Saturday, October 02, 2010

1. New Empire Building 2. Wise Investing

Reports in today's Independent newspaper about the Chinese government buying large tracts of land and interests in commodity companies all over the world read slightly critically especially  given the implication that the USA government is doing what is called 'taking an interest' in this development.

No British citizen could in my view  fairly criticise the Chinese for this investing policy as only a little more than a generation ago this nation was the world's largest empire builder. The history books do not record that like the Chinese today we then actually paid real money for taking over  large tracts of land and commodities in other countries. The Chinese do have records in other areas which are most  unnattractive such as retaining the extreme sanction of capital punishment and meting that out not infrequently. Chinese attitudes to human rights and democracy and their  old style colonialism, if not actual repression, in Tibet for example are worse than many of the old British colonial excesses. The British Empire building took place in an earlier age whereas in C21 mankind's development towards civilisation is supposedly more advanced than in earlier times.

However the Indy also  reports that the Chinese essentially have to buy/invest in commodity land and companies worth the equivalent of two BPs a year just to provide for their burgeoning population so I can sympathise with them about that.

That brings me on to wise investing.  This concept is a moving target made  almost impossible to achieve by the fact that needs, trends, fashions and luck are  mostly subject to unpredictable change. Who would have predicted a couple of years back that ploughing one's hard earned money into say the Royal Bank of Scotland or BP  in the expectation of providing a fair old age pension would have had the catastrophic effect of destroying the pensioner's   capital by  (back of envelope maths) maybe more  85% in a matter of months?

Dabbling in shares is somewhat of a hobby for me and as my day job is self employed there is also a need to have an eye to retirement. Even as an amateur however changes in sentiment become discernible For example Chinese investing  in commodities appears subtly to have altered investing  sentiment in the free world not excluding the City of London too. The view when banks and companies like BP were seen as safe investing havens, was that the shares of  tiny resource companies quoted on the seemingly  buccaneering London  Alternative Investment Shares market (AIM) should not be touched by real  or serious investors with a barge pole. Now following the trend set  in a huge way by the Chinese,  the share prices of certain small AIM resource companies  have rocketed.

To illustrate this point in June there was held on an investing bulletin board a purely fun competiton, to pick a company the cost of shares in  which would have risen most by Christmas.  Many picked tiny resource companies;  my own entry reads  "CAZA for me please buy SP 8p", which translated means that the shareprice of Caza Oil and Gas plc  was 8p in June 2010 and that  I expected it to be rather higher by Christmas. On the 1st October 2010 the shareprice was over 31p. Even more dramatic is the rise in shareprice of another small AIM oil company Encore Oil. A year ago each Encore Oil share would cost 14.75p to buy but today each Encore share costs over £1.27p to buy a gain of more than 764%.

Admittedly both  Caza and Encore Oil companies are more 1st than 3rd world prospectors (Texas and North Sea respectively) but the point is that rather like house prices, a surge in prices at the bottom of the ladder for first time housebuyers impacts all the way up to the top  the housing ladder. House prices in the UK London apart seem largely stagnent at present but not falling as yet  - London's are still high being greatly affected by foreign buying. The Chinese as foreigners buying heavily into often 3rd world's countries' farming land and resources, are likely to cause the prices of farm products and resources  significantly  to increase right up the food chain (!) to affect the deveoped world.

The Chinese are not blameworthy for this in my view but the impact of their investing may be that of greatly increased prices for food and commodities around the world - leaving empty plates for many. I hope that the huge % increases in the CAZA and Encore oil shareprices are not harbingers of commodity and food as well as oil  prices to come for ordinary people worldwide.

All this tragically  as the French might say creates 'danger de mort' for large numbers of people unless an organisation like the United Nations inspires governments and mankind worldwide to get  a real grip on the need to preserve basic human life.

No investing advice intended - please do your own research.

1 comment:

  1. I didn't realise you were self-employed, too, Jerry. I only had to organise myself which was perhaps just as well, but I supect you are responsible for several other people.
    I have always been interested in investing but have never had any capital to play with! Fascinated by your advice to would-be investors. You obviously know what you're talking about. On all matters financial I have to rely on the opinion of others (see my latest post).
    All the best
    Barnaby

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