As even our leaders seem to be somewhat bemused as to whether we are actually in a recession or depression, it is therefore quite understandable that most of the public are at least confused if not actually extremely nervous about what is going on. Thanks Gordon for that!

There is of course a careful balance here between pointing out the real dangers that are out there in the global economy, and the fact that we are in a cycle. It is of course hardly surprising that people are so worried with ranting headlines of gloom and doom as well as certain commentators giving us a regular feed of poisonous sound bites. Also if you insist on putting on peoples' television screens three times a night a red arrow bouncing downwards before finally crashing into the floor, then it is almost inevitable that most of us will receive a clear subliminal message that we are in deep trouble. The fact is that in a recession not everyone loses their job. Yes some very unfortunately do, and this does cause very significant pain and suffering for all those affected - after all a recession is when a neighbour loses their job, a depression is when you lose yours. So let's put this into perspective. In fact most people in Britain will still have a job. Not only that, many working people with tracker mortgages will have had some considerable benefit from a very significant reduction in monthly payments. Add to this the falling costs of certain goods and services as well as astonishing retail discounts, and in fact there are quite a number of people who will be significantly better off in this recession. However it seems that is neither fashionable nor even polite in the current climate necessarily to say so. More importantly though are the twin issues of trust and confidence, because even if you are in work, and paying less for mortgages and services, most people don't feel better off. The “feel factor” so often talked about, is crucial to an economy because if you don't feel confident and you are worried about tomorrow then it is hardly surprising that you don't go out and spend very much. Being “rash and splashing the cash” as some politicians are urging, is in fact illogical for most at the moment and for those with debt, in fact very stupid. That is why politicians seem to miss the point. Merely putting money out into the system doesn't make people spend - helicopter money - as it is sometimes referred to would have little effect. People would just gather it up and keep it - not spend it. So how do you create real confidence? The answer lies probably in two areas. Firstly that of your asset valuations - that would include your house or flat, pensions, savings and other valuables. At present of course most investments for many will be looking fairly weak and their cash not returning much, but it is probably their property that has the greatest effect. Thus those monthly reports from the mortgage providers and others that house prices are falling are just as damaging as that red arrow on the BBC. These figures are short term snapshots based on a tiny number of transactions but their subliminal message is just as damaging. In fact last week we even had one report showing a rising valuation - but this too we should regard with some scepticism. It is better that we look at the quarterly and half yearly patterns for a more realistic measure of what is happening. Another issue that is also worth highlighting concerning the structure and make up of UK companies today. Twenty years ago most working people either worked for the government (directly or indirectly) or for a large corporation. Since then the UK has changed radically and although we no longer be a ‘nation of shopkeepers', we are now a nation of predominantly small businesses with many operating as subcontractors and the somewhat ubiquitous consultants. This change doesn't mean that we can avoid any recession, but it does mean that we are far more flexible than the corporate monoliths who will just cut job numbers mathematically. Smaller companies will adjust and adapt as necessary to survive - larger corporates just often don't seem to care! And finally............ I am most grateful to a venerable New Yorker, enthusiastic golfer and devotee of the Vermont ‘smoothie' Mr Thomas Sherlock. He recently sent me this short note which I have to say puts golfers in a new light. “Stand proud you noble swingers of clubs and losers of balls.... A recent study found the average golfer walks about 900 miles a year. Another study found golfers drink, on average, 22 gallons of alcohol a year. That means, on average, golfers get about 41 miles to the gallon. Kind of makes you proud. Almost feel like a hybrid.”Have a good week,

Justin

Justin A. Urquhart Stewart

Director

Seven Investment Management Limited