Against a background of inflation, Government cost cutting and a difficult job market, Prime Minister's Questions seems to be used, predictably, more for political point scoring than to shed light to the population as a whole on how our leaders at Westminster see the medium term journey ahead - Sir Richard Lambert ably rammed home the latter point in his final major speech as CBI Director General on 24th January 2011, a copy of which can be seen by clicking here - it provides much greater intellectual leadership than I see coming from Westminster, but I probably say this because his vision of the way forward for the UK is similar to mine!
Another very interesting speech this week was that given by the Governor of the Bank of England, a copy of which can be seen by clicking here. I have been worried by the media column inches devoted to the need to raise interest rates to address inflation - this speech shows that the Governor understands that this response in today's circumstances would worsen the position rather than improve it - he also emphasises that a) the present pain being suffered across the country is unavoidable in the short term and b) we have to work our way through this pain by saving more, consuming less and exporting more.
Taken together these two speeches are very reassuring in terms of outlining where we should be heading and how we should get there - thank goodness the LCF Research investment template is in tune with the themes underlying these speeches!
Turning to companies, it is very noticeable that the share prices of a number of larger AIM companies have risen dramatically in recent months - I believe that a driver of this trend has been a desire on the part of many fund managers to exit smaller companies and invest in larger smallcaps throughout the asset management supply chain. Within AIM, although in many instances the underlying businesses of the larger companies look attractive, share price increases over the last few months are resulting in some very demanding PEG ratios - in my opinion, they are overvalued in relation to their growth potential. A contrasting position is arising where companies missing market expectations, albeit for sound business development reasons, are seeing their share price punished, providing attractive buying opportunities for the watchful. Ah well,…
About the Author
LCF Research
0 comments
