The current bull market is in many ways like a plane journey. It took off in 2003, and we expect it to reach its destination by approximately 2009/10. Like all long haul flights however, there are times between take off and landing that the captain has to put on the "fasten your seatbelt" sign due to air turbulence. When this happens it doesn't mean that he is going to have to go back to the point of departure, nor will the flight have to end immediately. No, it simply means that the plane will continue to its destination as planned, but for a short time the flight will be a bit uncomfortable.


When this happens, I can always tell the experienced fliers from the novices. The experienced traveller ignores the bumps and shakes, and continues to enjoy the film or book they are reading. The novice on the other hand looks anxiously at the other travellers whenever a particularly big bump comes along, occasionally uttering the odd gasp, as panic sets in. What I tend to do is look at the cabin crew, the most experienced fliers of all, and I am always reassured to see them getting on with business as coolly and calmly as ever.


So what have we seen in the last couple of weeks during the current stockmarket turmoil?


The novices, and usual panic merchants, have been doing their best Private Frazer impersonations crying "we're doomed" at every opportunity. The experienced investors have carried on as normal, aware that they are experiencing a bit of discomfort, but not too concerned as they are aware this is a long flight. However, it is the behaviour of the "flight attendants", or fund managers that is of most interest. Not only are they getting on with business as usual, but they are also doing so with a bit of a smile on their faces.


Why? Well to put it quite simply they are now able to buy stock in companies far cheaper than a couple of weeks ago. Neil Woodford, the extremely talented manager of the £15bn Invesco Perpetual Income and High Income funds, has been rubbing his hands, as one of the companies that he wanted to add to his fund at a price of £5.70 is now trading at under a fiver. Why the reduction in price? Has the company issued a profits warning? No. It all comes down to the short term nervousness, the fundamentals are still the same. But what Neil regarded as good value at £5.70 must be great value at under a fiver.


So what is our advice?


Act like an experienced flier, kick up your feet, put in your earplugs to drown out the panic merchants, and have a look at the "duty free" stockmarket trolley that is currently going up and down the aisle, because they love bargains.


Steve Forbes

Steve Forbes
Managing Director
Alan Steel Asset Management Ltd is authorised and regulated by the Financial Conduct Authority

The Financial Conduct Authority does not regulate tax advice

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