Our content this month are as follows:-

• News from Australia
• Active Managers and Down Markets
• Books We Have Read
• Quotes of the Month

Noel is currently in Australia attending the wedding of a friend's son. As well as enjoying the celebrations he has been casting an eye over the economic situation there and reports as follows:-

Australia appears to have been disproportionately affected by the worldwide credit crunch and has seen property values plummet, affecting some very large property trusts, and has also seen its stock market decline to a greater extent than other developed economies. It is interesting to note that the Australian business media carries far more detailed personal investment supplements than is the case in the UK, and more "sophisticated" investors prefer some pretty arcane types of investment.

One of the things that Les and I noticed when we were here two years ago is the huge racing and gambling sections within the daily newspapers; it appears to carry over into the investment world, where investors have been borrowing money secured on shares to speculate wildly on small and unfashionable shares. This has caused the collapse of a large stockbroking firm called "Opes Prime" whose clients include Australia's most famous criminal lawyer, Chris Murphy, who is reported to owe an eye watering $200 million. The fallout is taking a number of these small companies with it as forced sales of its shares are driving prices down.

This appears to be another lesson to those who would speculate on markets using debt that such speculation is usually unsuccessful and the downside can be devastating.

A claim made by the advocates of active management is that, while they accept index funds do better while markets are rising, the "skill" of active managers in stockpicking really comes into its own when markets drop. There is of course no evidence that this occurs at all and some recent research from Canada confirms that.

Standard and Poor's, the ratings agency, measure indices in Canada against active funds and in 2007 found that only 24.3% of actively managed Canadian equity funds outperformed the main Canadian index in 2007. Over three years only 13.3% managed to do so and over five years 8.4% of active managers beat the index.

We ought to feel sorry for them, really, as every time they dream up something plausible the facts turn round and kick them squarely in the teeth.

This month's selection is, "How Mumbo-Jumbo Conquered the World", by Francis Wheen. This is an interesting book that seeks to expose bluff and bluster and outright bull ….. wherever it can be found. You will not be surprised to hear that it is generally found in politicians and "community leaders". We suspect that, like most of us, you will like the chapters that confirm your own prejudices but may well be able to laugh along with those that do not. By turn both funny and disturbing, it questions whether we are as enlightened as we believe we are and whether globalisation is really new; the answers may surprise you.

The book is available from shops and Amazon but if you have any difficulty finding it simply e-mail nikki@indexwm.co.uk and we will be happy to help.

“You can get much further with a kind word and a gun than you can with a kind word alone.”
Al Capone

"The chief danger in life is that you may take too many precautions."
Alfred Adler