...a blog by Richard Flowers

Thursday, August 23, 2007

Day 2421: Darling Alistair Says Don't Panic – Now I'm REALLY Worried


"World Shares Crisis" that is what the headlines read, and I thought: "Oh, well, at least we are all joining in together!"

Money makes the world go 'round, or at least it does according to Daddy's record collection (I suspect that it is something to do with gravity and perturbation myself). But this week it is going round like a circle in a SPIRAL, a spiral of DESPAIR, as money gurgles round and round and down the PLUG HOLE!

What IS going on?

I asked the BBC's answer to BRAINS from THUNDERBIRDS, Evan Davis, to give me his analysis and frankly I am NONE THE WISER.

It seems that a hundred billion pounds of high risk mortgages are at high risk. So a-hundred-AND-THIRTY billion pounds has been wiped off shares world wide. Does this seem in any way a sensible way to run things?

Pension funds that had just struggled back into the black were all plunged back into deficit by the falling value of their assets. Now they are £20 billion in deficit. Which at least is better than last year when they were £40 billion in deficit. And the year before that when they were £80 billion in deficit.

This "in deficit" is a slightly alarming measure anyway. It means: if RIGHT NOW they HAD to pay all of the pensions that they one day MIGHT have to pay, do they have enough money?

The thing is, they DON'T have to pay them right now and – sadly for some people – they won't have to pay ALL of the pensions that they might because some people till DIE early. Which is why none of the pensions have gone bankrupt from losing on the stock exchange.

The reason pensions go bankrupt is because big fat crooks take all the money and spend it!

But is any of this really any reason for all the SUITS in the CITY to start doing the HEADLESS CHICKEN DANCE?

Because by and large the stock market does go up. Over time. So the problem with falling stocks is NOT that you have lost your money – you have only lost it if you need it again RIGHT NOW. So long as you are able to wait, then the chances are that the market will recover again.

The stock market is a RISKY place to put your money. This is why you should not invest ALL of your savings! Keep back some in the building society; make sure that you have some in a pension; consider buying a few government guaranteed bonds – or even Premium Bonds. In short: DIVERSIFY. Do not put all of your eggs in one portfolio. And above all DO NOT TAKE FINANCIAL ADVICE FROM A FLUFFY ELEPHANT[*]

And whadda ya know: stocks bounce back.

[*]Millennium is NOT regulated by the Financial Services Authority and if you take his advice then frankly you are crazy. Stock markets can and do go down all the time and you might still lose the lot especially if there's a Replutocrat in the White House dictating American fiscal policy like he's been to Vegas and never got out of rehab. Reputable financial advisors are available. Somewhere.

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