Friday, Dec 21, 2007
Shares fall next... the flight to cash continues
Telegraph: Private investors cash in shares in record numbers
"November saw net outflows from funds for the first time since records began in July 1992. More than £600m was withdrawn from equity funds, while investors continued to run from commercial property funds, with £253m withdrawn. There had been growing evidence that investors were cashing in commercial property funds, but it is the first time that nerves among equity investors have begun to show." -- Time to sell up?
Posted by drewster @ 02:33 PM (712 views) Add Comment
9 Comments
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1. cornishman said...
The question I'm pondering at the moment is whether to surrender two endowment policies I took out 20 years ago. Part of me can't see there being anything left in these funds in 5 years time when they are supposed to mature - and the other part of me is like a rabbit in the headlights!
2. enuii said...
Ditched my only endowment policy in July as they were too exposed to commercial property and there were no penalties associated with its surrender.
I believe that there will be big losses with regard to the commercial property sector as huge swathes of new-build and refurbished office space are currently languishing empty with no interest from buyers or renters and this will hit pensions and endowments etc hard when reality checks in.
3. drewster said...
@cornishman, I think that depends on how much of a penalty there is for early withdrawal. Only you can make the decision. Five years is a long time.
I've learned a lot about the financial system through the excellent contributions of the bloggers on this site. I think the outlook for equities (stocks & shares) is poor for the year ahead. There's no source of further money to inflate values unless China and the Gulf states decide to bid for our assets at overvalued prices. That is a distinct possibility - governments are usually the worst investors, and foreign governments are no exception. Barring their intervention though, share prices are a measure of confidence in the system and I see confidence falling. The outlook is not good.
An alternative view is that all the cash sloshing around in structured debt instruments might work its way into shares instead. Blue Chips and defensive stocks with reliable dividends might do well, especially if banks continue to have problems and if interest rates fall further. However I see that as unlikely - the money in debt isn't "real", and investors have lost their appetite for leveraged plays on the stockmarket. The FTSE has almost doubled in the last four years - that's not down to improved productivity or amazing new inventions, it's down to massive liquidity. Just as it seems impossible to many that house prices could ever fall, so it seems impossible that share prices could halve. But they can do and have done before.
Personally I'm planning to move out of equities on Monday (I can't access my brokerage account from work today). There's nothing special about that date and it's a move I've been considering for some months now. I'll be moving mainly into gold, Euros, and a couple of small bets on long-term emerging-market shares. I might also look for a Japanese property fund with low entry/exit costs and low fees. Note that the LSE closes at 12:30 for Christmas Eve, the NYSE closes at 13:00 eastern time.
That's all from me for today - merry Christmas everyone!
4. jack c said...
@ cornishman – if the Endowment Plans are traditional With Profits policies then they will both have a basic sum assured to which bonuses are added yearly (these are known as reversionary bonuses and once added to your policy cannot subsequently be taken away by the insurance company) – the policies will therefore have guaranteed maturity values so long as you maintain the premiums throughout the term. The insurer may also elect to pay a final or terminal bonus at maturity, which will boost the policy value, but this is entirely at their discretion and can be removed at any time. You need to think very carefully before surrendering early so as not to disadvantage yourself and in addition the policies will also include guaranteed life insurance (which may or may not be relevant to your circumstances)
If the policies are simply “unitised” endowments (which I suspect they wont be if you are going back 20 years) then this would make the surrender option potentially worthy of consideration.
Hope this info helps.
5. techieman said...
Dont surrender!! Cornishman! - Investigate selling 'em might do better. e,g, http://www.endowmentsurrenderplus.co.uk/
6. cornishman said...
Thanks guys - you've hit the nail on the head - a lot of the final payout on these two policies is the final bonus. So to surrender them early will mean losing that. But then in 5 years time there might be no final bonus as it's discretionary. The company might not exist either; so whether the already added bonuses would still exist is yet another matter...
Alternatively, these type of policies did well when there was a lot of inflation in the 70s and 80s. If we're in for that in the next few years, then to cash in now would be foolish.
I'll dither some more over the weekend.
7. who stole my pension? said...
Oh no there goes my pension again!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
What will Gordon steal now?????????
Oh no my pay packet!!!!!!!!!!!!!!!!
8. Mikedx said...
he stole your pay packet a LONG time ago... for every £ you earn, about 80p goes in tax after NI, PAYE and the VAT you buy stuff with..
and now, the falling £ means that give it a few months you'll lose a few more pence of it as petrol, bread, milk, go up.. and up... and up..
MERRY CHRISTMAS!
9. dohousescrashinthewoods said...
Speaking of the Euro, I was wondering if the half-trillion the ECB imagined into existence was aimed at weakening the currency to ease pressure on exporters (given that they didn't cut rates).
I'm interested in ETFs/ETCs in water, timber, wheat and the like. I can imagine oil falling back temporarily if depression seizes the world economy (and those 4x4s have to be sold to buy food).