It appears that history is cyclical after all...

I still tend to the view that markets are good, even in the midst of a potential financial crash, the likes of which has not been seen since the 1930's.

However, we have clearly begun to see the unravelling of a financial edifice which, it is now apparent, was reliant on people who were too clever by half. The financial markets have never been a zero sum game of relative values but are a theatre of sentiment and herd mentality.

Whilst the markets were dominated by people of a conservative ilk, people who understood how a balance sheet worked and looked for the fundamentals, things worked reasonably well. Alright, gains were generally unspectacular, but there was an understanding that brokers were playing with somebody's money, even if it wasn't theirs. Indeed, they had a pretty good idea whose money it actually was.

Nowadays, with vastly increased numbers of participants, and huge waves of money coming into play, the whole thing has become depersonalised, and the sense that 'this is somebody's money' has been lost. Financial instruments have become more and more complex, to the point where senior managers are reliant on terribly clever young men to deal with ever more leveraged transactions. Indeed, the game has become one of shifting risk in less and less transparent ways in the hope that someone whose greed exceeds their judgement will snap up the 'opportunity'.

The catch, and there is always a catch, isn't there, is that in a financial market riddled with interconnections, the fall of one institution leads to tremors across the piece. Banks and brokerages that are fine as long as things stay positive suddenly look vulnerable, and other fearfully clever people behave like a lion with a wounded antelope.

Ironically, it's the rather dull players, the mutuals, those who seek security over adventure, who are best placed to survive. Whilst their shareholders moan about a lack of ambition, they now have an asset with value, unlike, for example, shareholders in Lehman Brothers.

After the crash of 1929, rules and markets were tightened up. We see history repeating itself, as short-selling is prohibited, with doubtless more regulation to follow. It would appear that freedom to gamble means the freedom to lose, after all...