Harvey Jones speaks to two investment analysts holding opposite opinions on the stock market.
I've just had a couple of bracing interviews with two investment analysts, and found myself on the receiving end of two sharply differing views on the stock market.
The first, Jeremy Batstone-Carr at Charles Stanley Stockbrokers, was a great growling bear. The second, Clem Chambers, founder of website Advfn.com and author of 101 Ways to Pick Stock Market Winners, was a raw rampaging bull.
After 15 minutes talking to Batstone-Carr, I was ready to place an order for my own personal missile defence system, to protect myself against the mayhem to come.
But after 10 minutes with Chambers, I was ready to sell the shirt off my back to buy stocks and shares.
It was only when I read my notes afterwards, that I realised they had one thing in common. Bull or bear, they agreed on one thing: shares will see you through.
This bear bites
Let's tackle the bear first. As Batstone-Carr says, there is massive uncertainty out there. "We have the stand-off between China and Japan. A slowdown in the Chinese economy. That US fiscal cliff. A potential showdown in Iran. And little evidence that EU leaders can solve the eurozone crisis, or indeed that there is an easy solution."
Then there is all that sovereign debt. "Central bankers are desperately trying to create inflation to erode those debts, but are being swept away by the tide of events."
None of these problems have been solved. Like that debt mountain, they just loom closer. "All this is hitting company profit forecasts, damaging global trade, and could end in protectionism, trade wars, import tariffs and all that malarky," he says.
Ouch.
1, 2, 3 Q4....
Batstone-Carr says we shouldn't be fooled by the recent market bull run; that was down to markets anticipating further monetary easing from the Federal Reserve and European Central Bank. Since QE3 was announced, share prices have retreated. "We've had QE3, now watch out for Q4. The next three months could be hard."
Despite his pessimism, investors should hang onto their shares, for one simple reason: "Frankly, you can't get this level of income anywhere else now."
Nervous investors might want to take out a put option as protection against a market sell-off, but even this grizzly growler doesn't recommend selling.
True, he isn't exactly telling investors to fill their boots, simply to hold onto what you've got. In his bearish investment wilderness, dividend-paying stocks are as good as it gets.
This bull runs
Before we get too gloomy, let's hear from Clem Chambers. "All the bad news, everything we know about, from the US fiscal cliff to Israel v Iran, is already priced into markets. Of course, there may always be 'unknown unknowns', but nobody can invest with those in mind, because we know nothing about them."
He is so bullish, even war doesn't worry him. "Just look at how the FTSE or Dow Jones performed in WW2. You wouldn't have known there was a war on."
In a world of worry, he is clear on the biggest threat in facing investors: inflation. "Western governments are frantically monetising their debt. Eventually, we will get massive inflation. That's the only way the West will get its debts down to manageable levels. Central bankers have been rampantly printing money. They claim it is sterilised, but is it really?"
Soft money, hard assets
When inflation comes, you don't want to be holding cash. "People always describe inflation as rising prices. Actually, it's not prices going up, but the value of your money going down. You don't want to be in cash in the medium term, because it will be obliterated. You need to be in hard assets. That might be shares. It might be property. In a volatile market, you need to take on risk, otherwise you will be left behind."
This doesn't mean rising share prices are a one-way bet. They never are. "Share prices might fall. If they do, great, I'll buy more."
Bull or bear? Who cares!
They're both plain-speaking chaps, as you can see, and see the world very differently right now. Yet they agree on one thing: the power of the dividend.
You may be a bear, you may be a bull. You may be a bullish bear, or a bearish bull. But there will always be a compelling case for shares when you can buy solid defensive blue-chip stocks such as SSE (LSE: SSE) at a yield of 5.75%, National Grid (LSE: NG) at 5.68%, Vodafone (LSE: VOD) at 5.4%, GlaxoSmithKline (LSE: GSK) at 4.9%, Royal Dutch Shell (LSE: RDSB) at 4.8% and Imperial Tobacco (LSE: IMT) at 4.3%.
It is also worth pointing out that clever stock picking can still win the day, even in times of trouble. Here are 10 super shares that have soared in the crisis.
If bad news does strike, there's only one way to respond. Buy more shares. They'll be cheaper.
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Further investment opportunities:
> Harvey holds GlaxoSmithKline, Royal Dutch Shell and Vodafone. He doesn't hold any other investments mentioned in this article.
