Stockmarket crash is coming

THE man responsible for investing $41 billion of the State's money has warned mum-and-dad investors to prepare for a massive sharemarket crash.He says a dramatic downturn is inevitable as the rapid rate of investment is unsustainable, and the repercussions of the $300 billion subprime lending crisis in the US are yet to be felt fully. State Treasury has revealed that Victoria looks set to lose just $1.9 million directly from the subprime fiasco. But the chief investment officer of the Victorian Funds Management Corporation, Leo de Bever, is taking no chances, telling The Sunday Age that he is managing the risk of further losses "as best as humanly possible" by shifting investments to safer options. Mr Baillieu warned that millions of dollars of taxpayers' money was at risk and accused the Premier of failing to come clean about potential losses.
The boom of the past five years could not be sustained and mum-and-dad investors stood to lose if they did not act now. "Nobody wants to leave the party when markets are doing what they are doing, people want to enjoy it to the fullest … (but) it's time to buckle down." While market experts suggest moving investments into safer options — such as buying government bonds, gold or shares in consumer staples — could prove prudent, they are not predicting the downturn will be so drastic.Shane Oliver, chief economist and head of strategic investments at AMP Capital Investors, agreed that after the strong run, the Australian sharemarket was due for a correction, but said, despite the more volatile market and further expected problems in the US financial system, he believed "the conditions are just not there for a crash".But some key US banks are already in trouble, with reports that regulators are investigating Merrill Lynch for trying to hide the extent of its losses. And The Guardian newspaper has reported that another British bank, thought to be Barclays, has received an emergency loan from the Bank of England.