Housing has seen a correction from the exuberant borrowing on mortgages in the UK and USA, but an over leveraged sector still exists: government and consumer debt.

The fact is that UK and American consumers have borrowed heavily from their futures to spend on the high life of the past ten years, and the time is approaching for the debt to be repaid.

National economies will start to grow again, possibly as soon as next year, and the extra money that has been injected via quantative easing, to stimulate this recovery, will need to be removed.

Unfortunately I doubt our fiscally weakened Government can buy back all the issued debt quickly enough, and interest rates will have to rise sharply to control increasing inflation as growth accelerates.

It’s at this moment that the general public will realise how broke they really are, as loans start to be harder to maintain. As a consequence the housing market will take another downturn as people try to realise some badly needed capital.

Our currency will devalue relative to newly emerging economies, and we’re going to have to learn to live in a poorer nation than we’d like to believe, but then maybe it’ll be a fairer world.

These small businesses are staffed by the knowledgeable, enthusiastic types that originally gave birth to the Company. These are very high value individuals that will create that feeling of quality that niche customers prize so highly, and justifies your higher price.

Eventually, the time comes to make the decision whether to stay small forever, or start to scale up; and this is where disaster can strike.

Growing turnover is dependent on appealing to a larger market that rarely shares the values of your current clientele. Frequently prices must be reduced, but doing this on a large scale means cutting costs, especially wage bills. Poor staff leads to poor service, and to make matters worse, the decline causes those old hands to look for something better elsewhere… a downward spiral which can destroy reputations.

I’ve experienced this decline through several suppliers I’ve used over the years as they’ve attempted to grow. The message is clear: know your market, and when think carefully before making a decision you may regret.

I recently heard the founder of CMC Markets commenting, and I paraphrase, that traders call a bad trade an investment. At the heights of the last bull market, when M&A action was all that was sustaining prices, I have to admit that I nearly fell into this trap.

Whilst I feel that I’m confessing a sin: admitting to buying on market rumours, I avoided compounding the error by convincing myself that the stock would still be good value for the long term. It wouldn’t, the price was inflated, the fundamentals I ignored made that clear, and it was very unlikely to ever be worth what I paid for it.

Trading and investing are not the same thing, and require different strategies. Timing is important for a trade, as is close observation and the use of stop losses. An investment must represent reasonable fundamental value to be worth buying, so the precise dynamic of the current market doesn’t matter as much.

In future I’ll decide, in advance, whether I’m trading or investing.