Julian Knight: Missed opportunities leave me standing at the bus stop
Sunday 26 December 2010
I could be writing this from a villa in Provence or a yacht moored in the Seychelles, but I'm not – I'm in freezing London seemingly spending half my life waiting for buses struggling through the now-black slush.
Don't feel sorry for me, it's my own fault. I have had a chance to make my fortune over the past couple of years – if only I had been brave enough. This wasn't, though, some Dragons' Den-style entrepreneurial idea but instead shares – yes, the only asset class which is worth less than it was 11 years ago. I am a firm believer in the invest-on-the-sound-of-gunfire notion, and there have been some prime opportunities to make a killing which, due to lack of heart and resources, I've missed out on. Let me give you two examples.
A few years back, Shell was found to have got its calculations wrong over how much oil was in its fields. The hedge funds feasted and Shell's share price tanked. Here was a great, profit-making company available at a song, and did I jump in? No. I can't remember the rationale but while I dithered all the profits had been snapped up by investors with the resources and the appropriately large cojones.
The second, even bigger, miss was banking shares in early 2009. RBS and Lloyds would have gone if it hadn't been for the Government and there was a genuine risk – and still is to a lesser extent – that they would have to be fully nationalised. The share prices were so incredibly cheap; the gunfire was loud, and the buy signals were clear. After all, what was the worst that could happen? If the banks collapsed, then frankly I'd have a lot more to worry about than a lost investment. When money had the potential to be worthless, what's the worry about gambling some of it? It was the no-brainer investment of my lifetime but again I didn't go for it – partly because I write about the banks, but also a sit- on-the-fence-wait-and-see attitude.
Now I am being told that shares are the asset class of the moment, and there is logic to the argument. Investors are getting no returns on cash, bonds – or property for that matter – unless we are talking rental yields, which are, in fact, up. Meanwhile, company profits are proving resilient and dividends are holding up nicely. Some also suggest we're due another bull market – share prices are still below their 1999 levels yet the real economy is about a third bigger.
This should be the year to drip-feed money into shares and sit back and watch the capital grow as your friends and neighbours earn 2 per cent at best on their savings. But, then again, comes my inner voice of caution which worries about the sovereign-debt crisis in Europe and the fact that spending cuts in this country, instead of going too far, may in the medium term not prove enough; we borrowed £6bn more than were supposed to again last month. The market in isolation looks very good, but profit and loss doesn't count as much as future sentiment, and that could be ruined by the sovereign-debt crisis.
So, 2010 was an OK year for shares but not a great one, and, despite all the noise, I'm not convinced about 2011 prospects. There I go, fence-sitting again. Anyway, I must dash. I have a bus to catch.
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