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RichM

Anthony Hilton, Evening Standard, 10-2-2006

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Piece is titled "Pension funds' switch into bonds is pure folly"

1. Pension funds' switch into bonds is pure folly

2. Bonds are yielding 1%, equities risky but 5% yield

3. "Safety first" the prime instinct for trustees; bonds are safe because...

4. The herd says bonds is the way forward, so that must be the safe option! (Where have we heard that before...)

5. Equities kick ass in the long-term, dividend + capital gain = good

6. Risk in everything

7. Having pension funds 100% in bonds is a mistake made 50 years ago

8. After the dot.com bubble:

"people asked how they could have been so stupid, but claimed wrongly that no one warned them at the time that shares were hopelessly overvalued. No doubt they will do the same some time in the future after bond prices have collapsed and interest rates return to normal. Well, they are being warned now that what they are doing to pension funds in directing them into bonds at these prices is fundamentally mistaken."

And there's another chilling point made (in the context of some Spanish firm trying to buy BAA):

9. Stock market is high partly because chief execs have got bored with productivity improvements etc and are more concerned with acquisitions or demergers and other "short cuts" to share value

10. Banks lending shed loads of money to big business:

"The drive of all this is not a buoyant economy but dirt cheap-money"

11. Banks happy to lend lots of cash as

"they think there is little risk, and they have nothing else to do with the money. British industry is not investing and the housing market is flat, but there have been relatively few bankruptcies or bad debts so the banks have money coming out of their ears.

It is boring to be a Cassandra when everyone else is getting so excited by all these bids, but it does not seem healthy.... It is different when they are buying businesses not because they are good value but because the bank finance they have access to is artificially cheap."

The joy of cheap money, ladies and gentlemen.

Oh, and there was a great piece on p.22 on the tricks builders use in their showhomes. Some report from "New Build Inspections", a firm of "property consultants". Small furniture etc.

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Guest Bart of Darkness
no one warned them at the time that shares were hopelessly overvalued

They would probably have dismissed such warnings as the utterances of "doom mongerers".

Rather like many of the self-deluding twats bulls who post on this site.

Shoot the messenger seems to be their response to anybody pointing out the bleedin' obvious about what's on the way.

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Shoot the messenger seems to be their response to anybody pointing out the bleedin' obvious about what's on the way.
I guess going with the crowd can work 95% of the time. It's just that 5% of the time it can spell disaster. Oh well. Good job Anthony Hilton, nice to see that someone with some voice appreciates that cheap money does not an economy make.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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