It\’s bonus season, the time of year when bankers show us what they really believe. As soon as they get their money, they spend much of it on land and houses. They know that these are safer investments than the assets in which they trade. If they trash the economy again, they at least will survive.
Well, yes, it\’s called \”diversification\”.
It\’s at the very heart of all and any sensible savings or investment structures.
You certainly don\’t want to have your savings where your job is: you don\’t want you pension to be in he shares pof the company you work for. You want them to be in other assets, entirely (as far as is possible) unrelated. So if your job goes boom then you\’ve got your savings: or if your savings go boom then you\’ve still got your job.
And the same is true within an investment portfolio. You want to have a little of this, a little of that, spread the risks around, so that one piece or sector of the market going boom doesn\’t wipe you out.
There is another little point to make though. Let\’s just for the fun of it, set up a situation whereby a trader in mortgage bonds gets his bonus. Instead of buying land or a house, he thinks to himself, well, you know? I\’m one of the world experts in mortgage bonds. I should put my bonus into mortgage bonds. Trade them, just like I do in hte day job. In fact, with all that knowledge from the day job I\’ll be able to make a very good returon on my money.
What an excellent idea, eh? And we\’ve even got a name for this sort of behaviour:
The rest of George\’s column is entirely bizarre. Quite simply he\’s complaining that the Government had a negotiating position, which it negotiated for, and which it didn\’t manage to achieve, over bankers\’ bonuses.
And that\’s it. George seems entirely ignorant of the point that this is what politics is: negotiation between interest groups and compromise. That\’s actualy why we have politics, so that we can have negotiations and compromise.