FT.com / Financials - Footsie closes over 5,000 for the first time in year.
This is completely and utterly irrational.
Cash was provided to banks through capitalisation and quantitative easing.
They are speculating it. Not investing it.
The case for a Glass-Steagall Act grows by the day.
The prospect of a second wave crash grows likewise.
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I would have thought we should all be celebrating.
This time last year you were stocking up on food because you thought civic society was about to implode.
Earlier this year you said the FTSE was headed to 2,900.
Instead, I’ve made 30% this year, tax free. That helps real people (i.e. me and my family) to achieve real improvements in their standard of living. I think you’ll find much of the rise in the market has been through retail punters seeing a great long-term opportunity, certainly much better than getting 1% in the bank.
Perhaps it is you that is irrational, rather than the markets.
Also, remember that the FTSE is increasingly simply a bet on global commodity prices. As long as China and India grow, the FTSE will rise.
Richard, the share index is simply a reflection of the price of shares included in the index. Rationality has got nothing to do with it.
I think you will find that banks are not putting money into the stock market. Holding shares reduces banks’ regulatory Tier 1 capital, and it is thus unlikely that any of the cash provided to banks under QE will have found its way into the stock market. Indeed the only equities likely to be held in capital constrained banks will be those required for market making.
There may well be stocks held as managed assets for their client funds, but that is client money and nothing to do with funds available from QE or re-capitalisation.
If it makes you feel better, though I can’t see why it should, the FTSE has dropped below 5,000 again.
Alastair
You’re right
It is wholly irrational
Which is the point I’m making
As for MF – you have made nothing at all
Share price rises do not create value
Richard
I’m with you on this, Richard. The Footsie rise is just as unsustainable as the property price blip. It’s actually to my family’s advantage since my father has just agreed the sale of his house to a deluded first time buyer who probably believes the tabloid nonsense that the house price slump is over.