End of year stock market review

[Herr Tubthumper]

Isn't the strong stock exchange due mostly to a weak pound?

Don't ruin [MENTION=23440]Seagull58[/MENTION]'s little moment.

 

[larus]

Anarchy?

Actually, I have genuine concerns where the worlds financial system is heading. We're reliant upon more and more debt to keep "growth" going.

If/when there is a serious breakdown in the banking/financial system, it collapses quick. There is no enough "money" to pay everyone what they think they have in their bank accounts. It's all based on "trust".

If the banking system seizes up, everything grinds to a halt and fast. So yes, in this extreme event, a potential outcome is anarchy. I've read quite a few things over the years, and a number of people (hard to quantify) say stock up on gold/guns as if things do go south it will be ugly. (Imagine waking up in Croydon, with a Palace tattoo and replica shirt on - well, that would be like a holiday on a tropical beach compared ).

 

[Lord Bracknell]

I do like the current value of my investments compared to earlier in the year!!!!

Are you going to cash in and sell? If not, then the only value your investments have is the hope that you have that the future will be OK.

 

[Buzzer]

Don't ruin [MENTION=23440]Seagull58[/MENTION]'s little moment.

Oh bless these Remainer's little cotton-socks. Not content with getting their post-Brexit predictions about why the UK economy would tank so spectactularly wrong they then chastise the rest of us for cheering the good news.

It looks likely that the pound was, and remains, overvalued and all that Brexit has done is brought about some much needed re-positioning of Sterling and if that follows then it's another reason to cheer on Brexit.

https://www.bloomberg.com/news/arti...nk-s-five-reasons-why-the-pound-is-overvalued

http://www.independent.co.uk/news/b...erling-is-good-news-for-britain-a7353846.html

https://www.ft.com/content/ec6bef86-1653-11e4-8210-00144feabdc0



The fact that the UK economy didn't go into shock shows how robust it is and we can indeed give 3 cheers that we are in such a strong relative position. I know that upsets a lot of people but that's life, eh?

 

[Buzzer]

Are you going to cash in and sell? If not, then the only value your investments have is the hope that you have that the future will be OK.

What a bizarre statement. Isn't that the same for all investments? And if you don't think the future is okay and you do cash in, where do you keep your money? Isn't a bank or building society a form of investment?

 

[WATFORD zero]

And if you don't think the future is okay and you do cash in, where do you keep your money?

Tattoo removal companies

You have not been charged for this information

 

[Buzzer]

Tattoo removal companies

You have not been charged for this information

Ah yes! I remember you saying about that. Good call.

 

[Half Time Pies]

I do understand QE. It's de-facto devaluation

Actually the main purpose of QE was to increase the reserves of the banks in the belief that this would encourage them to lend which in turn would stimulate the economy. As it was the additional money didn't result in more lending but it was used to purchase assets which in turn raised prices. The BofE persist with QE as it believes that some of the money still ends up in the real economy, in reality however most of the beneficiaries are the top 5% wealthiest who own 40% of the stock market...and instead of spending their new found wealth, these people tend to reinvest it to benefit from rising prices! Its estimated that 8p out of every £1 of QE money makes it in to the real economy, the rest gets trapped in the financial markets making the rich richer and increasing inequality.

QE is a major contributory factor to why the FTSE has been increasing in value since 2009.

 

[larus]

Actually the main purpose of QE was to increase the reserves of the banks in the belief that this would encourage them to lend which in turn would stimulate the economy. As it was the additional money didn't result in more lending but it was used to purchase assets which in turn raised prices. The BofE persist with QE as it believes that some of the money still ends up in the real economy, in reality however most of the beneficiaries are the top 5% wealthiest who own 40% of the stock market...and instead of spending their new found wealth, these people tend to reinvest it to benefit from rising prices! Its estimated that 8p out of every £1 of QE money makes it in to the real economy, the rest gets trapped in the financial markets making the rich richer and increasing inequality.

QE is a major contributory factor to why the FTSE has been increasing in value since 2009.

The main purpose of the Asset Purchase Scheme was to buy government bonds.

On 4 August 2016 the MPC voted to increase the stock of purchases of UK government bonds by the APF to £435bn. In addition, the MPC voted to make up to £10bn of purchases of corporate bonds over 18 months. It also voted to introduce the Term Funding Scheme, to reinforce the transmission of Bank Rate cuts to those interest rates actually faced by householders and business by providing term funding to banks at rates close to Bank Rate.


However, I agree. It's benefited the rich and screwed normal savers and had next to no real effect on the real economy. Yet, we are meant to believe these people when they advised us in the referendum. Average Joe is fed up with the global elite screwing him over. I'm relatively lucky as I'm well off (subjective statement I know), but I voted leave as I genuinely believe we will grow stronger outside the EU.

 

[Half Time Pies]

The main purpose of the Asset Purchase Scheme was to buy government bonds.

On 4 August 2016 the MPC voted to increase the stock of purchases of UK government bonds by the APF to £435bn. In addition, the MPC voted to make up to £10bn of purchases of corporate bonds over 18 months. It also voted to introduce the Term Funding Scheme, to reinforce the transmission of Bank Rate cuts to those interest rates actually faced by householders and business by providing term funding to banks at rates close to Bank Rate.

The purpose of QE is to increase the overall amount of usable funds in the financial system, the method of doing that is to use the newly created money to buy government (and more recently corporate) bonds from financial institutions such as banks, pension funds and insurance companies.

 

[larus]

The purpose of QE is to increase the overall amount of usable funds in the financial system, the method of doing that is to use the newly created money to buy government (and more recently corporate) bonds from financial institutions such as banks, pension funds and insurance companies.

Mainly to buy government debt, of the £435bln, only £10bln has not been Government debt I believe. So it's like turning on the printing presses.

 

[beorhthelm]

QE is a major contributory factor to why the FTSE has been increasing in value since 2009.

its a factor but not the main one. QE buys up bonds which are mostly held by insurnace or investment funds that want income, so they seek out other bonds not the stock market. btw its supposed to stay in the financial markets, which is why its not the same as printing money. if it were to actually increase money supply we'd have outragous inflation across the western world. either way, its pretty irrelevent to Brexit debate as QE has only been increased another 15% in the name of brexit and we couldnt say it wouldnt have been done anyway.

 

[vegster]

Being totally honest, if you're not putting much into a pension scheme, you can't expect to get much out. If you don't earn enough, then I am sorry to hear that (genuinely meant BTW), but maybe you should think about what can you do to improve your prospects. Worry about what you can influence and not what you can't.

Thanks for your concern, i'm sort of stuck in a job that will not really give me much hope of improvement no matter how hard I work. I could put more in to my pension scheme but my take home is currently about £1,200 a month so do I whack loads in now and scrimp while working or pay the more standard amount ( company 1% and me 1% which builds over the next 5 years to company 2% me 5%) and hope that something turns up ? failing that it will be time to downsize my house the longer I live.

 

[larus]

Thanks for your concern, i'm sort of stuck in a job that will not really give me much hope of improvement no matter how hard I work. I could put more in to my pension scheme but my take home is currently about £1,200 a month so do I whack loads in now and scrimp while working or pay the more standard amount ( company 1% and me 1% which builds over the next 5 years to company 2% me 5%) and hope that something turns up ? failing that it will be time to downsize my house the longer I live.

That sounds like an Auto-Enrollment scheme with those percentages, and yes you're right, with those percentages, irrespective of how the stock market does, your pot will never grow into much.

I have no idea of your age/circumstances, but have you thought about evening classes to learn new skills.

Years ago (in my early 20's) I was doing 'go nowhere' jobs, then someone asked what I was good at. This random conversation led to me going back to college and studying computing (late 80's). It was hard work as I'd left home at 19 and had no support, so had to give up my job and survive on s small grant. Luckily it was only a fairly short course. I then joined a small software company, eventually went self-employed and since then I've been very lucky.

The reason for saying that is that I believe that sometimes we need to take that chance, albeit I don't know if that is realistic for you. I'm trying not to appear patronising, as I can look back on my life and see that things could have worked out very differently.

 

[Half Time Pies]

Mainly to buy government debt, of the £435bln, only £10bln has not been Government debt I believe. So it's like turning on the printing presses.

The purpose isn't to buy Government debt its just the method used, when the bond purchases are made the debt still remains on the Bank of England balance sheet as an asset and must still be repaid. You can see this on the Bank of England balance sheet as loan to asset purchase facility: www.bankofengland.co.uk/publications/Documents/weeklyreport/2015/2312.pdf

 

[Half Time Pies]

its a factor but not the main one. QE buys up bonds which are mostly held by insurnace or investment funds that want income, so they seek out other bonds not the stock market. btw its supposed to stay in the financial markets, which is why its not the same as printing money. if it were to actually increase money supply we'd have outragous inflation across the western world. either way, its pretty irrelevent to Brexit debate as QE has only been increased another 15% in the name of brexit and we couldnt say it wouldnt have been done anyway.

Actually one of the main purposes of QE was to increase inflation to keep it in line with government targets. Reverse back to 2009, in the aftermath of the financial crisis banks stopped lending and as most of the money in our economy is created by the banks as debt, as people continued to repay their loans, money was being destroyed and the total amount of money in the economy was shrinking. QE was designed to replace the money that was being destroyed to keep the amount of money in the economy at an acceptable level and to therefore help keep inflation on target. This working paper from 2009 explains the rationale behind QE. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/qb090201.pdf

In terms of the QE money not making it through to the stock market, this is not true, Financial institutions tend to buy and hold a whole range of assets in fact the BofE's own assessment of QE is "The Bank’s asset purchases have been almost entirely of gilts, causing the price of gilts to rise and yields to fall. But this in turn has led to an increase in demand for other assets, including corporate bonds and equities. As a result, the Bank’s asset purchases have increased the prices of a wide range of assets, not just gilts. In fact, the Bank’s assessment is that asset purchases have pushed up the price of equities by at least as much as they have pushed up the price of gilts" http://www.bankofengland.co.uk/publications/Documents/news/2012/nr073.pdf

All of this is entirely relevant to the post Brexit performance of the FTSE, the last round of QE was 4 years ago in 2012 and this latest round was launched purely as a result of the Brexit vote, along with the lowering of interest rates.

Surely any rational person can look around and see that these rising asset prices have little to do with productivity or economic growth? GDP growth across the western world is still lagging below normal healthy levels and indicators such as price to earnings ratio on shares show that companies are not increasing profitability relative to the rise in share prices. This is a speculative bubble fuelled by the injection in to the financial markets of newly created central bank money and low interest rates.

 

[Seagull58]

I'm afraid you've fundamentally misunderstood this. Most FTSE 100 companies are international and therefore earn most of their money in currencies other than Sterling.

Because the FTSE values companies in Sterling, if the pound crashes those companies automatically become worth more pounds than before.

That is not an indicator of health, it is an indicator of the weak pound.


Sent from my iPhone using Tapatalk

You're conveniently ignoring the FTSE 250, the AllShare, Small Cap and AIM 100

 

[Seagull58]

Yes, this is the elephant in the room. It will happen and the impact is very difficult to predict. China is still a relatively closed economy so the direct impact may be less than the indirect one of causing a crisis of confidence in other advanced economies that are still fragile. My advice is to hold some gold, preferably at least partly in actual metal as opposed to ETFs. I have seen a couple of predictions that gold could go to $7,000 an ounce (currently $1150ish)

Predictions, predictions. You're not a pollster, are you? They've done well over the past year or two.

 

[Seagull58]

Got to love all these amateur economists telling us exactly why record exports and a booming stock exchange is not necessarily a good thing. Maybe they could all get jobs with the IMF, BoE and the Treasury because NONE of the experts there correctly predicted what would happen in the few months after a Brexit vote with anything resembling the reality of the situation.

Yes, but i don't understand the FTSE so I can't comment on how totally wrong they got it. Up 800 points doesn't really mean up 800 points you see.

 

[Seagull58]

Are you going to cash in and sell? If not, then the only value your investments have is the hope that you have that the future will be OK.

I draw income from my investments. The more they grow the more income I can take without a drop in the overall value. Some income is taken from dividends and fixed income notes but some is taken through the sale of units.