THE ECLECTICA FUND - JULY 2003
Investment Manager’s Report:
Expectations are now high that, thanks to the US government, the world economy can get back to work. Iraq was a takeover bid, where to spend $40 billion to take over $16 billion of revenues looked a good deal, given the chronic underinvestment by previous management. The cost has soared to over $60 billion and now it looks like the numbers can only be achieved if this acquisition is merged with another one. The talk of recovery and the size of the spending has scared the bond market and the speed of the fall (15% at the long end) has testified to how leveraged the bond investors were. Stock markets have held up well in the face of the bond fall, primarily because they can take comfort from any growth in economies or inflation. However since 8th June even they could not advance, merely consolidate. Whither from here?