Diary of a Private Investor: 'I'm licking my wounds'

Diary of a Private Investor: 'I'm licking my wounds'
I am going through a bad patch and I am still licking my wounds over the demise of Aero Inventory

By James Bartholomew
Published: 4:36PM GMT 02 Dec 2009

What decides which way stock markets go? Most brokers and pundits focus on things like profits, charts, historical precedents and so on. But I am coming to the view that there is something even more important for short-term movements that is hardly mentioned: the Government. Actually not so much the Government itself, but the Bank of England monetary policy committee.

I submit that the major reason for the rally since March has been the so-called quantitative easing or, in ordinary parlance, printing of cash. The Bank has bought up government bonds and corporate bonds, putting cash into the hands of investors who have then bought other corporate bonds or shares.

The ultra-low interest rates – also decided by the committee – have made it sensible for people like me with Bank Rate-based mortgages to go on borrowing the money and keep it invested, again helping share prices.

So this has been, I suggest, a government-made rally. I am grateful to Tim Congdon of International Monetary Research for helping me see the importance of this early in the year and thus emboldening me to take part in the rise. But this is a point to remember for the future: for the short-term direction of the stock market, see what the Government is doing to the supply of money.

Right now, it is not as positive as previously. The Bank of England is continuing with quantitative easing, but more slowly. This suggests the market might continue to chug along, but is unlikely to make another major surge in the short term.

As for my portfolio, I am going through a bad patch. I am still licking my wounds over the demise of Aero Inventory, which held aircraft parts, in which I had a big stake. Since then, Harvey Nash, a recruitment and outsourcing company, has had disappointing results and the shares have fallen. Telecom Plus has come out with lower half-year figures. I have sold a few shares in both. After the Aero Inventory disaster, I am nervous about big stakes in individual companies.

Meanwhile, my three aggressive plays on recovery are performing badly. Enterprise Inns, a pub group, Tullett Prebon, a broker and Barratt, a house builder, have been through weak patches.

But I am certainly not selling any Barratt. Banks are much more willing to lend than earlier in the year and therefore house prices are likely to continue to rise. The number of mortgage deals available to those offering only a 10pc deposit has doubled since August. Barratt should benefit from stronger house prices.

Incidentally, despite all the technology about – much of it free – I still have not managed to find a website that tracks my portfolio satisfactorily. I use no fewer than four websites to follow my shares. I look at ADVFN, but since I decline to pay for the service, I never know when it is going to log me out. The service is live and in real time and it includes shares in other markets such as Hong Kong, America and so on.

But it has a way of deciding on the share price that I can't fathom. Sometimes it is neither the latest price dealt nor the middle between the buy and sell price. I also use Morningstar, which has the advantage of always showing the mid-price so I know I am comparing like with like, but the prices are a quarter of an hour out of date and not live.

If I want the latest price, I go to Hemscott where I do pay for the company's premium service to get access to brokers' forecasts and details of recent trades. But Hemscott does not show my whole portfolio in real time, which is a disadvantage.

Recently, I have also found the Yahoo portfolio service. This is free and live and it also includes Hong Kong shares. But it does not show the mid-market price and, of course, it does not include detailed broker forecasts. So none of these sites are perfect. I hope I have not been unfair to any of them. If readers know of a better way to follow a portfolio, I would be glad to hear of it.

http://www.telegraph.co.uk/finance/personalfinance/investing/6711000/Diary-of-a-Private-Investor-Im-licking-my-wounds.html