Gilt Sales Show U.K. Rating Not a Concern

setmefree2

jim83 wrote: »

You would have to be an absolute lunatic to buy gilts at the moment, particularly long dated ones.

The yield on a 30 year maturity is 4.12% - does even the most staunch deflationista think that inflation is going to be less than 4.12% averaged over that period? who could possibly be buying them?

The answer is that it's the "greater fool" approach to investing. Nobody is buying these things to hold to maturity, they are speculating that the yield will drop further so they will be able to sell the paper on for a profit. But they are making the fatal assumption that there will be someone stupider who is willing to buy from them in the future.

Ultimately the only buyer will be the BOE. With printed money.

That fool will be me then;). Not sure people are buying them for the yields. I'm in them for the capital gain. Trick is to get out with my gain in tact :think:

setmefree2

MiserlyMartin wrote: »

What about index linked Gilts pension funds? Is it time to exit out of those?

Imho index linked gilts are good for when/if inflation kicks in. But I'm sure someone will correct me I'm wrong...

Generali

setmefree2 wrote: »

Imho index linked gilts are good for when/if inflation kicks in. But I'm sure someone will correct me I'm wrong...

They are also good if expectations of future inflation start to rise.

As I posted in response to another post of yours, the battle in the market is between increased supply of bonds due to Governments across the world looking to borrow and demand increasing due to a desire for a safe haven but being wary of any signs of inflation.

I am still very troubled by the amount that everyone (not just the UK) is trying to borrow. Ok, the UK will be better placed to borrow than Latvia but there will be countries better placed than the UK.

purch

but there will be countries better placed than the UK.

Is that where Zimbabwe and the Weimar Republic come in ?? , or am I getting confuzzled by the argument ??

Wookster

purch wrote: »

Is that where Zimbabwe and the Weimar Republic come in ?? , or am I getting confuzzled by the argument ??

Who would you rather lend to?

A country that has a
- prudent fiscal & monetary policy
- produces things that the rest of the world wants to buy (i.e. positive trade balance)

or a country that has
- Loose fiscal/ monetary policy
- runs large deficits
- Had a negative trade balance (i.e. is a net importer)

It is a very clear choice.

setmefree2

Wookster wrote: »

Who would you rather lend to?

A country that has a
- prudent fiscal & monetary policy
- produces things that the rest of the world wants to buy (i.e. positive trade balance)

or a country that has
- Loose fiscal/ monetary policy
- runs large deficits
- Had a negative trade balance (i.e. is a net importer)

It is a very clear choice.

Posters said that the UK was bankrupt and that auctions would fail. I'm just picking up on the reality. We can argue forever about whether the UK government is prudent or not. Also, whether we export too little or are in fact a well balanced economy that is not over reliant on exports (such as Japan and Germany).

I respect you opinion. However, I think that it's possible that the UK economy is more resilient than you believe. We shall see;)

Wookster

setmefree2 wrote: »

Posters said that the UK was bankrupt and that auctions would fail. I'm just picking up on the reality. We can argue forever about whether the UK government is prudent or not.

I don't think anyone can fairly say anything for certain however the current course does place the UK on a much higher risk course than is ideal. We love to castigate the banks for their high risk strategies yet our own government is following its very own high risk strategy. It may all come crashing down, it may all be 'fine'. As a matter of prudence (being a conservative accountant) I think it is their obligation to take the least riskiest path available.

setmefree2 wrote: »

Also, whether we export too little or are in fact a well balanced economy that is not over reliant on exports (such as Japan and Germany).

I respect you opinion. However, I think that it's possible that the UK economy is more resilient than you believe. We shall see;)

Thank you.

I hope that I am wrong, however given all the news and looking at the fundamentals I cannot see any reason to be positive at all (other than I finish work on Friday and will have more time to hit the beach and kitesurf).

Furthermore there are some very serious, entrenched global trade imbalances which if not addressed are likely to result in economic catastrophe at some point. The question is, will that happen as part of the current cycle or will it be stored up for later. If it rebalancing happens now then there will be economic catastrohpy, if its stored up for later there will be bigger economic catastrophe.

setmefree2

Wookster wrote: »

I don't think anyone can fairly say anything for certain however the current course does place the UK on a much higher risk course than is ideal. We love to castigate the banks for their high risk strategies yet our own government is following its very own high risk strategy. It may all come crashing down, it may all be 'fine'. As a matter of prudence (being a conservative accountant) I think it is their obligation to take the least riskiest path available.

Furthermore there are some very serious, entrenched global trade imbalances which if not addressed are likely to result in economic catastrophe at some point. The question is, will that happen as part of the current cycle or will it be stored up for later. If it rebalancing happens now then there will be economic catastrohpy, if its stored up for later there will be bigger economic catastrophe.

I believe our government was being prudent by staying below 40% of GDP with the UK deficit. I appreciate that others see things differently, so please no flamers:D. Whist the credit crisis was predicted by a few, I don't really think it was realistic to expect any government to plan for what has actually happened. Again, I appreciate others see things differently:D.

I agree about the global imbalances. It would be better for everyone if China started to grow its domestic market at a faster rate and started investing in its own people. Giving them unemployment benefits, good state pensions would be a good start. This would encourage the Chinese people to spend. Indeed, if this were the case then China could let its exchange fluctuate freely and would not have to manipulate its exchange rate in order to flood markets all over the world with cheap Chinese goods. (Not I'm not partial to the odd piece of Chinese clothing;) )

Additionally, all governments need to address energy requirements going forward. "Peak Oil the dress rehearsal" was a very scary thing - more scary the credit crunch imho.

StevieJ

purch wrote: »

My bad !!!

Change that to "!!!!!!? and his mates"

!!!!!! and his mate Wookster Purch, I have told you a million times not to exaggerate, !!!!!! and his mate:rolleyes: would have been happy with 99% inflation :eek:
BTW have you noticed how Wookster is distancing himself from !!!!!! ('I am a conservative accountant:rolleyes: I live in London':D)

Really2

StevieJ wrote: »

BTW have you noticed how Wookster is distancing himself from !!!!!! ('I am a conservative accountant:rolleyes: I live in London':D)

Is he looks like he changed that then.:D

Wookster wrote: »

but I work in the financial sector and have a basic understanding of economics and the inter-relatedness of things financial and it really scares me where we are.

Or streched the above to support his argument (I am a quallified accountant but I would not class myself in the financial sector)

I wonder if !!!!!! will come back next week when Wooksters contract end.;)