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House rules

There was an amusing, but a little too accurate for comfort, remark made on a satirical comedy show recently. It was at the time of the 40th anniversary of the moon landing and the varying descriptions accorded to the International Space Station were contrasted.

In the US, it was said to be the largest structure ever assembled outside our atmosphere. The UK’s approach, with our fixation on property, was to say it was the size of a four-bedroom house.

Property is writ large in the domestic psyche. Is it merely a coincidence that the stockmarket has enjoyed a better time recently as the end of the slump in the housing market has been called?

The bounce has persisted far longer than I expected. We have yet to break decisively above 4,500 on the FTSE 100 index but we are bumping along at the top of the recent trading range.

In America, the recovery has been even stronger. There, too, property looks as though it has bottomed. And just look at how some of the emerging markets have rebounded.

An appetite for risk has returned and commentators are frequently mentioning green shoots and the worst being behind us. Perhaps they buy the property steer. I sometimes wonder if they are reading the same economic stories that cross my desk these days.

A taste of what might be in store can be seen in the Irish economy.

Despite two emergency budgets, Ireland teeters on the brink of bankruptcy. If the massive debt position that this nation, once termed the European tiger, has accumulated is not to bring the economy to a position of total collapse, then even more stringent cutbacks will have to be introduced by the government, according to a recent report.

It says a further 17,000 state jobs must go, education budgets need to be cut by 8 per cent, resulting in the closure of scores of rural schools and nearly 7,000 teachers losing their jobs, and social welfare payments must come down.

Already, the police have suffered a 7 per cent pay cut and other cuts are clearly needed. But these recommendations need to be put into context.

Ireland is a small nation. Its population is less than that of Greater London. The 17,000 civil service posts that the report recommends are culled would translate into 250,000 jobs going here and 1.25 million in the US.

Unemployment in Ireland is already 12 per cent and is expected to reach 16 per cent before too long. The picture is grim. Recent estimates that the standard of living in this country will not be restored for a further five years would look wildly optimistic in Ireland.

While not wishing to be a party pooper, it is worth reminding ourselves of the extent of the problems assailing the developed world right now.

Ireland is an extreme case but many countries will have to undertake painful surgery to assuage the excesses of the past. With the bulls, led by Anthony Bolton, currently winning the battle against the bears, championed by Neil Woodford, it is too easy to ignore the problems. Expect turbulent times ahead, even if property turns out to have bottomed.

Brian Tora ( is principal of the Tora Partnership


Careful with the China

It is always refreshing to come across a fund manager who is up front with their views and is not afraid of upsetting the marketing folk on the floor below. A fund manager admitting that now is not a good time to buy their fund says more than one that proclaims that it is now a great opportunity to invest.


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