Reasons to be cheerful are out there

May 9 2009 by Iain Laing, The Journal

SHOOTS of optimism or a flash in the pan? The answer to this will depend on whether you are an optimist or a pessimist, however your designated category will entirely depend on whether you have had your fingers burnt during this last 18 months of economic downturn. Like most people, I have been affected, however, I still like to think of myself as an optimist.

We are all probably sick of hearing about how we are all going to have to sell up and live in squalor because of the worsening recession.

The issue I have is that the reported information is quite often historic, and relates to a period that we are now out of. I will give you an example:

“Lending by banks and building societies to households totalled £1.1bn in the first month of the year – less than half the average for the last six months – according to new data from the Bank of England.”

This was released and reported in March yet very little explanation was given alongside it.

The reality is this. By the time this information was published the number of actual mortgage applications being made was on the increase. The number of property sales being completed was far higher than previous months, and optimism was being felt in the industry. This latter element did not really make the headlines.

There is also an explanation to say, who normally moves house in January? The answer being; not many. It is typical for this to be a very low month. Also, for these loans to actually complete in January, they must have been applied for in November/December of 2008, this being the exact time when all of the skeletons were coming out from their closets in the financial world.

My point is this; the bad news that makes the headlines can often be historic and there are often very obvious reasons for their levels. Since the turn of the year, many financial institutions have seen an increase to their levels of business. There is a market of opportunity out there and the smart people will take advantage.

The FTSE 100 is currently trading circa 30% higher than its low in early March. How many of you knew that? If you had invested earlier this year you may be feeling rather smug right now and you could have made significant growth. I admit there is the counter-argument; who has the bottle in these times to invest?, however; isn’t this the philosophy for making money with anything, ‘buy low, sell high’?

For the optimists out there, I believe the good news stories are there to prove we have hit the bottom and the opportunities are endless. It may be a rocky ride but, true to say, following every down, there is an up. Waiting too long could mean missing the boat. For the pessimists, you are all probably buying face masks and worrying about swine flu as that seems to be the new ‘in thing’ now that the shoots of optimism are there.

Karl Pemberton, director of business development at Active Financial Services