Has QE failed?

Linton

tigerspill wrote: »

So I have just read that article and have a question (showing my naivety).
What does it mean to "invest in cash"? What are the vehicles (other the savings/bank accounts)? Is an Absolute Return fund a cash investment?

Investing in cash - keeping your wealth as cash. This guarantees you will lose value over time because of inflation.

Absolute Return funds are very different to cash. They are managed funds with the objective of always making a (possibly small) positive return every year. They typically contain a wide range of bonds, some equity, property, cash and derivative products ( simple shorting or more complex instruments) chosen in the hope that the gains will always outweigh the losses.

In general they have not been going for a long time and some have failed badly, others appear broadly successful. I think it is fair to say that the jury is still out.

Chickereeeee

Ryan_Futuristics wrote: »

Funnily enough, I'm seeing more articles pop up now which suggest I'm not alone: "Bill Eigen, famed fixed income investor who works for JP Morgan has taken his unconstrained bond fund to an incredible 90% cash in the past – peaking in 2007. He now holds 55% of his fund in cash as he prepares for what he calls “double digit devastation”, that is the effect rising bond yields will have on prices."

http://www.morningstar.co.uk/uk/news/132373/should-you-invest-in-cash.aspx

That article refers to the possibility of bond prices dropping (and a diversified fund with c. 50% bonds/fixed interest having a higher weighting in cash than normal). Brooks is 'positive' on European and Japanese equities.

If it continues, I see low oil prices as equivalent to 'helicopter money', and replacing QE. This will boost equities, until growth causes rising oil and other commodity prices, thence inflation, thence higher interest rates and so the cycle continues. Low oil prices 'should' have been the the result of the last recession, but increased consumption in China meant it was very short lived.

Ryan_Futuristics

Linton wrote: »

Investing in cash - keeping your wealth as cash. This guarantees you will lose value over time because of inflation.

But you could say pumping up asset prices by 60% guarantees much larger losses in the short-to-medium term

Chickereeeee wrote: »

That article refers to the possibility of bond prices dropping (and a diversified fund with c. 50% bonds/fixed interest having a higher weighting in cash than normal). Brooks is 'positive' on European and Japanese equities.

If it continues, I see low oil prices as equivalent to 'helicopter money', and replacing QE. This will boost equities, until growth causes rising oil and other commodity prices, thence inflation, thence higher interest rates and so the cycle continues. Low oil prices 'should' have been the the result of the last recession, but increased consumption in China meant it was very short lived.

Yep, and I'm also positive on European and Asian equities (but it would take some pretty big balls to have more than 10% of your capital in Europe at the moment)

Europe's set to benefit from cheap oil more than anyone - and this could be the QE substitute Europe needs ... But then Europe is cheap because there's also the looming threat of slipping into a depression, and long-term growth prospects don't look spectacular (with an ageing population and relatively little invested in innovation)

Asia looks good for growth, but it's certainly well priced in - finding bargains in Asia is tricky now, and in the cases of Indonesia and Malaysia, you're paying an extraordinary premium to hold assets

ChopperST

Ryan I'm very much with you on P2P but thereis no way as a tax payer you'll earn 8% on Zopa / Ratesetter. Higher rate taxpayers will be lucky to earn 3%

Glen_Clark

To answer the original question 'Has QE Worked' you need to know what it was intended to do. If it was intended to make the rich richer and the poor poorer, it has worked. This isn't capitalism, its socialism for the rich - (just like the flood insurance on Thameside Mansions is now being subsidized by the premiums on one bed flats.) But what politician would admit that was their intention?

Ryan_Futuristics

ChopperST wrote: »

Ryan I'm very much with you on P2P but thereis no way as a tax payer you'll earn 8% on Zopa / Ratesetter. Higher rate taxpayers will be lucky to earn 3%

Yeah, I've only used Funding Circle so far, and I'm currently earning something like 10.5% (estimated 7.5% or so after debts and fees) - and I was thinking of adding Ratesetter (at 5.8%) just to spread the platform risk a little

I think ISA wrappers are on the way, but potentially so too will be a flood of new investors ... So, the way they work, I could see rates being pushed down

Glen_Clark wrote: »

To answer the original question 'Has QE Worked' you need to know what it was intended to do. If it was intended to make the rich richer and the poor poorer, it has worked. This isn't capitalism, its socialism for the rich - (just like the flood insurance on Thameside Mansions is now being subsidized by the premiums on one bed flats.) But what politician would admit that was their intention?

Yeah that's exactly what it has done - inflating asset prices without really fixing the economy

Glen_Clark

Ryan_Futuristics wrote: »

Yeah that's exactly what it has done - inflating asset prices without really fixing the economy

Judging by the current account deficit, (and the queues at foodbanks which probably tell you more than Government statistics) inflating asset prices has made the underlying economy worse. Why would investors risk capital in productive industry when they can make more from unproductive land speculation and buy to let? - with the taxpayer making up the difference between wages and rents with housing benefit - now over 5 million claimants and rising fast. Hence Osborne has borrowed more money in 4 years than was borrowed in the 300 years before him when records began :eek:
But some people are too intoxicated by rising asset prices to see it

Mistermeaner

need to get back to manufacturing. Making stuff to make money instead of printing it.

Need to get developing shale