A portentous moment

I'm calling this week as the point of greatest pessimism.

The stockmarkets may fall farther, the government may fall (or at least the Labour party leadership) there may be bankruptcies, recession and even depression to come but I'm marking this week and especially today as the point in time when it seems there is the least light and hope to be found anywhere. Talk today is of buying gold, of 3-4 years of being 'in the hole', of keeping money under the mattress, about not trusting banks and about the greatest regulatory failure of a century. It's hard to imagine a bleaker view of the future that still leaves the British pound as a useful currency. If things get worse, with major banks going bankrupt and tens of millions of people losing their savings, with government guarantees failing and major social upheaval then all that is perceived as 'normal' middle class lifestyle and society would evaporate.

Instead of this doomsday scenario I expect more turmoil as financial shake-outs continue, but gradually the government interventions, mergers and perhaps realisation that assets were written down too aggressively will turn the tide. When the media newsflow eventually turns positive the market reaction will be rapid and decisive, with what could be the greatest single day gains to be seen in a decade. Newly created financial giants will have dominant market positions with billion pound profits from retail banking and mortgages, secure and steady in much the same way as electricity and water utility company profit streams. When that happens I want to be fully invested in equity.

Today I transferred twelve thousand pounds to a stockbroker deposit account. Once the money clears, I will begin to invest it in long term recovery plays, with a view to buy steadily on dips in prices. Predicting short term price movements is beyond my abilities and I work full time so day trading is out of the question. Instead I will aim at long term buy and hold, building up stakes in quality companies gradually in anticipation of a future recovery and the boom when hot money returns to UK equity markets. The investment time scale is 15 years minimum and the money is a separate portfolio from my pension savings and mortgage repayment (both of which are in low cost index trackers). If I lose the entire portfolio I should still be able to pay off the mortgage and retire at a reasonable age, if all goes well I may be able to retire early and in greater comfort.

Taxes are a consideration as my ISA allowance is already maxed out and this portfolio will be subject to UK capital gains taxation. For the current tax year I'm already very close to max CGT allowance for this tax year so any profitable sales will be taxed. Trading costs will also be tracked closely, I'm using an online execution only stockbroker to keep costs down.

Tonight I'm hoping for a good nights sleep as tomorrow I need to be fully rested for crossing the Rubicon.