Monday, 15 June 2009

Why don't the rich want to come out and play (in equities)?

The very commendable efforts that have been made in the last three months to lift equity prices and boost consumer confidence, do not appear to be scoring too well with the most important constituency that needs to be convinced about the attractiveness of investing - the rich.

According to a Barclay's Wealth report which is discussed in the following news article

Wealthy investors are sitting on their hands and refusing to commit their cash amid fears that asset prices have further to fall, according to a report .

A survey of the world's richest people found they continue to be nervous about the prospects for most major economies and are ignoring entreaties from financial advisers that asset price falls have bottomed out and bargains are aplenty.

Almost nine out of every 10 investors can see investment opportunities but more than two-thirds say they are still nursing wounds from the fall in the stockmarket and the crash in commercial and residential property prices to start investing again.
The reticence on the part of the rich to come out and play must be slightly concerning to those intermediaries (e.g. Goldman Sachs and JP Morgan), currently warehousing huge inventories of equities and equity derivatives, and who are keen to see them transferred into strong hands for safekeeping. Perhaps retail investors and pension funds will keep buying while the rich sit on the sidelines a bit longer before they decide to join in the sports.
Somehow that's not how it's supposed to work.

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