Someone should start compiling a 11 September Excuse Book, a volume of the trends and events now bei...
Someone should start compiling a 11 September Excuse Book, a volume of the trends and events now being attributed to that momentous day. We all know that America will never be the same, but did you realise that the collapse of the World Trade Center towers is behind the plunging productivity of window cleaners in Leeds, the state of the roads in Norfolk, and the deteriorating punctuality record of a printing firm in Plaistow?
No? You should get out a bit more, then. From bricklayers to bridalwear outlets, businesses are shamelessly attributing their problems to 11 September, using the disaster as a convenient cover for their own inadequacies. This is a short sighted strategy, for there is still plenty of really bad economic news to come, and quite soon the S-11 excuse will be looking rather weak. Investors, too, are fooling themselves. Vulnerable in the current uncertainty and with little experience of bear market conditions, many are hoping the recession will just go away. Despite poor corporate results and gloomy economic reports over the last couple of weeks, equity indices are creeping up, some now well beyond the pre-attack level. Why?
It is a comfort fix. Markets are going up because they are going up. Ask anyone ' did the co-ordinated round of interest rate cuts from the US, UK and eurozone prompt your decision to jump back into the market? Not a bit of it. 'We are buying because the market is going up.' Recent rises are sustained by increasing monetary liquidity and a strange belief that tax incentives will follow the interest rate cuts, despite rising government spending. This is the most dangerous phase in the turning cycle, when everyone knows the party is over but they just want one last drink before they go.
There are a very few single-minded people who have managed to stay sober and ready for action. 'Be brave,' says a poster from New Star Asset Management. 'There are some exceptional opportunities out there.'
Sure, but be sensible. Leave them to investors who have the bullet-proof shirt. The Government, financial product providers and other interested parties are all urging retail investors to keep spending and investing. But ask any highly rated manager what they are doing with their own private money, and the answer is it's in hard cash.
Military strategists say the best war to win is the one you don't have to fight. At the moment private investors have an edge ' unlike the professionals, they are not obliged to invest in the equity markets. Fund managers whose portfolios must be nearly fully invested are turning where possible to preference shares, which look like stocks but act like bonds.
This market, still largely the preserve of institutional investors, has been deeply unfashionable for more than a decade. It is relatively un-developed in the UK, unlike the US, and few analysts bother with it.
But yields of over 8% already look attractive compared with 5% from government bonds. Once preference shares become more widely known, demand could rise steeply.
For those locked into inactivity by S-11, there is little to do but hang on and moan as world markets slide faster in recession. Some pass the time by trying to judge the bottom of the cycle. Financial astrologists, for example, pinpoint 5 December, when a Sun and Mercury conjunction opposes Saturn, as the turning point. Personally, I can't make that date with history. We have the local supermarket late-night opening. Unless it's cancelled, due to 11 September, of course.
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