Tide turning for interest rates?

Glen_Clark

lvader wrote: »

Actually it was the ability to do QE that created the confidence for the pound to appreciate when Europe looked doomed. Printing money is better than a bailout or a default it seems.

I don't know where you get this idea the pound has appreciated.
Europe may be doomed but its currency has held up better than Britain's -you got 1.4 Euros to the pound when the Euro was introduced. (Of course there have been fluctuations since then but the pound is still well down.)
Oh and the 'growth' is funded by increased borrowing, so its unlikely to last much beyond the next election.
But all the above pales into insignificance alongside Osborne's taxpayer funded interest free loans on sub prime mortgages. Help to Bubble is ringing every alarm bell in my head :eek:

bigadaj

Yes, this has also made me think about political risk in any form of investment. So many times that people have come on this board with ideas that buy to let is better than 'gambling' in the stockmarket, and the fallacy of this view is explained. No problem with property as part of a diversified portfolio, however there seems to be no limit to the measures that governments will go to support house prices, in which case a buy to let seems far more sensible as it is less risky than objective analysis would suggest.

Milarky

Glen_Clark wrote: »

all the above pales into insignificance alongside Osborne's taxpayer funded interest free loans on sub prime mortgages. Help to Bubble is ringing every alarm bell in my head :eek:

If you follow Max Keiser, he keeps on about the peculiar symmetry in the equation


Govt to 'cut' 11.8bn Housing Benefit <=> Govt to 'spend' 12bn on Help to Buy [Votes] Scheme

Glen_Clark

Milarky wrote: »

Govt to 'cut' 11.8bn Housing Benefit <=> Govt to 'spend' 12bn on Help to Buy [Votes] Scheme

Government was to cut sickness benefits which doesn't appear to have worked either, just lined the pockets of private contractors with taxpayers money. They now seem resigned to just reducing the rate of increase. But trying to cut housing benefit at the same time as pumping up housing costs with Help to Bubble can only lead to a bigger disaster.

Thrugelmir

Glen_Clark wrote: »

But all the above pales into insignificance alongside Osborne's taxpayer funded interest free loans on sub prime mortgages. Help to Bubble is ringing every alarm bell in my head :eek:

Nothing sub prime about the schemes.

Glen_Clark

Thrugelmir wrote: »

Nothing sub prime about the schemes.

Well they are not Prime Mortgages are they, because if they were Prime Mortgages Building Societies would lend without them. There would be no need for Osborne's Help to Bubble Scheme.
So they must be Sub-Prime.
And the real cost of them will be hidden by every trick they can think of, just like the real cost of bailing out the bankers. My Local Council (Nottinghamshire) had Icelandic Bank Debt on its books at face value when it was trading at half a penny in the pound! Expect the same tricks with all these taxpayer backed interest free Sub Prime mortgages.

sabretoothtigger

lvader wrote: »

QE will always lower gilt yeilds because it takes gilts off the market so increases domand. We ae not Zimbabwe!

QE has about 1/3 of the total debt. The main flaw there is you saying, and so increases demand.
Theres no good reason for QE to increase others buying bonds except in speculation, for holders or actual long term buyers its not improving the quality of the bonds.

The BOE increases the amount of currency in order to buy the bonds. The government is enabled in its spending and borrowing and is also increasing the amount of bonds available.
While we could argue about demand, it is certain that supply has been increasing over the last 4 years of both currency and bonds total.

True the BOE is withholding its bond and people point out less cash is circulated but in total the quality of Sterling decreased, the quantity of it increased and the amount of trade done in Sterling has not increased or improved in its quality.


Large sections of trade done rely on global trade done in dollars (OPEC) and of goods we dont control or own. Traders choose to use sterling and London and our legal system and so on but they dont have to.
Or put simply most stocks in the FTSE are not British, all of them can be traded elsewhere if our currency or systems failed to be reliable or consistent as 1/3 of UK debt owned fictitiously might cause

Glen_Clark

John1993 wrote: »

No-one talks about fractional changes in yields, though,.....
But, what do I know, I'm only an interest rates trader?..

Oh yes they do

Quote: The 10-year gilt yield has risen by more than 50pc since its low point last April. source: http://www.telegraph.co.uk/finance/comment/jeremy-warner/10297368/Higher-interest-rates-About-time-too.-Theyre-a-most-welcome-sight.html

Glen_Clark

Interesting comment in the Telegraph. Under normal circumstances, when interest rates rise its because of improving company profitability and that helps to boost shares. But todays circumstances are far from normal. We have the lowest interest rates since records began, artificially created through QE by Governments in an attempt to inflate away their debt.
We are in uncharted waters. So its no use looking at past performance. You might as well throw away the rule book. This time it really is different because nothing like this scale of QE in Britain has happened before. This time if interest rates rise it will because of a reduction in QE. Company earnings will fall because they will have to pay more interest on their debts. So a conventionally well diversified portfolio won't work - Gold, Property, Equities, Bonds etc will all be less attractive when you can earn more in bank deposits.
Their Conclusion: The only asset that won't fall in value will be cash in the bank.
(My thoughts, This assumes QE will be reined in at some point. But Osborne seems hooked on QE like a junkie on Heroin, so might maintain QE until the pound is worthless? I am about half in equities, half in cash and bonds.)

chucknorris

Glen_Clark wrote: »

Ah Thanks for the udate.
I should have added the Bank of England has predicted interest rates staying low, given their record on inflation forecasting the opposite seems more likely - indeed bond yields rose as soon as they said it..

(Being undecided as usual I have;
Shares 51.3%
4.5% fixed ISA 13.8%
NSI Index linked Bonds 11.3%
Instant access cash earning 2% gross 23.5%)

I'm moving away from holding cash, currently my portfolio is:

47% property
17% cash
14% pension
13% owed
9% shares

Moving more money into shares (and pension) is my target.