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Brian Tora column.

Byline: By Brian Tora

December is here already. Just 24 shopping days left until Christmas. Once upon a time there would only have been 21 days between now and opening your presents, but shopping these days can be an almost 24/7 experience. Not that this means we are necessarily spending any more. We merely have more opportunity to part with our cash.

Yesterday's Distributive Trades Survey and Nationwide House Price Index will be followed today by the Purchasing Managers' Index for manufacturing. On Friday a similar index for the service sector is published. Link that with statistics due from the other side of the Channel and the US and you will see that valuable information is becoming available to help us make a judgment on what markets may do next year. The signs are that economic activity is slowing all around the world.

This need not be bad for markets, but investors will doubtless be watching the way in which consumers react to changing conditions to ensure slowdown does not turn into recession. At least house prices are holding up, according to the Nationwide, even if next year could see a near standstill.

Professional investors are likely to be concerned over the flattening of the yield curve. For those unfamiliar with this piece of financial jargon, this is the graph that plots the difference between short-term and long-term interest rates.

Generally speaking, short-term interest rates are lower, but the fact that long-term rates were falling suggested the bond market was worried over economic growth prospects.

However, Monday saw a sharp sell-off in US Treasuries. Searching for reasons why, traders honed in on rumours of a large disposal by Asian investors. While it is true that Far Eastern banks have been big buyers of dollars, the reality seems to be that the longer end of the market has got ahead of the game. Hopefully, the position now will be more sustainable and fears will subside.

Meantime, attention is focused on the investment trust market. Investment trusts, the older brother of open-ended unit trusts, have taken quite a drubbing in the Press recently. While the main criticisms have been levelled at a particular group of trusts, the whole industry has been tarred with the same brush to some extent. One result is that the regulators intend to bring them into their circle of influence.

A number of options are being considered. However, this should not detract from their obvious merits as an investment vehicle. Investment trusts tend to enjoy lower management charges than unit trusts.

Investment trusts do not suit everyone and they do need to be researched carefully. But good advice is available. They deserve a place in many portfolios.
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Publication:The Journal (Newcastle, England)
Date:Dec 1, 2004
Words:450
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