The FTSE 100 index is but one number summing up the movements of the biggest companies, never mind the other 2,700 listed on the London Stock Exchange. Within such a huge shoal there will always be some fish that swim ahead while others fall back.
It is only six weeks since world stock markets started to crack, and there are a lot more twists and turns to come. But the most encouraging sign at the moment is the positive attitude of leading fund managers such as New Star’s Guy de Blonay, whom Clare Francis interviews on page 3.
He and many of his counterparts take the view that the current uncertainties will make some shares ridiculously cheap, exactly as happened in 2003.
I do not say that mood will guarantee a market recovery, because shares could take enough of a pounding to sap the heart of even the most bullish investor, professional or amateur. But, for the time being, De Blonay and his ilk will put a floor under prices as long as there is value to be had — and when they think prices have fallen as far as they are going to.
Last week David Williams, banking analyst at Morgan Stanley, predicted that Lloyds TSB could be the best of the British banks this year. As the shares offer a dividend yield of nearly 7%, more than twice most of the bank’s savings interest rates, you have to fear an economic freeze of Siberian proportions not to buy with that sort of praise being bandied about.
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You may not be getting in at the bottom, but that dividend should be worthwhile.
Fair exchange
SHARE-PRICE performance is one thing, but something much harder for investors to predict is the danger that they will be confronted with a tougher set of rules and regulations in the markets.
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Sir Callum McCarthy, chairman of the Financial Services Authority, last week raised the spectre of one of the American stock exchanges buying the London exchange and spiriting it away to America, where it would come under the more restrictive regime of Washington’s Securities and Exchange Commission (SEC).
Fanciful? Maybe, but McCarthy is no dreamer and it may be significant that his warning was issued after a visit to Washington to compare notes with Christopher Cox, his SEC counterpart.
Senior City figures tell me that, in that nightmare scenario, they would lobby to form a rebel stock market under the FSA’s lighter regime. This may sound a long way from deciding whether to buy a Fidelity or a Jupiter fund but, believe me, the resulting upheaval would hit share prices like a wet kipper about the face. It is far from fanciful to suggest that this could happen in the middle of a market freefall later this year. Just as it is good to be aware of buying signals, so bear that little cloud in mind, in case it turns into a thunderstorm.
Valuable lesson
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LEARNING about money can definitely affect your wealth — for the better.
A new report from Norwich Union cites American research claiming that compulsory financial education can make people richer by the equivalent of a year’s income by the time they reach the ages between 35 and 49.
In British terms, that means a couple with two children aged 5 and 11 could be better off by about £32,000, a childless couple could be £22,000 ahead, and a single person £13,000 up.
While it was always apparent that being more money-savvy would give you money-making ideas and help you avoid the worst pitfalls, it certainly focuses the mind to see the benefits in hard cash — however spurious the figures.
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Norwich Union, in tandem with Public Policy Research, uses this and other data to bang the drum for more resources to go into financial education. That is a campaign I heartily endorse, but it leads straight into the political snake-pit. On one side the Treasury jealously guards the purse-strings, while on another the Department for Education and Skills is populated by vested interests claiming that there is no room in the national curriculum for a Johnny-come-lately subject such as personal finance.
Something would have to give, and the potential somethings have their defenders.
So the Norwich Union report suggests some quick fixes to cajole financial innocents into “better” behaviour.
One odd idea is not to pay off all your debts at once, but instead use some of the money to build up savings. This flies in the face of all the standard advice to get rid of debts because they charge the highest interest.
Meanwhile, it is never too soon to start teaching children about money, from simple lessons about working for pocket money, to regular savings and how unit trusts work.
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The money industry is keen to push child trust funds as a way of getting kids used to saving, but I reckon that’s too remote for most of them. It’s money that comes from the sky and bears little relation to reality. Better to give them a sense of earning and ownership — and potential loss.