Investing in Stocks and Shares
Here are what I took down of the potted thoughts of Rakesh Shah - Andy Lynch and Ian Morley who have just been discussing the current stockmarket situation on CNBC
Rakesh Shah – shorters now in fear up capitulation to upside – got no ammunition to push prices down – problem is that the LSE system is no longer working – HBOS dropped 50% in auction in 8 minutes because system is broke – auction period should be increased to 30 minutes. It took only £60 million pounds to drive HBOS down 50%
Hedge funds were a lion that had been let out of cage but problem was it turned on the owner. Tail had finally started wagging the dog. The system therefore needs to be changed.
Markets will rally strongly followed by a massive fall – recommending bonds – says reversal will be very strong
Institution generally don’t have a clue how much of their stocks are being lent out for shorting – if they did then it would be an easy matter to stop it.
Andy Lynch – Schroders – economic fundamentals not changed – still difficult – shorters being forced out – middle of next week may start drifting lower
Rally has substance short-term but longer term economy in much worse position than in 2003 – valuations need to come down to around 4400 or 4500 on the FTSE – rout will continue
What should investors do now ? – AS : Ask where is world economy going ? Where will it be in 3 or 6 months time ? What are implications for share prices ?
Banks will need to reduce the supply of credit and their leverage.
Ian Morley – Corazon Capital – prices of financial feel because holders were selling not shorters – they were ridiculously overvalued – this is market manipulation on a grand scale done by regulators – true value and market price bear no relation to each other – fear much more powerful than greed – He bought HBOS last night (well done him ! – although he sold them this morning) because he could not see the logic of HBOS being down when they had agreed a price of 232p i.e. markets had gone nutty and people had no clue what they were doing anymore
At moment people are buying rumour (US rumours) once facts are known prices should come down again.
Banks were using public money in an incorrect way – Hedge funds are private companies which were taking a view on the markets. Hedge funds were actually buying after 9/11 when everyone else was buying.
What needs to change is stability – banks need to lend to each other – liquidity arrangements need to work – until then it is extreme fear and panic driving markets
Says you could buy an index of the banks but be careful – investment banks will be allowed to fail – but not commercial banks – buy index of commercial banks after they drop back a bit
Stock-lending is not the problem. Complete misunderstanding of cause of problem.
