Are you sure?

At my age I often forget why I've gone to the other side of the office, but remember all sorts of events from years and years ago.  How's your memory?  Do you remember "The Allisons" who won the Eurovision Song Contest with "Are You Sure"?  Jings - it was in 1961!

How well do you remember 2008?  That's only 4 years ago.  As the year kicked off economists were sure we were starting a new 4 year Business Cycle.  Otherwise sensible professionals and intelligent people were still sure about property.  Serious money was piling in to what were known as "Property Limited Liability Partnerships".  Piece of cake - you put in some and borrowed the bulk from Banks, who fell over themselves profiting from the latest "sure thing".

Then it all went wrong suddenly in the Autumn - no wonder it's called "The Fall".  And the nightmare began thanks to the US Government being sure letting Lehman Brothers go down the tubes wouldn't matter.  Aye the party was over!

The next "sure thing" was the World economy would be plunged into "a Great Depression" - thanks to bursting Property Markets, the collapse of Subprime Mortgages, the World Banking system freezing up, the near collapse of insurance giant AIG and the bankruptcy of the US car manufacturing industry.

Experts were all sure it was back to the poverty days of the 1930's.  Oh - and it was "a sure thing" we wouldn't recover for 10 or 15 years.

Yes they were sure any stimulus or effort by the Fed, the Chinese or the IMF just wouldn't work.  Countries would go bankrupt, and the US was heading for Third World status.  They were sure that bailed out Banks and the US car industry would struggle to ever pay back their loans.  Everybody opined it was a waste of money.

And over in the US, actions by the Fed helping Banks clean up balance sheets and exchange Sovereign Bonds for toxic assets was surely money down the drain - another "sure thing", we were told night after night!

When there was a sudden recovery in World stockmarkets from March 2009 the main "sure thing" story was that the FT and other Worldwide indices would have to fall significantly further before it would be worthwhile even thinking about investing.   And apparently any recovery anywhere is still regarded as an illusion.

Now it's a funny thing that if you are brainwashed enough to see only one side of a story you won't look for any other.  Most private investors receive information that tells them whether or not to invest anywhere entirely from the popular media, who focus on negatives not positives.

But let's take the US.  How many know loans from the taxpayers made to Banks and the Car industry have already been paid back, with interest?  Or that the US Car industry has bounced back?  Or that globally, car sales recovered in 2011, with the US leading the way?

The US increase in car sales were 50% higher than the sales growth in China!  Last week General Motors have come back so strongly from its bankruptcy only 3 years ago, it has regained its place as the top selling car maker in the World!  And the US Fed made big profits on assets it put on its books in the so-called "waste of time" toxic bail out process - $80 billion profit in 2010, and another $77 billion profit in 2011.

Somewhere on the back pages of the Financial Times last week it was reported manufacturing employment in the US has grown faster than in any other leading economy in the last 2 years, and added more net manufacturing jobs last year than the rest of the G7 put together.

So as we begin yet another year what are "the sure things" investors should avoid?  Well despite all the good news I've mentioned above, over in the US, private investors, tracked by what's called "Crash Confidence Index" are more scared of markets today than they were in 2008.  And so are Institutional investors - the big boys.  That's a good sign.  It's more worrying when these people are feeling as confident as they did back 12 years ago.

According to all the experts "the sure things" are Europe will fall off a cliff, bringing down the rest of the World, and the only place to invest is in Government Securities - Gilts as they're known.  It's also a "sure thing" the Europe mess and other economic worries over in China, and elsewhere, unemployment in the US etc etc is bad news for stockmarkets.  Don't fall for it this time.

Meanwhile where's all the value? In the stockmarkets.  We're not out of the woods yet but I've got more than a funny feeling being in the right funds will reward the brave.  The IMF don't agree though.  Perfect!

Alan Steel
Chairman

This letter is the personal view of Alan Steel.  Please check the appropriateness to your individual position with your adviser before taking or refraining from any action.