Sunday 7 August 2011

Crash? What crash?

The hackneyed news media deadlines are trotted out again: "x billion wiped off shares". How quickly we forget.

Below are the charts for the FTSE and the Dow from their recent low points in March 2009:

The FTSE closed Friday 49.4% higher than 29 months ago; the Dow, 74.8% higher.

I think that ultimately, both will (in real terms) plumb depths significantly deeper than they did in 2009, but it will not happen in one go, and it will take a long time.

The stockmarket is not a store of money: A has already paid B for ownership of the shares, and the money went into B's bank account. The money is not parked on Wall Street or Paternoster Square, it merely passes through it.

On the way, it's purchased either the promise of a future income stream (and how reasonable is that hope in an unravelling world economy?) or the chance to sell on to a bigger fool (in the hope that it hasn't already happened).

Remember, you don't have to be in this game. I should like to know where the traders' and bankers' bonuses are invested at the moment: do they eat where they cook?

INVESTMENT DISCLOSURE: None. Still in cash (and index-linked National Savings Certificates), and missing all those day-trading opportunities.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.


James Higham said...

Pity the second chart does not work but the FTSE is enough and yes, it does show how caution must be used in doomsday scenarios.

Yet you say yourself that this is a slow grind downwards, in fits and starts and that does seem reasonable.

As Jesse maintains, the basic infrastructure is rotten and at the moment, it is being propped up.

Also, it's not just a question of those in the game. Stockmarket crashes have a habit of going on to affect a significant proportion of the population, not just the players.

Sackerson said...

Hi, James

The second chart does work, but I too have difficulty seeing some of your images. I'm having other problems with Blogger at the moment, e.g. editing, I don't know if it's just me.

I don't underestimate the seriousness of the situation, it's just the way the media report it that I find irritating. Where's the balanced and objective reporting, the contextualising? Still, that's what some of us are here for on the interwebs, I suppose.

I certainly take your last point, but can't do anything about it. I can only offer financial perspective for those who still have some savings left, and try to help them not fall for the cons.

Jesse is right abpout support, and of course that will continue, which is why the whipsawing will also continue. In my view.

Jim in San Marcos said...

Hi Sack

I can't view either chart. All I see is a black triangle with an exclamation point in it.

Sackerson said...

I got that too, just now - then tried again and it corrected. I think Blogger's got problems.