tygerland.net

I have written many times about the fragility of the highly indebted Anglo-Saxon economies of the US and UK. The potential tipping point may well be around the corner, as yesterday the FTSE suffered its largest one-day slump since October 2002, after four continuous days of tumbling stock values. The Dow also suffered significant losses (-214 pts), and after reaching almost record highs a few weeks ago, it’s now up only 4% on the year. The NASDAQ Tech index is now down on the year.

The market is spooked [FT: subscription req] after interest rate warnings on both sides of the Atlantic. All this, comes after months of city-types claiming that the fundamental rules of economics, do not apply to the current bull market, which has kept our economies growing despite unstable levels of consumer lending. As Jeff Randall argued in yesterdays Telegraph, “Financial gravity is never abolished, merely deferred. History has much to teach us, including that experts are temporary but common sense is permanent.” Wise words you’ll no doubt agree.

Anyone with a modicum of financial nous, would advise investors to be cautious, and consumers, to drastically limit their level of spending and work to reduce their indebtedness, over the next few years.