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Once again, Index Linked Gilts appear as the panacea to all investment needs. We do NOT recommend Index Linked Gilts. The reasons for this, as well as an explanation of how such Gilts work, were published in Contrary View 42.
The fascinating lesson here is the implied linkage between different trends. There has been a bear market rally in equities, a rise in interest rates together with inflationary expectations. These are the normal countertrend activities of an ongoing bear market, which we believe cannot last.
An article which appeared last weekend used data for only the last 12 months, to "prove" the superior merits of index linked. Perhaps a longer time span, covering more than just the countertrend rally period, would produce a very different conclusion! If you are interested, we suggest you track down some 10 year data, showing prices for a long dated index linked Gilt and a similar maturity in a conventional fixed coupon to see how they compare.
We believe the rises in interest rates are drawing to a close. We also believe that inflation is no threat to savings. The real threat to savings remains deflation, which will become apparent once the trick of persuading people to borrow more and more ceases to work.
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WARNING: The firm can only be responsible for action taken on our advice given personally and specifically to be suitable for each individual. Statements on this site do not, on their own, constitute advice. Please note that UK regulatory requirements prevent us commenting on your existing investments or giving specific advice, unless you first sign one of our portfolio service agreements.
This advertisement has been approved by Kauders Portfolio Management, who are authorised and regulated by the Financial Services Authority in the conduct of investment business in the UK. Opinions and statistics are valid at time of publication but may differ later. We leave them on the site so that you can see how useful our point of view has been.
© Kauders Portfolio Management 2004