FinancialGuy Writes!

Is it just me, or is the entire financial world living in a dream right now?

On the one had, markets have been rising, some pundits on TV are talking about the recession ‘easing‘ or the ‘first signs of a recovery’ and on and on. But is it real? Is the global economy fixed yet? Or are they just saying this to feel positive on TV?

I ask this because the news seems to be getting worse, not better. Take this story where the BBC reports that the Latvian economy has shrunk by 18% in the first quarter of this year! I had heard of this already through a Latvian friend – well, I had at least heard that virtually every business was closing – about six weeks ago.

Then last week the BBC reported that the Dubai property market is in freefall and that prices are down by 41% in the first quarter. Forty one percent! Or perhaps the news that output is down in France and Italy. Even the United States has announced that the rate at which people are being made unemployed is falling. That means that people are still losing jobs more often than they are finding them, just that the rate is slowing a little. It is still bad news.

Sure, Dubai and Latvia aren’t the powerhouses of the global economy, they are just the stand-out news from the last few days. There is bad news everywhere. Even Arsene Wenger is talking about UK tax rates and the weakness of sterling!

In fact, things are so bad and it is now so obvious that even Gordon Brown has stopped trying to tell the British public that their national finances are ‘robust’ and ‘well placed’ to ride the recession out.

And yet the markets seem to be telling a different story. Perhaps the news that Gordon Gekko is to make a return to the markets and the big screen are providing the hope. But can this be the answer? It seems that even Warren Buffett has booked a loss. If that is the case then things really are bad…

One thing is for sure, if you have any money it is difficult to know what to do with it. Everywhere you look there is panic, mayhem, confusion and high levels of risk. For the stock market beginner it is almost impossible to know where to turn. In the UK at the moment, some savings accounts – I am thinking of one owned by Lloyds TSB (aka the government) – that is paying a pitiful 0.05% gross on a tax free product. This means that even cash is a bad investment! The difference between keeping the money in the bank and literally putting it under the matress is now one of safety and ease of access. And if the current banking malaise is anything to go by, it is safer under the matress…

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