Our content this month are as follows:-

• Market News Roundup
• 2008
• Books We Have Read
• Christmas quotes

We would like to consider this month the question, "what is a cash investment?" Now, we know what you are thinking; you probably think that this is a trick question, because we all know a cash investment is a deposit account with a bank or building society. Despite the difficulties banks have had, if you spread your money around you can be pretty sure that investing in a cash product means that you will get your money back when you want it and that if the bank fails, the Financial Services Compensation Scheme will come to the rescue.

All this is true of course, unless you have the misfortune to be advised by a private banker. As far as the private banks are concerned (and 2 of the largest have visited us to tell us this) cash is an "asset class". When we were approached by these banks, who will remain anonymous (Barclays and UBS) they had all kinds of wonderful schemes for cash, all of which involved additional earnings for them and additional risks for the client. We, of course, showed them the door and would like to think that we still understand that cash means cash.

Many examples of the failure of the banks’ approach are now being reported; clients who were directed into AIG‘s Enhanced bond have just had half of their money returned, with the rest being released over the next three years. Elsewhere, Legal and General have just announced that two of their structured products, one of them called the "Protected Capital and Growth Plan" are likely to return only 80% of investors money on maturity due to the collapse of Lehman Brothers.

We are aware that some clients have had this type of product foisted upon them in the past and we are happy to conduct a risk analysis of any such holdings, reporting on the following:-

• Credit risk

• Liquidity risk

• Counterparty risk

• Custody or structure risk

• Mark to model risk

• Corporate risk

Please contact us if such an analysis would be helpful.

Undoubtedly, 2008 will go down as one of the most difficult years ever in stock markets. The fall in worldwide markets is the most severe since the early 70’s and it seems that all economies are in for a tough time over the next two or three years.

At the seminar that we held at the National Motorcycle Museum on the 2nd December, we gave the current problems some historical perspective by considering the effect of and the headlines generated by previous bear markets. Invariably, at times like this, newspapers and magazines glory in the bad news and commentator after commentator, after expert after expert, cannot wait to tell us that, in one way or another, "it is different this time". It never has been and there is no real reason to believe that it will be this time. If you were unable to attend the seminar, these slides are available either in hard copy or by e-mail and please contact vickie@indexwm.co.uk if you would like us to forward a copy to you.

We appreciate the patience and loyalty demonstrated by you, our clients during these times; we always remember that without you we would not have a business and strive constantly to improve our services to you.

From all of us at Index, we wish you a Merry Christmas and a Happy New Year.

Appropriately, given our comments about newspapers above, this month we are recommending, "Flat Earth News" by Nick Davies. The author was previously one of the Guardian's star reporters but is now a noted commentator on the inadequacies of the so-called free press. The book has a number of interesting case studies, including the MMR vaccination controversy, has plenty to say about the Murdoch papers and devotes a whole chapter to the Daily Mail. Even those who already take a fairly cynical view of the media (including us) will be shocked at some of the revelations. Interestingly the book’s dust jacket carries no newspaper reviews!

It is available from good bookstores and Amazon, but if you have any difficulty finding it please contact vickie@indexwm.co.uk.

"Christmas gift suggestions: To your enemy, forgiveness. To an opponent, tolerance. To a friend, your heart. To a customer, service. To all, charity. To every child, a good example. To yourself, respect."

Oren Arnold

"Call a truce, then, to our labours - let us feast with friends and neighbours, and be merry as the custom of our caste; for if ''faint and forced the laughter,'' and if sadness follow after, we are richer by one mocking Christmas past."

Rudyard Kipling