Does anyone remember when the UK had an economy worth investing in?

thegentleway

Michael121 said:

thegentleway said:

Why is it “your” country? You didn’t chose to be born here...

What difference does it make. 

I think it makes a huge difference. You don’t think your life would have turned out differently if you were born in a developing country? 

If you’re born in the U.K., you’ve basically won the lottery of life. Seems strange to complain about being extremely lucky to live in the 6th largest economy in the world when most people alive today are nowhere near as fortunate...

grumiofoundation

CreditCardChris said:

bowlhead99 said:

CreditCardChris saidTake the S&P for example, for every $1 invested in the index, 27.7 cents goes into the top 10 companies because they make up 27.7% of the index. 

These companies are Apple, Amazon, Microsoft, Facebook, Alphabet, Visa etc. Absolute monster companies that are overall incredible companies, regardless of your view of data privacy etc, they make so much money and have awesome growth prospects.

Yes, it is quite a concentrated index, and your figures are slightly out of date in that the weighting in a typical S&P tracker fund as of yesterday  (using the iShares $220bn S&P 500 ETF as an example) had ~30.5% in the top 10 of the 500 names (Apple, Microsoft, Amazon, Alphabet, Facebook, Berkshire, J&J, Visa, P&G, Nvidia).

With the top three all up 70-85% in share price value year to date, the weighted average return for those 10 companies is 50% year to date, i.e. their value was a third lower on the first day of the year.  If you scale their current 30% weight of the S&P back to being a third lower they would only have been worth 20% of the index's current value back then.  So what you can say is that they have contributed ~10% of the index's value growth year to date, and over 9% of that 10% has come from the first five names. What's the total price growth of the index YTD?  9%. 

So although on the face of it it seems that the US economy is booming and the index of 500 leading stocks is breaking new highs and is clearly the best country in the world, actually all the year to date growth has come from those 5-10 companies and the other 490 companies as a whole were completely flat, with no average growth at all; and they have only been able to maintain the 'no growth at all' due to massive government handouts in the form of grants, tax cuts and loans provided by Uncle Sam (funded in part by US treasury issuing bonds to foreign investors).

I'm not sure it is wise to do as you do and shun all stock markets outside the US and all companies on the face of the earth that are not US-listed, on the basis that US markets are up while other markets are flat or down, when we can see that slightly more than every single dollar of the growth in the index this year has come from just five high profile companies - only one percent of the number of companies in the index, and a little over a tenth of a percent of the number of companies in the US total market index.  The dominance of a few at the expense of the many mirrors the fact that over a third of the country's wealth is held by 1% of the people in it. 

Still, if life is about getting rich on the back of other people's coat tails, then the US market would seem to be a great place to dive in and hold on with both hands. You can't lose, right?

And what about the other 29 years where US markets have been dominating? And please for the love of everything holy don't tell me it's a "market cycle" or that the US was a developing nation. The US was a developing country in the 1800's, not in the 1950's. 

But it's clear we're going around in circles. 
A lot of people think the UK is a booming economy because it's propped up on old grandpa companies which can't innovate and can't grow. A -50% drop in currency over a 50 year period and the weakest military in forever. While I think the UK is failing for these very reasons. Each to their own I guess.

Who is saying the UK economy is booming, whether absolutely or relative to other countries? 

The only person on this thread who is unable to understand the FTSE 100 does not represent the wider UK economy is you. 

Seems like you won’t be happy (Or proud) until Britannia rules the waves again, and forced labour in ‘our’ colonies enable CreditCardChris to live the life of luxury he so deserves and be proud of the Great British Empire. 

CreditCardChris

grumiofoundation said:

CreditCardChris said:

bowlhead99 said:

CreditCardChris saidTake the S&P for example, for every $1 invested in the index, 27.7 cents goes into the top 10 companies because they make up 27.7% of the index. 

These companies are Apple, Amazon, Microsoft, Facebook, Alphabet, Visa etc. Absolute monster companies that are overall incredible companies, regardless of your view of data privacy etc, they make so much money and have awesome growth prospects.

Yes, it is quite a concentrated index, and your figures are slightly out of date in that the weighting in a typical S&P tracker fund as of yesterday  (using the iShares $220bn S&P 500 ETF as an example) had ~30.5% in the top 10 of the 500 names (Apple, Microsoft, Amazon, Alphabet, Facebook, Berkshire, J&J, Visa, P&G, Nvidia).

With the top three all up 70-85% in share price value year to date, the weighted average return for those 10 companies is 50% year to date, i.e. their value was a third lower on the first day of the year.  If you scale their current 30% weight of the S&P back to being a third lower they would only have been worth 20% of the index's current value back then.  So what you can say is that they have contributed ~10% of the index's value growth year to date, and over 9% of that 10% has come from the first five names. What's the total price growth of the index YTD?  9%. 

So although on the face of it it seems that the US economy is booming and the index of 500 leading stocks is breaking new highs and is clearly the best country in the world, actually all the year to date growth has come from those 5-10 companies and the other 490 companies as a whole were completely flat, with no average growth at all; and they have only been able to maintain the 'no growth at all' due to massive government handouts in the form of grants, tax cuts and loans provided by Uncle Sam (funded in part by US treasury issuing bonds to foreign investors).

I'm not sure it is wise to do as you do and shun all stock markets outside the US and all companies on the face of the earth that are not US-listed, on the basis that US markets are up while other markets are flat or down, when we can see that slightly more than every single dollar of the growth in the index this year has come from just five high profile companies - only one percent of the number of companies in the index, and a little over a tenth of a percent of the number of companies in the US total market index.  The dominance of a few at the expense of the many mirrors the fact that over a third of the country's wealth is held by 1% of the people in it. 

Still, if life is about getting rich on the back of other people's coat tails, then the US market would seem to be a great place to dive in and hold on with both hands. You can't lose, right?

And what about the other 29 years where US markets have been dominating? And please for the love of everything holy don't tell me it's a "market cycle" or that the US was a developing nation. The US was a developing country in the 1800's, not in the 1950's. 

But it's clear we're going around in circles. 
A lot of people think the UK is a booming economy because it's propped up on old grandpa companies which can't innovate and can't grow. A -50% drop in currency over a 50 year period and the weakest military in forever. While I think the UK is failing for these very reasons. Each to their own I guess.

Who is saying the UK economy is booming, whether absolutely or relative to other countries? 

The only person on this thread who is unable to understand the FTSE 100 does not represent the wider UK economy is you. 

Seems like you won’t be happy (Or proud) until Britannia rules the waves again, and forced labour in ‘our’ colonies enable CreditCardChris to live the life of luxury he so deserves and be proud of the Great British Empire. 

Linton said it a few pages back that the UK has a world class economy... We had a world class economy, not anymore.
I know the FTSE 100 doesn't represent the wider UK economy, but it represents the 100 largest UK companies and when the top companies in 2020 are still oil & gas, banking, mining and insurance this is very worrying indeed. 

Mickey666

Hmm.  If the world's sixth largest country by GDP is not worthy of investment then we're probably all doomed

CreditCardChris

Mickey666 said:

Hmm.  If the world's sixth largest country by GDP is not worthy of investment then we're probably all doomed

The world's 6th largest country by GDP is propped up on dead beat industries. Take oil & gas, banking and insurance away from the UK economy and you'll soon find we're around 20th. In line with countries like Poland, Sweden, Austria etc. Not exactly poor countries, but nothing to write home about either.

bowlhead99

CreditCardChris said:
And what about the other 29 years where US markets have been dominating? And please for the love of everything holy don't tell me it's a "market cycle" or that the US was a developing nation. 

If you go back 29 years from the start of this year you get to 31 December 1990. From there to 31 December 2019 the S&P500 went up about 880%, from 330 to 3230. 
The UK's FTSE250 went up about 950% in the same timeframe. 

Although those are just the capital values of the respective indexes; we should probably count dividends reinvested too, as they wouldn't be discarded.

UK companies have paid higher dividends historically than their US counterparts.  A dollar in the S&P500 with a would have turned into $17-18, dividends reinvested, giving a total return of over 1700%.  A pound in the FTSE250 over the same 29 year period would have got almost a 2500% return and turned into £25-26. 

If you take into account that a pound at the start of 1991 would buy $1.94, you could have put the $1.94 into the S&P500 and turned it into $34-35, then converted it back to pounds at the December 2019 rate of $1.32 to the pound to be left with £26, which is basically what the UK 250 index got from an investment of a pound.

So basically the US 'markets' haven't been dominating, it's simply the case that the bigger players in the S&P were dominating the bigger players in the FTSE100, but everyone has told you that UK investors don't actually use FTSE100 to benchmark their portfolios due to its heavy skew to particular industries; everyone from investment hobbyists to financial advisors on here say they have generally avoided relying on it for decades, and every time a newbie investor says they have invested in a FTSE100 tracker because they heard of the index on the TV news every day and assumed it was a good choice, they're told in no uncertain terms that it would be poor quality investing to just buy a FTSE100 tracker which is not the sort of investment product that's designed to be held on its own. This is not some new insight; people were saying that when I joined the forum 15 years ago.

This does not mean the UK economy is dead and the US economy is great. As you can see from the figures, a tracker focused on UK businesses has given a sterling percentage return about 1.4x the size of the dollar S&P investor's percentage return over the 29-year period, which meant that despite the weakening of sterling in the last few years the overall return in pounds was about the same. 

Of course, we can all cherry pick dates to prove a point, although you did say 'what about the other 29 years' so it was your cherry picking rather than mine.

penners324

Oh dear. Probably think the UK has been in recession since Wilson was PM...

eskbanker

CreditCardChris said:
Take oil & gas, banking and insurance away from the UK economy and you'll soon find we're around 20th.

And if you make some anatomical adjustments to your aunt she'd be your uncle....

barnstar2077

What are you trying to achieve with this thread?

CreditCardChris

bowlhead99 said:

CreditCardChris said:
And what about the other 29 years where US markets have been dominating? And please for the love of everything holy don't tell me it's a "market cycle" or that the US was a developing nation. 

If you go back 29 years from the start of this year you get to 31 December 1990. From there to 31 December 2019 the S&P500 went up about 880%, from 330 to 3230. 
The UK's FTSE250 went up about 950% in the same timeframe. 

Although those are just the capital values of the respective indexes; we should probably count dividends reinvested too, as they wouldn't be discarded.

UK companies have paid higher dividends historically than their US counterparts.  A dollar in the S&P500 with a would have turned into $17-18, dividends reinvested, giving a total return of over 1700%.  A pound in the FTSE250 over the same 29 year period would have got almost a 2500% return and turned into £25-26. 

If you take into account that a pound at the start of 1991 would buy $1.94, you could have put the $1.94 into the S&P500 and turned it into $34-35, then converted it back to pounds at the December 2019 rate of $1.32 to the pound to be left with £26, which is basically what the UK 250 index got from an investment of a pound.

So basically the US 'markets' haven't been dominating, it's simply the case that the bigger players in the S&P were dominating the bigger players in the FTSE100, but everyone has told you that UK investors don't actually use FTSE100 to benchmark their portfolios due to its heavy skew to particular industries; everyone from investment hobbyists to financial advisors on here say they have generally avoided relying on it for decades, and every time a newbie investor says they have invested in a FTSE100 tracker because they heard of the index on the TV news every day and assumed it was a good choice, they're told in no uncertain terms that it would be poor quality investing to just buy a FTSE100 tracker which is not the sort of investment product that's designed to be held on its own. This is not some new insight; people were saying that when I joined the forum 15 years ago.

This does not mean the UK economy is dead and the US economy is great. As you can see from the figures, a tracker focused on UK businesses has given a sterling percentage return about 1.4x the size of the dollar S&P investor's percentage return over the 29-year period, which meant that despite the weakening of sterling in the last few years the overall return in pounds was about the same. 

Of course, we can all cherry pick dates to prove a point, although you did say 'what about the other 29 years' so it was your cherry picking rather than mine.

So would you say the FTSE250 is the actual true reflection of the UK economy and not the FTSE100? 

I will admit it's quite impressive that the FTSE 250 has out performed that S&P if what you say is true.