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Pain speaking

By the middle of last week, markets were feeling a little calmer and it was beginning to look as though the FTSE was capable of climbing above 6,000. However, the fact remains that news is still not improving. With UBS announcing further write-offs and its chief executive falling on his sword, it is clear that turmoil in credit markets has some way to run yet. In the UK, we saw the fourth consecutive month of falling house prices and the number of lenders withdrawing their mortgage products continues to grow.

If all this sounds somewhat downbeat, then you should have been at the Fund Strategy Investment Summit last week. Or there again, perhaps you should not. I listened to speaker after speaker give a cautious view of what the world economy might have in store for us. If I had not been performing the role of conference chairman, I would have been tempted to take myself off into the mountains. The quality of speakers was high but I wish they had not all been singing off the same hymn sheet. Then again, the crowd is usually wrong.

It is the dire state of the US housing market, set against a background of over-indebtedness and insufficient savings, which is laying the backdrop for a recession. Repossessions are rising and not just in the sub-prime sector.

According to Gerald Holtham, former chief investment officer of Morley Fund Managers and now manager of a modestly sized hedge fund, the problems being experienced in the US are far from unique and other countries, notably Spain, Ireland and New Zealand, have their own property bubbles that are causing concern. Perhaps most worrying was his dismissal of the more optimistic confidence surveys that have been around recently. He suggested that people only lose confidence when the problems in the economy hit home.

But it was not all doom and gloom. On the topic of whether emerging Asia can miss most of the collateral damage, the overall view appeared to be not entirely but a real global recession does not appear likely. True, there will be some pain to be felt. Chinese consumers may be more numerous and far wealthier than before but their buying power cannot begin to compete with the US.

These conferences can be most useful. You hear from those who are slightly detached from the industry and have less embedded interest in what they say and you can also take the temperature of the adviser community. Confidence was higher than I might have expected. Such is the depth of investment offerings these days that most believe there will always be something to buy for clients.

As for me, I reflected on how this business has changed without many of the basic principles altering that much. Trying to guess where the next market swing will take you is never easy. In the end, we are backing the capitalist system to reward us for supplying the capital that makes the wheels turn. I may have heard some learned debate but I still do not know what shares are likely to do next.

Brian Tora (brian.tora@centaur.co.uk) is principal of the Tora Partnership

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