From the Guardian this morning:
and
I have been saying that this was inevitable.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Read more about me
If you like what I do please support me on Ko-fi using credit or debit card or PayPal
Tax Research UK Blog is written by Richard Murphy unless otherwise stated and published by Tax Research LLP under a Creative Commons Attribution-NonCommercial 3.0 Unported License.
Design by Andy Moyle
With respect, Richard, if you say it long enough, it’s bound to happen sooner or later.
And what’s the cure? Surely you’re not now proposing to regulate the FT-SE 100??
The answer’s in the book
It is worth saying that you said to sell the FTSE when it was at 3,300, 5,500 and then again most recently, 2 weeks ago, at 6,550. Even after this morning’s drop it is currently 6,714. One day you will be right but I’d be confident the FTSE will be higher in a month’s time than it is now.
The FTSE is clearly in an irrational mode at the moment, but the general perception is that Bernanke and Abe are committed to inflating stock markets and this will drag all the markets around the world up. My understanding is that we are in unknown territory. Japan is doubling its monetary base over a 2 year period, Carney appears to want to do the same, demand is stagnant, inflation (apparantly) under control.
While I know you would love a stock market crash, I’m not sure it is going to happen yet. I suspect we are about a third of the way into a bubble that will end very messily indeed, though I am not sure anyone knows how this is going to end.
The real investment story at the moment is gold: being sold down massively by US investment banks apparantly liquidating ETFS while there is unprecedented demand for physical from the Far East. The US has asked for 7 years to repatriate the German gold it holds to Berlin. But if you look at the gold market too closely you soon go loopy with the conspiracy theories!
Indeed I will be right
As I was in 2008
You’re like the man who jumped from the 100 story building who after 99 floors thought “alright so far”
I woke early this morning and planted sweetcorn and squash in my garden. I’m more like the gardener who decides not to harvest when there is a squall in August because he believes the weather will pick up before winter. Of course bad weather is going to hit sometime, but the aim is to end up with the biggest crop, not the first crop (or in your case, no crop at all).
Strange analogy there Mr Phlegm. A productive garden is the opposite of the casino.
Well said Carol, I imagine that RP is not “producing” anything of value, but instead is at the casino wheel placing his bets!
It is no great insight to know that stock markets will go down as well as up, it is a statement that appears on every piece of investment advice and it is something everybody knows is inevitable.
The FTSE 100 is back where it was at the start of the week, and higher than it has been since 2007. Personally I will be more interested if it falls another 1,500 points and wipes out all the gains of the past year. A fall of about 2% isn’t exactly catastrophic or even massively unusual.
Richard, you constantly argue that the UK should take advantage of the low bond rates to borrow more and spend it on infrastrucutre as the rates won’t be going up anytime soon. Therein you find the answer why the market is going up. When your risk free investment is paying 2.5%, and you can buy good quality companies with strong brnads and operating history for 8% earnings yield and 4% dividend yield, it is a no-brainer that money is heading into the stock market, despite underlying economic conditions being poor.
Not at all
Most of those companies hold cash earning very little
This is misspent QE that should have been used for real economic stimulus
The FTSE 100 companies (excluding banks) hold £239bn in cash, however they also hold £588bn in debt, so in aggregate the FTSE-100 companies are £348bn in debt! In fact only 20 of the 100 companies hold net cash balances. This idea that companies are all cash rich is simply wrong, I am sure many would be paying down debt if they could, and will as it matures. that is why despite banks pushingh lending to companies, the net lending isn’t growing.
Richard,
I think you are spoiling a reasonable hypothesis with poor data. It weakens the case needlessly if today’s fall is just random noise. Just like taking bad weather as evidence of climate change.
I have read, but can’t remember where, that these large movements tend to cluster. A large fall does not occur at random, but is more likely to occur near the time of a large rise. The maths is related to that used to model radiation damage to DNA.
I agree with you that a major fall is likely some time, (a) because prices are getting high, (b) because profits are well above long term trend and if profits fall shares will look very expensive, (c) because our non-courageous government is effectively pouring money into the financial system without daring to direct how it is spent, and (d) it is hard to see how things can end well.
Oh a crash is on the way and when the financial sector’s multifarious ponzi schemes finally blow up we’ll be lucky if the world economy is not reduced to a barter one!
Fear not. The stock market is not part of the real economy. Houses, or rather the land under them, are. The bursting of the dotcom bubble did not crash the system, credit based on escalating land values did.
I worry about the unwinding of $1.2 quadrillion of what Warren Buffet calls weapons of mass destruction.
Could “Cyprus” happen on a global scale? In other words could the entire banking system collapse to the extent that it would not be possible to withdraw cash or make any other form of payment for say two weeks? If that were possible, what would be the outcome?
I understand that if a nation has control of its own currency then MMT indicates it shouldn’t have a problem if sovereign debt is in its own currency. However, what is the value of FOREX derivatives held by banks? I think you can see where I am going with this one…
This doesn’t exactly put my mind at rest….
http://www.bis.org/speeches/sp130516.htm
You are right to be worried
or this
http://www.zerohedge.com/news/2013-05-24/what-if-stocks-bonds-and-housing-all-go-down-together
It is almost impossible to tell what is happening on the stock market anymore.
So much of the “trading” is computer trading with computer, automatically, for a gain of a cent a millisecond (or nanosecond!).
Of course, we should never forget the tens of trillions (of whatever) riding on the stock-market-horse, which has no legs.
I worry not about the fall of the stock racket, I worry much more about the imminent fall of governments.
Never forget:
“We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both”
Justice Louis D. Brandeis.
Don’t worry guys, country by country reporting, unitary tax and land value tax (hat tip Carol Wilcox) will solve all this.