In this week's boards roundup: the death of AIM, who to blame for the credit crunch and make sure you know what's in your pension.
It's often said that smaller businesses are the future of an economy, and historically the UK's Alternative Investment Market (AIM) has been the most successful growth market in the world, with over 2,500 companies having joined it since 1995, many of them going on to establish themselves on London's main stock exchange. But the recent downturn has seen the value of companies on AIM plummet
On Paulypilot's Pub, a regular haunt for people interested in investment in 'small-cap' companies, dell314 highlighted plans for a possible cull of companies that have been hardest-hit by the recession, and considered the possible consequences.
"I'm quite shocked that such a cull might be seen as a solution to what are really the combined effects of illiquidity and, to a lesser extent, weak governance in a savage market. As AIM is intended to be more speculative, it’s pretty obvious that it’s not going to perform very well in a bear market, so why do those that govern it appear surprised that it's performed significantly worse than its larger counterparts over recent times?
"The victims of delisting all the smallest companies will be the shareholders who have already seen the value of their investments trashed over the last year, or so. Is practically wiping out the invested capital of the shareholders in these circa 400 companies going to encourage them to invest in other AIM companies and support valuations of its remaining stocks?"
Many people have spent a lot of time trying to attribute blame for the UK's and the world's current economic woes, accusing everyone from incompetent politicians, greedy bankers, to lax financial regulators. TIME magazine even traced the cause back to someone who bought a house in California with a subprime mortgage in 2003, and defaulted on it 39 months later, thereby triggering the series of events which may lead the world's economies into the greatest downturn since The Great Depression.
But TaurusTheBull, writing with all the detachment that comes from being on a beach in Thailand, thinks that blame and recrimination is a futile game:
"Whether it's Ireland, Mexico or Pakistan, it seems to me that many people have a finger to point, and most are in disarray.
"One country because of finance, another through drugs, another via terrorism.
"Management at HBOS buy shares in March 2008 on the dip to 4 quid. Lloyds TSB management approve the takeover of HBOS in September 2008, after seemingly non-existant due diligence, and then see the share price dive by 80 per cent.
"Is there a theme here? Well, maybe I'm a thicko, but there's one thing that stands out to me. And that's that not many people know anything useful at all."
and concludes that:
"The mismanagement of Western economies can be blamed on whoever you like, but we have inherited the situation we have. Blame and recrimination is a futile game. Take advantage of what human frailty has offered."
The topic of pensions is never really compelling for most people, but with the decline of the state pension, the closure of most final-salary schemes, more than 90% of pension schemes having insufficient assets to cover their liabilities (according to the Pension Protection Fund), and people increasingly taking responsibility for their own retirement income via SIPPs, it's something you ignore at your peril.
This week StrollingMolby took a look at how his pension funds are allocated, and invited comment from others.
"It occurs to me that while I spend a fair amount of time analysing the accounts and prospects of shares in my portfolio (and potentially in it) I have largely ignored my pensions over the last few years and these represent a much larger amount than my shares have ever done (especially now!).
"... What I would be keen to hear views on is how I should allocate funds across low, medium and high-risk funds to best safeguard and grow the pension until such time as I draw upon it."
Finally, with so much doom and gloom abounding - and with so much apparently good reason for it - it was refreshing to read Clitheroekid's post outlining what was, if not in the same league as Lou Reed's 'perfect day', then one that at least held the promise that things might not be quite so bad after all.
Last week's roundup: The End Of Property As An Investment
