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Investment view

I asked my dog the other day what he thought of the prospects for the stockmarket. “Rough,” he replied. Or at least, it sounded like that.

In the dog days of summer, with the market behaving like a dog, I am reminded that the erstwhile boss of Fleming, John Manser, used to feature his pooch in newsletters as a canine market oracle. Presumably, he was cocking a snook – or cocking something – at the traditional market pundit. These days I suspect the Manser pet would feel quite at home.

Last week saw more market gyrations as forecasters reined back their expectations for economic growth. Even the Bank of England started to murmur about lowering interest rates. And this when the Land Registry confirms that house prices really have delivered a double-digit rise during the past year. It may be more measured in its estimate of how fast residential property is rising in value compared with the lenders but it did confirm that the average house price in London now nudges £233,000, up by 13 per cent over the past 12 months and standing at nearly seven times the average Londoner&#39s salary.

Interestingly, Salomon Smith Barney was remarking only a few days ago on how US house price inflation was keeping the American consumer buoyant. Its bullish tone is clearly the order of the day over there. American TV stations have been asking if I am prepared to don my bear suit and enter into debate with the bulls that apparently still roam Wall Street. Are they really short of bears in the land where the Nasdaq stands at less than 30 per cent of the value it once attained? The market tells you they are not but it seems the professionals are putting on a bold face and preaching recovery – both for shares and the economy.

Perhaps it has all to do with staving off the day when the security guard with his black plastic sack turns up at your desk. Job losses are becoming increasingly commonplace in the financial services sector.

Last week saw rumours of mass lay-offs from the investment banking division of European giant ABN Amro, following news of 150 of Morgan Stanley&#39s finest getting the chop. Then Royal & Sun Alliance cut not only jobs but also its dividend to shareholders.

According to the Office of National Statistics, 36,000 jobs were lost in the financial services sector last quarter. It is not hard to feel bearish these days.

Yet we had a predominance of good days in the market last week. Wall Street, in particular, has seen some spectacular rebounds, fuelled by speculation that the Fed will cut interest rates to restimulate the economy.

By now we should know if Mr Greenspan has indeed eased further but we need to realise the scope is limited and a further reduction would be clear confirmation of just how anaemic the recovery in the US economy is. Welcome as it might be, if it does not feed through to corporate spending, it avails us little.

Let us look on the bright side. The US market has now risen by nearly 15 per cent from its July low. The FTSE 100 has also established a better trading pattern, albeit one which appears slavishly to follow the American lead. The economic news may be getting worse but enough bargain-hunters exist to give the market some support.

Even the disclosure of more obfuscation at WorldCom failed to stimulate an adverse reaction. Make no mistake, much of the buying is of a trading nature – bear closing and opportunism – but we need good days if confidence is to return.

Meanwhile, I learn of a new fund management firm to be launched, called Bedlam Asset Management. What could be more appropriate in this market, I thought, particularly as the prospectus makes clear the contempt felt by the new firm&#39s leading light for the investment management industry as a whole.

Indeed, among the risk factors mentioned is the prospect of Bedlam being involved in defamation actions as a consequence of its “aggressive and on occasions hostile” comments. The prospectus, by the way, carries the Edward Munch picture – The Scream. I think my dog would rather warm to the people behind this new firm. John Manser&#39s might, too.


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