CONSIDERING WORLD WIDE CONDITIONS PRVB DID RATHER WELL this past week.
from reuters:
Thu Aug 23, 2007 11:55 AM BST
By Matthew Goodburn
LONDON (Citywire) - Fund managers with good memories are looking at today's volatile markets and drawing parallels with the market crash of the late eighties.
From 1987 through to 1990 the markets suffered increasingly erratic share price fluctuations and liquidity issues which meant big buying opportunities were available, with most sectors being hit, as is happening now.
However, it is worrying that those three years were followed by a deep economic recession.
Insight Investment's multi-manager co-head Patrick Armstrong said that then, as now, markets had been motoring before being hit by a credit crunch and property was viewed as a low-risk investment.
He said: "Like now, people had viewed property as zero risk and now again the US consumer is not being lent to."
Armstrong added: "Hedge funds are the new banks of the world and are being paid to take on these debt risks. No one is sure this time where the debt will end up.
"Everything was going along well in the late 80s and then the credit crunch hit. Though no one is predicting a recession the market is unsure. There is no transparency about who has the end credit risk so no one is sure where the risk is coming from."
F&C Income & Growth fund manager Ted Scott says market conditions closely resemble 1987 when, after a sustained bull run, shares became significantly overvalued.
He said: "Up to two months ago the market had been complacent, although in the late 80s the market fell up to 20 percent in a day rather than the more protracted moves downwards we have now."
Scott sees parallels in the latest credit crunch, although he adds: "Then it was lending from small banks causing a credit crisis, whereas now it is the sub-prime market which has turned off the credit available."
He added: "Up to two months ago sub-prime had been ring-fenced within the mortgage market but now there is the risk of contagion focused on financial areas including banks, life assurance and hedge funds."
(c) Citywire Financial Publishers Ltd 2007.
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