This has been a week of searching for safe havens.
As it has finally become clear to investors everywhere that economies in the US and in Europe are double dipping, that the eurozone really is on the edge, and that there isn't much anyone can do about it, everyone has put their wealth-preservation thinking caps on. They've already come up with more than enough ideas a large number of which they have passed on to me.
On Monday, a famous fund manager told me that safety lies in defensive, income-producing stocks.
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On Tuesday, a hedge fund manager told me that the best thing you can have is the stuff that rich Asians want: it'll go up whatever happens in the West, but it will also protect you from inflation. So buy the best art you can. Buy the bestF diamonds you can not as jewellery, but as top-quality small rocks you can pop in your pocket. Buy gold and buy property in India in the places rich people like to live. Buy classic cars their prices have suddenly started to move upwards. And, whatever you do, don't hold cash every second it spends in your pocket loses you money in this high-inflation environment.
I was having lunch with the hedge fund manager, but the third member of our party wasn't buying the argument. If you want to preserve your wealth, he said, cash is your only choice: anything else is just too risky except perhaps property, which at least has a history of keeping up with inflation.
Later that day, another analyst agreed with the hedge fund manager. There should, he said, be a bull market in "shiny things". Diamonds, gold, well-polished cars these are all things the newly-rich love to have and to hold. So why not buy them before the Chinese get to them?
On Wednesday, a big wig in the Edinburgh financial community dismissed all of these ideas. Nonsense, he said: the world is more likely to see deflation than inflation, so there is no point in getting attached to real assets. Instead, if you want to protect and even grow your wealth, you need to be in the areas where the growth is. Think the biological sciences, where the rate of change is finally accelerating properly, making this likely to be the 'century of biology'. Or perhaps the huge shifts under way in internet technology (intelligent wallets operating via our mobile phones and the like).
He wasn't even convinced that there is any need for a safe haven. The pessimism that most of us are feeling, he says, is nothing more than a function of our own geographical self absorption and tendency to extrapolate. As a note from Baillie Gifford put it, we tend to a rather silly and "excessive extrapolation from recent events". Because our memories of the last financial disaster remain clear, we can't help ourselves overestimating the odds of it happening again so we search for protection against things that just aren't going to happen.
On Thursday, I was told by one manager that I must buy gold-mining stocks (I guess he isn't a regular reader) and then by another that I needed to be in Japanese equities and high-yielding European stocks.
It's all been quite exhausting. And that's before I even start on the endless press releases promising me even more safe havens for your money. ABN Amro favours "cash generative companies and real estate". Lots of other people do, too.
So who is right? This week it has clearly been the man with the cash. On Thursday, he would have been the only one not remotely bothered by the 4.7% fall in the FTSE 100, for example. And he would have been even less bothered if he is holding his cash in dollars: the US currency has been one of the few things on the up over the last week.
But while I'm all for holding cash at the moment, it can only ever be a relatively short-term safe haven. If you want to protect your capital over the next five years, the safe havens are likely to remain the things I've been writing about for years.
First, there's gold (it is insurance see my many past articles on why this is).
Second, there's value. This is currently to be found mostly in Japan, where you can buy the index to get very low-cost exposure to a broad array of global companies, as well as one of the modern world's most wondrous things: solvent banks. Not only have eight out of ten of the largest Japanese banks announced earnings upgrades this year, but Japan is the only place on earth where the banking sector is outperforming the national index.
But Japan is no longer the only place worth buying on pure value grounds. Soon all those who have been holding cash in anticipation of pouring into Europe when it becomes overly cheap will finally have good reason to do so: the Euro Stoxx 50 is yielding around 5%.
This article was first published in the Financial Times.
