Recivery by year end? Maybe... maybe not.

kennyboy66_2

Thrugelmir wrote: »

The Gilts are being sold by pension funds, insurance companies and other financial institutions, not banks in the main. So the cash generated from the sales is being deposited in the banks. Part of the cash is being reinvested in rights issues from Companies. This year around £320 billion of capital has been raised by Companies on the European bourses to reduce bank borrowing. The repayment of debt then brings the banks capital ratios back into line and leaves equity prices higher.

Equity prices are rising as "investors" with no debt and cash to invest are chasing yields. Corporate bonds are dropping in yield too. Certainly getting harder and harder to find good yielding investments. As many companies are cutting dividends. BP published good results. 2 weeks ago, but still cut its dividend by 2% to conserve cash.

Once QE ends what is going to happen to interest rates thats the question.

While I'd agree with a lot of this - there is absolutely no evidence that rights issues should lead to higher share prices.

Share issues will normally increase the weighted average cost of capital of a business, and increase the hurdle rate for investment.

Pete111

Rochdale_Pioneers wrote: »

As have the Americans and the Europeans - you're not one of the Britain in a bubble brigade are you? How could it be worse? Unemployment for one - we're a couple of percent below the European average. We're less than half the rate seen in Spain. Things are quite clearly bad here. But compared to elsewhere we're not doing too badly.

You miss my point.

Things are perhaps bearable now. However we are going to be overburdened massively by debt in the second decade (if not the third as well ) of the 21st Century due to the grand plan of 'spend spend spend....it's the only way we'll be ok ' that is the mantra of GB and his acolytes.

I would be more understanding if we had mitigated some of this by you know, having put some of the cash gleaned in the good times aside but no....we did the exact opposite.

Thrugelmir

kennyboy66 wrote: »

While I'd agree with a lot of this - there is absolutely no evidence that rights issues should lead to higher share prices.

Share issues will normally increase the weighted average cost of capital of a business, and increase the hurdle rate for investment.

Rio Tinto.

Share Price
52 week low 866p
52 week high 3000p

Current 2904p

A $15.2 billion rights issue seems to have been absorbed and digested very easily.

Thrugelmir

cootambear wrote: »

. QE money held by banks will be released only when the economy has stabilised, but the amount pumped now in will then be released as cheap money which will stoke asset value inflation ie another HP boom.

No it won't. The BOE will suck the QE money back out of the system to control inflation. Growth will be stunted until the fundamental debt issues are addressed.

kennyboy66_2

Thrugelmir wrote: »

Rio Tinto.

Share Price
52 week low 866p
52 week high 3000p

Current 2904p

A $15.2 billion rights issue seems to have been absorbed and digested very easily.

RBS rights issue Apr 2008.
Price at time 349p
Rights issue price 200p

Share price today 36.3p

The £12bn rights issue then seems to have been digested really easily. Not one of Questor (Daily Telegraph) conspicuous sucesses when they advised to take the rights up.

You could have chosen an 18 month period for Rio Tinto shares and used a high of 7023p.

What would your conclusion about rights issues by then ?

Pretty pointless using a single share to back up a theory.

Thrugelmir

kennyboy66 wrote: »

RBS rights issue Apr 2008.
Price at time 349p
Rights issue price 200p

Share price today 36.3p

The £12bn rights issue then seems to have been digested really easily. Not one of Questor (Daily Telegraph) conspicuous sucesses when they advised to take the rights up.

You could have chosen an 18 month period for Rio Tinto shares and used a high of 7023p.

What would your conclusion about rights issues by then ?

Pretty pointless using a single share to back up a theory.

RTZ's share issue was in last few months, post the crash.:rolleyes:

We are discussing the increase since March 2009 in the equity markets aren't we?

I used RTZ as an example due to its weighting and impact on the FTSE.

The new shares were issued at £14 each.

Rochdale_Pioneers

Pete111 wrote: »

You miss my point.

Things are perhaps bearable now. However we are going to be overburdened massively by debt in the second decade (if not the third as well ) of the 21st Century due to the grand plan of 'spend spend spend....it's the only way we'll be ok ' that is the mantra of GB and his acolytes.

I would be more understanding if we had mitigated some of this by you know, having put some of the cash gleaned in the good times aside but no....we did the exact opposite.

Yes you frothers keep making this point. But we're putting whole percentage points of debt on every week. At worst Brown added 9% of debt post 2001 bringing us to a level on a percentage basis that was still lower than the percentage he inherited. Our vast ocean of debt now has sod all to do with the few percentage points run up post 2001. Take 9% off our current position - would you be happy then?

Anyway, British debt is not the issue, its global debt. Yes Britain will have heading for 90% debt by the time this is over. That in isolation would be bad for Britain was debt elsewhere at previous levels.

The reality is that debt here will be no higher than the rest of the developed world, and still lower than debt in germany, Italy, japan etc etc. Where its a problem is that so many countries owe collectively so much debt all at the same time. You should be more concerned about the structural deficit run up by the rich countries as a whole and whom they are going to be in hoc to.

A few years ago I was discussing life with some Chinese students and telling them that the century is theirs for the taking. How right I was.

Pete111

Oh good.

As long as its a 'Global' problem then there will always be someone worse off than us. Love the concept.

1st Briton
'Psst! We may be digging ouselves into the deepest darkest hold imaginable but I hear that somewhere over there, soemone elses hole is ever so slightly deeper and perhaps even a shade darker!

Second Briton
"Woohoo! Break out the bunting!"

I guess at least we both agree the UK is screwed then? That's something I suppose...

Thrugelmir

Rochdale_Pioneers wrote: »

Yes you frothers keep making this point. But we're putting whole percentage points of debt on every week. At worst Brown added 9% of debt post 2001 bringing us to a level on a percentage basis that was still lower than the percentage he inherited. Our vast ocean of debt now has sod all to do with the few percentage points run up post 2001. Take 9% off our current position - would you be happy then?

Anyway, British debt is not the issue, its global debt. Yes Britain will have heading for 90% debt by the time this is over. That in isolation would be bad for Britain was debt elsewhere at previous levels.

The reality is that debt here will be no higher than the rest of the developed world, and still lower than debt in germany, Italy, japan etc etc. Where its a problem is that so many countries owe collectively so much debt all at the same time. You should be more concerned about the structural deficit run up by the rich countries as a whole and whom they are going to be in hoc to.

A few years ago I was discussing life with some Chinese students and telling them that the century is theirs for the taking. How right I was.

Though the longer term issue is that we are poorly positioned as a nation to repay our debt. Other countries are in a much better position to adjust to the new world economy.

mbga9pgf

Especially seeing as in the long term, Interest rates are going to go up.

And we have more combined debt than any other leading nation.