Sunday, April 19, 2009

Silver And Gold

In March I made two investments. One to spread my money and one 'bounce' bet.

I bought the Eurostoxx50 ETF at €19.45. Today it's at €23.41, a 20% rise.

I also bought MAN Group in the FTSE100 at stg£1.98. Today they're at £2.74, a 38% rise. I bought them because they specialise in hedge funds and I figured that, when the recovery comes, they should out-perform the market. They have, after all drastically under-performed the FTSE over the previous 12 months, which is saying something when the FTSE fell 34%! Furthermore I took a gamble that they'd maintain their dividend, which they have done, of 24.8p per share - a yield of 12.5% on the price I bought them at.

I'm very tempted to leave the Eurostoxx alone but sell MAN now and take what is an excellent profit in one month, just in case the current rally is another dead-cat bounce and they get dragged back into the mire. But then you end up with the temptation to get into quasi day trading, given the volatility in the market, so I'll have to resist it. I don't understand trends enough to get into that game. I actually expect the price to drop by about 10% next week as there will probably be some profit taking but I'll do just fine if I hang onto what I have for the medium term.

However I was also worried about sterling but there are indications that inflation is starting to hit the UK because of sterling's weakness. The price of food, in particular, is flying up, which is great news for traders on the southern side of the border (or 'this country' as I like to call it) and the deflation that the British thought was coming hasn't happened.

Instead they're in severe danger of stagflation if their stimulus packages don't work out. But whether Britain recovers quickly or not the Bank of England is going to end up raising interest rates sooner than it would like, which will strengthen the pound again. Good for Ireland and good for me.
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