AIM UK

[ls7550]

In view of the Freddie Mac and Fannie Mae issues announced earlier today I'm opting to decouple current cash overlaps between Ladders.

In the shorter term markets may rise in reflection of reduced unknowns. Over the mid term however I perceive potential risks of highly correlated (widespread) declines. Most likely driven by significantly higher levels of interest rates.

Decoupling will ensure that cash burn is maintained down to FT100 1000 price levels as per the Ladder shown in the iBox above.

A just in case approach. The potential additional benefits of cash overlaps just isn't worthwhile under the present climate IMO.

To put FT100 = 1000 levels into context, the Wall Street Crash saw prices halve, halve again and then halve yet again from its previous pre-crash highs. With the FT100 having peaked at 7000 such a 3 x halving would see a 3500, 1800, 900 type sequence, perhaps over the course of a year or two. From that Wall St Crash low however markets recovered somewhat and doubled back up again within a few years, so exhausting cash at 1000 odd levels could turn out to be at or near absolute bottom levels.

A benefit of such a wide ranged (top/bottom) Ladder is that it covers us for such eventualities in a transparent manner.

Just my opinion, that may very well turn out to be wrong. I just presently feel more comfortable erring on the side of caution and applying conservatism.