October 20, 2011

Is this the end of investments?

Economy

is this the end of investments - The Alessandro Benetton blog

One of the consequences of this long crisis (or maybe even two, if not three, crises within each other) is that investors have lost some basic certainties. Let me explain. All in all, it has become a recognized fact that shares may be lost on the stock market. Now, however, we have discovered that state bonds, which have always been considered a safe haven, especially by Italian investors, may bring losses if the reliability of the state that issues them worsens. What about real estate, which is very dear to Italians? In times of crisis, it looses its value and the market liquidity, or the ease of selling, (above all) decreases.

In short, investing has become difficult and the old categories no longer work. This analysis is so popular that it prompted one of the most influential economic weeklies in the world, The Economist, to publish an article entitled “No place to hide”. Metaphors aside, there is no safe place for our investments.

Why do I find this such an important issue, and not one limited to finance technicians, to write about it here?

Because it affects everyone from private to professional investors (banks, insurance companies, fund managers) who manage the life savings of ordinary people and, in one way or another, we are all (I repeat, all!) “forced” to invest in order to face the new welfare scenario where, on the one hand, our life span is extended and, on the other, the state is reducing and postponing its social security benefits.

The Economist sums up that “investors need to put their money somewhere but if they make the wrong choice, the results can be disastrous”. And so? I will let the technicians and institutions respond. I will limit myself to this comment: information can make a difference. We need more simplicity from those who issue financial products and those who purchase these financial products need to be willing to investigate.

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