UK Stockmarket 2009 and beyond

StevieJ

Us data turns ftse around.

LONDON (ShareCast) - 1410: Footsie (news) is in the blue now with the US expected to open higher following strong economic growth and unemployment figures in the world's biggest economy

http://uk.finance.yahoo.com/news/market-overview-us-data-lifts-footsie-digilook-7d01cc7aa2c2.html

worldtraveller

Update on the 'Flash Crash' on the 6th May:

A single sale of $4.1 billion in futures contracts by a mutual fund touched off a series of events that led to the so-called flash crash, the sharp stock market decline that shook investors and markets on May 6, federal regulators said on Friday.

In a long-awaited report, the Securities and Exchange Commission and the Commodity Futures Trading Commission said they had identified the sequence of events that erased more than 600 points from the Dow Jones industrial average in minutes on the afternoon of May 6 before the markets recovered just as quickly.

Significantly, the report found that the plunge was not caused by any market manipulation but by a single firm trying to hedge its investment position, if in an aggressive and abrupt manner.

The regulators hope the report lifts the uncertainty that has hung over the nation’s exchanges — and in investors’ minds — since the wild gyrations in May.

“This report identifies what happened and reaffirms the importance of a number of the actions we have taken since that day,” Mary L. Schapiro, the S.E.C. chairwoman, and Gary Gensler, the chairman of the C.F.T.C. said in a statement.

“We now must consider what other investor-focused measures are needed to ensure that our markets are fair, efficient and resilient, now and for years to come,” they said.

The regulators had already identified in an earlier report the single large sale of futures contracts as playing an important role in the May 6 plunge.

But in the new findings published Friday, the regulators emphasized the central role this large sale played on a day when markets were already under pressure because of the debt crisis in Greece.

It said that at about 2:32 p.m., a mutual fund — which was not identified in the report, but which officials have identified as Waddell & Reed Financial of Kansas — started a program to sell 75,000 E-Mini Standard & Poor’s 500 futures contracts, using computer sell algorithms. Normally, a sale of this size would take place over as many as five hours, but the large sale was executed in 20 minutes, the regulators said.

The algorithm was programmed to execute the trade “without regard to price or time,” the report said.

The selling pressure was then transferred from the futures markets to the stock market, leading to the abrupt drop in individual stocks.

Stock and stock-index futures prices were already declining on May 6 when, about 2:42 p.m., they suddenly plunged by more than 5 percent over the next five minutes.

When prices bottomed at about 2:47 p.m., the Dow Jones industrial average was down nearly 990 points, 9.1 percent below where it had started the day. Almost as quickly as prices dropped, however, they rebounded, with the Dow industrials recovering 543 points in about 90 seconds. The Dow finished the day down 347.80, or 3.2 percent, at 10,520.32.

Following the preliminary report in May, the S.E.C. announced it was temporarily instituting circuit breakers on all the stocks in the S. & P.’s 500-stock index, in an effort to stop another crash happening again.

It has since expanded the circuit breakers — which halt trading in a stock for five minutes if the price moves by 10 percent or more in a five-minute period — to a broader range of stocks.

In every week since the May 6 plunge, there have been outflows by ordinary investors from domestic stock market mutual funds, according to estimates from the Investment Company Institute.

The institute prefers to rely on monthly figures — but even that data shows monthly withdrawals by retail investors from stock market mutual funds. In May alone, $19 billion was taken out by investors from domestic stock market funds.

Some analysts have said this withdrawal may be explained, in part, by a souring of confidence among ordinary investors caused by the sharp stock market gyrations, the increasing share of trading on the nation’s exchanges claimed by computerized high-frequency traders, and perhaps also the authorities’ subsequent inability to immediately pinpoint the cause of the May plunge.

The report is the fruit of months of work by investigators at both the S.E.C. and the C.F.T.C. in Washington.

They have combed through mountains of data to identify patterns in the buy and sell statistics on the exchanges. They also conducted many dozens of interviews with traders, big investors and exchanges who were active in the markets on May 6.

The New York Times

blinko

London markets took a breather from their recent rally last week as uncertainty over the future of quantitative easing gripped investors.


As growth in the world's largest economy slowed in the second quarter and economic indicators point to further trouble ahead the Federal Reserve hinted it could step in with further quantitative easing which could come as soon as November.


Meanwhile, Monetary Policy Committee member Adam Posen sent sterling into a spin when he said the Bank of England should start pumping more money into the economy to avoid copying Japan in the 1990s and falling into a slump.


However, the picture was far from downbeat on the equities markets. Wall Street enjoyed its biggest September rally since 1939, with the S&P 500 up almost 9% during the month and the Dow Jones climbing almost 8%.


The FTSE 100 (UKX) was also powering forward in September, enjoying a rise of 8.5% during the month. However, the last week saw it hit resistance as it finished the week around the 5600 mark.


The industrial metals and mining sector put in the strongest performance with gains of just over 6% with electronic and electrical equipment firms piling on around 4.5%. At the other end of the scale banks were dragging their feet with the potential EUR34 billion bill for the bailout of Anglo Irish weighing on the sector.


BP (BP-) ushered in a new era in its corporate history as Bob Dudley took over the reins from Tony Hayward. Clean-up costs at the beleaguered oil titan have now hit $11 billion although shareholders have been tempted back into the stock by the prospect of the reappearance of dividends next year.


Among the smaller companies JJB Sports (JJB) saw its shares lose almost a quarter of their value during the week after it warned of a further deterioration in trading conditions.


The FTSE All-Share-listed group, which narrowly avoided administration last year, said conditions had been volatile since the start of August.


Nighthawk Energy (HAWK) was also on a downhill slope with its shares losing around 30% of their value over the past five trading sessions following the sudden resignation of founder David Bramhill.


However, AIM-listed Leni Oil & Gas (LOG) was enjoying a smoother ride. Its shares climbed almost 40% after its struck oil in Northern Spain. Caza was also on the front foot, piling on around a third in value this week after it announced the discovery of multiple potential pay sands at its 158 #1 well in Texas.


Elsewhere, the London Stock Exchange has enhanced its corporate bond platform for private investors with another 65 available on Monday. This takes the total number of corporate bonds available for trading on the London Stock Exchange's Order Book for Retail Bonds to 89 along with 50 gilts and three supranational bonds.


On the economic front, GDP growth in the UK in the second quarter of the year remained unchanged at 1.2% in its final revision.


This puts it at its fastest rate for nine years following last month's upgrade from 1.1 due to better-than-expected figures from the construction sector.


Commodities


It was another tremendous run for gold last week, as it notched yet another record high on Friday.


The precious metal spiked to $1,319 an ounce, as the dollar fell to a seven month low against the euro and western stockmarkets rose.


After kicking off the week around the $1,300 mark, it has spent much of the past five days taking lead from weak US economic data, including a surprisingly sharp fall in consumer confidence.


It ended September with 11 record highs under its belt, rising nearly 5% throughout the month.


Fellow commodity crude also soared to fresh seven week highs on Friday, boosted once again by the weaker dollar and strong manufacturing data from China.


The price of a barrel gained more than 6% on Tuesday on the back of an unexpected decrease in last week's US oil inventories, heading up above $81 at the end of the week.

StevieJ

My portfolio is finally back and above its July 2007 zenith, mainly through some successful individual share transactions and what some would describe as high risky exposure to Asia and EMs. The way the world is changing and power moving west to east, I am not really sure what is high risk any more.

sabretoothtigger

the picture was far from downbeat on the equities markets. Wall Street enjoyed its biggest September rally since 1939, with the S&P 500 up almost 9% during the month and the Dow Jones climbing almost 8%

Sounds good but I heard it pointed out that the price of copper rose faster then shares. So your copper water pipes did better then the SP500 :laugh: http://www.youtube.com/watch?v=MPtFLNq7NWU
Its a classic sign of currency devaluation that commodities rise fastest because its an adjustment not real growth or even real anticipation of growth

I started the month ranked 5th and ended up 37th on my virtual pick of shares for Sept. My worst choice was to short POG, silly but all the same it has underperformed and fallen back recently just as gold makes a new high
http://stockchallenge.co.uk/


Still not sure if Artemis has that gold or not but he does have bp and thats done well recently. I decided to hold BP for the moment, should have (re)bought some more at 400 really

http://www.bestinvest.co.uk/investment-research/fund-research/fact-sheet/artstras/artemis-strategic-assets-r/portfolio
The point about the gold is the price in sterling has not risen so much in sept because our currency has not fallen like the dollar. (so it wouldnt show as growth in a fund)
I heard the point made that when a charts gradient is steep it usually precedes a reversal to some degree, which is how the dollar is http://chart.ly/kk32wth


I dont think Im anywhere near back to 2007 unfortunately. I would be if I'd gone in more on my more speculative shares or not hesitated altogether on others like WPP in July 2009.
Think I got +17% in the last 12 months only but Iam improving. Aberdeen asia however got +27%


In 2007 the Sterling index was 102 and in August it was about 82
So in comparing worth of a portfolio it would have to 'grow' about 20% just to stand still.
Same applies to the endless debate on house prices or the price of anything in pounds imo
http://uk.reuters.com/article/idUKL1861587420070918



http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=3720183

China’s credit system, which allows policymakers to channel funds to favoured firms and projects http://www.economist.com/node/17093527?story_id=17093527&fsrc=scn/tw/te/rss/pe

StevieJ

sabretoothtigger wrote: »

In 2007 the Sterling index was 102 and in August it was about 82
So in comparing worth of a portfolio it would have to 'grow' about 20% just to stand still.
Same applies to the endless debate on house prices or the price of anything in pounds imo

The RPI is probably more relevant
July 2007 = 206.1
Aug 2010 = 224.5

8.9%

I suppose effectively I have been shorting sterling with having so many investments outside the UK. BTW the way I measure my portfolio is a net worth (excluding home) and I have actually spent quite a lot on one off costs, so I could probably add another 15% to my returns.

JamesU

StevieJ wrote: »

BTW the way I measure my portfolio is a net worth (excluding residence) and I have actually spent quite a lot on one off costs, so I could probably add another 15% to my returns.

You lost me on "excluding residence", what's this?

JamesU

sabretoothtigger

That would be excluding the worth of your own house I guess, often its people largest asset.

Sterling index would relate most to someone who spends most of their income on foreign holidays I guess. RPI might even be too harsh for someone who only buy things which got cheaper. I take sterling index as I will retire to Goa with my riches

I forgot to mention SKR got tipped. Kudos to Bob for mentioning it way back

Sunkar (SKR) was first tipped on WatsHot.com earlier this month at 23p. Since then, its share price has risen by over 21% in just 4 weeks! But small cap wizard James Faulkner, who edits WatsHot.com, believes there is still further to go.

When BHP Billiton launched its bid for PotashCorp I flagged Sirius Exploration as a possible beneficiary of that action, it being the only UK-quoted potash company. Since then the shares have soared by almost 200%. And I know at least a couple of you have made a pretty penny on that play. BHP's move is a sure sign that the demand for food and, more importantly from an investor's point of view, the factors of food production are going to rise dramatically in the future. Investors looking to benefit from this trend should take a look at Sunkar Resources which owns the Chilisai deposit, one of the largest known phosphorite deposits in the Former Soviet Union with a resource of some 800 million tonnes of ore (10% grade). DAP (diammonium phosphat e) is one of the key ingredients in fertilizers, and world prices began to rise recently. Upcoming initial results from a bankable feasibility study should help stir interest in the shares. Speculative buy.

NPK

It is becoming clear that having a mineral that is needed to increase yields and help feed the world's burgeoning population is potentially just as - if not more - strategically valuable than owning copper or iron, as our sister site Minesite observes:

"There is evidence that rock phosphate is becoming a strategic material for many countries, as pressure mounts to increase agricultural production to meet the needs of growing populations. Rock phosphate is a key ingredient in many fertilisers... [and] the price of fertilisers is building up again after having boiled over in 2008. Nitrogen, phosphorus and potassium are the three ingredients that promote plant growth and, of these, the future supply of phosphorus is most in doubt, as two thirds of the world's known resources are in two countries - Morocco and China."

Chilisai - Location, location, location

Sunkar's 100%-owned Chilisai deposit is one of the largest known phosphorite deposits in the Former Soviet Union with a resource of some 800 million tonnes of ore at 10% P2O5. The project is located 500 kilometres from the source of low cost sulphur recovered from the North Caspian oil and gas operations (the importance of which is explained below) which is connected with the project by rail road. Local infrastructure is good - a power line, railroad and natural gas pipeline cross the licence area of the company.

Sunkar is well positioned in proximity to China, which is the main target market of the project (railroad tariff of the Kazakh National railroad operator is $20 per tonne from the deposit to the western China border). However, the company also intends to use part of the future output to supply captive local markets in Russia and Kazakhstan which are both World top-10 grain producers. Due to high reserves of the deposit and access to low cost sulphur the company believes that the highest value added opportunity lies in developing an integrated phosphate fertiliser manufacturing facility at the deposit site. This facility will have one of the lowest extraction costs per unit of P2O5 in the world.

Sunkar should be able to generate early cashflow through initially producing Direct Application Rock (DAR) which is simply concentrated to a grade of around 17% P2O5, finely ground and sold to local farmers. However, this is simply picking the low-hanging fruit. The longer term goal is to produce high grade fertilisers which can be sold into international markets - principally China. This is where the North Caspian oil and gas operations come in, as they produce vast quantities of waste sulphur which can be easily shipped to the project site. Sulphuric acid is used to react with the phosphorite concentrate to produce phosphoric acid, which is then neutralised with ammonia to produce DAP.

Recent Trading

Several events in recent months have laid the foundations for future success. In December 2009 a plant scale test undertaken by an independent consultant established that the the 17% concentrate can produce acid of a quality to make ammoniated phosphate fertilisers. According to the Florida-based consultant the results of the pilot plant programs exceeded initial expectations. This was followed up in January by the release of JORC estimates for 40% of the Chilisai licence area, which confirmed that the area contains more than sufficient resources for 20 years of ore extraction at a rate of 10 million tonnes per annum. Finally, the company secured GBP 10 million of equity line finance in June, thereby putting to bed any doubts over its near-term financial position (company also has c.$7 million cash and no debt). Significantly, subscriptions will be priced at a mere 6% discount to the market price and will take place at timings and intervals and i n sizes determined by the company, thereby protecting shareholders from any unnecessary dilution.

Upcoming Catalysts

Engineering contractor SNC-Lavalin has commenced a Bankable Feasibility Study for the Chilisai project, with initial results due shortly (H2 2010) and final results due in the first half of 2011. This should de-risk the project and enable the company to secure long-term financing to ramp up production and develop the fertiliser manufacturing facility on site. There is also upside potential from reserves upgrades as the company continues to explore the 60% of the project not currently covered by the JORC estimate. After the BFS, the next major catalyst will be first sales of DAR. This shouldn't prove too much of a problem given that Kazakhstan itself is a major farming nation. Further along the line, Sirius Explorations' recent agreement with the largest Chinese fertiliser company highlights the potential there.

Sunkar has a potentially highly valuable project that is underpinned by a highly favourable economic and corporate activity backdrop. Research house GMP Resources values the company using a discounted cash flow model with a discount rate of 18%. It then further discounts the net present value of the project at a rate of 80%, arriving at a valuation of 75p per share - more than 160% upside from here. Speculative buy at 28p.

http://img440.imageshack.us/img440/7033/img12860475710068758311.gif

JamesU

sabretoothtigger wrote: »

That would be excluding the worth of your own house I guess, often its people largest asset.

Sterling index would relate most to someone who spends most of their income on foreign holidays I guess. RPI might even be too harsh for someone who only buy things which got cheaper. I take sterling index as I will retire to Goa with my riches

I forgot to mention SKR got tipped. Kudos to Bob for mentioning it way back

And there I was scratching my head.... maybe "residence" time in cash rather than investments, "residence" of investment e.g domicile etc.

Unfortunately I need to make a lot more on my investments before I can upgrade from a house to a residence.

I also prefer using RPI. Helps with decision making on what annual returns to aim for.

JamesU

Thrugelmir

StevieJ wrote: »

The way the world is changing and power moving west to east, I am not really sure what is high risk any more.

Providing you bear in your mind that the standard of Corporate accounting and the way business is conducted isn't of Western standards.

There's a good reason why many financial institutions base themselves in London. Despite all the media headlines on bankers.