Investments | Safe havens?
We hear a lot about so called ‘safe havens’ for investment funds. The United States was a ‘safe haven’ for many US investors and the UK has seemed a safe investment for many funds compared to Europe. It’s not just Government bonds that are seen as ‘safe havens’ by investment fund managers, but blue chip shares too.
We had some news this week from the European central bank saying they had a new rescue plan for the Euro that involves buying the bonds of debt ridden nations to get their borrowing costs down. The world’s stock markets responded positively to the news, with most indices rising over 2%.
Investors were being picky on the London stock market though and they seemed to be favouring banks, more than the ‘safe haven’ blue chips. Banks are seen as under-priced and some major blue chip companies are seen as over-priced, because although many funds were happy to see a zero return in exchange for a ‘safe haven’, they really want a return, however small.
Lloyds Banking Group, Royal Bank of Scotland and Barclays all made good gains yesterday of over 3% and at the time of writing appear to be doing quite well again this morning. There are other shares that I think are good value, because of the underlying potential of the company, but you can see what people are buying for yourself. You can also see what they are selling and many companies that were considered safe, but offering poor returns are out of favour. There seems to be an appetite for risk, but not too much risk; some struggling companies are seeing their share price drop even more.
Other news this week was the Prime Minister’s announcement about house building and planning permission for extensions. You would expect shares in house builders to go up. Right? The problem is, who can afford to buy new houses with a recession and with banks unwilling to lend on mortgages?
I have had three invitations this week to transfer balances on to credit cards for a fee. This makes sense for banks. Get them hooked and in debt on credit cards because the interest rates are 4 times what they are, on mortgages. I will put my money on the motivating power of greed every time, especially when it comes to banking. RBS is up over 4% so far this morning, they still look cheap too.
Politicians tend to be greedy too and so if the rate of VAT goes up to 25% across the European Union in time for Christmas, don’t be surprised.
I would really like to invest in a company that makes it’s money outside of Britain and the Eurozone. I have been watching such a company and it’s really out of favour and so the shares seem cheap. I will be covering that investment in a blog if and when I decide to buy!
Trying to predict the unpredictable seems impossible most of the time. Predicting the world economy and stock prices is a gamble, computers can help, but don’t rely on them for anything other than research and information. We have seen it can all go horribly wrong if you rely on them to trade!
Please note that this isn’t investment advice, just opinion. I do own RBS and Lloyds as you will know if you have been following my blogs. There are more amazing blogs on the home page and on a zillion ideas. Comments welcome!
- Finance Friday | The economy (mike10613.wordpress.com)
- A financial storm brewing? (mike10613.wordpress.com)
- Banking sector is ‘bloated’ and ‘inefficient’ says Lloyds boss (itv.com)
- Bank secrecy masks a world of crime and destruction | Observer editorial (guardian.co.uk)
- Indian shares end up; blue chipS rally (uk.reuters.com)