It’s the decade of the private investor

Last week’s suggestion that there is a bull market coming (or perhaps is even underway) has gained much support in the City.

Roger Hardman (www.hardmanandco.com), one of the best small-cap researcher in the business, offers some of the following reasons to support our belief that we will see the rebirth of the private investor:

  • The FTSE100 has fallen from c.7,000 at the end of 1999 to c.6,000 now. Adjusted for inflation this is the equivalent of 3,600.
  • This is mainly because pension funds have been forced by the Regulator to reduce their equity exposure and to increase their reliance on bonds. In the last ten years the proportion of UK pension fund investments held in UK equities has fallen from 51% to 23.7%.
  • Pension funds are no longer dragging in new monies as before. As one example the baby boomers (the huge population bulge of post war infants born in 1946 – 1950) are leaving work and drawing out money.
  • These downward trends are almost at an end. The market is now seeing new entrants. Company share buybacks are increasing. Public-to-privates are being seen. IPOs are expected to begin to increase. The supply side is improving. There will be more activity.
  • The FSA’s crackdown on boiler room operators is giving investors increased confidence that private investment is a more even playing field. Internet trading has never been easier or cheaper.
  • Many of the retiring baby boomers are taking 25% of their pensions in cash much of which could find its way into equities. Interest rates are expected to stay low for a long time reducing the attraction of deposit facilities. Property prices may increase but there is no clear picture.
  • The personal financial press are recommending shares more readily.
  • Investments clubs will start to re-appear.

The bull market is starting and it will be fuelled by the private investor.

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