Buying opportunity or not

Posted on 15 August 2011 by Douglas Chadwick

At the beginning of June last year the FTSE100 closed at around same value as the close last week. Last year the Autumn rise was sustained and lucrative. Will it be the same again this year? That really is the ten million dollar question. Well now the FTSE is trading at nine times earnings whereas last year this was nearer to thirteen times. This means the market is very much cheaper and that the companies in the FTSE100 are very much more profitable than they were this time last year. Of course the profit being referred too was generated the year before and a fair share of this profit was probably generated in the emerging markets. But Hey Ho,who cares,it is a good sign and we could be justified in believing that the larger U.K. companies are enjoying more profitable times. Now not forgetting that big fleas have smaller fleas to feed on them. Then perhaps smaller UK companies are also enjoying better times.
 
Now both Bernanke in the U.S.A. and Mervyn King in the U.K. are indicating that interest rates are likely to remain close to zero for the next couple of years for big business. So surely this indicates that this profitability should continue or perhaps be enhanced in the future. So the big question as I said earlier is whether now is the time to step back into the market.? For a long term static hold this must surely be the case. For myself I will probably make a small step back into the markets with about 10% of my investments moved from safe into slow ahead. The problem that I still see large on the horizon is that Europe and America politicians are still pussy footing around with their countries economic problems of debt. I feel that there is some major blood letting to come before the markets finally turn towards sustainable growth. So as always it is a matter of watching the numbers from the sidelines and waiting for that great day.