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David Kempton: FTSE to test 5,000... before steaming ahead
It's time for Europe to decide between ruthless austerity and printing more money, says experienced investor David Kempton.
On the first day of the long Jubilee weekend I read the papers early in the morning, and felt it was probably the most depressing financial news of recent years.
Among the litany of catastrophe we had Chinese growth downgrades; US job figures well below expectations, leading to a 200-point fall in the Dow 200; disappointing UK output figures; and even Brazil had economic downgrades. We’ve not even started on Europe, where Greece is imploding and Spain still cannot accept its situation.
France has an untried, raw left-winger running the country, and they have started buying houses in London already, competing hard with the Greeks. Even Germany has reported downgraded car sales, and oil has dropped below $100 a barrel.
Whitehall's 'privilege days'
I despair even more at the news of officials in Whitehall being given an extra 'privilege day' on top of the weekend’s double bank holiday.
I, meanwhile, headed to Manchester on Tuesday (Whitehall’s second holiday of the weekend, one more to come) for the board meeting of a recruitment company, since the executive directors are too involved running the business to be able to take more time off.
The board are all royalists, but running 500 temps and placing 20 people into permanent jobs every week is very hard work in today’s Britain, and they simply cannot afford to spend any more time away from the business.
The dilemma at the heart of Europe
Europe now faces the dilemma of German chancellor Angela Merkel imposing austerity, which is good for bonds (at zero yield now in the stronger economies) but bad for equities, or France and the weaker southern neighbours printing money and going for growth, which is bad for bonds but good for equities.
Toss a coin and maintain a very close eye on your portfolio, I suggest.
Changes to my portfolio
The professionals are doing the same. I have adjusted my portfolio, with my two largest holdings by a country mile cautiously managed funds. I have increased my holding in Hawksmoor’s Vanbrugh , for whose management company I act as a director, but there are more than 100 others in the sector to choose from.
I don’t have the time to watch the news 24/7, but they do, so it is absolutely the right time to hand management to a professional who will be on the job full time, able to adjust instantaneously to fast-changing circumstances.
Also I have increased my holding in dollar index linked bonds (Tips), which I have bought through the CG Asset Management Dollar Fund .
Taking a major hit from Lamprell
I remain bearish about the rest of this year, but am very bullish for 2013. Once this European uncertainty has passed the world will refocus and print money.
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