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Hello Crazy Fans,
As far as I can see, there's a lot of jumping from less safe shares into more safe (we hope) shares. These more cautionary stocks are known as defensive shares.
We go into them not to make oodles of cash, but to try and conserve the cash we have, while still allowing the chance of a small profit. But why are many of us being drawn to defensive shares, when the rewards are usually not as great.
Well, the financial world seems to expect a mini recession. This is because of the shortage of credit. If we can't borrow as much, we can't spend as much and all kinds of businesses may suffer.
Their raw materials are not getting any cheaper, but people refuse to pay more or indeed refuse to pay at all.
The companies which will be hurt most by a shortage of customers are the ones which produce goods or services we would like to have, but can still do without.
For example, we can do without new cars, pleasure trips by train and ferry, holidays, tellies, radios, DVD's, cinemas, up-to-date kitchens, replacement carpets, pubs, hotels and all that jive. But we can't do without, or would really miss: electricity, gas, oil, petrol, medicines, nuclear power and water.
And however short of cash we may be, we will still spend money on this stuff. So that is why people have been piling into firms like British Gas (Centrica (CNA)), British Energy (BGY) and drugs companies and coming out of Marks & Spencer (MKS), breweries and most of the other big shops.
Now I take the view, like the boss of Marks & Sparks, that the present share price is really cheap. So it could be a buying opportunity for 'non- defensive' shares. They may fall further, but I rather think the selling may have been overdone.
What do you think? I'm often wrong. Rock on!
To find out more about Malcolm CLICK HERE
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