Investors are rapidly running out of homes for their cash. House prices are tumbling. Share prices are volatile but recently the main trend has been down and commodity price are wobbling. In the short run it makes cash itself look one of the better options with returns topping seven per cent.
The stock market has also been tough for value-oriented investors. This may explain the losses made by experienced investors like billionaire, Joe Lewis, in Bear Stearns and RAB Capital Group in Northern Rock. They tried to analyse the shares and concluded that they were cheap on value grounds, just as Phoenix is doing now to justify its purchases of shares in house builder, Barratt Developments.
The message of 2008, though, is that this type of analysis is often a poor guide to investment decision making. Shares can look cheap but still fall dramatically.
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