Fools rush in...

Friday, Aug 05 2011 by

Well, it's "kiddie in sweetshop" time for me.

Maybe I'm being way premature, and maybe the global economy is falling off a cliff, but I see lots of apparent bargains out there.

There is a fascinating piece on excess cash sloshing around the system, suggesting to me that at some point stocks will be bought heavily:

...Custodian banks are hurting because it’s near impossible for them to return even a zero rate on large deposits of cash. There’s simply not enough Treasury bills out there, which is why they are trading at negative rates causing all sorts of dysfunction at money market funds.

It’s natural, therefore, that they would eventually start charging for a service that is costing them — as Bank of New York Mellon announced it would start doing on Thursday...

...Which suggests the next obvious step for the Fed is to declare an official negative interest rate policy, or a national imposed tax on deposits of a certain sum.

It’s what Switzerland, by the way, has also heavily hinting it will do if the Swiss franc remains “massively overvalued”.

And yes, if you think that’s effectively nothing more than a wealth tax on the extremely rich, you’d be extremely right. Unfortunately, it might just be the incentive needed to get hoarded cash circulating through the economy once again...

This morning, I have bought:

  • Encore @ 43p [75p's worth of assets + upside, I reckon]
  • Braemar Shipping Services (LON:BMS) @ 400p [7% yield - BMS hardly suffered during the GFC, despite trade freeze up, so I reckon resilient]
  • JPMorgan Indian Investment Trust (LON:JII) @ 377.5p - lowest level since May 2010 - and has the Indian economy gone backwards in that time?

All additions to existing holdings. I have my eye on a few others (Vodafone (LON:VOD) , Rit Capital Partners (LON:RCP) , Medusa Mining (LON:MML) , HG Capital Trust (LON:HGT) ), but they're not quite cheap enough yet...

I would be buying more Halfords (LON:HFD) (7.5% yield that I reckon is sustainable & likely to grow - I'll be writing an article in due course) and Aminex (LON:AEX) but added a little prematurely (with the benefit of hindsight) on Wednesday. The aggregate yield on my high-yield sub-portfolio is now 6.9%.

After my spending binge, cash now stands at 11% of my porty - but it should soon receive a boost when the sale of Caledon completes.

So, what are you buying?


Filed Under: Portfolio Management,


The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.

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246 Posts on this Thread show/hide all

marben100 5th Aug '11 1 of 246

HG Capital Trust (LON:HGT) is now cheap enough: bought @ 1017p (around 10% discount to diluted assets - has been trading at a premium for the last 6 months).

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marben100 5th Aug '11 2 of 246

Just bought Polo Resources (LON:POL) @ 5p; 1p special divvy expected following Caledon completion; currently @ nearly 25% discount to NTAV, most of assets (apart from Caledon holdings) being cash. See (courtesy of "fordtin")

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emptyend 5th Aug '11 3 of 246

I'm continuing to sit on a big cash cushion in the ISA. I'm not in any rush to invest it, as it will cover my living costs between now and the start of my pension income - and I don't want to be a forced seller through having gone in hard (tempting though it is in very many cases!).  I'm happy, though, to see lots of stocks trading cheaper and having speculative froth blown off - especially as I expect to be a buyer across the board before too long (assuming that M&A has become more likely for real businesses with real assets, thanks to the falls).

In my pension fund I'm intending to take profits on the bond funds in the next few days and will probably move back into equities for the first time since October 2007. Haven't yet decided exactly which funds and it may well depend on how the next week plays out - but I'm thinking that the US market is starting to look reasonable value and the Eurozone may bottom out at some point in the next month or two.

I'm also observing (once again!)  the very real opportunity costs of Directorships!

I'll follow this thread with interest though.......undoubtedly there are some babies that have been thrown out with the bathwater and I'm sure they will get picked up.


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Fangorn 5th Aug '11 4 of 246

There certainly are alot of bargains out there Marben. Have my list of imminent buys that I'm trying to whittle down.I suspect though that we have a few more days of volatility,and am intending on holding off till I return home next tuesday. Might have missed the best opportunities by then but so be it.

Am fortunate to have been 75% in cash for a long while as I was expecting something like the current market carnage to happen.Wasn't expecting it to it my gold ans silver miners quite as hard as well though. BMS definitely going in this time, as well as the other high divi suspects - the problem is there is simply so much choice out there, but will they be cheaper next week.

I/m pretty sure that if the current carnage continues into early next week then QE3 will be announced pretty sharpish.

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snaj 5th Aug '11 5 of 246

In reply to marben100, post #1

Hi marben

Did you consider HGTS rather than HGT, or would the gearing effect have been too much? I can't recall what the remaining life of the sub shares are, and of course that would be a critical consideration.


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emptyend 5th Aug '11 6 of 246

In reply to Fangorn, post #4

I/m pretty sure that if the current carnage continues into early next week then QE3 will be announced pretty sharpish.

Remember that this is August. Not only is George Osborne away but most of the other political classes have a large slice of their elite on the beaches. France usually closes down completely in August...... I wouldn't rely on a quick fix.

That, most probably, was a factor in the hedgies picking now to send the market over the edge.....light volumes, few checks and balances ....and some very very large doses of genuine uncertainty!


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