Where to make money this summer – MoneyWeek

ConsumercreditrosesharplyinMarchby$13。

5billion(£6。

8billion)suggesting,saidChristopherWoodofCLSA,abroker,thatwithhousepricesnolongerrisingand“thehomecreditequitylinecutoff”,Americanconsumersareturningtotheircreditcards。

Mastercardsawthenumberoftransactionsusingitscardsrisebynearly20%inthefirstquarterof2007。

That’sclearlynotsustainable。

Evenwiththegrowthincarduse,consumerspendingroseatitsslowestpaceforfivemonthsinMarch。

Economicgrowthfelltoamiserable1。

3%inthefirstquarter,afour-yearlow,andtherecouldeasilybeafurther–andentirelyjustified–growthscareahead。

Indeed,ifthehousingmarketcontinuestosuffer–notethatexistinghomesalesfell8。

4%inMarch,thebiggestdropin18years–itispossibletheeconomymightstopgrowingaltogether。

YetevenagainstthisbackgroundtheDowJonesindexhasbeenrisingsteadilyalmosteverydaysincethehiccupoflateFebruary。

Mostforecastshaveitcontinuingtodosoandacan’t-losementalityappearstohavetakenholdofmarkets。

BytheendofMarchtheamountofdebttakenonbyinvestorsspecificallytobuysharestotalled£318billion。

That’smorethaninMarch2000–thepeakofthetechbubble。

Stockmarketbubbles:speculativefeverinLondon

InBritainthesituationismuchthesame。

Housepricesarestagnantinmuchofthecountry(Londonexcepted)andwiththelatestinterest-rateriseyettobite,itishardtobeentirelyconfidentthattheeconomywilllooksogoodunderGordonBrown’spremiershipasitdidwithhimaschancellor。

YettheFTSE100hitasix-yearhighafewweeksagoanditsstrongrunisexpectedtocontinuethroughoutthesummer。

Theproblemhereisthatthewatersofthemarkethavebeenmuddiedbyprivateequity。

Whentradersandmanagerstalkaboutstocks,theydon’tspeakintermsofvaluationsanymore。

Theytalkaboutthe“wallofmoney”sittingonthesidelinesofthemarketlookingforadeal。

Investorsaren’tlookingtoseewhatmighthappentoprofitsorshowinganyinterestintheeconomy,butaresimplyplacingtheirbetsonbids。

SuchisthespeculativefeverthatevenhugestocksareseeingthekindofvolatilityoneusuallyassociateswithsmallerfirmslistedonAIM。

TwoweeksagoRioTintojumped11%inonedayonnothingmorethantherumourofanapproach。

Thisdoesn’tmakemuchsense。

ItispossiblethelikesofRiocouldbebidfor,butnotlikely。

Themarketisbehavingasthougheverythingisnotjustapotentialtarget,butadefiniteone。

Butprivateequitycan’tactuallytakeovereverythingsobuyingsharesincompaniesinthehopetheywillgoprivateisnotinvestingbutspeculating。

That’snottosaythereisn’tmoneytobemadethissummer,butwhenthefundamentalsareasshakyastheyare,marketscan’tbedrivenforwardbymergermomentumforever。

Stockmarketbubbles:whyJapanhasbeenleftbehind

OnemarketthatissingularlylackinginmomentumatthemomentisJapanwheretheNikkei225indexhassofarrisenameasly1%thisyear。

I’vewrittenbeforeabouthowIthinkitshouldbedoingratherbetter。

ItispartlybecauseJapanhasseennoneoftheexcitingmergersandacquisitionsactivitythattherestoftheworldhasbeengettingexcitedabout,butalsobecausepeoplearen’tconvincedthatdeflationreallyhasbeenbanishedandthatconsumptionreallywillpickup。

WiththisinmindIwanttopointtowhatJonathanAllumofKBC,aconsultancy,calls“bignews”。

JapanesefoodproducerQPistoraisemayonnaiseprices。

FromJune1,itsstandardmayonnaisewillcost10%more。

Totheoutsider’seyethismayseematrivialmatterbut,saidAllum,itisnot。

Itisthefirsttime“anybrandedmass-marketcondimenthasputinapriceriseforatleastadecade”。

AssuchitcouldsuggestthatQPatleastisconfidentenoughinconsumerspendingthatitthinkspricerisesmightfinallybeabletostick。

I’minTokyothisweek。

NextweekI’llletyouknowifIthinkQPisrightandwhatthatmightmeanfortheJapanesemarket。

FirstpublishedinTheSundayTimes21/5/07

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