Good morning! Futures are indicating that the FTSE 100 should open slightly down, 12 points to 6,437. The US Govt shutdown does not seem to have spooked the markets (yet?) but I'm sure is making us all a little more nervous than we would otherwise be. I have noticed some small caps that I monitor and hold positions in, retrace quite a bit from recent rises, which is beginning to present the odd buying opportunity.

What I like about small caps is that it only takes one or two clumsy sellers, and/or a flurry of panic selling from short-termers to drop the price quite a bit - and if it starts triggering stop losses or forced selling at the Spread Betting companies, then all hell can break loose! These should be seen as good buying opportunities in my view, providing you are well prepared, having done your research, and have screened out companies with weak Balance Sheets and excessive debt.

Of course you can only buy if you have some cash on the sidelines, and/or have only used little or no gearing. It's so satisfying to be buying the dips, rather than being a forced seller from margin calls on the dips.

 

 

Not a great deal of company news this morning. Albemarle & Bond Holdings (LON:ABM) has issued a very worrying-sounding update on their financing, with a failure to reach agreement with its largest shareholder over underwriting an equity raise of £35m.

Two days ago I mentioned the problems at ABM, and commented;

"So ABM shareholders have woken up this morning to a near-50% drop in the share price, down to 67p at the time of writing. I wouldn't touch them with a bargepole, with that level of uncertainty over their financing. It's a very powerful reminder that Balance Sheets really do matter a lot, and that highly indebted companies are accidents waiting to happen, which is why I don't go near them."

 

Today's announcement makes it clear that the situation has got a lot worse, indeed looks to be critical. So anyone holding these shares now needs to understand they are a binary bet on the banks continuing to support the business, but hefty dilution now looks inevitable at some point, and it's anybody's guess at what price.

Risk averse investors…

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