The Great Debate

from The Great Debate UK:

Peering into a murky crystal ball for 2010


-Jeremy Batstone-Carr is director of private client research at Charles Stanley. The opinions expressed are his own.-

It’s that time of year again!  The time of year in which the writer’s desk, never a pretty sight at the best of times, becomes clogged with the product of the investment community’s crystal ball gazing.

Needless to say the vast majority is effusive in its enthusiasm for risk assets (turkeys don’t vote for Christmas) and makes an aggressive and fairly convincing case as to why equity markets will never go down again…ever!

However, for the Bob Cratchits of this world (well, our office Christmas party was cancelled) life just isn’t like that.  Most investors have learned the hard way that trees don’t grow up to the sky and share prices can go down as well as up.

Market forecast

According to consensus expectations, UK corporate profits are expected to increase by about 34 percent over 2010 and by 16 percent in 2011.  In part, this profit surge is down to many UK quoted companies’ exposure to the still-fast growing Asian and, selectively, emerging market economies.  The earnings improvement is likely to be influenced by cost cutting and further working capital improvements.

from The Great Debate UK:

The EU and Hedge Funds: silencing the dog that didn’t bark

Laurence Copeland

- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of "Verdict on the Crash" published by the Institute of Economic Affairs. The opinions expressed are his own. -

We could see it coming, couldn't we? Those gigantic over-leveraged hedge funds were bound to come crashing down, as their massive bets turned sour, forcing them to default on their bank loans and bringing the banking system to its knees.

Except that it never happened. Instead, the system was destroyed by the greed and incompetence of the insiders, including some of the most blue-blooded investment and commercial banks in the world. Highly regulated as they were said to be, they were allowed in every country except Spain simply to move their riskiest investments off balance sheet, where they were free to bet the bank on investments in the notoriously toxic mortgage-backed securities.

Active funds, more high-paid value destroyers

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

While they have avoided the opprobrium heaped on bankers during the bear market, traditional active fund managers have quietly been proving that they too are often highly paid destroyers of value.

Active managers have few bushes left to hide behind, and the release of a new report from Standard & Poor’s uproots one of the few left: that somehow they provide protection during down markets, being able to go into cash and defensive stocks.