FTSE 100 - Higher and Higher ?

Discussion in 'Finance, Property, Law' started by Ramillies, Mar 20, 2006.

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  1. The FTSE 100 rose above 6000 but I see this pm that is back just under 6000. It has risen steadily over the past couple of years to the highest it has ever been. Any pundits from the city like to speculate as to the future ?

    A crash, a gradual decline or will it continue the steady increase ?
  2. oldbaldy

    oldbaldy LE Moderator Good Egg (charities)
    1. Battlefield Tours

    Not quite true. Highest since 30 December 1999 when it was 6930.2

    Where will it go?
    If I knew I'd be a millionaire
  3. Ah yes .... forgive me.. I had forgotten those great days. Worth investing on the probability of an increase ?
  4. The time to invest was just before the bullets started flying 3 years ago. However, the market sulked through most of 2003 and the really big and safe profits have already gone to those who invested then.

    As for now? Well, I note that the market is still relatively undervalued but it has increased of late a tad too quickly for my liking and I am selling into strength. I also note that the Icelandic currency was hammered by some 15% in a few days just recently, with other minor markets dropping by similar amounts. There is a degree of concern about the bubble in gilts, too, and about the amount of money in the derivative markets; when they all decide to rush for the exit, there will be a bloodbath.

    However, if you see something you like, go for it, but on a long-term basis.

    In terms of blue sky stuff, I like the idea of a cure for asthma and for eczema - but we are years and millions of pounds away from a product. Would I invest now? No! but it's on my watch list!

  5. L,

    Thanks - very interesting. You mention that most of the safe money has been made; I note that BAE have had an excellent end of year, plenty of contracts coming up, BAA probably has some way to go; go for the safe bet or..... something small, new to the market and on the rise. Which in the current climate and with a fair wind, should reap the benefit of the rise in stock market confidence.

    Food for thought.
  6. Bad CO

    Bad CO LE Admin Reviews Editor Gallery Guru

    Considered looking overseas? I've recently discovered the joys of IShares - a really easy way to invest in the equivalent of the FTSE 100 in China, Japan, India, Eastern Europe, etc. You buy and sell them like normal shares so really easy to deal as well. China did badly last year but is clearly the future .....
  7. Great to hear from you Ramillies!

    Anyone thinking of dealing in shares should do their homework (or pay someone to do it for them) and only invest what you can afford to lose, especially overseas.

    This piece might be helpful:

    Shares have made a comeback and the stock market is once again an exciting place to invest your money.

    Investors fled the market in terror in 2000 when the tech bubble spectacularly burst. Confidence was rocked again by the terrorist attack on the twin towers a year later. The FTSE 100 index of the biggest companies plunged from a high of well over 6,000 in early 2000 to a little over 3,000 in early 2003. No wonder people poured their money into property.

    But the market started to rise again in 2003 and is up about 60% over the past three years. Of course, there have been some ups and downs along the way. Last Tuesday, for example, the Footsie suffered its worst day of the year. But it now stands at about 5,840, an increase of roughly 17% over the past 12 months.

    “We have come out of an incredible year in 2005 when the Footsie gained about 20%,” says Richard Royds of Merrill Lynch Investment Managers. “ UK equity investors will have made a lot of money. They could have made 20% or more with a good fund manager, compared with about 3% from the bank.”

    No wonder investors are keen to get back into shares. And they do seem to be keen. Sales of equity Isas in January more than doubled to £82m compared to last year, according to the Investment Management Association. Clara Furse, chief executive of the London Stock Exchange, says: “We have seen a marked increase in interest in equities from private investors. But private investors should also remember that if you are saving for the long term, historically there has never been a bad time to be in the equity market.”

    The latest study by Barclays Capital would seem to add weight to her argument. Each year, the company compares the performance of shares with bonds and cash – and its data stretches as far back as 1899. The research shows that shares beat bonds and cash over most periods. The victory last year was comfortable. The return on shares was 18.9%, adjusted for inflation, compared with 9.8% for corporate bonds, 6% for government gilts and 2.7% for money held on cash deposit.

    The market is now pretty much where it was before the dot com bubble burst. So you would at last be starting to recover those losses. The big question is whether shares can keep on going up. There are plenty of optimists – and they are gaining strength from the value of shares, as distinct from the price. Market analysts measure a stock's value in several ways, but the most common is the price/earnings ratio - the share price divided by the earnings per share.

    Tony Dolphin, director of economics and strategy at Henderson Global Investors, calculates that the UK market is trading on a p/e of about 14, which is below Europe, America and Japan . He says: “ UK equities look reasonable value given the current economic climate of relatively low and stable inflation.”

    Richard Buxton of Schroders Investment Management understands that investors might be getting a little bit nervous after a three-year bull run, but he also draws comfort from the p/e ratio. He says: “The market's latest rally has been driven entirely by profits growth. The market's p/e ratio remains similar to 2003.” He also points out that the UK market is unrepresentative of the wider economy so is not necessarily susceptible to a consumer slowdown.

    The equity market also looks good value against the bond market. Theo Zemek of New Star Asset Management says: “The equity market is fabulous value when compared with the low yields in the bond market. It seems to me there is a glaring valuation difference between equities and bonds. You have to sit back and say: ‘Let's have some of those equities'.”

    Chartists study technical data to try to predict the future movement of share prices. And one of the most respected chartists is Richard Lake , director of technical analysis at Brewin Dolphin. He believes the Footsie remains in “a strong uptrend and comfortably above its steeply rising 50-day and 200-day moving averages”. However, he is a little bit worried about the dominance of stocks such as BP and Royal Dutch Shell, which combined account for nearly 20% of the index.

    High oil and gas prices have boosted the performance of energy stocks – and so the market. But Lake is nervous about the Footsie's reliance on such a narrow sector. He says: “In all, I would advise some caution and greater selectivity than usual when buying stocks.”

    But does it make sense to buy an asset when the price has been rising steadily for three years? Surely if share prices have gone up they must eventually come back down. The study by Barclays Capital shows that if shares – or bonds – have done well over the previous 12 months they are unlikely to produce positive returns over the next few months.

    Investors also have an unfortunate tendency to pile in at the top of the market. It was, for example, easy to persuade people to buy tech funds in 2000, but difficult to lure them into Isas in the spring of 2003. In other words, investors have extremely bad timing.

    Anthony Bolton, Fidelity's investment guru, is getting nervous. He thinks we are in the late stages of this bull market. “There have been 12 bull markets over the past 40 years and the average has lasted 25 months. Only two have been longer than the current one,” he says. The crash of 2000 should have taught us at least one thing: it is fiendishly difficult – even foolhardy – to try and time the market. If you invest in equities, you should invest for the long haul. At least then you can ride out the market's inevitable ups and downs.
  8. F_S,

    Thank you so much for your reply; pertinent, wise and informed as always.

    This is what worries me. The start of the slippery slope is I fear - about to start. I have sympathy with the above view, bull marekts do not last long. In my opinion, stay with the blue chip companies for the long haul. Big firms like BAE with plenty of forthcoming contracts (as stated in the media) are the ones to go for along with utilities. ISA funds of various types continue to do well - especially the High Income ones. I have looked at ishares and need to do more research on them as these are new to me.

    Nothing connected with this and I do not expect a reply, interesting to see that insider dealing is thought to be more rampant than ever in the city according to the broadsheets. Very difficult to prove and get a conviction but one never knows when one is getting advice from the City experts whether there is a bit 'inside' information in there as well. This is where us Army types are at a disadvantage. I use a well reknowned City stockbroker who generally is always along the right lines (to date !) and well worth paying the commission for. I always reserve the right to give direction as required rather than letting the broker do it who gains commission on the more dealing he/she does. I am one of the never trust anyone types ! Anyway - enough from me. R
  9. You're too kind, as ever.

    It depends on your attitude to risk. Dealing in shares is risky and there is nothing to stop you losing all the cash you invest (unless you get into stop-loss etc). Blue chip can provide a comfort zone but you should aim to hold onto the shares for a while and ride out any bad times. Collective investments such as unit trusts, investment trusts or Oeics are the way forward if you want to give your money exposure to the stock market but face less risk because of pooled funds and investments which are spread and managed. Yes you pay a fee but it could make the difference between losing cash or gaining returns. You also need to be prepared to invest for a few years to iron out the fluctations of the market. Buying and selling shares over short periods in the hope that you can make a quick buck is a recipe for disaster.

    Your point about insider dealing is interesting but I believe it is no more rampant than before (ie it has always been pretty rampant!). There is more scrutiny now and perhaps a clearer route to getting caught and getting into serious trouble but it's a bit like adultery, the temptation is always there and it depends how you respond to it. Many people are truly convinced that they will not be the ones to get caught!
  10. I read the same thing. I am by no means any authority whatsoever on the stock markets etc. But my hunch/fealing/guess is that. Anthony Bolton like any other "business man" advises everyone else to do one thing, while planning himself to take advantage if they do :) , without a dip in the stock market stock pickers cant get a bargain
  11. BiscuitsAB

    BiscuitsAB LE Moderator

    Investing in Equities is not about Market timing its about time in the market. The rest is semantics.
  12. Not really. Bolton is one of the most successful fund managers ever, and for longevity and long term performance I think the most successful ever. Whilst he probably doesn't really need to put on the suit and go to work in the mornings anymore, he is paid to do well with your money. If he thinks the stock market is going to take a dip then he will be planning accordingly on his customers' behalf. I forget the figure but the amount £1000 invested with him would have turned into over the last 15 years or so is quite astonishing.

    He is a wily old fox and has usually been right over the years.

    He works for Fidelity and while starting to take a back seat still runs their "Special Situations" fund.
  13. I know who he is and what he does, infact his abilitys have made me money over the years. But he/the company charges people for this advice, they dont give it away for free. The best way to improve your gains on the stock market is to have an effect on it direction. Maybe Bolton is like the Alex Ferguson of the stock market, in that he knows a few choice words at the right time for free, is worth a few free points to his team in a full season?? lol. Just offering a diffrent (some what crazy) view on things.
  14. He's made me quite a bit over the past year too. I don't bedgrudge (or even notice) the fee of 1.5% when he's made me 30+% and you don't get owt for nowt - he's not the CAB. I did wonder if that was what you meant; perhaps it is a case then of "do what he does" rather than "do as he says"! Cynical eh?

    I do trust him with (some of) my dosh though so following the lines of that possibility above am not unduly concerned.
  15. Bad CO

    Bad CO LE Admin Reviews Editor Gallery Guru

    Ref my last on the subject of iShares, might be worth reading the following article from today's Telegraph