Liquidate entire portfolio until virus is over?

blue_max_3

kuratowski said:

If your theory is right and there is a big conspiracy, that won't happen.  Governments will be hoping to keep interest rates low but inflation rates high and therefore make the debt smaller in real terms without paying high servicing costs.  The name for this is financial repression, and it's how the UK and US escaped from the debt burden of the second world war.

Well, I don't have a conspiracy theory. I have never suggested it was a conspiracy. They are helping the economy by paying a quarter of the countries salaries. That is helping many businesses. All indirectly helping the stock market to some extent. It's documented what they are doing in the States and that is reflected in our market.
Anyway, will have to have a think about the repression argument. Can't get my head round it at the moment. I understood that around 2% was the most advantageous figure. High inflation will surely effect commerce?

bowlhead99

blue_max_3 said:

Anyway, will have to have a think about the repression argument. Can't get my head round it at the moment. I understood that around 2% was the most advantageous figure. High inflation will surely effect commerce?

2% is perhaps a popular number to aim for because
- if you have high inflation people will not want to save for the future to protect against financial shocks, or lend money to the government, because the value of what they get back later will be less in real terms.
- if you have low or negative inflation there is no incentive for anyone to go and buy anything because they can get it cheaper tomorrow.

So, 2% might be thought of as a happy medium that doesn't result in workers demanding massive annual pay rises (perpetuating high inflation) while still making people recognise a 'cost' of the time value of money.

Sebo027

EdGasketTheSecond said:

JP Morgan economist says we are heading for Weimar Republic style inflation:

https://news.maketiplace.com/2020/05/10/former-jpmorgan-economist-we-are-heading-towards-a-weimar-republic-inflation-setup/

Above is taken from the website provided. It would be good to see a long term graph demonstrating this correlation, and a source for the data. 

LHW99

Sebo027 said:

EdGasketTheSecond said:

JP Morgan economist says we are heading for Weimar Republic style inflation:

https://news.maketiplace.com/2020/05/10/former-jpmorgan-economist-we-are-heading-towards-a-weimar-republic-inflation-setup/

Above is taken from the website provided. It would be good to see a long term graph demonstrating this correlation, and a source for the data. 

I note the stocks' y-axis scale is 1/10 of the Balance sheet one, and neither begin at zero. It looks nice, but its "presentational', rather than 'mathematica'l IMO.

port_of_spain

blue_max_3 said:

I understood that around 2% was the most advantageous figure. High inflation will surely effect commerce?

2% is the target which the Bank of England have been using for a while. Very high inflation would indeed be bad for commerce. But only very high inflation, not just going well over the target.

Anything between 0% and 10% inflation seems to be fine for commerce. Perhaps even a bit higher than that would be OK. There hasn't been much research on exactly how high is an issue. But clearly over some level it causes serious problems. And any negative inflation (less than 0%) tends to be bad.

port_of_spain

So-called "financial repression", i.e. interest rates being lower than inflation, can be good for commerce. For instance, if businesses are looking to borrow to invest, it makes it easier for their investments to be profitable.

However, this is very dependent on the other economic circumstances. E.g. is more investment what's needed? And if it is, what is holding it back? If the limiting factor is not the cost of borrowing, but something else, then changing real interest rates may have little effect on investment.

coastline

LHW99 said:

Sebo027 said:

EdGasketTheSecond said:

JP Morgan economist says we are heading for Weimar Republic style inflation:

https://news.maketiplace.com/2020/05/10/former-jpmorgan-economist-we-are-heading-towards-a-weimar-republic-inflation-setup/

Above is taken from the website provided. It would be good to see a long term graph demonstrating this correlation, and a source for the data. 

I note the stocks' y-axis scale is 1/10 of the Balance sheet one, and neither begin at zero. It looks nice, but its "presentational', rather than 'mathematica'l IMO.

Seems to be a connection since 2008 where every increase in the Fed Balance Sheet is met with a rise in the SP 500. Even some of the falls seem to be linked ? Just google  " Fed balance sheet v SP 500 "
https://www.ft.com/__origami/service/image/v2/images/raw/https://d1e00ek4ebabms.cloudfront.net/production/30b8d4ee-5b68-436d-890d-7215e9003dfb.png?source=Alphaville
https://pbs.twimg.com/media/Dz38SLUX0AAUYGy?format=png&name=900x900
https://pbs.twimg.com/media/EO2M7dtX4AE9Dk1?format=png&name=small
Earlier in the thread the suggestion April is a good month also isn't that far away. It's been that way in recent decades.
https://www.marketwatch.com/story/for-the-stock-market-april-is-the-strongest-month-2019-04-02
http://stockmarketalmanac.co.uk/2017/04/the-stock-market-in-april-4/
Regarding the OP's question I'm leaning towards the low being in especially in the US markets. They've recovered very well and it would take a 20% fall to test the March lows. Who knows ?
https://insight.factset.com/sp-500-forward-p/e-ratio-rises-above-20.0-as-eps-estimates-continue-to-fall

EdGasketTheSecond

blue_max_3 said:

Thrugelmir said:

Certainly a broad suggestion that induced inflation is the only way out of the current printing press frenzy. 

I wonder how many will cope if interest rates rose to even 5%. Given I have paid 16.25% when I bought my first property, it amuses me that people could never imagine it rising. It's going to catch a lot of people out if the value of their property falls at the same time.
If this plays out Stateside, it could weigh heavily on the stock market too.

You just will never see 5% interest rates. The FED have put themselves in a corner where they can't afford to raise interest rates much above 2.5% as debt would be unserviceable. That is why inflation, when it gets hold, would be unstoppable. You'd have to see a financial reset, debt jubilee or some other massive change before rates could be at anything higher than 2.5%.

Sailtheworld

I keep reading about how I should we worried about warnings from the BoE about the worst economic conditions for 300 years. and the economy being ravaged.

Where's the inflation coming from? All the excessive wage rises that happen when war, pestilence, famine and death take a saunter down the local high street?

bowlhead99

Sailtheworld said:

Where's the inflation coming from? All the excessive wage rises that happen when war, pestilence, famine and death take a saunter down the local high street?

This is why you have to look at the Wiemar Republic hyperinflation following the first world war, which EdGasketTheSecond heard about a couple of months ago and usually brings up every couple of weeks