December 2008
Our Review of 2008 and Outlook for 2009
You’re Next Move Could be the most Important One You Make All Year! We believe that 2009 will offer many unique investments opportunities and, with a patient approach, has the potential to be a rewarding year for investors. Asset prices across the board are severely depressed, driven down by the wave of negative economic and corporate news that swept the financial markets last year. As conditions stabilise, and they will, we anticipate sentiment to improve later in 2009 thereafter followed by asset appreciation. We are not of the opinion that the end of the world is nigh! In summary; •...
Read the Full NoteNovember 2008
Crude Oil
It would have been hard to imagine four months ago, that the price of crude oil, then near $150 a barrel, would plummet over 70% to its current level. But plummet it has and to a level we now consider offers an excellent opportunity for investment. Since breaking above $80 in 2007 the oil price moved strongly as investors wary that the spiking oil price would ignite inflation, (and weaken the dollar) invested in the highly liquid oil futures market as a strategy for hedging against the future effects of inflation. However this summer's escalation of the financial crisis, the...
Read the Full NoteSeptember 2008
Will the US Dollar Come to the Rescue?
The recent rally in the US Dollar against other major currencies shows it may have been knocked down, but certainly not knocked out. Below we discuss why the Dollar is due renaissance, and why this may actually come to the aid of faltering global economy. It was the sub-prime crisis that so spectacularly hit the US economy and prompted the Federal Reserve to embark on one of their most aggressive rate cutting campaigns to date. In contrast the Bank of England and the European Central Bank chose a different route by focusing on the soaring level of inflation to keep...
Read the Full NoteAugust 2008
Gold, The Ultimate Insurance Policy?
We believe that Gold may be the solution The global economy continues to slow and markets are dropping under the increasing weight of soaring inflation and a credit contraction. We're facing an outright bear market in financial assets so where should we as cautious investors be looking? From its all-time high in April, spot gold prices have declined 8%. Even though gold has soared over the last few years, the spot price of gold is still 55% below its inflation-adjusted high since January 1980. Global gold production has been declining since 2005 with South African and Australian output virtually stagnant...
Read the Full NoteJuly 2008
No Relief for the UK Housing Market
What will be the result for the broader economy? Many have predicted a crash in the UK housing market, a view that is of no surprise given the meteoric prices rises of the last ten years. However the market has shown remarkable resilience especially in the face of recent crisis in the mortgage market. House prices in the UK are, on average, 1.3% higher than at the beginning of the year according to property website rightmove.co.uk. Unfortunately this also includes a drop of 1.8% this month, the worst July on record. Far more telling and of more concern are new...
Read the Full NoteJune 2008
Who is afraid of a Bear Market?
Having recovered from the credit-crisis induced falls at start of the year, global equity markets have once again succumb to selling pressure as investor’s fret over the declining economic growth and soaring inflation. Economic growth in the UK, as measured by real GDP slowed to a 1.8% annual rate in the first quarter of 2008 against 3.1% and 2.5% annual rates in the first and second half of last year respectively. The housing market, long the principal pillar supporting the UK economy, is in near free-fall with estimates of 2% price falls in June alone. Inflation accelerated to 3.3% in...
Read the Full NoteMay 2008
Is the US in a recession? George Bush does not think so.
Earlier this month the President of United States, George Bush, declared that the US was not in a recession but simply a slowdown; shortly after past-Federal Reserve Chairman Alan Greenspan predicted there was a 50% chance of US recession, and just this week the sage of Omaha, Warren Buffet declared that the US was already in a recession. Below we ponder who is right and does it actually matter. First we must establish how we define a recession. The commonly subscribed to macroeconomic theory defines a recession as being generally associated with a “decline in a country’s real gross domestic...
Read the Full NoteApril 2008
UK Inflation
Q: Why did the Bank of England Keep Interest Rates Unchanged? 13th May 2008 - Annual Inflation Surges to 3% in April “Annual UK inflation rose by 0.5% to 3% in April in what is the sharpest single month increase since 2002” A: Because they knew inflation was back! Even through the answer was pretty clear many where left scratching their heads as to why the Bank of England left UK interest rates unchanged at 5.0% following their last meeting. Firstly US rates have been cut several times this year to ward off the possibility of economic recession, yet UK...
Read the Full NoteMarch 2008
Bear Stearns
FOR SALE: 5th Largest US Investment Bank, priced to sell. Do the Weekends events mark the beginning of the end of the credit crisis or merely the beginning? The US-led credit crisis claimed it latest victim last week; Bear Stearns, the 5th largest investment bank in the US announced on Friday that it had secured emergency financing from the US Federal Reserve Bank of New York and JP Morgan Chase. The announcement sent the banks share price into a tail spin and sent both lenders and investors running exaggerating the funding problems the bank has sought sort to relive. Then...
Read the Full NoteFebruary 2008
Catch a Falling Knife
The X year Bull Run we all enjoyed abruptly ended in the summer of last year as a detiriateing economic environment took its toll on the most susceptible of our society and we where hit with what has now come to be know as the “US Sub-Prime Mortgage Crisis”. Subsequently the market has been bombarded with mixed news sending it plummeting and soaring on a daily basis. This extreme volatility erodes investor confidence and makes the investment managers’ job even more challenging. As early as beginning of 2007 Tradition have been on a more defensive tack in anticipation of these...
Read the Full NoteJanuary 2008
The Rise of the Euro
The Euro is continuing to strengthen against the US Dollar and having firmly broken out of its long-term trading range against Sterling (1.52 to 1.37) looks set to move even higher, in the short-term at least. The Dollar has been on a losing streak against most major currencies since it became clear that the US economy is in a recessionary environment. Growth forecasts have been cut and interest rates have begun to fall. The UK economy, through not facing the same recessionary forces as the in the US, has started to slow led primarily by a soft property market and...
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