The "talk the economy up" thread.

sabretoothtigger

Deflation is a negative as I understand it because it discourages growth and destroys capital investment and we want people to invest in Britain long term without fear. Low inflation is best

Anyway on a related point I thought this was a strong positive, ironically

a deferred increase from 17.5% to 22.5% in the VAT rate would raise around £20bn.

And it's one of the few future tax rises which might actually stimulate a bit of increased economic activity ahead of its implementation, rather than encouraging us to save

To use the economic cliche of the moment, it would give us all quite a "nudge" to spend now, before the swingeing increase in VAT would kick in.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

Maybe the temporary abolition of housing duty would achieve something similar, its not like they'd be missing out on much

Libor rate latest

Updated:
21 November 2008, 2:25pm Reader comments (13)
We explain Libor, its relationship with the bank rate and why it is so important in the credit crunch and for influencing mortgage pricing...



Commentary from Editor Andrew Oxlade (21 Nov): The fall in Libor was slight again, down only two percentage points overnight to 4.04%. The daily falls have slowed to two or three points whereas last week Libor fell 17 points in one 48-hour spell. One analyst suggests further large Libor falls (vs bank rate) will only come after Christmas.

Libor in america is rising but then their base rate of 1% is unrealistic

Kez100

I can see pestons logic.

sabretoothtigger

Forex Focus: Worst Of Pound's Fall Could Be Over

[FONT=verdana,arial,helvetica,sans-serif]After about four months on the slide, the pound could finally find a little respite.
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[FONT=verdana,arial,helvetica,sans-serif]A hint that the worst might be over for the U.K. housing market as credit conditions improve, suggestions that sterling may have already discounted the worst, and indications that U.K. banks are bringing overseas funds home to boost their balance sheets are all helping.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]The pound, which fell from over $2.00 in mid-July to a near six and a half year low at $1.45 two weeks ago, could well be headed back towards $1.60.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]"A break of the $1.5620 trendline resistance level will open the way to the $1.58 handle," said Ian Stannard, a senior currency strategist with BNP Paribas in London.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]He noted that the pound's break up through $1.5250 means that sentiment should keep on improving in the near-term.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]The brighter outlook for the pound emerged late last week as the Nationwide reported that the decline in house prices had moderated this month - falling by 13.9% on the year after declining by 14.6% in the year to October.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]Some experts dismissed the slowdown, suggesting that the house price decline still has a lot further to go. Others argued, though, that the improvement might reflect increased U.K. government pressure on U.K. banks to continue providing funds to the mortgage market.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]BNP Paribas' Stannard noted that a new buyer intention subindex in the survey rose sharply, suggesting that "an improvement in credit would immediately stabilize the housing market."[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]The latest consumer confidence survey from GfK also provided a little hope for optimists. The confidence index lifted slightly to -35 from its recent near 30-year low at -39.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]Stuart Bennett, senior foreign exchange strategist with Calyon Credit Agricole in London, said the data indicated that the recent aggressive rate cuts by the Bank of England had failed to have much impact.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]"The index implies that the Bank of England's aggressive 150 basis points rate cut did little to soothe consumers' fears as they face news about the poor economy and mounting concerns about job losses," Bennett said.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]The latest Confederation of British Industry survey Friday provided further proof that consumer activity has dropped sharply.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]The survey showed a record negative balance of retailers seeing higher sales, the worst since the survey started in 1983.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]Nevertheless, some currency experts feel that much of this doom and gloom on the U.K. economy has been written into the pound already and there is only a small downside risk to sterling.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]"Any impact may be limited given that extreme pessimism now appears to be heavily discounted by financial markets," said currency strategists with Bank of Scotland.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]"This," they added, "leaves the risk of a squeeze higher in sterling crosses should the data not deteriorate further."[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]Apart from the economic background, the pound should also be getting some help from underlying flows that are working in its favor.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]"There is increasing evidence that U.K. banks have been repatriating funds from abroad to shore up balance sheets," said BNP Paribas' Stannard, adding that a further near-term rebound in the pound against the dollar cannot be ruled out.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]Early Monday in Europe, the pound was lower as risk aversion rose once again - this time on concerns over the Chinese economy after Chinese Premier Hu Jintao warned about the impact of global slowdown on the country's trade strength and the latest purchasing managers' index fell to a record low.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]By 0812 GMT, the pound was down at $1.5244 from $1.5402 late on Friday in New York, according to EBS.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]The dollar was down at Y95.04 from Y95.55 as the fall in risk appetite helped to push the Nikkei down 1.4% on the day. The euro was also down at Y120.45 from Y121.36.[/FONT]
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[FONT=verdana,arial,helvetica,sans-serif]The euro declined to $1.2674 from $1.2707 as the market looks ahead to a likely 75 basis point cut in European Central Bank rates later in the week. An unexpectedly large 1.6% fall in German retail sales, combined with Friday's news that euro-zone inflation had collapsed to 2.1% from 3.2% is encouraging speculation of a large rate cut.[/FONT]
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sabretoothtigger

Update to the above seems to be prices of:

$1.48 to a pound
Y92.63 to a dollar
Y119 to a euro
$1.29 to a euro

Update to Libor:

(9 Dec): Libor has fallen from 3.32% to 3.28% overnight.
The fall since the UK bank rate was cut last week from 3% to 2% has, proportionately, been far less than after the previous drastic rate cut. In November, rates were cut by 150 basis points and 107 were passed on the following day. This time, only 38 of the 100 points were immediately passed on. It will probably take several weeks for this latest cut to be fully factored in, if indeed it is.

NYTIMES
It May Be Time to Think About Buying a House

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Rates on 30-year fixed-rate mortgages are already close to 5.5 percent

Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one.

That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.


If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.

Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.

http://www.nytimes.com/2008/12/06/business/yourmoney/06money.html?em

Kez100

My thoughts on deflation. If it is caused by pockets of prices falls - like fuel and food then really all that part of the deflation figure is a reversal of the stupid (speculative bubble for fuel?) that caused inflation to peak to 5%.

Not deflation as such just a statistical smoothing process when evened out giving us 2% inflation (with manipulation like that I could be a politician!).

If fuel is going to be purchased as a commodity by speculators then it ought to be taken out of inflation figures or we will always be battling against a rollercoaster.

Generali

Kez100 wrote: »

My thoughts on deflation. If it is caused by pockets of prices falls - like fuel and food then really all that part of the deflation figure is a reversal of the stupid (speculative bubble for fuel?) that caused inflation to peak to 5%.

Not deflation as such just a statistical smoothing process when evened out giving us 2% inflation (with manipulation like that I could be a politician!).

Some people like to talk about disinflation - where prices of a few things are dropping very fast causing the price level overall to fall despite the prices of most things not really changing. In this case, deflation is a reduction in the prices of most things.

I must say, my bullsh1t-o-meter was twitching like crazy just typing that but I've not really had the time to sit down and work out for myself whether it's rubbish or a decent argument. How can I have time to sit and think about that stuff when there are beaches full of 20 y/os in bikinis for me to take the kids to?

Kez100 wrote: »

If fuel is going to be purchased as a commodity by speculators then it ought to be taken out of inflation figures or we will always be battling against a rollercoaster.

The Fed tried taking out volatile items from their CPI measurement in the 1970s. It turned out that all the things outside the index were rising like crazy but weren't being counted. Generally it was unimportant stuff like rents, food and petrol. It took Volker and Reagan to take things in hand. Reagan might have looked like a bumbling !!! from here but he knew how to get stuff done, even if it was by other people.

sabretoothtigger

The three-month sterling Libor rate fell from 3.01% to 2.98%.

Libor-bank rate gap
Before Nov 1.5-point bank rate cut: +1.06 points
Day afterwards: +1.49 points
Before Dec 1.0-point bank rate cut: +0.79 points
Day afterwards: +1.37 points
Latest gap: +0.98% points

http://www.thisismoney.co.uk/libor

sabretoothtigger

Libor bank rate gap
Day before Nov 1.5-point bank rate cut: +1.06 points
Day afterwards: +1.49 points
Day before Dec 1.0-point bank rate cut: +0.79 points
Day afterwards: +1.37 points
Day before Jan 0.5-point bank rate cut: +0.57
Day afterwards: +0.88

Day before Feb 0.5-point bank rate cut: +0.64
Day afterwards: +1.12

Latest gap from 1% bank rate: +1.06 points
Average gap from bank rate in boom years: Between +0.10 and +0.20


LIBOR (THREE-MONTH RATE): 2.061% (16 February)

$1.48 to a pound
Y92.63 to a dollar
Y119 to a euro
$1.29 to a euro

$1.42 to a pound
Y91.74 to a dollar
Y117 to a euro
$1.28 to a euro






http://www.xe.com/

sabretoothtigger

FT dude says credit less crunched, video including libor chart, etc

http://www.ft.com/cms/bfba2c48-5588-11dc-b971-0000779fd2ac.html?_i_referralObject=4851859&_i_referrer=rss


http://www.ft.com/cms/s/0/cbee4c00-3999-11de-b82d-00144feabdc0,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html

sabretoothtigger

I found this article on stocks quite convincing so deserves to go here:

A US asset allocation survey in early March showed that experienced investors held 46pc in cash – a record. The last two occasions when deposits were almost as high – 38pc in 1991 and 39pc in 2002 – were the previous two best occasions to have bought equities since November 1987.

Over the past 40 years, the sole occasion when extreme pessimism was as high as it was in early March 2009, was December 1974. That proved to be a significant buying opportunity despite the horrendous economic conditions in Britain and high levels of pessimism. Over the following 12 months the UK stock market rose 149pc, including reinvested income.

a chart showing US stock market rolling 10-year average total returns from 1810 to the end of last year. Findings show four previous occasions when the rolling 10-year returns were close to, or below zero, as they are today. On each occasion, the following decade saw total returns from stock market investments close to 20pc per annum.

In every previous bear market, in the final bottoming phase, some sectors always outperform as others tank. After the stock market bottoms, sector performance dramatically swaps places. And that's exactly what's happened in the past 12 weeks.

http://www.telegraph.co.uk/finance/personalfinance/investing/5367551/History-tells-us-that-March-2009-marked-a-buying-opportunity.html

USD EUR GBP JPY CAD AUD CHF RUB CNY ZAR MXN

1 GBP = 1.59105 1.13518 1.00000 150.809 1.78766 2.03459 1.72271 49.3208 10.8645 13.0616 20.8782

http://www.xe.com/