UK unemployment rate falls to 5.2%, lowest in nearly 10 years

michaels

wotsthat wrote: »

....and no sign of any inflation.

They'll go up though. There's only so many times you can strongly hint at increases and not do it.

Forward guidance (getting people to change behaviour in anticipation of any change) relies upon that guidance occasionally being reliable. I'm a year into a 5 year fix based on the words that came out of Carney's mouth - I was played and made myself look a chump. It would be over egging it to say I feel violated because I can hardly complain about 2.29% until 2019.

And I fixed 12 months earlier than you based on an identical set of messages that were being put out at that time and perhaps it will still look the same 12 months from now...although some seem to think 'this time it will be different'....

Generali

chucknorris wrote: »

When rates do get back to normal (or what I perceive as the 'new norm') I might have another look at bonds. But I have been wary of investing in bonds because of what would happen when rates went back up. My logic might be flawed, as I didn't really do much research, as I wasn't that drawn by bonds in the first place, but for the sake of diversity, I will have another look at some point.

Your logic isn't flawed. Bonds are a lousy bet right now.

I have some fears as to what will happen to annuity providers as rates rise and the holders of their products. I suspect that some provision will have to be made for them.

Generali

michaels wrote: »

And I fixed 12 months earlier than you based on an identical set of messages that were being put out at that time and perhaps it will still look the same 12 months from now...although some seem to think 'this time it will be different'....

My opinion isn't so much this time it's different as this time it's going to go back to how it's always been apart from the last few years.

Seriously, you can't base investment theory solely on the last 7 years any more than you can on the period 1929-39 or the post 1873 1870s.

The crisis seems to be ending so things are going back to normal. Even this month, investment banks have shed another 100,000 jobs.

wotsthat

Graham_Devon wrote: »

You know what wotsthat.

We have something to agree on. And not just the chump bit

It was OK to start with. We had an unemployment figure and forward guidance that interest rates would look to be raised when unemployment hit the magical 7% number.

As soon as it got close, forward guidance changed. Afterall, as Carney said himself, he was not aware unemployment would fall as fast as it did.

We then had months of "rises are closer" and "rates will be lower for longer" speeches. This was all dependant on who he was speaking to. The CBI? Well rates would be lower for longer. BOE reports? Time is getting closer for a rate rise.

And now we have the situation where Carney didn't know oil would fall or that China would have problems. So based on that, all previous guidance is out of the window and it's all based on wage rises. (convenient now they are falling back).

If wage rises grow over the coming few months, it will change again as it snowed in December and Carney didn't realise it sometimes snows in December.

I put the chump bit in for you to pick up on - think of it as an early Christmas present.

We only really agree I'm a chump. The problem I have with the forward guidance is not that minds were changed as circumstances changed but, at the time I fixed, the language from Carney seemed far less nuanced about rate rises and much more explicit. Yes, it was nuanced enough to give ample get outs but I interpreted it to mean 'this is what we're going to do' rather than 'this is what we might do'.

I was a chump because he clearly never said he was going to do something and I over-estimated his predictive abilities. More fool me because I'm now stuck paying 2.29% for the next 4 years

Generali

Remember that the Governor of the BoE is under no obligation to tell the truth: he (and shamefully it's always been a he) says what suits his purposes not the truth. The statements of Mr Carney are about managing inflation expectations not a representation of reality.

The economic data are fantastic news. The UK is doing very well: unemployment is collapsing, employment rates are at an all time high and forward looking indicators (manufacturing and services PMIs) are bot solidly in positive territory. If the Government can get spending under control than the UK is looking in really good shape.

Thrugelmir

chucknorris wrote: »

When rates do get back to normal (or what I perceive as the 'new norm') I might have another look at bonds. But I have been wary of investing in bonds because of what would happen when rates went back up. My logic might be flawed, as I didn't really do much research, as I wasn't that drawn by bonds in the first place, but for the sake of diversity, I will have another look at some point.

Not all bonds are fixed rates. There are funds that invest in floating rates. Twentyfour Income is one I've held for a while. Though now trades at a premium to NAV.

Lots of question marks over the sustainability of dividend levels for some of the UK's biggest payers as well.

Generali

Thrugelmir wrote: »

Not all bonds are fixed rates. There are funds that invest in floating rates. Twentyfour Income is one I've held for a while. Though now trades at a premium to NAV.

Lots of question marks over the sustainability of dividend levels for some of the UK's biggest payers as well.

The vast majority of bonds are fixed rate to the extent that most bond teams at asset managers and investment banks are known as fixed income teams. If someone told me that 90% of issues are fixed rate I'd be surprised that the figure was so low.

FWIW, I think that the dividends of oilies, miners and cigarette companies are the main ones at risk. I am particularly interested to see what happens to Anglo American this year. I have a funny feeling that they are in all sorts of trouble. Anyone that invests in cigarette companies is mad.

tincans6

Generali wrote: »

The vast majority of bonds are fixed rate to the extent that most bond teams at asset managers and investment banks are known as fixed income teams. If someone told me that 90% of issues are fixed rate I'd be surprised that the figure was so low.

FWIW, I think that the dividends of oilies, miners and cigarette companies are the main ones at risk. I am particularly interested to see what happens to Anglo American this year. I have a funny feeling that they are in all sorts of trouble. Anyone that invests in cigarette companies is mad.

I'm with you on this - I think there is a colossal bubble in bonds - huge amounts of government debt with a negative yield.

One thing is certain we will get back to 'normal' either slowly or quickly - but we will get back there eventually.

Almost all miners certain to slash dividends (why BHP haven't announced already is a mystery).

Good to see a Vampire Squid prediction that Iron Ore will average below $40 for the next 3 years & that "by 2040 China's demand for ore will contract by 50% as steel consumption drops and more scrap is used with greater recycling".

I can't see ore prices falling too much, but there is no way I would be buying BHP or Rio shares even at these bombed out prices. Decades of monster over capacity which can't be destroyed.

Tobacco companies are a strange one - haven't held any for years and missed out on massive capital growth and better than average income stream. They continue to confound me & I suspect could do for another decade.

Thrugelmir

tincans6 wrote: »

Almost all miners certain to slash dividends (why BHP haven't announced already is a mystery).

Last man standing approach? Akin to Saudi Arabia with oil. With low cost ore production in Australia. Keep the squeeze on those competitors with higher production costs.

You didn't mention Shell, BP or HSBC either. All potentially may have difficulty in maintaining dividends.

Generali

I don't think it's possible to hold cigarette companies from a moral POV, frankly.

I think we're going to see a very messy shake-out this year in the resources sector. BHP and RIO should come through okay but even the likes of Glencore could be in a spot of bother. BHP and RIO have both committed themselves to continuing to pay out a steady dividend which is nuts quite frankly and being supported by increased borrowing. There'll be blood on the carpets when they are forced to cut in a few years.

I think Aus is going to do alright out of this in the end Lots of the really cheap mines are in Aus and it's such a great place to operate (high minimum wages don't impact on mining firms) that generally companies will cut capacity elsewhere first.