongst the best so hang on.
    • FSEQTI – another fund with an inexplicable losing week (-3.68%). It is another long term investment so hang on.
    • RCMEUTU – my attempt to buy was thwarted as the fund manager advised that this fund (and all of its similarly named family) were closed for new subscriptions.
  • U.S. – the FLEUSTI and MERTEPI equity funds had a poor week due to inexplicable fund manager pricing – see my separate report. The long term price performance stats are still amongst the best so hang on as I do not expect that high tech will become unpopular.
  • WFUSLCA – this fund also had a bad week (-1.6%) and under-performed the sub-index for U.S. large cap growth (+0.52%). As with the other equity funds which under-performed the relevant indices, the long-term stats are good so hang on.

Bond Funds – last week bond funds, which had been performing well all year, reversed and headed lower.

Currencies – I expect the gains in sterling to continue. The future of the Euro now rests with EEC governments which have not taken expansionary measures for a decade. This has to change if the EEC is to rescue its economy as Draghi is right when he says that ECB monetary stimulus will not work without each country taking expansionary measures.

I reckon that it is a good time to buy property in the UK if intending to live there.

If your thinking of stepping out of the rat race, there is an area of countryside just south of Rome where the Italian government will pay newcomers to go and live there. All a newcomer has to do is buy property and set up a small business to help the community. Why? The younger generation has deserted the area to earn higher incomes in cities and richer parts of Italy. Allegedly there are ample small empty village cottages which are not expensive. 

 

Leave a Reply