Private Investor: Dot.com disaster or investment opportunity?

It hasn't been a good week for Japan. A dead whale dumped outside its embassy in Berlin (the sort of political protest I can agree with). The Tokyo stock market bouncing around like a drunken Sumo.

A chap named Takafumi Horie had a lot to do with this. He was raided by the police, with the allegation flying around that he had been falsifying the earning of his big internet company. The Nikkei collapsed in a fit of vapours and the Tokyo Stock Exchange had to suspend trading.

I suppose the effect on the market in New York would have been the same if it had been found that something really outlandish like, say, the mighty Enron had been on the fiddle. Oh yes, something like that did happen didn't it? Silly old me. The point, I suppose, is that the knockabout in Tokyo proves that the Japanese rally is both a bit more modest and a bit more fragile than has hitherto been assumed, even though the market righted itself somewhat towards the end of the week.

The long-term problems with the Japanese economy, well publicised over almost two decades now, will ensure that is the case until some more radical restructuring of that economy takes place.

The second thing it demonstrates, like the Enron affair, is how quickly confidence can be eroded by a story such as this. Yet in retrospect economic life went on after Enron flopped and it will go on after Mr Horie becomes the subject of "whatever happened to"articles and the answer to a question in a trivia pub quiz.

Far worse news, I fear, comes form the bond market and the astonishingly low long-term interest rates that are now emerging there. The reason for these, it seems, is all those pension funds piling into bonds as a "safe" haven to match their future liabilities. Maybe they have to do this, for reasons of prudence or because the regulator makes them, but I can't help feeling that these great columns of professional investors have served their public, on the whole, quite badly.

It's like this. When the great tech bubble started, what did they do? They bought into the very stocks that were running so far ahead of rational valuation it beggared belief. Then their friends and colleagues encouraged the rest of us to invest in those very stocks through collective funds devoted to the new technology. The bubble grew larger and larger, with the lure of easy, fast money. Only the sage of Omaha, Warren Buffet, stood out against the wave of conventional wisdom about the "New Paradigm".

Then the tech-media-telecoms bubble burst. So what do the funds do? They sold, sold, sold. Then the market went into a tailspin so the regulators told them to sell more, simply because the market was down, so adding another twist to the downward spiral.

The FTSE was at 3,600; blue chip shares such as Shell were just being dumped on to the market for whatever they'd get. There was was a fire sale of equities.

Amateurs like me could spot that that was a fine moment to buy, but the big men of the game it would seem did not. When the pompous know-it-alls in the City declared that the stock market was down and out for 20 years there was no better buy signal. So it has proved. Somewhere out there there is an analyst clever enough to tell us how much better off our pension funds might now be if they hadn't panicked and sold all those equities a few years ago at the bottom.

How much less acute would the "pensions crisis" now be? How many occupational schemes would still be operating ? Over the past few decades the market has shown group think and the herd mentality at its worst. Still, wasn't it always thus?

s.ogrady@independent.co.uk

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
The guide, since withdrawn, used illustrations and text to help people understand the court process (Getty)
newsMinistry of Justice gets law 'terribly wrong' in its guide to courts
News
Bobbi Kristina Brown with her mother Whitney Houston in 2011
people
News
Starting the day with a three-egg omelette could make people more charitable, according to new research
scienceFeed someone a big omelette, and they may give twice as much, thanks to a compound in the eggs
News
Top Gun actor Val Kilmer lost his small claims court battle in Van Nuys with the landlord of his Malibu mansion to get back his deposit after wallpapering over the kitchen cabinets
people
PROMOTED VIDEO
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
newsPatrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
News
Robert Fraser, aka Groovy Bob
peopleA new show honours Robert Fraser, one of the era's forgotten players
Life and Style
Torsten Sherwood's Noook is a simple construction toy for creating mini-architecture
tech
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
News
i100
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    As in 1942, Germany must show restraint over Greece

    As in 1942, Germany must show restraint over Greece

    Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
    Britain's widening poverty gap should be causing outrage at the start of the election campaign

    The short stroll that should be our walk of shame

    Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
    Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

    Homeless Veterans appeal

    The rise of the working poor: when having a job cannot prevent poverty
    Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

    Prince Charles the saviour of the nation?

    A new book highlights concerns about how political he will be when he eventually becomes king
    How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

    How books can defeat Isis

    Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
    Judith Hackitt: The myths of elf 'n' safety

    Judith Hackitt: The myths of elf 'n' safety

    She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
    The open loathing between Barack Obama and Benjamin Netanyahu just got worse

    The open loathing between Obama and Netanyahu just got worse

    The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
    French chefs get 'le huff' as nation slips down global cuisine rankings

    French chefs get 'le huff' as nation slips down global cuisine rankings

    Fury at British best restaurants survey sees French magazine produce a rival list
    Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

    Young carers to make dance debut

    What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
    Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

    Design Council's 70th anniversary

    Four of the most intriguing prototypes from Ones to Watch
    Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

    Dame Harriet Walter interview

    The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
    Art should not be a slave to the ideas driving it

    Art should not be a slave to the ideas driving it

    Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
    Bill Granger recipes: Our chef's winter salads will make you feel energised through February

    Bill Granger's winter salads

    Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
    England vs Wales: Cool head George Ford ready to put out dragon fire

    George Ford: Cool head ready to put out dragon fire

    No 10’s calmness under pressure will be key for England in Cardiff
    Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

    Michael Calvin's Last Word

    Time for Old Firm to put aside bigotry and forge new links