Your savings, investments and Total Bankers

Your savings, investments and pension pot may all be looking a bit bruised and you yourself may well be feeling a bit bewildered after this week's wild ride in the stock markets. Days of triple digit losses for the FTSE 100 share index, the Dow Jones Industrial Average and the rest of the world's markets were followed by days of triple digit gains as market sentiment towards shares "yo-yoed" violently up and down (read our end of day stock market report).

In case you think all this excitement doesn't concern the vast majority of us, let me remind you where most of your pension savings are invested, although as you get older your exposure to shares in your pension funds should naturally reduce anyway. But it's not just the active investors and your pension savings that have been hit. Hundreds of thousands of us own shares in the companies we work for - holdings built up through Save As You Earn schemes. All those worker-shareholders will be feeling poorer for the stock market's behaviour since its peak last year.

UK companies are also starting to feel the pinch from the mess made by US bond insurers - debt ratings have already been cut for some and that means their cost of borrowing will go up, potentially curtailing these companies' abilities to invest for their future and threatening their workforce's jobs.

Want to track your investments? Moneyextra's free portfolio service has all the tools you need.

SocGen - a French farce or more serious for global markets?

News of a massive fraud in the equity derivatives team at France's second largest bank, Societe Generale (SocGen), came as icing on the cake, or was it, as some suggest, actually the cause of the market mayhem on Monday, 21 January 2008 and the catalyst for all that followed in the next few days?

SocGen had been widely regarded as one of the more nimble players in modern financial derivatives. However, it would appear that at least one of the bank's traders was playing his own game. The trader, named as Jerome Kerviel, took what the bank has described as 'massive fraudulent' positions last year and this month.

SocGen discovered the losses over the weekend of 19-20 January. The bank revealed the awful (in all senses of the word) truth on 24 January and claimed it had acted to close out the fraudulent positions as quickly as possible. SocGen is now sitting on a loss of £3.7 billion as a result and its future looks only marginally brighter than that of Northern Rock.

The trader responsible has, said SocGen, been suspended (mind you the bank didn't say what they were suspending him by!) and together with his immediate superiors, faces the sack and legal proceedings. The bank, meantime, is itself being sued by shareholders and faces an uncertain future.

SocGen's equity derivatives trader and his bosses are first in our list of Total Bankers.

Find out how your investment fund is performing now.

Is recession on the way or not?

Did SocGen's action cause or exacerbate the falls at the start of the week in the European markets? Would the US Federal Reserve have cut interest rates so aggressively had it known of the French bank's debacle?

It doesn't really matter. Share values in stock markets around the world were an accident waiting to happen. Financial guru (and the man who broke the Bank of England) George Soros, writing in the Financial Times this week, reckoned the crisis in the financial markets is the worst "in 60 years" and that recession is coming, like it or not.

But what of the rallies in the share markets? The Fed's interest rate cut followed by rapid agreement between Congress and the White House on a stimulus package for the US economy together with meetings between market regulators and bond insurers in New York all pushed US markets back up.

And if you're wondering whether you could make a better fist of interest rate policy than the central bankers, why not take a crack at it courtesy of the Federal Reserve Bank of San Francisco.

Get free company reports, and up to date financial information on selected companies for your investment decisions.

See also:London shares - bye, bye, bye or buy, buy, buy? and Shares and Bears - what should investors do now?

25 January 2008 © Moneyextra.com

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