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For brave investors only: 10 ways to tell that you are touching bottom
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Telegraph readers, I salute you. After this column last week offered a bottle of champagne for the best top-of-the-market signal that should have alerted us to the looming credit crunch, there were 400 postings on the website and about 20 letters in my mailbag.

Your correspondence contained a delightful mix of shrewd insight, bitter experience, and one or two ideas that, if I were generous, indicated a need for mild sedatives. The majority, however, were observations from the University of Real Life, lessons drawn from the daily grind in a bubble economy.

This column suggested that the most reliable signpost to the end for irrational exuberance had been the £2.2bn stock market flotation of Mike Ashley's Sports Direct, a rag-bag of leisure brands that regards corporate governance as a theoretical concept. In less than two years, under eccentric leadership, the company's shares have lost nearly 90pc of their value.

Many of your examples were far better: such as the proposed launch in summer 2007 of an all-pink airline called, wait for it, FlyPink. Based at Liverpool's John Lennon airport, it hoped to cater for women of a certain type – Victoria Beckham wannabes – who fancied shopping trips to Paris, Milan and New York, while enjoying free manicures and pink champagne. Today, sadly, there is no sign of the start-up on the airport's website.

In a similar vein, though rather more enduring, was the stock market launch in Canada of the gloriously named, lululemon, a clothing company specialising in "yoga-inspired apparel". Its shares touched C$37.24 before falling back to C$13.48. Yogis, it seems, can be liberated from worldly suffering, but not from the spirit-sapping forces of financial gravity.

There were, of course, many instances of madness in the property market, including the sale of a former public lavatory for £195,000 (four times the guide price), a one-bedroom flat "on a dodgy council estate" that went for £200,000, and a dilapidated tin-roof beach hut for £90,000.

Other gold-plated pointers were: a Benjys sandwich bar that became a branch of Hermes, daytime TV filling up with debt-consolidation commercials, supermarkets selling finance for buy-to-let mortgages, and a chronic shortage of butlers for business lunches.

When David Wilson, founder of David Wilson Homes, sold his housebuilding business to Barrett for £2.2bn, half of which was in cash, we should have guessed that trouble was coming. Likewise when Tony Blair handed the keys to No 10 to Gordon Brown, it ought to have dawned on us that the illusion of good times was about to end. And what about when HSBC sold its head office to a Spanish property company and lent the buyer the money to complete the transaction? Boy, how did we miss that one?

My favourite, however, was submitted by Mr Richard Kellner: "The huge rise in divorce enquiries from the trophy wives of bankers, which began last year. The wives might be light on loyalty, but they know a busted flush when they see it." Sir, your prize is something appropriately fizzy and expensive.

Meanwhile, a few hard-hearted souls accused me of wallowing in hindsight, ie, being clever after the event that I failed to spot. In my defence, I invite you to read this paper's business section of May 3, 2006, in which I listed "10 reasons why it's all going to go horribly wrong".

That said, it's no good resting on one's laurels. The top of the market has long gone, but what about the bottom? How will we know when the downward plunge in asset values has ended, and the turn is about to occur?

I am grateful to Guy, who commented: "We will only know we are at the bottom when Sarah Beeny is eating maggots on I'm a Celebrity." Ms Beeny, for the uninitiated, is a TV personality best known for presenting Channel 4 property shows, such as Britain's Best Homes.

Conventional wisdom is that the bottom is reached when the last bull becomes a bear. In other words, when capitulation is complete. Only then can recovery begin. For those who prefer a more off-beat approach, here are 10 other possible indicators.

1 Investment bankers' children stop lying about what Daddy does.

2 Chocolate biscuits are again acceptable at directors' meetings.

3 Our worst universities are full for MBA courses.

4 Roman Abramovich abandons Chelsea.

5 The cost of keeping a boy at Eton falls below the average wage.

6 A celebrity chef is paid to endorse McDonald's.

7 The number of houses being repossessed in a year is greater than the number being built.

8 Royal Ascot accepts sponsors for its races.

9 A well-known charity goes bust.

10 Gordon Brown says: "I've had enough of this".

By Jeff Randall

Source >  Telegraph | dec 10

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