It is little wonder that equities continue to plumb the depths when those whose activities can determine the direction of a market are preaching one thing and yet doing another.
How many seminars or presentations has anybody attended recently or how many articles have been read recently from fund management groups and life insurance companies to indicate the comparative value of equities, particularly with regard to the income being generated?
How many of those institutions, particularly life insurance companies and pension funds, are actually buying equities?
How many of them are actually selling equities and moving into bonds? I will contend that the answer to the last questions is, most of them.
I realise that as far as life insurance companies are concerned, there are solvency regulations which have to be adhered to which have been relaxed but the problem is one of confidence.
The unloading of equities in favour of bonds sends out totally the wrong message to retail investors and can have only two consequences, which are that equities will continue to plummet and that confidence will suffer even further.
If managers of institutional funds and life insurance companies were actually to put their money where their mouths are, some level of confidence will surely be restored and the lemminglike behaviour to jump off the edge of a cliff would cease.
Nothing in this world has any specific value whatever from a financial point of view apart from whatever value it may have at any one time being solely dependent upon whether anybody is prepared to buy it. In my opinion, the institutions must take their fair share of the blame as to where markets are now because it is their activities that influence the market.
The rest of us in the retail sector can only follow. Isn't it time to stop being negative? Isn't it time to consider that those who have the balls to buy into the equity market now might be doing their longterm investors a very great favour and might be doing us all a great favour by bringing confidence back into markets.
Highfield Financial Planning,