I am equally concerned about the market and I shall be going into 2007 in a very liquid position. Both in equities and property. Very similar to my approach in 2000!
Firstly, I believe interest rates will have to go a lot higher than many of the so called economists forecast. I am looking for rates nearer 6% than 5%. I see a 50 basis point hike at some time to shock the market. If this happens there will be a massive change in the yield curve and the repercussions on gilt, equity and house prices will be equally dramatic. The curve will still remain inverse but even more so.
I see pain and massive problems in the housing market and a fall of 25% to 30% in prices in 2007.
I am a director of a fast expanding electrical business at the wholesale end of the market in the south of England. We have never seen business so good and it is always a good barometer for the economy. Everyone is pointing to the Olympic Games keeping the pot on the boil for years to come. Something will have to give as the formula we are seeing in the South is a recipe for inflation and everything that goes with that. I have warned our Board to continue with our expansion plans but to be extremely careful when choosing marginal new branches and in awarding credit to our customers and in our monitoring of them. We give 60 days credit.
I am also a director of a small property company and we have just liquidated the last of our properties in December. With the exception of an interest in a land-bank we are now all in cash!
This is a short summary of my views. To go into it in any further detail will send everyone, including myself, to sleep!
A very Happy New Year to everyone on the Scotty thread and may it be a prosperous one for you all.
For what it is worth I remain convinced that we will see Scotty taken out at what will be the equivalent of 7p. The end of January will show us the way in 2007!!!!!!!!!
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