modus06

06 started very well .

focus in it given higher corporate spending?
check weightings orcl, sunw, intc, sap.add other positions ? cap gemini,cien, glw
get rid of hkd, usd currency fund, hfund, check gbp

The most interesting issue, however, will be the extent to which 2006 sees a further move back to the investment climate of 1906—or at least to the climate of the early years of the 20th century. Money was cheap; bond yields in established markets were low; equities relied on dividend yields for support. Inflation in most developed countries has been very much the same in the first five years of the 21st century as it was in the first five years of the 20th. And there was a burst of globalisation that demanded to be financed.

So what did investors do? They scoured the world for yield. They plunged into railways in Argentina; invested in plantations in India and mines in Africa; and, most dramatically, bought tsarist bonds. Russia was the fastest-growing European country, the primary supplier of raw materials to its more developed west. The mechanisms were different: public offers rather than private equity; investment trusts rather than hedge funds. The source of savings was different. But the pressure to get yield in a world of low inflation was much the same.

Historical parallels are seductive but dangerous. This is no longer an age of empires and power is moving away from the established developed world. So this burst of globalisation is more sustainable. But it won’t continue at this pace for ever. The more wisely the markets allocate investment funds, the longer will be this growth phase of the global economy. If 2006 looks like being a more difficult year for financial markets than 2005, which it does, that means there is even greater responsibility on investors to be calm and cautious.