Is this a bear market?

tropic_of_Username019

The tool to reduce excessive inflation is raising taxes. They do have the tools, because we have a reasonably functional tax system.

kinger101

tropic_of_Username019 said:

Most people spend nearly all their income, so replacing 80% of their income doesn't look like "huge sums" to them, it looks like something they might just get by on. And many other people are still facing huge drops in their income, because they fall through the holes in the Government's 80% schemes (e.g. zero-hours employees; recently self-employed; people forced to reduce work to look after their children during school hours).

The assistance offered is generous.  Very generous compared to the alternative of people losing their jobs and needing to rely on benefits.  Some people will fall through the gaps, but the Government needs to come up with broad-stroke approaches which work for the many and are implementable.

The overwhelming majority of the population should be able to survive a few months on 80% income.  They might need to make some adjustments to their lifestyle, but reduced commute costs will help.  The major difficulty might be the delay the money arriving for the self-employed.  Perhaps the banks can help there with interim interest-free overdrafts for people who'll be covered by the scheme.  In fact, it's the least they can do after the Government stepped in in 2008.

Linton

I agree that significant inflation is not a serious risk.  By the end of the pandemic, both people and companies on average will have less money to spend than prior to the start thanks to loss of income, unemployment and deferred rent, loan interest, and tax.  The most serious problem will be the rebuilding of company finances and replacement of those companies which do not survive.

The money being spent now is not "wasted".  It is merely a very partial replacement for the money that is no longer being recirculated around the economy.

tropic_of_Username019

kinger101 said:

The assistance offered is generous.

I was arguing that it isn't inflationary, not about whether it's "generous". That is an odd term to use, when the Government is supposed to be act on the people's behalf, using public money, to handle the crisis; they are not our parents or superiors, generously giving us some of their own money.

I agree they need to use broad-stroke schemes. IMHO, a better broad-stroke scheme — with much smaller gaps — would be a temporary universal basic income.

Thrugelmir

@Prism
Nick Train's views in interviews are consistant. LT invest according to their own strategies and convictions. In essence a one trick pony. Their belief is that quality companies in certain sectors will perform well in the longer term. Also says that investors should be diversified and hold investments with different managers. As their own funds will go through periods of market underperformance. That's unavoidable with portfolios concentrated into a small number of stocks. Like Buffett's view,  there's limited opportunities to invest into quality companies at the right price. 

Prism

Thrugelmir said:

@Prism
Nick Train's views in interviews are consistant. LT invest according to their own strategies and convictions. In essence a one trick pony. Their belief is that quality companies in certain sectors will perform well in the longer term. Also has says that investors should be diversified and hold investments with different managers. As their own funds will go through periods of market underperformance. That's unavoidable with portfolios concentrated into a small number of stocks. Like Buffett's view,  there's limited opportunities to invest into quality companies at the right price. 

I agree there will sometimes be some underperformance however from what I have seen it tends to be short lived. LIndsell Train went through a short period of underperformance during the later part of last year yet its still beating the index over the full year. Fundsmith and Scottish Mortgage are up even further. When the dust clears I think that people will forget about 'price' and continue their previous habits. Most people in those types of funds probably haven't done much selling anyway since they have held up pretty well

Thrugelmir

Prism said:

Thrugelmir said:

@Prism
Nick Train's views in interviews are consistant. LT invest according to their own strategies and convictions. In essence a one trick pony. Their belief is that quality companies in certain sectors will perform well in the longer term. Also has says that investors should be diversified and hold investments with different managers. As their own funds will go through periods of market underperformance. That's unavoidable with portfolios concentrated into a small number of stocks. Like Buffett's view,  there's limited opportunities to invest into quality companies at the right price. 

I agree there will sometimes be some underperformance however from what I have seen it tends to be short lived. LIndsell Train went through a short period of underperformance during the later part of last year yet its still beating the index over the full year. Fundsmith and Scottish Mortgage are up even further. When the dust clears I think that people will forget about 'price' and continue their previous habits. Most people in those types of funds probably haven't done much selling anyway since they have held up pretty well

Many investors have yet to appreciate the financial damage that is being caused. The thing that many of LT's current investments have in common. Is that they depend on consumers spending money. 

DuffHead

Too much demand and not enough supply IMO. Inflation is on the cards by definition the economy is not producing much goods or services, yet billions are being dished out as the government gives everyone wages. Never mind the collapse of global supply chains.  

kuratowski

DuffHead said:

Too much demand and not enough supply IMO. Inflation is on the cards by definition the economy is not producing much goods or services, yet billions are being dished out as the government gives everyone wages. Never mind the collapse of global supply chains.  

The government is "dishing out" money so people can pay their bills and not starve.  Given the numbers put out of work by the crisis I really doubt this is inflationary.

EdGasketTheSecond

kuratowski said:

DuffHead said:

Too much demand and not enough supply IMO. Inflation is on the cards by definition the economy is not producing much goods or services, yet billions are being dished out as the government gives everyone wages. Never mind the collapse of global supply chains.  

The government is "dishing out" money so people can pay their bills and not starve.  Given the numbers put out of work by the crisis I really doubt this is inflationary.

Maybe not immediately but it will indeed be inflationary. Do you think money can just be conjured from thin air and handed out freely with no consequences? Ultimately people can only pay their bills by hard work, not government hand outs. There will be a reckoning coming.