A vexing market

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THE LONDON STOCK EXCHANGE

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London, the capital of the United Kingdom, is a political, cultural, commercial, industrial and financial centre of the country. At the same time London is one of the world’s financial capitals. The business centre of London is the City, where

numerous banks, various exchanges, insurance offices, shipping and other companies have their head offices.

At the heart of the City is the London Stock Exchange where millions of shares and securities are traded daily. There are also exchanges in several other cities of the United Kingdom but the London Stock Exchange is the most important. Here through the Exchange members the investor can buy or sell shares in any of the thousands of companies which are quoted on the Exchange and many more companies which are quoted on recognized exchanges overseas. The London Stock Exchange offers the largest range and number of securities quoted on any Stock Exchange in the world. In volume of business it ranks third to New York and Tokyo.

London is also the headquarters of many prominent international banking and insurance concerns which deal in foreign shares, insurance and bonds and handle English investments in other countries.

The urge to call the market's direction is fierce. Trouble is that is devilishly hard to do. It's best to be wary of those who build their investment strategies around market timing. Also dangerous: people who think they see turning points at which all the old laws about investing are repealed. In the late 1990s a lot of investors were convinced that technology had given rise to a new paradigm in which the market's direction would be ever sky- ward. The mantra of that era -"It's different this time"—came crashing down when investors realized that profit-free Internet companies weren't such a good idea after all.

Vintage periodicals give us a window on how wrong market forecasts can be. My collection of market memorabilia includes the 1979 BusinessWeek issue with the infamous "Death of Equities" cover. I also retain a lesser-known and more accurate FORBES issue from a month later, "Back From the Dead?", pooh-poohing the silly notion that stocks were finished just because there had been a prolonged bear market. The roaring 1980s gave lie to the BusinessWeek story. One thing that hasn't changed is the long- term viability and resilience of the stock market.

Let's look at what has changed. Another old magazine I own, a 1950 Time, had a cover highlighting very cheap blue chips with very high yields. General Motors had a price/earnings multiple of 6 and a dividend yield of 11%, Boeing a 7 P/E and an 8.6% yield, Phelps Dodge a 7 PIE and an 8.3% yield. At the time the S&P 500 had an average PIE of 7 and yielded 6.9%. All this came at a time when long-term Treasuries offered a mere 2.3% yield to maturity.

Дата добавления: 2015-06-30