| | Thursday 2 August 2012 THOUGHT FOR THE DAY  Hello Share Shifters,
Some people come up to me these dark days and ask: why am I still doing shares with all this worry about the Euro and even the mighty USA not doing that well in the growth stakes?
It is a good question. There is a lot of worry about. Let me answer the question, as I am answering it for the sceptics among my acquaintance.
Shares are cheap historically. The number of low price-to-earnings ratios for many stocks shows this. Also, profits are still relatively strong for many companies, particularly the Footsie ones. But for many other firms too.
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Paper round RBS, Spain, NYSE...
Senior government figures are discussing the possibility of buying out private investors in Royal Bank of Scotland and fully nationalising it amid mounting frustration at banks’ failure to lend to British businesses. Cabinet ministers are having conversations about whether to spend around £5bn buying up the 18 per cent of the bank the government does not own, although George Osborne, the chancellor, is opposed. [The Financial Times]
Italy’s leader Mario Monti is to make a last-ditch effort tomorrow to persuade Spain to swallow its pride and accept a formal rescue, hoping to clear the way for double-barrelled action by bail-out funds and the European Central Bank. The frantic diplomacy comes as investors wait nervously to see if German-led officials on the ECB’s governing council will stand behind the bank’s chief, Mario Draghi, who triggered a euphoric stockmarket rally last week with hints of intervention in the Spanish and Italian bond markets. [The Telegraph]
The New York Stock Exchange was forced to cancel hundreds of share trades yesterday after a technical glitch deluged traders with orders. Unusually high volume in the first 45 minutes of trading caused wild price swings in nearly 150 stocks, prompting exchange officials and federal regulators to open an investigation. Traders said that the sudden spike in volumes had sparked fears that the exchange was suffering a “flash crash” similar to the one experienced in 2010. [The Times]
British manufacturing shrank at its fastest rate for three years in July, highlighting the perilous state of the economy as the Chancellor, George Osborne, launched his Funding for Lending programme to encourage banks to lend more to businesses and households. The Markit/Cips PMI manufacturing index dropped unexpectedly sharply from 48.4 in June to 45.5 in July – any measure below 50 indicates the sector is shrinking. This is the first major economic indicator suggesting the third quarter in Britain has got off to an even worse start than the second. [The Independent]
Fashion chain Next said the Olympics has hit trading in its London stores, as tourists and locals stay away, leaving the capital a ghost town. Next is the first of the retailers to give a sense of current trading and will compound fears that the Games will fail to drag the UK out of recession. Next's chief executive, Lord Wolfson, said its 23 shops in London had been "adversely affected" and he does not expect any kind of retail boost from the Olympics. "The two weeks of the Games for retail won't be good. As with any sporting event, people tend to stay in and watch them on television rather than go out shopping." [The Guardian
Shareholders wiped out by the nationalisation of Northern Rock had their hopes of compensation dashed yesterday when the European Court of Human Rights dismissed their case. The Northern Rock Shareholders Action Group said it was shocked and saddened after it heard that the court had ruled its case was inadmissible. About 150,000 Rock shareholders, including the hedge funds RAB Capital and SRM as well as Rock employees, lost everything when the bank was nationalised after suffering a depositor run in 2007.
THE LATEST ON THE CRAZY BOARD The top 5 hot company threads on the Bulletin Board: Ariana Resources Wolf Mineral BTG Fiberweb Running trading thread
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BOOK OF THE WEEK  By Peter Lynch and John Rothchild
A book review by Ross Jones From when Lynch took over the management of Fidelity's Magellan Fund in 1977, until his departure in 1990 he delivered his investors an annualised return of 29.2%, outperforming the benchmark US markets by 13.4%, growing funds under management from $18 million to circa $14 billion. This is pretty spectacular and warrants investigation into how this was achieved.
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