Mark Carney warns of complacency in financial markets

wymondham

Has Mr Carney assured us yet today he will raise rates when needed ...... although not yet ...?

MFW_ASAP

Good to see that Carney is finally catching up....

MFW_ASAP wrote: »

I've been quietly moving my pension investments into cash (and my wife and daughter's pensions too). I think there will be a major correction as an awful lot of investors have moved into the market because of zero returns from savings are are investing in funds/shares that are way outside their normal risk profiles. Once a small correction occurs, these guys will panic sell.

"Mark Carney said that in the search for returns on their money, investors were pushing up the price of assets and taking excessive risks.

Speaking at a conference in Wales, he said that the situation increased the risk of a "sharp reversal" in asset prices.

He also said that a rise in UK interest rates was "getting closer".
Asset prices 'stretched'

"We are alert to the possibility that financial markets may be mispricing risks", Mr Carney told an insurance industry conference."

princeofpounds

What could possibly have caused complacency in financial markets?

Oh yes. Central Bank Policy. That was it...

Sharia Banking manages quite well.

Islamic banking... one of the biggest exercises in legal & theological semantics there is. For something that is meant to provide a replacement for credit markets, it looks suspiciously like debt from almost every practical angle.

Generali

MFW_ASAP wrote: »

Good to see that Carney is finally catching up....



"Mark Carney said that in the search for returns on their money, investors were pushing up the price of assets and taking excessive risks.

Speaking at a conference in Wales, he said that the situation increased the risk of a "sharp reversal" in asset prices.

He also said that a rise in UK interest rates was "getting closer".
Asset prices 'stretched'

"We are alert to the possibility that financial markets may be mispricing risks", Mr Carney told an insurance industry conference."

Isn't yours the HPC argument that you despise when it comes to housing but espouse with other assets apparently.

How long are you prepared to be out of the market? Given that you can't call it right every time (you accept that right?) at what point do you buy back in? 10% rise, 20%, 30% or does each increase mean that the market is more and more overvalued and you're just more right?:money:

Thrugelmir

Generali wrote: »

Stock markets look reasonable to me.

Thats a broad generalisation. When looking at Company results on an individual basis there's plenty of negative factors around. Finding value is increasingly difficult.

Generali

Thrugelmir wrote: »

Thats a broad generalisation. When looking at Company results on an individual basis there's plenty of negative factors around. Finding value is increasingly difficult.

I agree but most people buy into funds rather than individual names.

The thing that I find interesting is not just that the FTSE 100 is trading below a long term average PE despite very low interest rates it's that the average dividend cover is apparently about 2.5. 2.0 for an individual name is pretty decent as a rule.

When the banks finally get their mojo back (quite a wait in store I grant you) the market will rocket as dividends shoot up.

tincans

Generali wrote: »

I agree but most people buy into funds rather than individual names.

The thing that I find interesting is not just that the FTSE 100 is trading below a long term average PE despite very low interest rates it's that the average dividend cover is apparently about 2.5. 2.0 for an individual name is pretty decent as a rule.

When the banks finally get their mojo back (quite a wait in store I grant you) the market will rocket as dividends shoot up.

Perhaps companies are geared more highly than in the past.
I don't know recent figures but generally gearing increased considerably during the 1990's compared to historical levels (even without Tesco style SPV's).

I would class myself as a long term equity person and never trade but I've just got a feeling that the market looks a bit 'crashy' - and not least the USA stock market.

I'm not talking 1987 style meltdown, but I'd hardly be surprised by a rapid 5-10% fall before 2014 is up.

Still 5-10% is trivial in the long run.

Generali

tincans wrote: »

Perhaps companies are geared more highly than in the past.
I don't know recent figures but generally gearing increased considerably during the 1990's compared to historical levels (even without Tesco style SPV's).

I would class myself as a long term equity person and never trade but I've just got a feeling that the market looks a bit 'crashy' - and not least the USA stock market.

I'm not talking 1987 style meltdown, but I'd hardly be surprised by a rapid 5-10% fall before 2014 is up.

Still 5-10% is trivial in the long run.

Interesting comments, thanks.

Our chief economist at work thinks that we're still at the early end of a bull market and that falls are healthy (bull market not bubble) and represent a buying opportunity.

I don't think companies are over-borrowed. Governments and individuals still have substantial borrowings and those could be problematic.

MFW_ASAP

Generali wrote: »

Isn't yours the HPC argument that you despise when it comes to housing but espouse with other assets apparently.

How long are you prepared to be out of the market? Given that you can't call it right every time (you accept that right?) at what point do you buy back in? 10% rise, 20%, 30% or does each increase mean that the market is more and more overvalued and you're just more right?:money:

Bit of a strawman argument. I have never 'despised' the HPC argument, indeed I actually agreed that we were heading for a correction pre-2007/08 and started paying down my mortgage and increasing my savings in anticipation. Once I felt the crash was over and the bottom reached, I bought a new house.

The issue I have with the HPC crowd is that once they had their crash, they didn't make use of it and are still sitting on their hands still waiting for it to happen. They are 'perma-bears' which is a ridiculous position to hold because markets are never permanently in decline or permanently in boom.

As far as the stockmarket is concerned, I monitored my investments over the past 12 month and they have been up and down, but the amount in the pot is about the same today as it was 12 months ago. I can't see what would stimulate, in either the UK or US markets, a 10% to 30% rise while I'm out of the market. QE has ended and we are just waiting for an interest rate rise. The footsie 100 rises to 6800 and then it falls. If I were regularly contributing to my pension, I could gain on these falls by buying cheaper shares, but I'm not doing. My pension just goes up and down and, effectively goes nowhere.

I did the same action prior to the crash in 2007, and was out of the market for about 4 months, I may have missed out on some gains, but these would have been wiped out by the huge fall.

I'll be out of this market perhaps for anything upto a year. If I'm wrong then I might have missed out on an average of 5% gain, if I'm right, then I'll make a much bigger gain.

Thrugelmir

MFW_ASAP wrote: »

I can't see what would stimulate, in either the UK or US markets, a 10% to 30% rise while I'm out of the market.

In the US fracking. Plentiful supply of cheap energy. Enough in fact to export as well as surplus to requirements. Spin off is that manufacturing is returning on shore. If HK unrest spreads to mainland. Then this process could accelerate quicker and further.

In no way suggesting financial issues are resolved however gives a solid foundation to future growth. Something the UK is severely lacking.