We live in interesting times … that you can not enter the TV or read a newspaper without hearing talk about the adverse fate and the dark. If it 's ownership of and not the stock market falls it' the price of oil s passing through the $ 100 level and the situation seems to deteriorate nell'Irak. Well, stay clear of most of that except the issue of markets across the world going down. At this point we feel like saying please take a deep breath each. It 's certainly true that the' first 'secondary, the crisis has badly affected confidence in the markets. Just as the Nordic fiasco of the rock in the United Kingdom and the collapse of Bear Stearns in the United States. Is there other 'nasties' around the corner, people rightly ask? The answer is yes there could be and things may require several more months so that all remaining problems make an appearance unwelcome. So what happened? Well, in short, it 's partly down to greed. During the last years a lot of the bank invented complex products to sell at a profit above, with the full ramifications of what they were selling not know then. He packed together the various types of debt – good, average and poor quality – and sold it over. The bank has evaluated these formulas packages invented by themselves. With the benefit of retrospective view, could be discussed that has been broken in spectacular style. In general, the high-risk debt has become worthless, the average debt level split in two in value in high quality and even reducing the value near about 30%. This was made more obviously defective because the sales force tend to get less. There is also the issue of how banks lend to each other, known as the interbank rate, so that the money be provided to people like us. Gone are the days (but come back?) When the bank has used purely savers' money to be provided. So when the confidence is affected and the bank is reluctant to lend to one another and to make any loan charge much more. What we need is of course a period of stability, with the bad debt that is amortized and interbank rates that settle down. The need of liquid capital to be found, with rich holdings denominated Sovereign is a fund to help – at a price. As background to all this, it must be said that the last 15 years were enough drugs with the rates and high growth with low interest. This' Goldilocks' period is ending, with the development down and inflation up. This leads to deal with the dreaded stagflazione of speech and this is perhaps the most defective recession. Another point is that compared to other periods of market volatility and the fall in equity markets seemed enormous. Compared to the end of 2007 that the FTSE is down around 14% and that of course can fall further or recover. But in 1974 the market fell 51%, before recovering in 1975! So what should investors do? Well, if you don 't need your investment time (or within 1-3 years) our advice is to hang above. Don 'losses card turned tonnes in actual losses by selling low. We have seen new customers tell us that they sold when the market went down and bought yet when I went up. Why? Well, simply felt that this was the 'sensible' thing to do. This is the classic sense so that investors lost money on several occasions. For example, if you had missed the best 25 days from 7300 days between 1986 and 2006, your compound annual return would be 6.72% 11.74% instead of the market returned. Here is a recent article that discusses these issues: http://tinyurl.com/3cucrbKey considerations: The maximum dell'affare old and is very closely aligned. If you do not need the money that our advice is to hang the inertia of on.ACTION POINTPerhaps is a better way of putting it – drive out the storm. If the actual reversal volatility has you, then reassessed if you are reducing your risk here, or should be in the stock market at all?
Ray Prince
Oct 01