The Credit Crunch Cliché
Posted by Mark on 29th Jul 2008
In a recent article (FT 29/7/08), Gideon Rackman, argued that clichés are in effect truisms, based upon the received wisdom of crowds; or to put it another way, you are more likely to get the right answer asking the audience than phoning a friend.
On this basis if I write a blog full of clichés, it is bound to be more accurate than one without them, so here goes:
On the 9th
August we reached the tipping point of the Credit Crunch when BNP Paribas effectively declared that two of their hedge funds were sicker than a dead parrot.
A year on we would appear to be in a perfect storm, but how did we get here? Are we at the beginning of the end of our troubles yet, or merely the end of the beginning?
By Autumn it was clear that the good ship Great Returns From property was holed below the water line and retail investors, always late to the party, rushed for the life rafts of this rapidly sinking ship.
By December brave investors had stepped up to the plate to buy from the funds who were forced to sell, but by January it was clear that they had caught a falling knife and the market in New Year was flatter than a dead cat bounce.
Buying investments based on last years’ values is clearly like driving only using your rear view mirror.
Any hopes of a resurrection following Easter, where dashed when the green shoots of recovery, being nurtured by the agent community, were left withered in the ground by cold blast of Arctic realism blowing into MIPIM with the banking community.
The collapse of Bear Sterns shortly thereafter showed that no one was too big to fail.
Through early summer until now a Mexican Standoff has continued, with sellers either not able or willing to put their heads above the parapet, to be shot at by the big guns of the opportunity funds.
The elephant in the room is of course the question how the banks will react, now there appears to be no relief in sight (not even in September).
Dawnay Day has shown that it’s not always the banks problem if you owe them £2bn.
Come the autumn we’ll be ready and willing to run a few ideas up the flagpole to see who salutes, but for the time being we’re happy to wait for blood on the streets.