The Brexit effect

[tomdhu]

Not all gloom and doom then...

http://citywire.co.uk/money/ftse-enjoys-best-week-since-2011-in-brexit-rebound/a927442?re=40961&ea=305556&utm_source=BulkEmail_Money_Daily_Summary&utm_medium=BulkEmail_Money_Daily_Summary&utm_campaign=BulkEmail_Money_Daily_Summary

[red devil]

As the article says, has to be seen in the context of the plummeting pound and the anticipated BoE stimulus.

Cost of holidays has instantly gone up, and petrol prices due to soon...

[DulwichFox]

Cost of Holidays ALWAYS rise at this time of the year as we enter the period of School Holidays..

Petrol has been at an all time low at was bound to of risen whatever the outcome of the Referendum..

It has only been 1 week and the Pound has stregnthened a little. It fluctuates hourly..

Too soon to jump to any conclusions.

The weak pound against the Dollar is good for American Tourist to the UK. and those Guys spend Money..

Foxy.

[Robert Poste's Child]

The Standard's front page headline is about property prices falling. It's at too high a level to bother most of us right now but presumably is expected to mark the turning of the tide. That said, earlier this week a commentator, can't remember who, said they've been falling for 18 months already. I'm all for it, but after years of economic policies to keep the bubble growing it may hurt a lot of people.

[pebs]

I dont know THAT much about finance but this is a spurious headline. The FTSE is made up of Int'l companies not UK so has little bearing on UK economy. What you need to track is inward investment. This week according to the FT more than ?650 m commercial property deals have fallen through. Lower interst rates is not a good thing! Besides, wait until we really pull the trigger on article 50 ...

[Robert Poste's Child]

You're right that at the top they're multinationals, but they're all subject to UK law. They're classified by market cap(italisation), which is the number of shares x current market value per share, so in that sense it's kind of a barometer of investor confidence in UK business, if that makes sense.

[pebs]

Yes they are listed in London but could be anywhere ... better reflection is FTSE 250

[Robert Poste's Child]

Agreed on that point. Small to mid cap are probably a good reference point.

[Lordship 516]

Impossible to evaluate the issue of house prices because the data is always imperfect in real time. It takes 3 to 6 months to get real information from house completions via the Land Registry & the regional variations are quite different also as are the different areas of London. The Nationwide & Halifax indices are skewed indices & whereas they show a trend they are not accurate as they don't compare like for like and their samples are too small. Estate agents & even chartered surveyors never tell the actuality as they are forever trying to pump the market for one reason or another so their immediate feedback must always be suspect. What matters at the moment is lenders' attitude or sentiment towards lending & I would suggest that this is negative at the moment. Bankers are chappies who will give you an umbrella if the sun is shining but they want it back if there is a hint of rain. Valuers will also be very cautious and they will mark prices down just in case. So prices will be depressed, probably until early next year at least. The Eurostat HPI is not useful for consumers as it compiles statistics as a feed into Macroeconomic models to provide early warning to flag up possible imbalances. By the time the information is available the market has moved on - up, down or flat. This is what I do for a living. Houses are for living in, not for investment. Property investment needs particular conditions in order to thrive - now is not the time to move or invest unless you can afford to lose money or wait out the downturn - this is normally referred to as gambling - property roulette.

[pebs]

100% agreed.

[Robert Poste's Child]

Also difficult to quantify at this stage if the fall is in asking or actual price. A fall in asking prices may just mean they thought it was worth a try.

[red devil]

DulwichFox Wrote:

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> Cost of Holidays ALWAYS rise at this time of the

> year as we enter the period of School Holidays..

What's that got to do with anything? Holidays do indeed cost more during school holidays, but it's still an additional cost regardless.

> Petrol has been at an all time low at was bound

> to of risen whatever the outcome of the

> Referendum..

You don't know that. And even if it was going to rise, again it's an additional cost on top of that rise regardless.

> It has only been 1 week and the Pound has

> stregnthened a little. It fluctuates hourly..

Against the Euro the Pound is worth over 10% less than it did before the vote, a direct result of the Brexit result. A 10% drop isn't a normal fluctuation.

> The weak pound against the Dollar is good for

> American Tourist to the UK. and those Guys spend

> Money..

I would guess not nearly enough to counter the additional costs to businesses that deal/trade in Dollars, our very own Seabag has been hit hard by this..

[Louisa]

There is a clear and present hit to the UK economy as a result of brexit. The percentages and consequences of this hot vary widely depending on who you ask or what you judge it by historically, but no one could possibly begin to suggest the economy hasn't taken a hit.

Even the most optimistic economic outlooks suggest a shallow recession later this year and early into next year. We need to hope and pray a new PM is able to negotiate in a sensible manner, one which limits the collateral damage by as much as is possible under the awful circumstances.

Louisa.

[Loz]

DulwichFox Wrote:

-------------------------------------------------------

> Petrol has been at an all time low at was bound

> to of risen whatever the outcome of the

> Referendum..

Petrol price has been low because the price of Brent Crude has been low. The price of Brent Crude has not markedly changed since Brexit.

> It has only been 1 week and the Pound has

> stregnthened a little. It fluctuates hourly..

It fluctuates hourly by fractions of a percent. It has dropped 10% due to Brexit. Prepare for the price of most imports to rise accordingly.

[ianr]

I think I've heard it said that a levelling down of the pound was due sometime anyway. Could it be that Brexit was at least in part stimulus rather than outright cause?

[Lordship 516]

None of the usual economic guru suspects are saying anything about the economic outlook. Carney was very reassuring but didn't give any forecasts as he has no basis at this time. He knows that price inflation will occur; he also knows that production will fall and employment will be affected; he also indicated that he MIGHT engage in more quantitative easing but defined it as making sure BANKS had easy access to credit - doesn't follow the banks will lend it on to businesses. Increasing money supply coupled with slowdown in growth of goods, due to reduced demand & increased unemployment, will bring inflation. Uncertainty is the enemy of economic stability - we have policy-related uncertainty, rather than economic uncertainty but policy uncertainty is common and often transitory - however if it persists, it may induce greater economic uncertainty than we have had already. We need to create policy stability quickly which looks to be unlikely - if not maybe we are heading back to the 1970s - stagflation, who knows ? It's an unholy mess. By the way - I'm an optimist !

[brum]

A local shop has just been notified by one of it's main suppliers of imported goods that its prices will increase by 10% with immediate effect. Could be the Brexit effect is already underway.....

[Robert Poste's Child]

Presumably due to the weaker pound rather than to an actual price increase though.

[????]

Where I agree with you entirely Lordhip is on the uncertainty - I don't think we should even have an election yet because of this just get on and get some heads of agreement on Brexit negotiated.

[Lordship 516]

???? Wrote:

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> Where I agree with you entirely Lordhip is on the

> uncertainty - I don't think we should even have

> an election yet because of this just get on and

> get some heads of agreement on Brexit negotiated.

Sure ???? - this is the single most destabilizing factor that we have in play at the moment. An election would only fuel further uncertainty. For a developed economy like the UK/EU, in the current circumstances it doesn't matter a great deal which leader or which party will be in place - what matters in economic terms is as you say - get on with it. Cameron ought to have stayed in place & got on with it - his resignation has caused further uncertainty.

[Seabag]

More worrying is, are 'any of them' capable of making a viable plan, given their form on the whole event

Will the markets take note of anything the current lot of clowns 'do'

[Lordship 516]

Politicians are like the packaging on food, the message needs to be clear & the attitude positive & certain.

The real work will be carried out by civil servants with contributions from other experts including diplomats & lawyers. Politicians can sometimes act as facilitators & negotiate logjams & points of principle that civil servants cannot agree on - this requires the politicians to develop a good rapport with politicians from other countries.

Markets are sensitive to every little nuance so Politicians ought to be careful about their language which can sometimes spook markets that will watch for any little clue about anything.

Managing Johnson would have been a nightmare, same with Gove; Theresa May or Andrea Leadsom would be very good for this role.

[Earl Aelfheah]

The markets rallied after it became clear that no one was going to hit the Article 50 button anytime soon. Once that does happen expect further market shock.

Of course no one can predict the future with certainty, but if the UK doesn't fall into recession in the near future, I'll be (pleasantly) surprised. The falling pound, whilst potentially good for exporters, can only really have a negative impact generally, on an economy which relies far more on imports.

[Seabag]

This 'grey' period we're in is damaging, in that the effect will be corrosive beyond measure

And the thing you can't buy, trade and or quantify is momentum. And we're loosing ours rapidly I'm saddened to say

I'm still reeling from the fact that the government (bunch of c-nuts) even considered a vote at all

But here we find ourselves

[Lordship 516]

Seabag Wrote:

-------------------------------------------------------

> This 'grey' period we're in is damaging, in that

> the effect will be corrosive beyond measure

>

> And the thing you can't buy, trade and or quantify

> is momentum. And we're loosing ours rapidly I'm

> saddened to say

>

> I'm still reeling from the fact that the

> government (bunch of c-nuts) even considered a

> vote at all

>

> But here we find ourselves

Seabag - couldn't agree with you more.

Also, it will be more than loss of momentum [deceleration] but a decline.

General level of prices in an economy increases = Inflation, not quite hyperinflation but abnormally high

Production of goods and services in the economy slows down or even starts to decline = Stagnation

Both at the same time = Stagflation

Prolonged stagflation = Depression

When inflation rises, purchasing power is diminished.

The resultant drop in consumer spending has a negative effect on stock and bond prices that will be further affected by a resistance to exports.

Unemployment will rise, for sure.

Impact of unemployment = reduced revenue.

Reduced revenue leads to more borrowing.

Antidote to depression is more government debt

More borrowing leads to demand for repayment which leads to more borrowing or increased taxes

Increased taxes leads to reduced demand which leads to slow down in production which induces stagflation

Its a vicious spiral, a perverse result that will run contrary to what was originally intended by the Brexiteers.

These little Ingerlanders [scotland & NI voted the other way] appear to have imagined that they were embarking on a new golden age for the UK. Many innocent citizens will pay dearly for all their lives for their ill thought out escapade.

We will have our 'freedom' back - free to enjoy lower incomes, lower standards of living, less mobility - we will have lots of freedoms - enjoy !

Timing to recover from stagflation - 10 years ? Certainly not 2 to 4 years.