This makes no sense at all unless the Euro bailout has the sole aim of making the rich richer

Posted on October 18 2011

This is the FTSE for the last three months, care of Google, screen captured a few minutes ago:

This makes no sense at all unless some very particular circumstances exist.

This weekend we'll be seeing discussion to bail out the Euro. That will extract vast amounts of value out of the Eurozone, depress demand and increase unemployment and austerity in the way it seems likely to be undertaken. Markets should therefore be down. They're ludicrously high. It was as if nothing much had really happened in the years since 2007.

How can that be? Well only because those with the biggest stakes in the market think that they will be the biggest beneficiaries of this bail out and that despite the impact on the rest of the economy they will do well out of it. As a result they've priced that into the market.

It's either that or they're stupid.

But we have to be stupid if they get away with this again.

PDF of article

Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:

There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.

You can subscribe to this blog's daily email here.

And if you would like to support this blog you can, here:

Comments

When commenting, please take note of this blog's comment policy, which is available here. Contravening this policy will result in comments being deleted before or after initial publication at the editor's sole discretion and without explanation being required or offered.

5 Responses

roger phlegm says:

October 18 2011 at 11:21 am

I’ve expected the market to correct for some time and it hasn’t. But the truth is that the FTSE is a bet on the global economy, not the British one. So it has held up much better than the CAC40 or DAX, which were down about 40% on the year. I’d actually be interested to know what proportion of the profis of the giants of the FTSE like Vodafone, BP, Shell or Rio Tinto come from the UK or even Europe. And as I have said before, what we are seeing is a massive shift in economic power south and eastwards. Just becase Europe is increasingly perceived as an economic backwater doesn’t mean the rest of the world is going that way.

It’s also worth recalling that the FTSE is still 20% down on where it was in 1999.
- larry Levin says:
  
  October 18 2011 at 11:35 am
  
  Hi Roger but what about when you include 12 years of dividends?
  - Brian says:
    
    October 18 2011 at 1:41 pm
    
    Good point. Shares values can show dismal returns,even if invested long term-but,if the dividends are re-invested also, long term it can prove quite the opposite.Plus, say further investment over some years in the portfolio, is closed on retirement,and dividends taken just as income-it can prove well worthwhile.The only hard bit is choosing the right shares-but that`s where a few well regarded investment(not unit) trusts can be of good service.A monthly fixed payment plan in same,can also include the advantage of pound cost averaging – i.e. you buy more shares when they are cheaper.No, I`m not in the industry-I just found out by experience over many years.
  - Richard Murphy says:
    
    October 18 2011 at 2:07 pm
    
    I was with a fund yesterday
    
    Historically they made 4.5% and charged 1.8%
    
    Work it out – even cash is better than that
  - larry Levin says:
    
    October 18 2011 at 2:40 pm
    
    selecting active over passive management is a losers game, how many active managers can beat their benchmark over a 5 year period? 10% not good odds.