Private Investor: Why does anyone get out of bed, let alone buy shares?

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The Independent Online

Another good week for the bull run, although where all this optimism, or money, is coming into the market from, I don't really know.

Another good week for the bull run, although where all this optimism, or money, is coming into the market from, I don't really know. Every economist you read seems to be dreadfully downbeat about prospects for the economy. Higher interest rates; global instability and higher oil prices; the Chinese bubble; Bush's deficits and the plummeting dollar; the great German economic disaster; the Brown boom, the slowdown in the housing market, global warming, MRSA... you name it, we're doomed, it would appear.

It's all very worrying, and I wonder how anyone gets out of bed in the morning, let alone buys shares right now. Perhaps asset markets are simply becoming more and more detached from the real economy, as we saw recently with house- price inflation.

Stock markets have always seemed to give two fingers to the rest of the world. During the recession in the early 1980s, the London market sailed on, remarkably untroubled in the circumstances, presumably because it could see that the result of all the painful "restructuring" (ie, unemployment) would be a stronger, healthier flow of profits in the longer run. And that, as it happens, is, in large part, the reason why the UK is in such relatively good shape today.

Now, though, there seems to be much more gloom around about the medium and long term, but everyone's buying shares. Well, someone must be.

I suspect that what has been driving the FTSE 100 index beyond 5,000 is a bit of catch-up. First, it seems to be a correction to the disparity between property and equities - in other words, as the smart money moves out of property and into shares as the next place to make profits. Second, the big FTSE 100 firms are beginning to see their share prices come into line with their smaller brethren in the FTSE 250, which, as has been widely noted, has been doing much better over the past year or two.

Even so, I am a little disappointed, but not totally dismayed, that Vodafone is such an inert stock. I suppose that it is so vast and globally well represented now that it is just a proxy for global growth. It is also very well researched by all the brokers and suchlike, so there isn't much scope for surprises because it is so closely watched. I happen to think that it still has some good growth opportunities, but these are no doubt reflected in the price.

What is a shame is that Vodafone hasn't seen its shares moving up a gear in the way that most of its rivals have. Given the size and weight of Vodafone in the FTSE 100 index, that is quite an achievement. Anyone who quietly nipped in to buy Vodafone when it fell well below 100p, as I did, will have seen decent gains, though. But I can't help feeling that the best part of this bull run is behind us.

The other annoyance last week derived from this new law that allows airline passengers to claim compensation against carriers if their plane is late. The precise circumstances in which this can be done - after a terror attack, say, or because of a natural disaster - are unclear, and I look forward to the lawyers getting rich while the courts go through some test court cases to determine when it is right to bankrupt an airline and destroy an entire industry just because people can't accept that life can be a right bitch sometimes. I mean, I know it's awful if you're two hours late into the air because of high winds, but if everyone claims big damages because of this sort of delay, there won't be any more flights anywhere because it will simply make no economic sense to run an airline. That is the ultimate destination of this flight into the compensation culture.

It also happens to mean that my shares in British Airways and easyJet (a hedged pair if ever there was one) have been knocked sideways as a result of this consumerism gone mad.

Never mind. My pure punts, or speculation, or gambles if you will, on Matrix Communications and Sportingbet are still doing nicely, up 50 per cent and more. I sold some of my Marks & Spencer shares to buy them: years of underperformance made up in weeks. Marvellous.

s.o'grady@independent.co.uk

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