Where next for the Economy and the Markets

[Mick Mac]

With the UK and US markets rising strongly for the last two weeks, is there growing confidence that sentiment is improving for the longer term?

[Narnia]

Is there any chance you will contribute to a thread that you start with a question Mick?

[Mick Mac]

With Newsnight anticipating Vince Cable attacking Capitalism tomorrow, and the possibility of him promoting more taxes on banking and bankers, I don't think that will help.

"Capitalism kills competition"... he will say. This is the Business Secretary of the Tory government.

It may be a case of Vince talks and noone on the Tory party listens, let him have his say and hang himself.

[woofmarkthedog]

Is this another "betting thread" Mic mac ?

W**F

[Mick Mac]

No - I'm interested in what the general "mood" is. To me it looks positive, more than at any time in the last 2 years. Of course one bit of economic data can change things. As well as global prosperity, it affects a lot of London people's work, job security, remuneration etc.

Of course there is sooo much to overcome in terms of austerity measure etc, but the markets tend to try to preempt the position 6 months hence and there seems to be a positive mood developing.

[louisiana]

The markets are always the last to react to anything. The markets are full of lemmings.

It looks positive to you because.... we haven't had another huge shocking piece of news for two or three months?

The banks are still full of bad debt that has yet to crystalise. The housing market is not looking good anywhere. And sovereign debt... There's a mountain of public sector unemployment to come.

'Confidence that sentiment is improving' seems a strange measure of anything - unless your intention is to take advantage of short-term changes in lemming-like sentiment to go in, get out, and hopefully make a quick buck or two if you time it right.

[HAL9000]

The last two decades of supposed growth were based on a massive Ponzi scheme whose underlying asset bubble has been artificially supported by equally massive government intervention that must eventually bring higher interest rates, inflation and unemployment.

The western world cannot now support the booming economic conditions that prevailed before the banking system imploded. Those conditions are unlikely to return any time soon - the economic reality of a post-Peak Oil world.

There is no free lunch.

[legalbeagle]

I was once told, in all seriousness, that hemlines are a leading indicator of economic conditions. Any fashionistas out there who can tell us whether skirts are long or short this season?

[Mick Mac]

Doom and gloom.

There has been a 2 year cooling off period while companies recharge their balance sheets. Companies are now being bought up again on more attractive earnings multiples and more reasonable levels of debt.

I believe people move from over confidence to over cautious often at the wrong times. And we seem to be in an over cautious period at the moment.

Yes the boom was highly geared and many knew that it would crash but companies which have made it through the last 2 years have good survival possibilities in general.

The future will be more cautious but long term investment prospects may be for slow but steady growth.

I dont think the markets are the last to react. I believe they factor in the next 12-24 months. There are a lot of day traders but in general most money will stay invested longer and there must be a lot of cash ready to return to the markets. There are a lot of funds out there that have kept their money out of the market over the last 2 years and are waiting for some confidence to return. The M&A activity seems to be coming back to life.

[SeanMacGabhann]

Reading the wider text of the speech, it doesn?t seem as alarming as you are making out Mick. He is condemning capitalist models per se, rather the current excesses

Every succesful capitalist society has had some regulations ? none have a completely free-market approach. So he is saying some of the excesses need to be restrained. Like the housing markets, it?s all well and good until first-time buyers can no longer play, as the money consolidates towards the top ? at which point it starts to eat itself. So saying ?capitalism kills competition? ? left to it?s own devices, it does. Look at the media in this country and the concentration in Murdoch?s hands ? is that healthy?

[Mick Mac]

i have not seen the speech except that one line which caught newsnights attention. Might see it later.

[SeanMacGabhann]

to be fair I have only read this much

Cable Speech preview

[DJKillaQueen]

I think until we see the impact of the spending review and the coming cuts and job losses it is too early to say what the economy is going to do. When spending power is taken out of the economy (as job losses come) then there's an impact. Also I suspect the slight recovery has more to do with the recovery in banking (how long did their recession last then?)....but for the rest of us there will be no real recovery for a few years at least. Businesses are still complaining that the banks aren't lending for example.

[SteveT]

Karl Marx was right then,

capitalism relies on continuous growth,

which is unsustainable as we cannot feed and water the population we have.

Should future population be controlled by central government?

and if so, when should it start?

[Brendan]

I have not read it but as I took a deliberate interest in Vince Cable?s economic ideas during the election I would be very surprised if this was some sort of Marxist attack on business. The man is very definitely all for business and will be the best ally to enterprise in this government. He has severe and justified issues with monopoly and exploitation though so I would assume it has more to do with that.

But no doubt there will be countless petulant pin-striped bullies shrieking that the Bolsheviks are knocking at their door and all sorts of similar bullshit peddled by the right wing press.

One thing I like about Vince Cable is that, unlike every other bugger it seams, he realises that economies can be based on enterprise but regulated to make sure they work fairly and without exploitation and without post industrial ideas of communism vs capitalism which seem to be the narrow minded ideas on which everybody tries to base any discussion on the topic.

He?s in my good books for now.

For now mind you. He better not fuck it up by saying something stupid in this speech.

[Brendan]

Robert Peston has commented quite well on it, http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/09/cable_i_love_business_really.html

This may also be the time to point out that if the likes of Cameron get their way objective journalism from people like Robert Peston will be sidelined by fox news style propaganda.

[louisiana]

Mick Mac Wrote:

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>

> I dont think the markets are the last to react. I

> believe they factor in the next 12-24 months.

So the markets factored in Lehman's, for example? (On 22 Aug 2008 shares in Lehman closed up 5%; up 16% for the week; three weeks later Lehman's filed for Chapter 11)

[louisiana]

Presumably the markets hadn't "factored in" NOT too big to fail, Mick Mac?

[Mick Mac]

Factor in their own company and economic performance predictions in deciding whether to buy a stock.

Obviously they cannot tell the future.

[Mick Mac]

Brendan Wrote:

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

> Robert Peston has commented quite well on it,

> http://www.bbc.co.uk/blogs/thereporters/robertpest

> on/2010/09/cable_i_love_business_really.html

>

>

> This may also be the time to point out that if the

> likes of Cameron get their way objective

> journalism from people like Robert Peston will be

> sidelined by fox news style propaganda.

This tendency of markets, especially financial markets, to encourage impatient herdlike behaviour rather than thoughtful, patient investment is not a new malaise: Keynes, for example, is withering about it, in the general theory.

If Vince Cable tries and fails to cure this great Anglo-American disease, he'll be part of a distinguished and long line of well-intentioned, disappointed minsters.

Herdlike behaviour is to be avoided and people are I think being herdlike in currently being too conservative, stocks may be cheap.

Warren Buffet recommends investing in downturns:

Warrent Buffet strategy

July 15th, 2009 ? No Comments

This is an excerpt of YM Tunku Dato? Yaacob Tunku Tan Sri Abdullah, President of FMUTM speech on 31 October 2008. This article is interesting as our action normally goes against logic.

Warren Buffet, the investment guru has a wonderful way of explaining this simple strategy. Everyone knows the golden rule of making money and that is to ?Buy Low and Sell High?. But how many people know the true secret of investing and that is to answer the key question of ?WHEN?- When to buy and when to sell?? Warren Buffet addresses this ?when? question by asking investors to identify their long-term goals. Depending on your stage in life Warren Buffet identifies two type of people-people whose long-term goal should be to Invest and people whose long-term goal should be to ?Dis-invest? (which is the opposite of invest-that is to sell). Deciding what your long-term goal should be, can in a simplistic way be determined by your age.

For example if I am still reasonably young and earning an income from my job or profession my long-term goal should be as a net Investor. I should be regularly and steadily investing the money that I have earned from work so that money can work for me to earn more money.

However if I am much older and retired and no longer earning an income from work I will be surviving on my savings or investments. I should be steadily selling down my investments and using the proceeds to enjoy my golden years. At that stage in life I will enter my Dis-investor mode of my life cycle.

When my long-term goal is as a Dis-investor I should be happy when stock markets are high for I will be selling high. Short-term market weakness should not be a concern for me for my Dis-investment mode is a long-term strategy and I know in the long-term market always go up again and I can continue to Dis-invest into a rising market.

Unfortunately most people who have not learn the investment secret of Warren Buffet react the other way. When they are supposed to be Investors they get excited and happy when markets go up. They are happy to buy expensive. Crazy! And that?s because they have been conditioned to have a short-term mentality. Long-term investors should be happy when markets are DOWN ?. Not UP!

But we have to realise that our strategy is long-term. When we are in our forties and in our Investor-mode short-term markets will go up and down. We should invest regularly during this period and be happy when markets are down for we will be investing cheaply. We might even be tempted to buy a little more.

When we are in our seventies and in our Dis-investor mode short-term markets will still be going up and down. You can be sure of that. We should Dis-invest regularly during this period and be happy when markets are up for we will be Dis-investing expensively. We might even want to sell a little more.

This market slump is the ideal way for investors to buy cheap. In this market Investors hsould invest more and Dis-investors should sell less. When the markets turn around and go up Investors should buy less and Dis-investors should sell more.

[Brendan]

On that note I hope the good people running my pension fund have taken advantage of the market slump.

[Mick Mac]

Investment professionals can sometimes be the most herdlike of creatures.

[Ridgley]

I will reserve my judgement, until I see how the cuts will affect ordinary people.

[Mick Mac]

Yes Vince.....we know, we know,

http://www.tribunecartoons.com/wp-content/uploads/2010/09/TribVince.jpg

[HAL9000]

Mick Mac Wrote:

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> With the UK and US markets rising strongly for the

> last two weeks,

About due for a good correction by the look of my trading screens this morning. The Euro and Gold may have peaked short term, too.