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Opinion

Abigail with attitude: Bernanke's put is the grandaddy of all puts

Autumn is a wistful season: the balmy summer days redolent of hope are behind us. We wince at the prospect of grey winter and another year drawing to its close. The autumn is often a tricky and tumultuous period for markets. Some of us still remember the 1987 equity market crash. This occurred on October 19 when the Dow lost over 500 points and 22% of its value evaporated.

I’m surprised that retail investors ever went near the stock market again. But they did: only to be pummelled once more in further market plunges during 2002 and 2008. Perhaps we should recognize equity investing for what it is: Russian roulette for the affluent.

I jest slightly. But one must remember that none of us has a crystal ball and it is probably wise to bear in mind Warren Buffett’s wonderful adage: "Be fearful when others are greedy and greedy when others are fearful."

In the end, most of us are powerless when it comes to the trajectory of the markets. We have to try to figure it out, assess our risk attitude and then plunge in, keeping our fingers and toes crossed. However, senior monetary policymakers do have the power to influence markets.

And you don’t come much more senior than the chairman of the Federal Reserve. As dedicated readers will know, I have grave reservations about Ben Bernanke’s championship of ‘lower for longer’ monetary policy – in other words quantitative easing. If markets went into meltdown in late May when bountiful Ben talked about withdrawing some portion of ‘quality heaving’ – as I have termed it in my own mind – how will they react when interest rates are actually raised? I have some sympathy with a headline in a mid-October edition of the Financial Times.

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