Fed Hike

Generali

michaels wrote: »

UK q2 geowth looks to be about 0.1%. Does that really justify a rise?

I think that the BoE will follow the Fed up. Once the Brexit risk is out of the way I expect to see a goodly rise in investment (assuming Remain wins - a Leave win will cause a huge fall off in investment in the short term at least).

economic

FED have no choice but to raise. low rates is killing the pensions and savings of so many. plus there is no more room to accomodate once another recession comes along so there is a need to normalise rates. this will cause dollar to rise and casue another global recession.

michaels

economic wrote: »

FED have no choice but to raise. low rates is killing the pensions and savings of so many. plus there is no more room to accomodate once another recession comes along so there is a need to normalise rates. this will cause dollar to rise and casue another global recession.

The quickest way to see some inflation in the UK to help deal with the debt and allow interest rates to be normalised would be Brexit leading to a fall in sterling - it would seem to be Carney's only reccomendation for meeting his inflation target.

michaels

Generali wrote: »

I think that the BoE will follow the Fed up. Once the Brexit risk is out of the way I expect to see a goodly rise in investment (assuming Remain wins - a Leave win will cause a huge fall off in investment in the short term at least).

If you assume that weak growth in the UK is as a result of the Brexit vote then that makes sense.

It you think this is just a continuation of a fall in growth rates that has lasted at least a year and reflects weakness in the Eurozone and the BRICS then you might assume that any brexit effect is second order.

economic

michaels wrote: »

The quickest way to see some inflation in the UK to help deal with the debt and allow interest rates to be normalised would be Brexit leading to a fall in sterling - it would seem to be Carney's only reccomendation for meeting his inflation target.

not neccesarily - inflation does not make mean debt will be gone faster always. we are in stagnation and if we get inflation we maybe in stagflation. wont help the debt may even make it worse as tax revenues fall.

Generali

economic wrote: »

FED have no choice but to raise. low rates is killing the pensions and savings of so many. plus there is no more room to accomodate once another recession comes along so there is a need to normalise rates. this will cause dollar to rise and casue another global recession.

German life assurance companies are going to start going bust from 2018 because of NIRP apparently.

http://www.wsj.com/articles/german-life-insurers-feel-pain-of-negative-rates-1460547975

German regulators are so concerned about the impact of negative interest rates on the country’s life insurers that they have said they can only be sure the sector is safe through 2018. Even today, half the industry would be short of capital without the help of special measures.

The trouble lies in the promises insurers made to policy holders years ago, when nobody would have guessed central banks around the world would send interest rates barreling toward zero, only to remain there for years on end and even break into negative territory. The German life industry is particularly badly affected by very low or negative interest rates because companies have historically offered what now look like high levels of guaranteed returns over very long periods.

It does rather sound like Equitable Life all over again: making promises that falling inflation and interest rates have made impossible to keep.

Filo25

michaels wrote: »

If you assume that weak growth in the UK is as a result of the Brexit vote then that makes sense.

It you think this is just a continuation of a fall in growth rates that has lasted at least a year and reflects weakness in the Eurozone and the BRICS then you might assume that any brexit effect is second order.

I personally think the uncertainty around Brexit is having an impact but suspect that the bigger issue at this stage is the weakening global environment.

economic

Filo25 wrote: »

I personally think the uncertainty around Brexit is having an impact but suspect that the bigger issue at this stage is the weakening global environment.

yes brexit is just noise. bigger picture - weakening global environment that is about to get a LOT worse as the fed raises and dollar rises.

but anyway the whole point of all this discussion is where is the best places to have our welath. given the outlook i would say blue chip US stocks, other defensive stocks say in uk, property in good location (with limited supply) and cash.

Generali

michaels wrote: »

If you assume that weak growth in the UK is as a result of the Brexit vote then that makes sense.

It you think this is just a continuation of a fall in growth rates that has lasted at least a year and reflects weakness in the Eurozone and the BRICS then you might assume that any brexit effect is second order.

TBH if I was running a large exporter in the UK I'd be letting stocks run down a bit running up to the Brexit vote. Similarly I'd be avoiding making any large investments. Those things will have direct impacts on GDP.

I accept that it is possible that there is a long term gain to be made from Brexit. I think it's less likely than there being a loss but it is quite possible that ridding companies of some of the excesses of the EU would be helpful. In the short term however (decade?) I am positive it will be highly destructive as rent seeking unwinds (I'm looking at you Nissan) as companies that want easy access to EU markets relocate.

michaels

Generali wrote: »

German life assurance companies are going to start going bust from 2018 because of NIRP apparently.

http://www.wsj.com/articles/german-life-insurers-feel-pain-of-negative-rates-1460547975



It does rather sound like Equitable Life all over again: making promises that falling inflation and interest rates have made impossible to keep.

Obvious solution is to increase German interest rates, the German economy (possibly apart from it's banks) could almost certainly cope with higher rates and a stronger German currency would help to normalise world trade