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True or false market in shares?

Some of the correspondents in the issue of July 25 have some rather strange ideas.

First, Philip Milton seems to think that stopping stock lending will reduce the false market in shares. I have heard this comment elsewhere but I am afraid it simply will not wash.

The fact is that CFDs and options account for many times the value of all world stockmarket valuations and consequently it is these which are creating a false market(and will continue to do so when the markets go up again as well – if they do.

Stock borrowing is a relatively small percentage, although it does have some effect.

Mark Dampier, of Hargreaves Lansdown, seems to think if there are compulsory pensions that people will take their money that they would have spent on shopping, holidays, etc.

Don&#39t you believe it! It is quite clear that, in these cases, credit card spending would go up again. I cannot imagine that people will forego their shopping or holidays.

Finally, Terence O&#39Halloran is under the impression that with-profits funds have outperformed managed funds by 2 to 4 per cent over a 15-year term. I would very much like to know where on Earth he gets this extraordinary piece of information because surely with-profits funds have much the same constituency as managed funds, with the money put aside for so-called smoothing (which does not seem to have worked as well as it should have done).

By definition, the managed funds must have outperformed. This will not be the case in a sustained bear market.

Indeed, I have always used the managed funds in the past, as an indication of which with-profits funds I would prefer to use.

The fact is that Skandia are the only people who have a suitable fund now – the guaranteed one – although there is still a place for reasonably straightforward with-profits funds for the more cautious investor.

BGW Jamieson

Principal,

Jamieson Financial Management,

Bognor Regis,

West Sussex

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