only cheap looking backwards2 Dec 2007 08:47
Many shares can be said to be cheap looking at pre-credit crunch share prices...the question is whether they are cheap looking forwards...if one relies on the Daily Telegraph's doom profits there is more downside to come on equities, a view shared by those moving into bonds, notwithstanding that the yield falls as the price rises...any port in a storm for some...two problems ahead for the current week: (1) a belief that the BofE will not cut rates; (2) the possibility that RBS may indicate sub-prime write downs at the upper end of analysts forecasts. Meanwhile only China's massive expansion may be supporting the current high demand for precious and base metals. Another concern is the impact of a strengthening euro. It would be good to think that there will be a pre-Christmas bull run, but unless the BofE follow the Fed's lead and cut rates by .5%, there may be little Christmas cheer and if so the New Year could be bleak. The last crash in share prices occurred on the first trading day after the New Year. History has a funny way of repeating itself. No-one expects a crash, but short of some really positive news to boost confidence in investing in equities, the decline in values could continue for a few weeks/months yet. All of this is compounded by falling house prices. This will lead to less spending and a further fall in profits in retailing and banking profits.