'Resilient' Footsie is hiding the real gloom

Don't believe it. True, the Footsie 100 has remained comfortably above 6000 even when the news has been at its worst, but it is a tale of two markets. The good news stocks are those connected with natural resources, such as mining and oil companies, none of which have much of their business in Britain but who nevertheless list their shares here.

But elsewhere - in property, financials, retail and media - it has been carnage. Full 12-month figures sometimes disguise what has been going on since July because most stocks scored good gains in the first and second quarters. But a look at six-month performance shows builders Barratt and Taylor Wimpey down by more than 50%. Royal Bank of Scotland and Barclays are down a third and Alliance & Leicester 44%. In retail, Kingfisher has lost 37% and DSG 40%. Property group British Land is down 36% but its first half was also weak, so on the year it is off an astonishing 46%.

This is just a sample - there is much more besides. How many active fund managers will beat the index this year, one wonders?

THE latest figure for inflation, coming in at a lower-than-expected 2.1%, was a welcome piece of good news for the Bank of England this week. That Consumer Prices Index figure is the one the Bank measures itself against. However, the peg for pension increases and most other inflation-related products is still the Retail Prices Index, whose level over the past year has been 4.2%.

The RPI rate of inflation means most savers will have lost money by the time they have paid tax on the interest they receive. Next year may be different because the banks have got themselves into such a financial mess they will be desperate to attract savers and build up their deposit base. Expect them to offer much higher rates than we have seen for many a long day, particularly for people willing to put in a sizeable sum and lock it away.

But there is a body of opinion that thinks inflation next year could be significantly higher than it has been this year - though others point out that not since 1973 has an economic slowdown coincided with a significant erosion in the value of money. This, however, is where NS&I - the trendy acronym for National Savings & Investments - comes in.

Unlike the banks and most commercial institutions, it has a range of inflation protecting products that gives savers the RPI plus a bit more - currently about 1% - in interest and allows them to collect the whole lot taxfree. Over the past 12 months, holders of those products have had something over 5% and next year, if inflation is higher than 4.2%, it will be even more.

So if you think the economy is headed down that particular road to hell, you know where to look for protection.

IT'S a few days since Win Bischoff was appointed chairman of Citigroup, and I have spent the intervening time wondering how best to congratulate him on what is a richly deserved but nevertheless remarkable achievement - as well as being one we all hope will not turn into a poisoned chalice as the group battles with its subprime problems.

Bischoff only joined Citi when it took over Schroders, the British investment bank, in the early years of this decade and was until a few weeks ago chairman of the European business. Then, with the forced resignation of Citi chief executive Charles Prince, the group turned to him as a safe pair of hands while it found a permanent replacement. That done, it now wants to keep him on as chairman.

The Schroders deal was remarkable in that it was a rare case in which the Americans resisted the temptation to move in and destroy what they had just paid a fortune for. They left Schroders largely intact and it has flourished, with the result that Schroders alumni now occupy many of the key posts in Citi's London business.

Indeed, what with their success and Bischoff 's elevation, perhaps we should think of the Schroders deal as the ultimate reverse takeover.