OPINION: Forman & Son MD Lance Forman is looking at long term investments
PUBLISHED: 08:00 08 March 2017
CARMEN VALINO ALL RIGHTS - on shift
Call me lucky if you will, but in addition to predicting three of the recent major politcial events, namely the last general election, Brexit referendum and the Trump victory - many months ahead of each vote, my predictions in financial markets have also been remarkably accurate, so I am happy to leave you with my top investment tip.
After the bursting of the dot-com stock market bubble following the turn of the millennium, shares dropped in a three year period by around 40 per cent. Political turmoil with the Iraq invasion of Kuwait at the start of 2001 and 9/11 towards the end of 2001 ensured the decline continued. However, when 2003 saw the invasion of Iraq with “shock and awe” and many feared the financial markets’ further weakening, my view was the opposite, that this was the time to start buying. Buying when everyone’s selling and selling when everyone’s buying doesn’t always work as a strategy, but I looked at the long term trend in the markets, and it was clear the sell-off had been too great and it was a time to buy shares.
Markets rose dramatically and by 2006-7, David Cameron and George Osborne, who had become leaders of the Tory Party, were claiming in opposition that Tony Blair had got it right on the economy and that what they wanted to do, should they come to power is deal with the country’s social ills. How blind they were. It was so clear to me that boom and bust had not been eradicated and I referred to the economy in 2007 as a “fried breakfast economy”. After a daily fried breakfast, you come away feeling sated and ready to attack the challenges of the day, but what you don’t notice, in the background, is that there’s a big heart attack building up. To me the crash of 2008 was obvious and I sold all the investments I had made in 2003. The market crash was vicious in 2008 and once again by 2010, financial markets were below the trend line and so provided a good opportunity to buy.
Now I usually look at long term trends, but it was so clear to me days before the referendum that the Leave camp would win and I knew there would be an immediate shock sell off, so this provided the perfect time to sell and buy back a week later and that’s what I did, which delivered a far better result than going to the bookies.
But what for the future? Well last August, when everyone was fearful about the implications of Brexit, I signed off a blog stating “it’s a great time to buy shares”. The FTSE 100 was 6500 then, as I write this today, it is almost 7400, a rise of 14pc in seven months or 24pc per annum. Hopefully many took my advice. When you look at the long-term trend line of the FTSE100, markets should be around 8000 by the end of this year, so don’t be afraid to buy whilst the market is at highest peak ever, there’s still a long way to go. Buy-buy!