The Private Investor: Forget the Tube, I'm on investment strike

Yet another depressing week in the markets. The reason is not, of course, hard to see; we're all very worried indeed about what a war on Iraq will do to the world economy. The only assets that seem to have done well out of this uncertainty are gold and, naturally, shares in hedge funds. At $320 an ounce or so, gold is probably still quite cheap, only around a fifth up on its nadir a couple of years ago. It probably has some way to go, although it will never yield you any income. But the question is, is there any reason to go into the market at these levels?

Last week's results from Close Brothers, a sort of bonsai investment bank, and a very successful one, confirm that we are in the middle of a what the radical left used to call an "investment strike". Investors, large and especially small, are staying out of the market and don't show many signs of coming back. Confidence is indeed fragile.

As the chairman of Close Brothers, Sir David Scholey, said: "In market-making, the green shoots of recovery that seemed to appear in the autumn of last year swiftly withered and this year ended on a subdued note. Despite a 23 per cent fall in the FTSE All Share Index, Winterflood Securities made a profit every month except September and a 33 per cent return on capital, which is commendable. We remain confident of our strategy for the longer term; in the short term our stance remains continued caution".

I don't have any shares in Close Brothers at present as they always seemed a bit too pricey, even to a mug like me during the bull run, even if they had the legendary Brian Winterflood on their team. They peaked at about £13 in 2000, when I was thinking about buying them, and are now around 420p.

So why am I not rushing to buy into this small but perfectly formed concern now? Even when it still makes money and has managed to preserve the dividend, and the shares trade on just nine times earnings? I still resist, mainly for the reasons that Sir David outlined.

But the long-term view is still worth a look and one other interesting piece of information that emerged last week was that Lord Sterling, the chairman of P&O bought 250,000 shares in his company for a consideration of nearly £500,000.

I'm not yet in a position to follow his example on that sort of scale, and political factors would constrain me from buying shares in P&O, but I wonder if there aren't some substantial values that demand attention right now, and which should have very good prospects.

One candidate certainly ought to be Waste Recycling, which I bought some time ago at about £4 and have seen run down to around 250p, and I wonder whether now might be a good time to think about averaging down the cost of those shares. The business should be a growth one, as we become more environmentally conscious, well, those of us who don't dump fridges in parks, that is, and the controls on disposing of rubbish get more stringent.

Even if its landfill side declines it has many interests in composting and recycling. Exciting, eh? The company operates an "energy from waste" incineration plant and sewage farms at Leeds and Sheffield, and quarrying, in Yorkshire. Someone has to. And local authorities award lots of contracts to Waste Recycling for rubbish collection, recycling or disposal.

Such a strong background kept the shares high, but investors dumped them last month when the company said tighter accounting had cut its profits in half. Interestingly, the day after the announcement, Paul Rackham, a non- executive director, spent £140,000 to buy 50,000 shares at 280p. Nigel Sandy, chief executive, and Hugh Etheridge, finance director, each bought 3,600 shares at 275p. James Newman, non-executive chairman, bought 5,000 at 275p, and Christopher Cox, commercial director, bought 1,500.

A complicating factor is the intentions of the former Yorkshire Water, Kelda, which has a 45 per cent stake in the group. I am inclined to follow the directors' lead, but, as for the last few weeks, I'm not in any hurry. We can all afford to wait in this market, and we all do.

s.o'grady@independent.co.uk