Private Investor: Time comes to reverse the truck, and sell
Saturday 16 June 2007
I've finally offloaded my Alliance and Leicester shares this week. Having followed fevered reports in the press about their imminent takeover by one of a variety of touted continental suitors last year I decided to "back up the truck" and buy a heap, well a small heap, for the portfolio. Usually I don't bother with takeover rumours, either published or unpublished, because they very often turn out to be rubbish, or "right at the time" as we say in the newspaper business.
Alliance and Leicester was a rare exception to the rule, and after more than a year of waiting for an offer for the mortgage bank to materialise, I've given up on it happening. Despite the decent yield and quite an impressive set of results last week I've sold my holding at a loss of 5 per cent or so. I actually sold them before the results statement, because I was getting nervous about the market as a whole, which has had its share of gyrations lately.
So that was one share I dumped with few regrets. I also sold down some of my stake in Rightmove, the on-line estate agent. For what it's worth, I do think the long boom in British residential property will be coming to an end soon, and the world will see quite a slowdown in economic growth in, I guess, 18 months' time. The creaking world economic ship just has too many imbalances to carry on as we have been doing; and correcting imbalances usually involves a great deal of pain for a great number of people.
Out of it, as in previous recessions, may emerge stronger economies more capable of sustainable growth, as was the case in previous slowdowns that sorted out the Japanese/US trade imbalances, the legacy of the junk bond phenomenon, and the dot.com collapse, to take examples from the 1980s, 1990s and 2000s respectively.
So, I suspect, it will be with the various excesses associated with the runaway Chinese economy (in certain ways – such as the trade surplus – analogous to the old positions of the US and Japan), and also with America's re-emerging twin budget and external deficits, booming commodity prices and, indeed, the giddyishly high value of property here in Britain.
Just ask yourself this question: do you really think a world-wide slowdown or recession is likely or unlikely in the next two years? My guess is that you wouldn't dismiss it out of hand, which is as good an indication as any of confidence.
Which brings me back to Rightmove. Long term, as with my Witan Pacific and JP Morgan Fleming India Investment trusts, I'm an extremely bullish fan of Rightmove, as I think it has the advantage of being already dominant in a market that will steadily migrate from estate agents' windows and newspaper property supplements to the web. Short term, however, there have to be worries about what, exactly, rising interest rates will bring in their wake.
If anything I should say that were interest rates higher now and inflationary expectations knocked firmly on the head we might not have to endure more interest rate rises going into the medium term. A stitch in time, and all that.
Either way, though, Rightmove will probably suffer with most other property stocks, so I've decided to take some of my very substantial profit and sell some shares. I've managed to make 89 per cent since last November, so I'll count that as a success.
By the way, I'm still being plagued by "stockbrokers" (real and bogus) calling me up and trying to part me from my hard-earned. However, I'm getting better and better at winding them up and I advise you to do the same (provided they've not got some scam that means you pay for the phone call or if they ring you from abroad on your mobile).
I'd ask as many questions as you can of them, take notes and then post the results on bulletin boards and the like to warn others. In the worst cases, ring the company secretary of the shares these "stockbrokers" mention and tell the FSA. But don't forget to take the mickey out of these crooks and rogues first.
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