Crash is coming, warns top investor
Crash is coming, warns top investor
Jason Dowling and Peter Weekes
November 4, 2007
THE man responsible for investing $41 billion of the State's money has warned mum-and-dad investors to prepare for a massive sharemarket crash.
He says a dramatic downturn is inevitable as the rapid rate of investment is unsustainable, and the repercussions of the $300 billion subprime lending crisis in the US are yet to be felt fully.
State Treasury has revealed that Victoria looks set to lose just $1.9 million directly from the subprime fiasco.
But the chief investment officer of the Victorian Funds Management Corporation, Leo de Bever, is taking no chances, telling The Sunday Age that he is managing the risk of further losses "as best as humanly possible" by shifting investments to safer options.
Mr de Bever's comments come after last week's running stoush in Parliament between Opposition Leader Ted Baillieu and Premier John Brumby over Victoria's exposure to the US financial crisis.
Mr Baillieu warned that millions of dollars of taxpayers' money was at risk and accused the Premier of failing to come clean about potential losses.
"We know hospitals and local governments have been exposed, we know there is a level of exposure to the VFMC, and John Brumby won't even provide a basic reporting process," Mr Baillieu told The Sunday Age.
Mr Brumby told Parliament that he had not received any advice regarding the exposure of government investments and agencies to the US subprime market but reiterated that the state had a "wide range of requirements in place" concerning investments.
However, Mr de Bever — who oversees the investment of money from entities including the Royal Children's Hospital, the Royal Women's Hospital, the National Gallery of Victoria, the University of Melbourne and the Transport Accident Commission — described the subprime debacle as being "the least of our concerns". It was the "roaring bull" market that kept him awake at night, he said.
The boom of the past five years could not be sustained and mum-and-dad investors stood to lose if they did not act now.
"Nobody wants to leave the party when markets are doing what they are doing, people want to enjoy it to the fullest … (but) it's time to buckle down."
While market experts suggest moving investments into safer options — such as buying government bonds, gold or shares in consumer staples — could prove prudent, they are not predicting the downturn will be so drastic.
Shane Oliver, chief economist and head of strategic investments at AMP Capital Investors, agreed that after the strong run, the Australian sharemarket was due for a correction, but said, despite the more volatile market and further expected problems in the US financial system, he believed "the conditions are just not there for a crash".
But some key US banks are already in trouble, with reports that regulators are investigating Merrill Lynch for trying to hide the extent of its losses.
And The Guardian newspaper has reported that another British bank, thought to be Barclays, has received an emergency loan from the Bank of England.
http://tinyurl.com/ypbm8m
Jason Dowling and Peter Weekes
November 4, 2007
THE man responsible for investing $41 billion of the State's money has warned mum-and-dad investors to prepare for a massive sharemarket crash.
He says a dramatic downturn is inevitable as the rapid rate of investment is unsustainable, and the repercussions of the $300 billion subprime lending crisis in the US are yet to be felt fully.
State Treasury has revealed that Victoria looks set to lose just $1.9 million directly from the subprime fiasco.
But the chief investment officer of the Victorian Funds Management Corporation, Leo de Bever, is taking no chances, telling The Sunday Age that he is managing the risk of further losses "as best as humanly possible" by shifting investments to safer options.
Mr de Bever's comments come after last week's running stoush in Parliament between Opposition Leader Ted Baillieu and Premier John Brumby over Victoria's exposure to the US financial crisis.
Mr Baillieu warned that millions of dollars of taxpayers' money was at risk and accused the Premier of failing to come clean about potential losses.
"We know hospitals and local governments have been exposed, we know there is a level of exposure to the VFMC, and John Brumby won't even provide a basic reporting process," Mr Baillieu told The Sunday Age.
Mr Brumby told Parliament that he had not received any advice regarding the exposure of government investments and agencies to the US subprime market but reiterated that the state had a "wide range of requirements in place" concerning investments.
However, Mr de Bever — who oversees the investment of money from entities including the Royal Children's Hospital, the Royal Women's Hospital, the National Gallery of Victoria, the University of Melbourne and the Transport Accident Commission — described the subprime debacle as being "the least of our concerns". It was the "roaring bull" market that kept him awake at night, he said.
The boom of the past five years could not be sustained and mum-and-dad investors stood to lose if they did not act now.
"Nobody wants to leave the party when markets are doing what they are doing, people want to enjoy it to the fullest … (but) it's time to buckle down."
While market experts suggest moving investments into safer options — such as buying government bonds, gold or shares in consumer staples — could prove prudent, they are not predicting the downturn will be so drastic.
Shane Oliver, chief economist and head of strategic investments at AMP Capital Investors, agreed that after the strong run, the Australian sharemarket was due for a correction, but said, despite the more volatile market and further expected problems in the US financial system, he believed "the conditions are just not there for a crash".
But some key US banks are already in trouble, with reports that regulators are investigating Merrill Lynch for trying to hide the extent of its losses.
And The Guardian newspaper has reported that another British bank, thought to be Barclays, has received an emergency loan from the Bank of England.
http://tinyurl.com/ypbm8m
bin66 - 7. Nov, 01:29
