The Finance Thread

[SillyBilly]

http://www.bbc.co.uk/iplayer/episode/p03g89n5/this-world-the-great-chinese-crash-with-robert-peston

Not bad for Peston.

[Zag zig]

38 minutes ago, SillyBilly said:

I'm on the beans for the rest of the year now, just added a load more First Majestic Silver Corp. I like this company a lot as a growth stock (big increases in ounces mined will filter through all the way into 2017 and beyond), not a dividend payer as yet but one which will outpace the likes of Pan American in silver price moves (up and down). Undervalued on a peer group basis. Need the bounce in gold now to $1300 and silver for the ride.

 

There are quite a few miners starting to consolidate on a bounce now, whatever size or exchange you look at. I've had a few decent winners and halved several last week. Any decent pullback will see me add, you have to remember long term February Ann March usually see a sell off, ironically around the PDAC; it's a cursed event that one.

Metals looking good tonight.

[SillyBilly]

5 minutes ago, Zag zig said:

There are quite a few miners starting to consolidate on a bounce now, whatever size or exchange you look at. I've had a few decent winners and halved several last week. Any decent pullback will see me add, you have to remember long term February Ann March usually see a sell off, ironically around the PDAC; it's a cursed event that one.

Metals looking good tonight.

Good to hear. Interesting you say Feb/March, I had made an assumption a while back of a March 2016 low for gold and oil - whether it comes to pass is largely irrelevant as my positions are already taken (I don't back myself to pick lows or highs). I am not really trading as I don't have the time or skill, I do take a bit off from time-to-time if I feel something is overdone, but I would generally buy back as I'd only ever be in a stock if I thought the outlook was good over at least the medium term. I'm basically net adding in gold and silver holdings from middle of last year until the end of 2017 (2.5 years of accumulation). That is the decision I took then and I am running with it come hell or high water, mechanical unemotional accumulation! I have a feeling its going to break or make me!

[Zag zig]

Coming to a pension plan near you?

http://www.zerohedge.com/news/2016-02-18/i-guess-its-food-stamps-400000-americans-jeopardy-giant-pension-fund-plans-50-benefi

Pension pots cut by over 50%! yikes, sure do feel for the youth of today.

[SillyBilly]

Thought it had gone quiet on Illinois - the state is bankrupt. State pensions there will be paying out a few cents on the dollar at the rate its going. The current backdrop for the state is spending going up and revenues decreasing as well.

This is just indicative of what will happen here unless we get inflation moving again. So either you get the nominal amount you're expecting (but its purchasing power is trashed) or you get a haircut in a deflationary environment where they can't meet the obligation. Just inflation is an easier way to de-fraud the masses. I don't see much difference between either, one is just a more honest way of shafting someone (and so has to avoided at all costs!).

[ValeRam]

Was wondering if any off you could help me with a conundrum I have whenever they talk about the jobless numbers.

Just from the man in the street's view, I would have thought it really excellent news that there are currently record numbers of employed in the UK and that unemployment numbers are on a downward trend. Isn't that  good for the economy , the exchequer and people's general well-being ?

So why is it that these announcements are seemingly always almost blotted out by the financial media who seems to be more focussed on the low rate of wage increases ? Again, isn't this a good thing ? Low pay rises = low inflation/more certainty. And if real wages are actually falling, doesn't this make industry more competitive and more inclined to invest, recruit and progress ?

I know the media talk about the fall in productivity that this implies. But why is that a problem in the whole scheme of things ? Isn't it better that more people actually have jobs and are being contributors to the economy ?

[SillyBilly]

There are record numbers of people in the UK so the first point you make obviously would need a qualification of % of employment relative to population. Otherwise its a meaningless stat! Not sure what the exact figures are here but despite record people in work in the States the labour force participation rate is trending towards the levels of the 1970s. I would have thought it obvious why. Never look at the headline figure from a government. 

It is not neccessarily good for the exchequer unless they are well paying jobs. Tax credits aren't a tax rebate and they are very, very expensive! Do the maths how much Job Seekers pays out relative to walking a mates dog for 16 hours a week and claiming tax credits. Could be getting £800 a month in WTC alone for that job (add on wages, housing benefit, child tax credit, married couples allowance etc.) relative to remaining unemployed. But the job figures are better. Ofcourse tax credits are a de-facto citizens income so it would be circulated in the local economy which does have good benefits for local businesses. Swings and roundabouts. The point I am making though is unless you are creating a £30k+ job with no or little entitlement to the array of state support it is no longer clear what the accrued financial benefits of that job creation is. When a job can be a tool to leverage income via benefits for working minimal hours that creates unusual incentives. One business owner was telling us (on another forum) how he has basically stopped working and is using money in the business to pay himself 16 hours a week work and then claiming (£800 in WTC alone). He can do this for 5 years. He is slightly worse off but now he barely works! He would have to earn a lot of money after tax to get what he does in his current arrangement, so why bother? Or work 50+ hours a week to make himself slightly better off? Why? And it's all legal as it is not means tested.  I think people have twigged (single parents, second income earners) that cutting their hours has almost no net effect on income than working the traditional 40 hr week, so why bother? Can't blame people for this but creating state subsidies for jobs is not the traditional route to prosperity . It creates more jobs (part time) and more state dependency contra 1 person working full time with no state dependency. 

Won't go into inflation/deflation too much apart from saying there is nothing more destructive in our financial system than deflation. It is the worst thing possible for businesses and government. People hoard in deflationary conditions, not spend. We live in a debt based spending economy. Deflation increases debt in real terms. Less income in deflation. =.  DEPRESSION. That is why we have had all this QE etc. It is why they are obsessed with wage inflation. The economy naturally wants to tip into deflation to expunge the debt but they can't let it.

[ValeRam]

Thats great @SillyBilly, very informative thanks, if a little concerning !

So broadly are you saying that a lot of the new jobs actually result in increased benefit payments ? Excuse my naivety.

What do you think is the solution ? Really scale back benefits and tax credits ?

 

[SillyBilly]

1 hour ago, ValeRam said:

Thats great @SillyBilly, very informative thanks, if a little concerning !

So broadly are you saying that a lot of the new jobs actually result in increased benefit payments ? Excuse my naivety.

What do you think is the solution ? Really scale back benefits and tax credits ?

 

Jobs aren't all equal. The UK runs a trade deficit. It doesn't make a whole lot of difference how many "service" jobs we create within GB, they're not increasing our national prosperity and improving the trade deficit - they're mostly recirculating already earned income. They add to our GDP though which is why that number is such a poor measure of prosperity! To make us more prosperous you need to make things (valued added to a product) or export a service - that brings money into the country (which can then be recirculated through the economy). We have a system which incentivises the creation of low-value jobs (this I would argue is damaging for all of us in the long-term). They are mostly low paying service jobs which pay little to nothing in tax and bring no extra money INTO the country. The job created then unlocks access to more benefits than would be available than on JSA. This is a state subsidy for low productivity and weak output. Perhaps this invested money in TC's etc. would be better invested in infrastructure building or STEM projects etc. to provide high quality jobs for people to do?  And yes, tax receipts for the exchequer have improved but not as much as George would expect hence why we're nowhere near balancing a budget despite this year originally being forecast as the break-even year.

The solution IMO is a change in the monetary system first and foremost. Do we have a low wage country or a high cost of living country relative to wage? The welfare bill simply tracks the cost of living. Why are people's living expenses going up then?

If people could think for a moment I think they'd appreciate that we're not becoming anymore prosperous, we're just becoming more indebted. The banks have socialised this debt (most of it against the housing stock) in that much of it is paid by taxpayers to support housing benefit, working tax credits etc (to service the debt). The above chart is a prime example, house prices haven't increased in value because of supply and demand, they have increased because of the credit extended against them (which benefits banks who make bigger loans with more interest due). This pushes up living costs, people are duped into thinking they are more prosperous but they're relatively no better off (in most cases more indebted)! The public kitty is significantly worse off as it now has to house and feed the population who can't keep up. Our whole system is geared to extending more and more credit which ultimately makes living costs higher (and state subsidies higher).

This is why I get frustrated with left-wing politics in this country because although intentions are good they are fairly clueless in the solution. They think increasing or maintaining Working Tax Credit, Housing Benefit etc. helps the problem! I would argue it creates a positive feedback loop to pushing up the cost of living which the banks then feed off (higher rent = higher house price = bigger mortgage). It just creates a bigger state subsidy to the banks and the people in between get absolutely nothing to show for it.

You can't reign in any of this stuff without crashing the economy (and it'd be unfair on people at the bottom) so it'll just go on until the whole thing blows up, including pensions. The public purse can't socialise all debts forever despite trying to, national debts have broadly doubled across the Western world in a decade. Not sustainable.

[GeneralRam]

Well today I decided to sell my FTSE shares.

I was expecting to take a £400-500 hit, but I had a pleasant surprise when it was a £80 hit! That'll soon be made up once my First Direct regular saver matures in April.

I'm going to stay out of the FTSE for a while and look at putting some money into some Vanguard funds once the new tax year starts and I can start putting money into a new ISA.

[Rev]

I've not long got rid of my share Isa's, using the money recouped to offset my current account mortgage. 

Makes more sense reducing interest payments of 4% than chasing higher returns at the minute.

[Zag zig]

14 minutes ago, reveldevil said:

I've not long got rid of my share Isa's, using the money recouped to offset my current account mortgage. 

Makes more sense reducing interest payments of 4% than chasing higher returns at the minute.

Getting rid of any debt is a good decision in my opinion.

You can still get positive returns in falling or volatile markets mind. Shorting for instance is one way, really it's just the market saying the valuation was bloated in the first place, whatever metric you want to judge a stock, index, commodity on.

[Rev]

3 minutes ago, Zag zig said:

Getting rid of any debt is a good decision I my opinion.

You can still get positive returns in falling or volatile markets mind. Shorting for instance is one way, really it's just the market saying the valuation was bloated in the first place, whatever metric you want to judge a stock, index, commodity on.

I always think to be comfortable with and fully understand an investment is the way to be, share ISA's was as exotic as I've got!

I've managed to overpay on the mortgage to the tune of 20k so far, less than 30k to go with our original endowments we took out to cover our original interest only mortgage maturing early next year, so hopefully be completely debt free Easter 2017, then maybe look to throw a little caution to the wind in the future.

[Zag zig]

20 minutes ago, reveldevil said:

I always think to be comfortable with and fully understand an investment is the way to be, share ISA's was as exotic as I've got!

I've managed to overpay on the mortgage to the tune of 20k so far, less than 30k to go with our original endowments we took out to cover our original interest only mortgage maturing early next year, so hopefully be completely debt free Easter 2017, then maybe look to throw a little caution to the wind in the future.

Good for you Revel

Ahh those good old endowment mortgages. Might be worth seeing if you were not mis-sold them in the first place, even if you don't feel you were. Say this as a couple of years after cashing mine in, happened to notice an article in the Daily Fail at the time when they all blew up, offering contact numbers to check with various providers on the scandal of mis sold endowments.  Anyway, cutting it short, bugger me they coughed up enough to pay for an holiday, just by giving them my reference number; don't think I'd ever been more surprised.

Dont know whether the claims are time bound, but maybe worth a shout for anyone who's not done so, nothing ventured and all that.

[Rev]

1 minute ago, Zag zig said:

Good for you Revel

Ahh those good old endowment mortgages. Might be worth seeing if you were not mis-sold them in the first place, even if you don't feel you were. Say this as a couple of years after cashing mine in, happened to notice an article in the Daily Fail at the time when they all blew up, offering contact numbers to check with various providers on the scandal of mis sold endowments.  Anyway, cutting it short, bugger me they coughed up enough to pay for an holiday, just by giving them my reference number; don't think I'd ever been more surprised.

Dont know whether the claims are time bound, but maybe worth a shout for anyone who's not done so, nothing ventured and all that.

Did enquire, with the firm itself, took their response as gospel unfortunately, by the time we realised we really did have a case the time limit had passed!

Decent lesson learnt though, made me gen up on the facts and make my own decisions in future.

Also mis-sold a whole of life policy from the same advisor, luckily managed to get something back from that.

[SillyBilly]

1 hour ago, GeneralRam said:

Well today I decided to sell my FTSE shares.

I was expecting to take a £400-500 hit, but I had a pleasant surprise when it was a £80 hit! That'll soon be made up once my First Direct regular saver matures in April.

I'm going to stay out of the FTSE for a while and look at putting some money into some Vanguard funds once the new tax year starts and I can start putting money into a new ISA.

Nice one, timed that very well. Wise choice I think.

[SillyBilly]

Might be of interest to some but George will be making an announcement on tax relief in Spring budget.

25% or 33% flat rate for everyone is being touted. So if you're a basic rate tax payer it should incentivise your pension saving more. Less good obviously for higher rate payers. One of the last "low-hanging" fruit raids the Chancellor can do to close the deficit.

[GeneralRam]

20 minutes ago, SillyBilly said:

Might be of interest to some but George will be making an announcement on tax relief in Spring budget.

25% or 33% flat rate for everyone is being touted. So if you're a basic rate tax payer it should incentivise your pension saving more. Less good obviously for higher rate payers. One of the last "low-hanging" fruit raids the Chancellor can do to close the deficit.

Could you explain this for me? How would this not be good for higher rate payers as the higher rate is 40-45%?

EDIT: I see you meant pensions. Don't worry about explaining!

[ketteringram]

1 hour ago, SillyBilly said:

Might be of interest to some but George will be making an announcement on tax relief in Spring budget.

25% or 33% flat rate for everyone is being touted. So if you're a basic rate tax payer it should incentivise your pension saving more. Less good obviously for higher rate payers. One of the last "low-hanging" fruit raids the Chancellor can do to close the deficit.

Do you think he is actually going to put the lower rate up by 5%? Surely that would be massive? I've read a lot about him likely interfering with salary sacrifice, ie scrapping it. oh well, it was good while it lasted. 

 

Edit. Also just realised that you are not talking about tax rates, sorry!! 

[ValeRam]

What do people think about the relative financial/economic  impact of the referendum ?

personally I'm not sure it will make that much difference. It's not as though , if we leave the union, we are suddenly no longer part of Europe ? What actually would change ?

and the fact that we have never been part of the Euro currency has almost been a precursor to us not being part of the full Union anyway ? 

I'm a finance director to a handful of SMEs across the East Midlands, mainly manufacturers . I can't see that their fortunes will be adversely affected by us leaving. What really screws them, however, is the ever-growing nanny state perpetrated by both the euro Union and our own government. The constant need to spend more and more time and money on non-value added activities like pension provisions, collecting money on behalf of the state for free, giving new parents loads of time off when clearly there are no resources to replace them ( and being forbidden to replace them anyway), filling in ridiculous forms.  As an example, it's actually not in their interests now to employ women of a child-birthing  age - surely that is madness and can never have been intended by legislation ?