The Finance Thread

[SillyBilly]

So, from my vantage point, we are on the precipice of another major global financial crisis, one which could make 08/09 look like a tea party.

The signs of a global economy reaching the tipping point are becoming louder, more frequent and more severe:

* commodities have plummeted to lows not seen since 2002

* global shipping indices are dropping with negative year on year movements of up to 20%

* the oil price, as a gauge of global economic activity, is reaching lows not seen since the depth of the crisis of 2008/2009. Oil exporting nations are either collapsing (Russia/Venezuela) or burning cash reserves (Saudi, UAE) at a frightening rate.

* key exporting nations (commodity players) are in deep trouble including Australia, Canada, Brazil and much of the rest of South America

* consumer spending in the US , the key driver of US GDP, is contracting (due to peak debt) and major retail outlets are in trouble.

* the Dow, the S&P 500 and the Russell 2000 are barely propped up by a few big players. The vast majority of publicly listed stocks in the US are in steep decline. The PPT are trying to prop the market by buying the big banks.

* the Chinese economy is in deep trouble with year on year exports as well as imports in negative.

* Chinese property prices are declining. China's shadow banking sector is highly leveraged in "over-investment" projects in property (people thought the sub-prime mortgage crash was bad in the States)

* after the RMB devaluation the global currency wars stepped up another notch; EM currencies such as the Malaysian Ringgit and the Turkish Lira are in free fall.

* China is now exporting deflation to importing nations such as the US and the UK. Deflation and unprecedented debt HAS to be avoided. Neither the US and UK can achieve their 2% inflation targets despite the trillions of dollars/pounds thrown at it.

* the Fed and the BoE are rudderless, if they raise rates they will strengthen the USD and GBP creating even more deflation. If they maintain interest rates or even lower rates they will have lost all credibility. After the SNB fiasco in the beginning of the year, trust in central banks will hit rock bottom and the central banking system may lose investor confidence

* EMs and developed nations are facing a mountain of debt facilitated by the Fed's cheap money policy.

 

I could be wrong but I have moved all into cash apart from holdings in PM's (first time ever) and I would seriously suggest anyone who has money invested outside of a pension wrapper looks at their risk appetite. Once this September-December period is navigated, we should have a clearer picture whether the recent turbulence is just that or the part of a systemic crash.

Invite anybody to share their thoughts on the economy/market, I seriously hope I am wrong.

 

 

[GboroRam]

I would recommend investing heavily in vodka.

[Pearl Ram]

Don't be SillyBilly, Mel will sort it out from his petty cash tin. 

[LesterRam]

its fantastic news, sooner the better

[Rev]

So, from my vantage point, we are on the precipice of another major global financial crisis, one which could make 08/09 look like a tea party.

The signs of a global economy reaching the tipping point are becoming louder, more frequent and more severe:

* commodities have plummeted to lows not seen since 2002

* global shipping indices are dropping with negative year on year movements of up to 20%

* the oil price, as a gauge of global economic activity, is reaching lows not seen since the depth of the crisis of 2008/2009. Oil exporting nations are either collapsing (Russia/Venezuela) or burning cash reserves (Saudi, UAE) at a frightening rate.

* key exporting nations (commodity players) are in deep trouble including Australia, Canada, Brazil and much of the rest of South America

* consumer spending in the US , the key driver of US GDP, is contracting (due to peak debt) and major retail outlets are in trouble.

* the Dow, the S&P 500 and the Russell 2000 are barely propped up by a few big players. The vast majority of publicly listed stocks in the US are in steep decline. The PPT are trying to prop the market by buying the big banks.

* the Chinese economy is in deep trouble with year on year exports as well as imports in negative.

* Chinese property prices are declining. China's shadow banking sector is highly leveraged in "over-investment" projects in property (people thought the sub-prime mortgage crash was bad in the States)

* after the RMB devaluation the global currency wars stepped up another notch; EM currencies such as the Malaysian Ringgit and the Turkish Lira are in free fall.

* China is now exporting deflation to importing nations such as the US and the UK. Deflation and unprecedented debt HAS to be avoided. Neither the US and UK can achieve their 2% inflation targets despite the trillions of dollars/pounds thrown at it.

* the Fed and the BoE are rudderless, if they raise rates they will strengthen the USD and GBP creating even more deflation. If they maintain interest rates or even lower rates they will have lost all credibility. After the SNB fiasco in the beginning of the year, trust in central banks will hit rock bottom and the central banking system may lose investor confidence

* EMs and developed nations are facing a mountain of debt facilitated by the Fed's cheap money policy.

 

I could be wrong but I have moved all into cash apart from holdings in PM's (first time ever) and I would seriously suggest anyone who has money invested outside of a pension wrapper looks at their risk appetite. Once this September-December period is navigated, we should have a clearer picture whether the recent turbulence is just that or the part of a systemic crash.

Invite anybody to share their thoughts on the economy/market, I seriously hope I am wrong.

 

 

This could be good advice,  but you assume too much of us to think we can decipher all the acronyms! 

Any chance of a key! I guess EM is emerging markets, PM's precious metals but some of the others are head scratchers? 

Should I stop my £100 a month into a share only ISA?

[uttoxram75]

Most people struggle to pay their rent/mortgage, gas, electricity, water, council tax, food, kids school clothes, phone/internet, petrol and all the other bills to worry about what the billionaires are gambling on at any given time.

Maybe if the press would explain how the stock market gambling affected the lives of ordinary people we'd all be in a better position to vote on it at election time.

 

[RicME85]

But but but it was all the fault of Labour...

Pissed me off no end how the press blamed Labour for the GLOBAL financial crisis in the lead up to the election.

[ketteringram]

Or....... the whole thing is a buying opportunity! 

[SillyBilly]

Or....... the whole thing is a buying opportunity! 

Kettering, you may be right but please acknowledge a buying opportunity would have NOTHING to do with fundamentals and everything to do with the Fed/BoE/ECB (Federal Reserve, Bank of England and European Central Bank) reacting to this with more "easy money". Something the Fed in particular said they would not do. If you can post data on this thread which suggests the global economy is in better shape than I have, by all means.

To be clear I am basing my assumption of collapse on the fact the Fed said there would be NO MORE quantitative easing after QE3 last year. To give an analogy, withdrawing QE is like withdrawing all methadone from a heroin addict, the person (in this case the economy) will soon crumble without its prop. If no more QE is forthcoming, a crash is coming, its inevitable. This will result in large scale bankruptcy - anyone with half a brain should know the current debt in the world can never be repaid. In a healthy economy one would allow bankruptcy to happen. From 2008 we we have not allowed this to happen, to save the financial cronies and their dodgy loans from total collapse we lowered interest rates to 0% - ultimately this has meant recklessly indebted banks, people and businesses could now survive where previously they would go bust allowing a reset to happen. What we have now is UNPRODUCTIVE debt which cannot be repaid but which the politicians will not allow a default on (I wonder why). These are not normal conditions of capitalism where the market is the executioner.

The choices for the central banks are simple:

1) We allow the crash of 2008 to happen in all its glory. This will be brutal but is best for the vast majority in the mid to long term. New or strong banks can make fresh productive loans and the global economy can enter a new period of prosperity (with tighter regulations).

2) We actively turn Japanese. This whole drama has played out before believe it or not. The Nikkei index reached a high of almost 40,000 in 1989 and people were screaming then, just as they are now, to buy into property and the booming market as a result of easy money, the "lost decade" had begun. Massive quantitative easing was used as a tool combat the inherently deflationary environment and to stave off collapse. Eventually the index of course did collapse reaching a low of 7800 in 2003 (lost 80% of its value in just over a decade). Property in prime Tokyo had LOST 99% of its value over this time, property in other regions traded at a discount of 50-90%+. The Japanese now have the largest public debt in the developed world and 25 years later are still systemically trying to destroy the value of the Yen to get out of this cycle with "Abenomics" (to allow Japanese exports to flood the world to delay the inevitable). The vast majority of Japanese debt is held by the Japanese people which has allowed the above scenario to continue for much longer than had the capital been provided from international markets (like USA/UK). I don't think we'll have this "luxury", if you can call the above crashes a luxury....

Who knows, like Japan, the FTSE may climb to 20,000 if this charade is allowed to continue...it will have nothing to do with the strength of the underlying economy though.

3) QE for the people. Might sound good but ultimately delays the inevitable in my view. Some economists think it may actually work though. Who knows?

For people's interest, one of the pillars of QE (and how it is supposed to work) is the so-called "wealth effect", this is central bank talk, not mine by the way. By pumping up equities and house prices people feel "wealthier" and they spend more in the economy, creating demand and therefore growth. The wealth effect is of course negligible when the money either sits on a bank balance sheet or accumulates in the hands of the wealthiest who own most of the assets. QE is effectively a transfer of wealth from the have-nots to the haves and therefore real demand in the economy decreases.

IF and its a big IF, the Fed starts QE 4 (Quantitative Easing 4th phase) then we could feasibly see the markets turn positive, property to continue rising.

My advice is still taking money off the table until seeing what the Fed does next. Yes, you might miss a few % on a rebound but I'd rather that than the tanking that will take place if they don't extend the monetary stimulus.

 

[SillyBilly]

Most people struggle to pay their rent/mortgage, gas, electricity, water, council tax, food, kids school clothes, phone/internet, petrol and all the other bills to worry about what the billionaires are gambling on at any given time.

Maybe if the press would explain how the stock market gambling affected the lives of ordinary people we'd all be in a better position to vote on it at election time.

 

Indeed Uttox, there are a few web sources which (albeit poorly) tracks the allocations of billionaires which I keep an eye on as these guys usually are privy to the information we're not. Interestingly, never before has Berkshire Hathaway (Warren buffet's company) held so much cash out of the market. Over $50 billion in CASH. BTW that is a lot of money lost each minute the cash is out of a "rising market".

Stanley Druckenmiller just placed the largest long gold position in history the other week. George Soros has supposedly placed a $2 billion bet against the S&P 500. Funnily enough the last time he made this call was about 2007...

http://www.newsmax.com/Finance/george-soros-stock-market-S-P-500-bet/2014/08/16/id/589153/

When these guys start taking money off the table, betting against the market or buying gold you should get worried. 

 

[SillyBilly]

This could be good advice,  but you assume too much of us to think we can decipher all the acronyms! 

Any chance of a key! I guess EM is emerging markets, PM's precious metals but some of the others are head scratchers? 

Should I stop my £100 a month into a share only ISA?

Hi reveldevil, you are right on the acronyms, sorry, force of habit! It depends - I thought it'd be helpful to set up a thread on markets though as opposed to hijacking the EU thread. I don't claim to be a financial advisor nor have I ever engaged with one. I am saying that (for me) the risk at the moment outweighs the reward until I can see what action the Fed will take if this correction continues.

The issue is we're not in a market anymore but a central bank experiment. If they do QE, the brakes may be off again until next year when another dose will be needed. Rinse and repeat. Until confidence fails.

Look at the data though mate and ask yourself can this continue and for how long, if so? Do I want to be in the market when this thing blows? Obama walked into the Oval office with US debt at $10.6 trillion. He will have doubled the national debt in 8 years (not his fault by the way). Despite 6 years of "growth" the debt is now above $18 trillion. Normally, in a "recovery" you pay off the debt that was created in the bust, not double it! What happens if we enter another downturn, consider that if normal economic cycles are anything to go by, we average a recession every 7 years or so? There is no scope to increase national debt levels without arguably losing the confidence of bond holders and interest rates can't go any lower! More QE? Kick the can down the road some more.

 

 

 

[Ovis aries]

So, from my vantage point, we are on the precipice of another major global financial crisis, one which could make 08/09 look like a tea party.

The signs of a global economy reaching the tipping point are becoming louder, more frequent and more severe:

* commodities have plummeted to lows not seen since 2002

* global shipping indices are dropping with negative year on year movements of up to 20%

* the oil price, as a gauge of global economic activity, is reaching lows not seen since the depth of the crisis of 2008/2009. Oil exporting nations are either collapsing (Russia/Venezuela) or burning cash reserves (Saudi, UAE) at a frightening rate.

* key exporting nations (commodity players) are in deep trouble including Australia, Canada, Brazil and much of the rest of South America

* consumer spending in the US , the key driver of US GDP, is contracting (due to peak debt) and major retail outlets are in trouble.

* the Dow, the S&P 500 and the Russell 2000 are barely propped up by a few big players. The vast majority of publicly listed stocks in the US are in steep decline. The PPT are trying to prop the market by buying the big banks.

* the Chinese economy is in deep trouble with year on year exports as well as imports in negative.

* Chinese property prices are declining. China's shadow banking sector is highly leveraged in "over-investment" projects in property (people thought the sub-prime mortgage crash was bad in the States)

* after the RMB devaluation the global currency wars stepped up another notch; EM currencies such as the Malaysian Ringgit and the Turkish Lira are in free fall.

* China is now exporting deflation to importing nations such as the US and the UK. Deflation and unprecedented debt HAS to be avoided. Neither the US and UK can achieve their 2% inflation targets despite the trillions of dollars/pounds thrown at it.

* the Fed and the BoE are rudderless, if they raise rates they will strengthen the USD and GBP creating even more deflation. If they maintain interest rates or even lower rates they will have lost all credibility. After the SNB fiasco in the beginning of the year, trust in central banks will hit rock bottom and the central banking system may lose investor confidence

* EMs and developed nations are facing a mountain of debt facilitated by the Fed's cheap money policy.

 

I could be wrong but I have moved all into cash apart from holdings in PM's (first time ever) and I would seriously suggest anyone who has money invested outside of a pension wrapper looks at their risk appetite. Once this September-December period is navigated, we should have a clearer picture whether the recent turbulence is just that or the part of a systemic crash.

Invite anybody to share their thoughts on the economy/market, I seriously hope I am wrong.

 

 

 

It will not effect the ordinary saver in this country because interest rates are none existent anyway.

Plus we are not in the Euro  

[SillyBilly]

 

It will not effect the ordinary saver in this country because interest rates are none existent anyway.

Plus we are not in the Euro  

Sorry but unless you live in parallel universe, it will have an enormous effect.

http://investmentresearchdynamics.com/eu-regulators-order-11-countries-to-adopt-bail-in-rules/

Suppose, you missed the memo like the rest of Europe, that if the system crashes this time, it'll be your money confiscated to clear up the mess. Bail-outs are out of fashion now, after the success of "Cyprus" its all about "bail-ins" now. Funny how, this information doesn't get publicized isn't it?

And an American problem is a global problem. And a crash in Europe is a crash in the U.K.

Lets wait and see anyway, corrections of 10-20% happen quite frequently in markets when they get frothy. Just the debt and stakes are higher this time.

[Ovis aries]

Sorry but unless you live in parallel universe, it will have an enormous effect.

http://investmentresearchdynamics.com/eu-regulators-order-11-countries-to-adopt-bail-in-rules/

Suppose, you missed the memo like the rest of Europe, that if the system crashes this time, it'll be your money confiscated to clear up the mess. Bail-outs are out of fashion now, after the success of "Cyprus" its all about "bail-ins" now. Funny how, this information doesn't get publicized isn't it?

And an American problem is a global problem. And a crash in Europe is a crash in the U.K.

Lets wait and see anyway, corrections of 10-20% happen quite frequently in markets when they get frothy. Just the debt and stakes are higher this time.

Greece has not effected us .

[SillyBilly]

Greece has not effected us .

Economy sizes -

Greece - $238.023 billion

UK - $3.122 trillion

EU - $18.495 trillion.

To put that into perspective how small Greece is on the world stage, the UK has recently  printed $589 billion via QE (over double the national output of Greece). They are not even a blot on the landscape of the markets. For your information, the markets aren't interested in Greece, they were watching Spain and Italy (and arguably Portugal). What came out of Greece was important in terms of the message it provided for the big players. Would debt be written off or would they kick the can down the road and prescribe the patient more debt?

The can was kicked down the road in Greece, much like it was in its 1st bailout, its 2nd bailout, now its 3rd bailout. And in 2 years time, its 4th bailout. Greece has been put on life support rather than allow the crash.

Greece was all about "contagion" basically. Brushing Greece's problems under the carpet so we don't rattle the markets in Spain and Italy (and therefore the EU).

[Ovis aries]

The only people worried are the rich, me with my little nest egg and guaranteed pension do not give a F/F

[ketteringram]

Kettering, you may be right but please acknowledge a buying opportunity would have NOTHING to do with fundamentals and everything to do with the Fed/BoE/ECB (Federal Reserve, Bank of England and European Central 

Right............. Regarding my buying opportunity post. That was actually light hearted! Though actually, it probably is. 

I have no intention of posting anything positive about the world economy, and in particular, the way things are currently heading. There is little or nothing, that I would disagree with in your opening post. 

Indeed,  as you are  so fond of acronyms, I have been posting on some TFH forums for over ten years. It actually screwed me up quite a lot from 2007-2010. To be honest, I'm a lot more relaxed these days. As you are probably well aware, it is frightening how unaware / uncaring the average person is! I've given up trying to explain any of it. Just come across as a nutter 

You know what 'they' will do. Same as they always do. They know no different. 

Good luck anyway. Beans and shotguns! 

[Budgie895]

Im depressed now, I wish I had never read it ?

[PistoldPete2]

Most people struggle to pay their rent/mortgage, gas, electricity, water, council tax, food, kids school clothes, phone/internet, petrol and all the other bills to worry about what the billionaires are gambling on at any given time.

Maybe if the press would explain how the stock market gambling affected the lives of ordinary people we'd all be in a better position to vote on it at election time.

 

well I remember some people being Blaise about the Lehman brothers crisis.... They didn't get the link between Wall Street and Main Street. By soon after all those bankers lost their jobs at Lehman brothers, the crisis engulfed quite a lot of other sectors in 2008/09.

i hope we don't see a return to those days. 

[SillyBilly]

Right............. Regarding my buying opportunity post. That was actually light hearted! Though actually, it probably is. 

I have no intention of posting anything positive about the world economy, and in particular, the way things are currently heading. There is little or nothing, that I would disagree with in your opening post. 

Indeed,  as you are  so fond of acronyms, I have been posting on some TFH forums for over ten years. It actually screwed me up quite a lot from 2007-2010. To be honest, I'm a lot more relaxed these days. As you are probably well aware, it is frightening how unaware / uncaring the average person is! I've given up trying to explain any of it. Just come across as a nutter 

You know what 'they' will do. Same as they always do. They know no different. 

Good luck anyway. Beans and shotguns! 

Apologies chap, seems like you know what is going off too. The disconcerting thing is, as you'll probably know, its increasingly difficult to invest on fundamentals with the market so distorted, now by putting our money on or off the market, we are effectively being forced into placing a bet onto how long we feel this financial model will last, not on the quality of the stocks. How determined are the powers that be to inflate the bubble bigger because they won't face reality? Its all guesswork now. Its so wrong, this has led to the markets becoming pure speculation and not investment driven and its entirely driven by the actions of central banks in my opinion.

It should come as no surprise that I want the bubble to pop so people can take my views with a pinch of salt.