Slightly to my surprise, given that Asian markets fell overnight, the FTSE 100 has opened flat this morning.
So far, markets seem to have shrugged off the crypto collapse over the weekend.
I warned that was possible.
It does not mean tha the correction is not coming. I think that is inevitable.
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Around 25 years ago, I remember reading a piece written by Robin Angus of Personal Assets Trust that has rather stuck in my mind.
“…in markets such as these I am much more concerned about the risk of loss than I am about the risk of missing out on possible gains…suppose I have £1m. Whether it rises by 50% or falls by 50%, that sounds like the same percentage movement.
However in real life a 50% fall in value has much greater consequences than a 50% rise.
If my £1m rises to £1.5m I am certainly better off, but it is only a matter of degree. While I can live of £1.5m, I can also live off £1m, just about. However, if my £1m falls by 50% to £0.5m I can’t live off that. My whole way of life will have been changed significantly and for the worse. And can I get back to where I started, and have £1m again? Only if I double my money, which is very hard to do.”
He described what 98% of people feel.
Unfortunately, in my experience, 98% of people with “capital at risk” products (workplace pensions being a case in point) simply do not understand that. Financial literacy in the UK is poor.
I very much agree based on having nearly 1,000 clients at one time.
The Crypto dip turned out to be a flash crash, at the bottom Black Rock purchased 45,000 BTC costing around $5B and the BTC price recovered. Crypto is indeed a dangerous world, if you don’t follow certain rules around trading and safe keeping it is possible to get burnt. Related instruments such as meme coins have proven to be extremely dangerous open to massive manipulation; a good example being the Trump coin. Other areas of crypto are not so risk adverse; Tether USDT, which if you looked at their balance sheet has nothing sinister within; US Bonds, GOLD, BTC and Cash are the main components. Tether switched recently from a preference for BTC purchases to Gold & Canadian Gold Investment companies. A large portion of global market trade has switched into Gold and Silver. The main risks for the market come more from how these instruments are used and packaged over their fundamental design. It a massive risk if US debt (or any other) were to be packaged into a stable coin and ‘forced’ onto the market, many nations simply would not get involved as such instruments provide no income and be subject to inflation. BoE’s Bailey recently commented globally on the risk and misuse of stable coins, a future risk!
The highest developing primary risk to the current market (bubble) is not Crypto it lies with AI funding between AI majors MSFT, OPEN AI, NVIDIA, multiple others; Google, xAI, Oracle etc. Investments between $100B to $300B are being announced for Data Centres and new Graphic Cards on a massive scale, all funded by stock swaps; 95% of all players within AI are not making any profit and only have a few $B available in liquid assets reported on their balance sheets. Can the retail investor afford to support these investments and feed this new funding initiative? These investments using mainly stock transfers that face up as a form of Round-Tripping, which is far more dangerous than the risks presented by crypto. This AI funding initiative could be seen as a repeat of the early 90’s crash where many companies expanded IT to meet sales which were never going to be realised and as an example IBM who ended up in a period of oblivion by purchasing more hardware systems for internal use over external sales.
I have said all of this before.
And I do not believe that this was a flash crash. Have you looked at the massive loss of value in this sector which is the thing that most characterises it?
Personification? Can a market shrug? It my be just trying to delay the pleasure to come.
At the margin, the weekend news was positive as Trump back pedalled on the latest tariffs that spooked the market.
However, for Dogecoin and other such nonsense there has been no bounce.
Markets can remain irrational longer than you can remain solvent.
Agreed
It’s worth pointing out the bubbles are largely caused by MMT advocates, such as yourself. With QE pouring money into the financial system with no concomitant increase in production inflation across assets has been considerable, including crypto, which suggests MMT and its advocates ought to confess they have been peddling myths for some time.
MMT is opposed to QE
You really ought to do your homework before writing here