The Finance Thread

[SillyBilly]

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

Fair play Ovis.

[GboroRam]

So should I move my overdraft somewhere? 

[SillyBilly]

So should I move my overdraft somewhere? 

Transfer it all into the S&P 500 and then take out a 0% credit card and start shorting Australian banks with the cash as a hedge.

[GboroRam]

Transfer it all into the S&P 500 and then take out a 0% credit card and start shorting Australian banks with the cash as a hedge.

Got you. Hide all my cash behind a hedge. Wait for everything to blow over.

[SillyBilly]

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

I would be depressed if there wasn't a crash. How else can the above be reversed? That graph (same for U.K by the way, I just prefer USA data as its the biggest economy) is the largest contributory reason (in my view) we are in this mess. For all of modern history, wages have broadly tracked productivity gains (and so standard of living increased commensurately). It stopped in about 1980. I won't go into politics here as that is another thread but Reagan happened in the States. You can pump up the property market and equities to make people feel richer while robbing them with inflation and a falling dollar/pound but eventually people will switch on to what is going off. I hope so anyway. You can hide the standard of living fall by:

- Encouraging/necessitating 2 earner families where there was previously 1 (1st phase since 1980)

- Increasing debt to maintain standard of living (2nd phase since 1990's)

However, when people reach a debt saturation point, you can't do anything more, the standard of living will drop. We're there now and it will only get worse unless the system is brought back into line.

The problem with communism? Eventually you run out of other people's money to spend.

The problem with capitalism? Eventually you end up with everyone else's money.

I believe in capitalism but with strict controls for what it is worth. I would be very positive about the future is this ponzi scheme came down. Look at Iceland and compare with Greece. Iceland went bankrupt, I am advocating an Iceland route. Not a Greece route which will lead to a century of suffering, not 2-5.

[Ramarena]

If it does kick off hopefully this will be the end of neo-liberalism preached by the Tories and new labour.

[ketteringram]

Another fun days trading in China. 

[Boycie]

What does all this mean for the normal family?

[needles]

Thanks SillyBilly - cracking thread. I knew it was looking gloomy, but I hadn't taken the time to investigate. Nice synopsis for the uninitiated like me. 

[Stive Pesley]

What does all this mean for the normal family?

Sadly I think it means that we’ll get further punished by our respective governments as they seek to limit the damage.

 It’s for our own good don’tcha know

[Ovis aries]

Black Monday, surely Rio must have something to say about that.

[PistoldPete2]

What does all this mean for the normal family?

if banks lose money, they don't lend to businesses. if businesses cant borrow money, they can't do business properly. So they cut costs,, and jobs. So then people don't spend money as they fear for their jobs. Which hurts businesses even more. And so on. 

So we're all ******. 

[ketteringram]

Where has silly Billy gone?!? 

[SillyBilly]

http://finance.yahoo.com/echarts?s=^VIX+Interactive#{"range":"10y","allowChartStacking":true}

This graph is the graph to watch, it'll let us know whether this is a market correction or whether this is something bigger. Its called the VIX index, known otherwise as the "fear index". 12-16 is about its normal range. If it goes above 25...you start selling. I knew from Monday last week this was coming as the daily volatility was going insane, It has spiked to 36 at the moment. If it comes down in the next day or two, this means we're likely to see a trend reversal after a further moderate decline. If it goes above 50, we're in 2008 territory, expect a crash of big proportions.

Again, I would advise leaving money off the markets until at least the following points are passed/clarified (this will determine direction of travel):

- Service data from China due any time now. Manufacturing data is already out and is not good hence the current malaise. Will the service sector save the day or follow the same route? Will China cook the books anyway to stop panic?

- Fed decision to raise or not to raise (BoE will likely follow the same path)

- U.S debt ceiling to be breached before year end to my basic calcs (nothing in the news about this so far as I can tell but they have been using extraordinary measures since March - normally its 8 months or so before it comes home to roost). This will be turbulent if the last few years are anything to go by, will America near default again? Rather be out than in until that is dealt with.

[Boycie]

I think channel 4 news were on about all this tonight?

[robglosta]

@SillyBilly What a knowledgable chap, thanks for posting all of this.  I have a passing interest in markets, so this is very intriguing.  Do you analyse housing/property markets, also? 

[Uptherams]

I would be depressed if there wasn't a crash. How else can the above be reversed? That graph (same for U.K by the way, I just prefer USA data as its the biggest economy) is the largest contributory reason (in my view) we are in this mess. For all of modern history, wages have broadly tracked productivity gains (and so standard of living increased commensurately). It stopped in about 1980. I won't go into politics here as that is another thread but Reagan happened in the States. You can pump up the property market and equities to make people feel richer while robbing them with inflation and a falling dollar/pound but eventually people will switch on to what is going off. I hope so anyway. You can hide the standard of living fall by:

- Encouraging/necessitating 2 earner families where there was previously 1 (1st phase since 1980)

- Increasing debt to maintain standard of living (2nd phase since 1990's)

However, when people reach a debt saturation point, you can't do anything more, the standard of living will drop. We're there now and it will only get worse unless the system is brought back into line.

The problem with communism? Eventually you run out of other people's money to spend.

The problem with capitalism? Eventually you end up with everyone else's money.

I believe in capitalism but with strict controls for what it is worth. I would be very positive about the future is this ponzi scheme came down. Look at Iceland and compare with Greece. Iceland went bankrupt, I am advocating an Iceland route. Not a Greece route which will lead to a century of suffering, not 2-5.

When you say controls, the controls in my view are not really against capitalism. Because capitalism is the best model we have. As you highlight, eventually a few end up with everyone else's money. For me it isn't capitalism itself. It evolves. It evolves to become corporatism. You need to prevent corporatism reaching a worrying level. To do this we need to continue to innovate. Also there do need to be controls. Ceilings if you will. The wonderful thing about capitalism is it allows for an amazing amount of innovation. Innovation leads to increase in quality of life. The issue is this innovation leads to the human being required less and the entry to innovation becomes more difficult.

Automation. People need to understand that automation is a wonderful thing. That we should be pushing for it to be implemented at as fast a rate as possible. The problem is how do we deal with the downfalls. In my view the solution is basic income and free education. It's a self fulfilling cycle. If every adult in the UK had an income that provided them with their basic needs and had access to free education then we would enter a renaissance period of sorts. A boost to innovation and culture. On top of this we will also benefit from other factors such as de-centraliztion. De-centralized currencies, de-centralized energy, zero marginal cost aka the internet of things. Such as Bitcoin, solar power and home battery units, physical goods becoming digital services. Such as online education or a marketplace where you choose from millions of designs for products you can then 3D print. 

It all comes down to timing. The time is almost ready for us to implement these two things (basic income and free education). If it were done 10 years ago, it wouldn't have worked out. Capitalism has some legs in it. We just need to take care of it for a few more decades. Because the reality is, no one knows what happens when AI arrives.  

 

 

[SillyBilly]

Australia finished up last night which is the best indicator for the Western markets. Shanghai over 7% down. I'd keep the powder dry for now.

[ketteringram]

@SillyBilly What a knowledgable chap, thanks for posting all of this.  I have a passing interest in markets, so this is very intriguing.  Do you analyse housing/property markets, also? 

Oh and do you post elsewhere about such things under the same name?  

[Ovis aries]

False alarm, false alarm.