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Once upon a sub-prime time…

Once upon a time there was a fairy tale about a whole nation that was so stupid that when they were told that the king was wearing fabulous clothes, although in fact he was naked, did not want to appear to be the odd one out and seem daft so they pretended to see these wondrous clothes.

However, a small boy who did not need to be one of the crowd spoke out to say that the king was indeed naked and he was ridiculed by everyone. As we know, he was right, of course, and eventually everyone came to believe him.

Some years ago, major insurance companies rushed headlong into buying estate agency practices at highly inflated prices? As we all know, the bubble went pop and they all lost a fortune, not their own money but that of shareholders and with-profits policyholders.

After a while, the chaps who sold them these businesses bought them back at much lower values and carried on as before.

Recently, a bunch of greedy bankers heard that you could get higher rates of interest by lending to people who normally would find it difficult to get a loan, the so-called “sub-prime”. They all rushed headlong into this one as well. It seems that a lone voice, not that of a little boy this time, questioned this.

We all know what happened next. You would hope that lessons have been learned this time but I expect not.

Mel Boustead

Barbican Independent Financial Advisors

Peakirk

Peterborough

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