Legs eleven

The achievement of the FTSE 100 index in rising for 11 consecutive trading days is quite remarkable. The many plausible reasons for dismissing this record-equalling run cannot undermine the fundamental shift in investor sentiment.

Attempts to explain away the rise of 11% in the London Stock Exchange’s main index in just over a fortnight include unusually low volume, the international composition of the index and the fact that the mid-caps failed to match the full run.

All these are reasonable points but they diminished in impact when, after a fall on the 12th day, the Footsie more than made up the deficit on the 13th day to top 4,600 points. Few would at the start of the year have expected to reach this level before the end of July.

Times are still admittedly hard and results continue to be mixed. The two oil giants, Royal Dutch Shell and BP, for example have both seen profits slump while chocolates maker Cadbury did well.

It was always expected that the fall in crude oil prices from the peak of $147 a barrel this time last year would have a massive effect on Shell and BP’s profits, just as the surge from around $40 had boosted the figures. Those who accused the oil majors of profiteering last year now have their answer: it works both ways.

Crude has over the past 12 months been all the way back down to the previous norm but has recently picked up to $60-$70, where it may have stabilised in the global downturn. All in all, the latest quarter to the end of June reflects as sharp a contrast as we are going to get year on year.

The belief is growing that all the bad news really has been factored into the Footsie. The scope for companies to disappoint shareholders is still there. It inevitably happens even in the good times. But while expectations are still pretty limited, the chances of a pleasant surprise are greater.

Once again we have seen a phenomenon that I identified 10 years ago. Summer months do not set a trend but they do continue the prevailing momentum. The pick-up in spring was a warning not to sell in May and go away.

I had thought I was being optimistic at the start of 2009 in hoping for a serious rally to start in, and run through, the autumn. I now feel that autumn will be a time for consolidation of the spring and summer gains rather than a fruitful period. However, the dangers of a collapse to the depths of 2003 are fast receding.

BA? Bah!
If you are looking for a company to buck the better trend, look up now. British Airways is a disaster on wings. It has reported a pre-tax loss of £148 million in just three months as passenger numbers and freight have fallen back in the recession.

It has had an unseemly public spat with staff over cutting wages and it discovered, unsurprisingly, that its employees are reluctant to work for nothing. Industrial action is threatened. BA is cutting back on inflight meals, which may drive away more passengers.

It is very hard to see BA getting out of this situation in the next 12 months despite the fall in fuel prices. If anyone can make out a case for buying the shares, I can’t see it.

In the shadows
Shadow Chancellor George Osborne stepped out of line with sensible proposals to effectively scrap the Financial Services Authority and return much of its powers to the Bank of England.

Then his boss David Cameron has demonstrated why Opposition parties may be sensible to refrain from specific policy announcements when they look like winning the next election by default.

Cameron proposes that the motorists who have already paid for any new roads several times over in taxes should be charged tolls on new motorways. He cites the M6 relief road near Birmingham as a success that was originally proposed by a Conservative government, albeit built under a Labour one.

He would be better advised to admit it was a failure, attracting much less traffic than was projected and doing little to ease congestion on that stretch of the M6.

Blame game
As you sit in your hotel or caravan contemplating the rain and wishing the recession had not confined you to the UK, keep yourselves amused by playing the blame game. See who can find the most unacceptable argument for demanding compensation.

How soon will it be before seaside resorts try to sue the Meteorological Office for forecasting wet weather? Bournemouth is not going quite so far but it is considering setting up webcams to provide an online view of how the weather really is. The resort claims to have lost £1 million in revenue over one baking hot weekend that was supposed to be wet.

Given that the weathermen forecast a barbecue summer, one wonders how many people poured themselves and money into Bournemouth on wet weekends that were supposed to be sunny.

Will Bournemouth pull the plug on this scheme when it keeps people away? Answers please on a postcard postmarked Margate.

The argument that one should not blame others is a recurring theme of this weekly missive. A prime example is the misguided litigation claiming compensation over Northern Rock.

The Appeal court has ruled, quite rightly, that the High Court was correct to throw out the case. Northern Rock was bankrupt through actions of its own making. Those who were prepared to pocket dividends when the reckless lending policies brought in profits should accept the losses when those same policies failed.

Alas, even hedge fund managers have difficulty with this concept. SRM Global, Northern Rock’s largest shareholder before the government had to step in, and RAB Capital think they should have all the benefits while the taxpayer should pick up the bill. They are threatening to go to the House of Lords and, assuming as is likely that they lose again, to the European Court of Human Rights.

Ordinary shareholders should not follow these siren voices. Learn from your mistakes and move on.

New tricks
They say that comedians do not need new jokes, just new audiences. The same can be said of confidence tricksters, who seem to be able to recycle old ideas with remarkable success.

It is some 50 years ago that I heard of a woman who lived in the same village as I did and who visited the Lewis’s store in Manchester. While she was in the toilet, her handbag was snatched from under the door.

A couple of days later she received a phone call purporting to come from Lewis’s saying her bag had been found with the contents intact and would she come to collect it. She arrived to find that Lewis’s had not made the call. The thief watched her leave home and burgled her house at leisure while she was gone.

I hear that this same trick has been pulled recently in London. You have been warned.