Up, up and away
President Kennedy’s father Joe was a hugely successful investor.He once observed that in getting in and out of the stock market the final 10% up or down should be left to somebody else.
Most press attention has been devoted to the soaring cost of property. The London stock market is now quite close, however, to its all time high, and New York is now well above its all time high. However these pale into insignificance compared with many other stock markets, notably China.
The world is awash with liquidity which has driven up property prices, stock markets, and the art market. A sale at Christies in New York last week of modern art yielded an astronomical $354.6 million, largely on the back of Russian buying. Significantly, auction prices were for the first time displayed in roubles, and no doubt will be in the Chinese yuan before long.
Anthony Bolton, London’s most successful investment fund manager, warned against all this excess in his retirement speech last week. The securitisation of borrowing means that the normal direct relationship between a lending institution and a borrower has been lost, and private equity deals can fuel the market without the normal restraints.
Growth in the British economy has been largely driven by the consumer, on the back of rising asset prices. Any reversal would create a significant problem for any Chancellor of the Exchequer in the future.