Published by Kauders Portfolio Management, Authorised and regulated by the Financial Services Authority
Have you noticed some wildly optimistic forecasts for 2001? Well, markets are about to make a complete nonsense of them. The only forecasts that matter are unlikely to appear in your favourite newspaper or magazine, so here they are.
Sooner or later, the FTSE will break through 6,000 on the way down, and stay below 6,000. Likewise, the Dow Jones will break through 10,000 on the way down, and stay there.
Speaking on Radio 4 Moneybox on 30th December 2000, David Kauders said "we are at a major turning point"*. Other panellists either thought the future for equities was rosy, or that prices might go down for a while, but the second half of the year would be better. Judge for yourself who is right - but if you want to play with equities, stick to Monopoly money.
Serious money should be in Gilts and US Treasury Bonds, so as to project yields into the future. Why? Because as share prices come down, so the highest quality bonds - those issued by major Governments - will rise in price. The trend is inevitable so long as the economic background remains deflationary, which will be for decades rather than weeks or months. Once you buy a Government security, you go on getting the same income even though later buyers pay more to get less income.
* see www.bbc.co.uk/moneybox for a transcript (the original programme will be current to the morning of 6th January 2001, then move to archive). You will need Real Audio.
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© Kauders Portfolio Management 2001