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Wednesday, July 4, 2007

But You Swore it was 'Contained' ...

All the talking heads swore subprime was a tiny little problem contained to an insignificant little corner of the debt markets.

But the smart ones, the ones who really understand economics, they know better.

" Anthony Bolton, who helped turn Fidelity International into the U.K.'s largest mutual fund manager, said declines in subprime mortgages and collateralized debt obligations may indicate that investor confidence will soon fall, leading to a drop in equity markets.

Investor's appetite for risk may slide as a result of declines in the investments, which have forced some funds to close, Bolton said. The collapses may mirror the drop of split capital trusts in the U.K. earlier in the decade, he added.

" For the first time I can see what may be the catalyst,'' Bolton, 57, said today in an interview at the Fund Forum conference in Monaco. "We have started to see it with the subprime and the CDOs. It has started to percolate out.'' "

In the meantime, they've all been busy getting out of the way...

" Bolton said he is protecting his fund by buying more shares in larger companies, which he says are more stable in a market decline, and selling smaller stocks. The amount of his fund invested in larger companies has climbed to almost 50 percent from about 20 percent a year ago, he said. "

Source: Subprime Declines May Signal Market Turn, Bolton Says (Update1) (