Investments | Royal Bank of Scotland Group (RBS.L)
Buying in a bear market
When there are more sellers than buyers in the market, traders call it a bear market and when the buyers outnumber the sellers, they call it a bull market. This appears to be a bear market; but the government is buying back it’s bonds by ‘printing’ money. What will the financial institutions do with the new money they get from selling bonds? I think they are buying shares in the markets again but being very selective. I have bought shares in another company that is making a loss; the Royal Bank of Scotland Group.
This is the third loss making company I have bought and then written blogs about the investment. The other two were Premier Foods which I bought at about 4p and they are 11.75p at the time of writing and Lloyds Banking Group at 28.99p and they are now 35.34p. Will Royal Bank of Scotland go up too? I don’t know but I obviously expect them to or I wouldn’t have bought them!
The bank has sold off a lot of assets, consumer loans, pubs, a hotel and so has more cash and has a low interest loan to fund further investment. It’s still a sizeable group and owns National Westminster Bank, Churchill insurance, Direct Line, Privilege, Ulster Bank, etc. It also has extensive investments overseas in the USA, Europe and as far away as China. The bank has a lot of potential to recover from the mistakes of the past. The share price could go back to what it was in the glory days, making money for the tax payer who own 84% of the company. If the shares go back to what the government paid for their shares I will be happy. If they go up to the sort of price they were before the financial crisis when they were £7.00 a share, we can all celebrate! I would be ecstatic!
I have a list of companies that I watch and I have ignored my own instincts when I have thought a company’s shares were really cheap and not bought. I need to be braver! I think there are still some bargains to be had. Share prices are jumping around as sentiment changes people’s minds and greed makes traders take profits. One share price I was watching made quite spectacular gains earlier in the week and now the profit taking is taking it’s toll on the price at the end of the week. This game isn’t for the faint hearted or for people who think short term. I am thinking long term and hoping to make a few quid over the next few years.
The WPU, is the FTSE Wealth Preservation Unit and it’s a global unit of currency made up of a basket of currencies and commodities. It aims to be unaffected by inflation and the devaluing of currencies by expansion of the money supply and quantitative easing. We have to think about trying to get returns on investment that are real returns. With inflation well above the Bank of England ‘target’ and often over 5% we need to have returns higher than the inflation rate or we lose wealth.
We should also strive to have more assets that are appreciating like equities, property and commodities than assets that are depreciating like household goods and the car. In the UK now most property is depreciating too and wealth is being destroyed by quantitative easing at an unprecedented scale.
Now I have made myself sound like a capitalist. I will qualify that by, saying I think everyone should have the opportunity to save and invest but people with little in savings can’t even save the deposit on a house now. That is the result of a greed driven economy and society where narcissistic people are worshipped. We have to change society to make it fairer and encourage people to be more empathic and charitable.
- RBS Nears Sale of Asian Assets to Malaysian Bank (blogs.wsj.com)
- Royal Bank of Scotland posts £766m loss, says bonuses down 42pc (telegraph.co.uk)