A small minority escapes the credit crunch climate, while others bear the brunt

27 November 2007
The credit crunch continues to have a profound effect on the economy but not all the fall-out has been negative. Reports indicate that New York-based hedge fund Paulson & Co. has actually made £2 billion by betting that markets were to drop before the major initial sub-prime problems occurred.

Moreover, new research from fund manager TD Waterhouse shows that a record number of investors have put money into equities this year, despite a certain level of turmoil within the financial markets. "People are still interested in investing even though their confidence has been dented," chief executive, Angus Rigby, told the Financial Times.

However, this may not last forever as investor confidence appears to have been dented by recent events. TD Waterhouse's 2007 Investor Confidence Index revealed that confidence fell from 50 per cent in 2006 to just 33 per cent this year. This could lead to a downturn in investment in the near future.

The US is certainly feeling the strain in the aftermath of the sub-prime debacle. Goldman Sachs predicts that potential losses could be as high as $445 billion. Many experts are predicting a recession in the US and that the strain is likely to be felt even by companies not associated with sub-prime lending. And, with Christmas around the corner, retailers fear a sharp decline in sales over the festive period.

Furthermore, CitiGroup is planning further job cuts following massive sub-prime related losses. The company, which is still looking to replace former chairman and CEO, Charles Prince, is expected to announce thousands of redundancies.

Approximately 17,000 jobs were axed in April, and there has been speculation that another 45,000 people will lose their jobs. No decisions have yet been announced, but the group said it is "planning ways in which we can be more efficient and cost-effective to position our businesses in line with economic realities," according to a company spokesperson.

© Fair Investment Company Ltd