Not up to the job

‘Nobody rings a bell at the bottom of the market,’ says an old adage in the investment world — and anyone who thought they had already heard a distant peal signalling the low point of the current financial crisis has been proved woefully mistaken this week.

Some stock-market investors, for example, had begun to feel that blue-chip equities looked attractively cheap in relation to historic dividend yields. But now, one after another, and on both sides of the Atlantic, major companies are slashing dividends or abandoning them altogether: in some cases as a matter of urgent necessity, in others as a matter of opportunism at a time when yields on alternatives such as cash deposits and government bonds are at rock bottom. This sudden fashion for dividend cuts renders historic yields meaningless. Amid the continuing gloom, it has helped drive share prices down to levels not seen since the mid-1990s.

Yet again the interests of prudent savers, investors and pension-holders are being brutally sacrificed on the grounds that we must all must make sacrifices to avoid a new Great Depression. That is little comfort to the voter approaching retirement age who is now wondering whether he or she will be able to make ends meet — and why ministers permitted Sir Fred Goodwin to trouser such an offensively huge pension deal.

Yet the threat of depression is real enough: its gravity was brought home this week by yet more bad news, reminding us that we would be foolish to assume that we have heard the worst. Just when it seemed nothing could top Royal Bank of Scotland’s losses for last year of £24 billion, the American insurance giant AIG announced losses of £44 billion for a single quarter — including huge write-downs in the commercial property sector, in which there is clearly a great deal of trouble still to come.