Adrian's Update  Volume 4 October 2005
I remember reading an article a few years ago about the “End of the World”, it was a spoof piece akin to the reading of H G Wells “War of the Worlds” during a prime time radio broadcast some ago but instead of Martian invaders, the Earth was being threatened by sudden and dramatic climate and weather changes.  This month one could be forgiven in thinking that perhaps this wasn’t so far from the truth after all.  The month was beset with natural disasters the world over and although the cost in human terms is almost incomprehensible, the economic impact will also be felt for many months to come.
	In addition to all of this we were faced with another Wall Street scandal as Refco Inc. (“RFX”), the commodities and financial markets broker, shut down its capital markets unit and started unwinding trades in its broker-dealer unit.  The shares plunged as it emerged that the CEO was suspected of hiding $430 million of debt that he owed the company and all of this less than 2 months after the company’s IPO, it has now filed for Chapter 11 bankruptcy protection and it appears the hapless investors will get nothing.  US inflation was also a loser, figures out this month showing a surge in consumer prices (“CPI”) of 1.2% and wholesale prices (“PPI”) by 1.9% in September to record 25-year and 31-year highs respectively.  A large factor in the rises was the rise in energy costs and whilst the month closed with a reduction in fuel prices, natural gas prices remains high.
Interest rates impact Although the Fed raised US rates by 25 basis points to 3.75%, last month and there was some talk of changing tack due to the impact of the Gulf storms on the economy, be prepared for a further rise to 4% on November 1 and do not discount a final 25 pips for December.  Inflationary fears remain and although the economy will be impacted by the storms this year it will also be boosted by rebuilding in 2006.  Although Alan Greenspan will have retired by the New Year, I do not expect Ben Bernanke (the incoming Fed Chairman) proposing radical changes in the near future.  The dollar is emerging as a winner with the higher rates in the US and posted gains throughout the month against the majors.  The ECB left rates unchanged at 2%, the same level now for 2 years and although the bank is cited as remaining concerned over German economic growth the economy rose this month.  Still no change across “the Pond” with The Bank of England’s concerns over inflation and GDP growth keeping rates on hold at 4.5%, the last change being the reduction of 0.25 percentage points back in August, the next MPC meeting will be on November 10. Where to now? With the US continuing its lackluster performance for the bulk of the month compared to most major markets it was encouraging to witness the month-end rally which further assisted gains in the other global markets on the back of the US wake-up.  We continue to see the UK with a strong performance for ’05 and it is good to note that Germany is at last showing some of the promise that over time must prevail. Equities continue to offer opportunity but the more esoteric specialized stocks and sectors can still be traps for the unwary.  Top houses surveyed still show a 58% allocation to equities in any balanced portfolio.  Although a number have increased cash to almost 12%, my recommendation would not to be to hold 30% in bonds.  With hedge funds having a tough time this year, rather look to property funds and specifically our own ADASTRA Realty Fund which offers solid performance with low risk.  Further information can be found on our website www.adastraportfolio.com or by contacting us by e-mail on invest@adastraportfolio.com. Tailpiece A Texan man has filed a $350,000 lawsuit against himself for making his own life a misery.  His lawyer explained that the man is suffering from a multiple-personality disorder. Six of his characters are respectable citizens, but the seventh is a drunken bully.  If he wins his case his own insurance company will have to pay out.  It seems to me that there are more important things in life! Food for thought Winning isn’t getting ahead of others.  It’s getting ahead of yourself.
Adrian's update is a monthly market roundup from the desk of Adrian P Sinden.  It is supplied free of charge to ADASTRA Clients and Registered Users of our