Share guru says slide could go on for months
By Patrick Hosking and Gary Duncan
BRITAIN’S most successful stockpicker yesterday told investors to brace themselves for months of falling share prices.
Anthony Bolton, who runs £6.5 billion of funds for Fidelity International, suggested that the jitters of the past two weeks could turn into a more prolonged bear phase as shares plunged again.
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In a rare public appearance, Mr Bolton said: “I think it could be the end of the bull market. The correction could be months, not days.”
His comments came as markets on both sides of the Channel suffered another battering that reversed much of Tuesday’s rebound. The FTSE 100 index lost a struggle to cling to its 2005 closing value and finished down 91.6 points, or 1.6 per cent, at 5,587.1.
In a sign of market nervousness, two initial public offerings were postponed yesterday: CMC Markets, which provides spread-betting and foreign exchange services, and Sigma Capital Investments, the Black Sea property group. Both said they planned to wait until the markets calmed.
Mr Bolton pointed to the steep rise in share prices over the past three years and the increasing difficulty in finding value in stocks, adding: “The bull market is old.”
However, a sharp slide could prevent a more protracted downturn, he said: “The faster it goes down, the shorter the consolidation phase is likely to be.” In March Mr Bolton is understood to have taken out a vast insurance policy against falling share prices, buying put options that give him the right to sell about £1.6 billion of blue-chip stocks at pre-slide prices.
The options, which expire next month, were bought on behalf of Fidelity’s flagship Special Situations fund and an investment trust, Fidelity Special Values.
After his speech to the Securities and Investment Institute, Mr Bolton said that a number of factors could lead to a protracted bear phase, including inflation fears, bird flu and the fizzling out of US consumption.
He also pointed to the warning from the US billionaire Warren Buffett of the dangers of a blow-up in the credit derivatives market. “When money is virtually free, that’s when people do silly things,” he told The Times.
Hopes that Tuesday’s bounceback in leading markets could end investors’ rush for the exits were dashed by another bout of heavy selling in Europe. In London, the FTSE’s losses were deepened by a continued retreat in shares in mining companies as key commodity prices tumbled again. Copper prices fell by as much as 7 per cent, with gold and silver also dropping sharply. In Paris, the CAC 40 dropped 1.3 per cent, while Germany’s DAX closed down 1.6 per cent. On Wall Street, shares slid into negative territory but then recovered.