Back to school but a nerve-wracking term awaits

Steve Sedgwick
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THE first week of September is a sorry one for millions of Britons. It’s the end of the holidays, and not just for the kids.

They may have to go back to school and have nothing more than double science on a Tuesday afternoon to look forward to. For those of us who have finished with our formal education and have found ourselves with a career in the financial markets it’s much more of a reality check after the carefree time on the beach.

The fact is we are going back to a market that is nervous as hell. Every time equities appear to be picking themselves up and shrugging off the latest debt crisis along comes another scare to derail any recovery and nibble away further at the conviction of even the most strident bulls.

To recap, the S&P may have gone up nearly five per cent last week but it’s still down nine per cent this month, the FTSE is off 12 per cent throughout August, and the barometer of the big caps in Europe’s largest economy, the DAX, is down over 20 per cent in the same period.

But you know all that. You also know it appears too late to seize upon great returns in either cash or the “safer” sovereign debt markets, unless you find ten-year gilts a mouth-watering prospect at 2.5 per cent.

For many of you it’s a case of keeping your fingers crossed and hoping that sooner or later debt crises will blow over and we can all start appreciating equities again and the great rally of autumn 2011 can begin.

If the rally comes, chances are we’ll suddenly get reams of fund managers coming out of the woodwork and telling us how they always knew the benefits of strong corporate earnings, exposure to emerging markets and huge cash on the balance sheets were always going to prevail over the pessimists. To these money managers I only ask a couple of basic questions.

Firstly, have you been filling your boots in this crisis? It seems most of you are now hunkering down, maxed out on the cash portion of the portfolio you’re allowed to hold. If equities are really at once-in-a-lifetime valuations versus fixed income yields shouldn’t you be remortgaging your “own” home to load up?

Secondly, can you not utter the words “relative performance”? You see, none of us can actually spend that. If you are down money just say it. It will save us having to trawl through your performance figures.

You see “relative performance” clearly won’t pay for the school fees, which are not only due now but also have no relationship to the rest of the economic doom and gloom in the UK. And on that note if you want a tip from me, why not set up a school fees inflation index? I’ll wager it’ll outperform any other benchmark, not only relatively but in absolute terms.

Steve Sedgwick is a CNBC anchor