Excessive optimism resulting in pain in 2007

by Ashik Shah on 31 October 2007

Recent months have been very volatile and the markets are likely to continue in this pattern for the next few months if not longer.  The last few years of sustained optimism, sometimes excessive, will almost certainly result in much pain and suffering in the markets for those who have not been prudent.

In addition to the sub-prime market’s continued impact on the markets,  there are increasing concerns about the dollar, the overheating of emerging economies, including the emerging giants of China and India.  Commodities such as the metals have also shown tremendous growth, as have soft commodities such as grains.  The prudent investor must be careful to discriminate between a short-term fad and a long-term development.

Kurm has increased its exposure to the UK markets and to those of Asia in the last year.  In addition, there are certain stocks with large exposure to the oil markets, which provide a kind of natural hedge.  Recent years have reminded the investor of the dangers of inflation to the future value of wealth, as reflected in concerns over the dollar.  However, the best method to preserve and grow capital is to invest in good business run by prudent, motivated and capable managers, who keep a good eye on capital allocation and do not become too capital-intense.  Kurm does not invest in industries where any new investment simply results in lower prices as all competitors keep up, but seeks businesses with distinct and understandable competitive advantages, which will then help in the fight against inflation.

Those with preparation and a long-term view will certain find opportunities for profit.

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The views expressed and comments made on this website are not personal advice based on your circumstances. The purpose of this website is to provide information and analysis to help you make your own informed investment decisions. If you are not confident making your own investment decisions you should contact a firm which is authorised and regulated by the Financial Conduct Authority (such as Ashik Shah & Co. Ltd.) so that a qualified financial adviser, after considering your personal circumstances and investment objectives, can make personal recommendations of investments which are suitable for you. Whether you make your own investment decisions or prefer to follow the recommendations of a financial adviser you should always remember that your capital will be at risk and that investments can go down in value as well as up.

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