Becoming more bearish

BananaRepublic

csgohan4 said:

BananaRepublic said:

csgohan4 said:

BananaRepublic said:

masonic said:

Thrugelmir said:

BananaRepublic said:

Thrugelmir said:

BananaRepublic said:

itwasntme001 said:

BananaRepublic said:

itwasntme001 said:

It is what happens when you have 0% interest rates, massive fiscal and monetary stimulus in many major economies and human nature driven by greed.

The interesting question is why did we not do all this in previous recessions like 2008 or early 90s?  I think the answer is inflation and the political will to unleash it.  Now it seems inflation is not a concern so they have more room for stimulus.  So every trade is essentially a view on inflation and no one can forecast inflation well at all.

The covid recession is fundamentally differerent from the GFC. Back then credit dried up, people couldn’t borrow, it hit the economy quite widely. This recession is hitting some parts of the economy badly, others not at all. Cafes and restaurant jobs will bounce back quickly, even though some businesses will go under staff will be rehired by new owners. There are many people working from home or on furlough, spending less than usual. Trades have been busier than usual, DIY is booming, people are having house extensions, loft conversions etc. 

We have as a nation run up huge debt, and somehow we will have to pay for that. Some say a wealth tax is coming. Whatever happens, spending on public services may be squeezed. 

That is because 2008 was a financial crisis and everything was done to recapitalise banks (and QE was seen as a way to kick start the economy).  But my point was that why wasn't any fiscal stimulus done back then to encourage growth - it seems it was only monetary (QE) and even that was not nearly as forthcoming as we saw last March?  Now you have huge fiscal stimulus after 10 years of austerity in the UK and 5-6 years in the US (until Trump cut corporate taxes).

To me it seems like policy makers are becoming less and less concerned about inflation because they saw QE did not generate any, so why not push ahead with fiscal.

For me the question is why testing and track and trace were so royally messed up. 

Ever built something from scratch in a matter of weeks?  Unfortunately Alexa is actually pretty dumb. Other countries systems aren't a roaring success either. 

They had months, not weeks. Some countries such as South Korea managed it. China has the virus under control. It might be our inability to obey lockdown, or government projects.

South Korea has had viruses previously.  Chinese state control is something that many would object to. Not just the Covidiots either. There's objections in Singapore now as appears that the data is going to be used for other purposes. The grass is far from being greener taken as a whole.

Germany did quite a good job though. Not an example of a country with previous experience.

Some have said that obedient and conformist nations did best. It’ll be interesting if studies of our behaviour appear, to see if rule breaking had an impact. 

Japan although not formally under lockdown previously did well, their citizens on the whole obeyed and did the 'right' thing. Sadly some people in this country thought Covid doesn't apply to them and partied the night without thinking of the consequences and disobeyed the lockdown rules. Not to mention a certain Mr Cummings. 

On the same note, the track and trace system is only as good as the people using it. It isn't mandatory and people don't need to put their details in, real anyways.  Once you make it mandatory or linked to your own personal ID, people you would hope would adhere better. But not always, even Korea they had shut some of the hospitality sector due to rising cases. 

Your first paragraph is based on assumptions. I would want to see a proper analysis, before drawing conclusions. 

As for the second, no the UK government screwed up big time, as per most big UK government IT projects cf the NHS IT project that was a miserable and expensive failure. 

While I don't have figures and only anecdotal evidence, just looking at the news over year, countless fines awarded to individuals and business flouting lockdown rules, that is undisputable. 

How does one analyze behavior which cannot be objectified? who is going to admit in a survey they flout the rules?

Also Covid is not spread by people staying at home generally, but by people mixing and no obeying social distancing and rules at the time. Japan has among the lowest death rates in the world, not to mention infection rates, why is that? same with Singapore and Korea. Test and trace may play a part, but not all. 

You are guessing, and guesses often turn out to be wrong. It could be that the lock down rules were too lax for some activities. It could be that the rules were too lax when we opened up. And it could be that some people broke the rules, perhaps most people followed them, but enough didn't to allow the spread. When I was skating on a tennis court, the skate park next door was full of kids ignoring the rules. It might be that covid was spread mainly at work, due to lax rules, and then spread further by intergenerational mixing at home. It was particularly bad in places like Bradford where lots of people work in factories, and live in large home groups of mixed ages. We know that in Leicester many factory owners ignored the rules, and also paid below the minimum national wage.

And as the other poster indicated, you can make an assessment of what went wrong. You can create models, and run them with many scenarios and see what happens. Thus you can see what happen if 50% of children under 16 ignore the distancing rules. You can look at police records, and see which groups violated regulations and see where they were. So yes you can get an informed view of what happened and why, although we might never know the full picture. 

Linton

In my view if you get worried at what the market will do you are investing at too high a risk level. Just accept that the future is unknown.  Apart from the loss of sleep, the problem is that emotions can lead to poor short term investment decisions.  Better to  have a strategy you can live with in the long term no matter what happens.  In the extreme all bets are off however you are invested.

Bobziz

Linton said:

In my view if you get worried at what the market will do you are investing at too high a risk level. Just accept that the future is unknown.  Apart from the loss of sleep, the problem is that emotions can lead to poor short term investment decisions.  Better to  have a strategy you can live with in the long term no matter what happens.  In the extreme all bets are off however you are invested.

Absolutely. I see emotion as the biggest risk to my portfolio. Unless your money is managed by an IFA or is a buy and forget fund, then managing your emotions seems key.

itwasntme001

Linton said:

In my view if you get worried at what the market will do you are investing at too high a risk level. Just accept that the future is unknown.  Apart from the loss of sleep, the problem is that emotions can lead to poor short term investment decisions.  Better to  have a strategy you can live with in the long term no matter what happens.  In the extreme all bets are off however you are invested.

I think the hardest thing is is to let the winner go because the case of FOMO is all too real.  But there is a point where you have to cut your winners because they become a serious risk of being over bearing.  I think the easiest way is to just stick to passive trackers for your risk tolerance and objectives and get on with life.

Linton

itwasntme001 said:

Linton said:

In my view if you get worried at what the market will do you are investing at too high a risk level. Just accept that the future is unknown.  Apart from the loss of sleep, the problem is that emotions can lead to poor short term investment decisions.  Better to  have a strategy you can live with in the long term no matter what happens.  In the extreme all bets are off however you are invested.

I think the hardest thing is is to let the winner go because the case of FOMO is all too real.  But there is a point where you have to cut your winners because they become a serious risk of being over bearing.  I think the easiest way is to just stick to passive trackers for your risk tolerance and objectives and get on with life.

If you don't want to or can't come up with a strategy appropriate to your situation, yes I would agree, just go for a multi-asset fund passive or otherwise.  However a better option, if you are able to do so, is to devise your own strategy that both meets your specific requirements and enables you to sleep at night no matter what happens.  For serious amounts of money this could be a good reason to consult an IFA.

Thrugelmir

masonic said:

Thrugelmir said:

BananaRepublic said:

Thrugelmir said:

BananaRepublic said:

itwasntme001 said:

BananaRepublic said:

itwasntme001 said:

It is what happens when you have 0% interest rates, massive fiscal and monetary stimulus in many major economies and human nature driven by greed.

The interesting question is why did we not do all this in previous recessions like 2008 or early 90s?  I think the answer is inflation and the political will to unleash it.  Now it seems inflation is not a concern so they have more room for stimulus.  So every trade is essentially a view on inflation and no one can forecast inflation well at all.

The covid recession is fundamentally differerent from the GFC. Back then credit dried up, people couldn’t borrow, it hit the economy quite widely. This recession is hitting some parts of the economy badly, others not at all. Cafes and restaurant jobs will bounce back quickly, even though some businesses will go under staff will be rehired by new owners. There are many people working from home or on furlough, spending less than usual. Trades have been busier than usual, DIY is booming, people are having house extensions, loft conversions etc. 

We have as a nation run up huge debt, and somehow we will have to pay for that. Some say a wealth tax is coming. Whatever happens, spending on public services may be squeezed. 

That is because 2008 was a financial crisis and everything was done to recapitalise banks (and QE was seen as a way to kick start the economy).  But my point was that why wasn't any fiscal stimulus done back then to encourage growth - it seems it was only monetary (QE) and even that was not nearly as forthcoming as we saw last March?  Now you have huge fiscal stimulus after 10 years of austerity in the UK and 5-6 years in the US (until Trump cut corporate taxes).

To me it seems like policy makers are becoming less and less concerned about inflation because they saw QE did not generate any, so why not push ahead with fiscal.

For me the question is why testing and track and trace were so royally messed up. 

Ever built something from scratch in a matter of weeks?  Unfortunately Alexa is actually pretty dumb. Other countries systems aren't a roaring success either. 

They had months, not weeks. Some countries such as South Korea managed it. China has the virus under control. It might be our inability to obey lockdown, or government projects.

South Korea has had viruses previously.  Chinese state control is something that many would object to. Not just the Covidiots either. There's objections in Singapore now as appears that the data is going to be used for other purposes. The grass is far from being greener taken as a whole.

Germany did quite a good job though. Not an example of a country with previous experience.

Had a system in place for another reason. Though that in itself has proved insufficient. 

I'm surprised more people haven't emigrated over the years. Given the negative attitude towards their own country. 

BananaRepublic

Thrugelmir said:

masonic said:

Thrugelmir said:

BananaRepublic said:

Thrugelmir said:

BananaRepublic said:

itwasntme001 said:

BananaRepublic said:

itwasntme001 said:

It is what happens when you have 0% interest rates, massive fiscal and monetary stimulus in many major economies and human nature driven by greed.

The interesting question is why did we not do all this in previous recessions like 2008 or early 90s?  I think the answer is inflation and the political will to unleash it.  Now it seems inflation is not a concern so they have more room for stimulus.  So every trade is essentially a view on inflation and no one can forecast inflation well at all.

The covid recession is fundamentally differerent from the GFC. Back then credit dried up, people couldn’t borrow, it hit the economy quite widely. This recession is hitting some parts of the economy badly, others not at all. Cafes and restaurant jobs will bounce back quickly, even though some businesses will go under staff will be rehired by new owners. There are many people working from home or on furlough, spending less than usual. Trades have been busier than usual, DIY is booming, people are having house extensions, loft conversions etc. 

We have as a nation run up huge debt, and somehow we will have to pay for that. Some say a wealth tax is coming. Whatever happens, spending on public services may be squeezed. 

That is because 2008 was a financial crisis and everything was done to recapitalise banks (and QE was seen as a way to kick start the economy).  But my point was that why wasn't any fiscal stimulus done back then to encourage growth - it seems it was only monetary (QE) and even that was not nearly as forthcoming as we saw last March?  Now you have huge fiscal stimulus after 10 years of austerity in the UK and 5-6 years in the US (until Trump cut corporate taxes).

To me it seems like policy makers are becoming less and less concerned about inflation because they saw QE did not generate any, so why not push ahead with fiscal.

For me the question is why testing and track and trace were so royally messed up. 

Ever built something from scratch in a matter of weeks?  Unfortunately Alexa is actually pretty dumb. Other countries systems aren't a roaring success either. 

They had months, not weeks. Some countries such as South Korea managed it. China has the virus under control. It might be our inability to obey lockdown, or government projects.

South Korea has had viruses previously.  Chinese state control is something that many would object to. Not just the Covidiots either. There's objections in Singapore now as appears that the data is going to be used for other purposes. The grass is far from being greener taken as a whole.

Germany did quite a good job though. Not an example of a country with previous experience.

Had a system in place for another reason. Though that in itself has proved insufficient. 

I'm surprised more people haven't emigrated over the years. Given the negative attitude towards their own country. 

A lot of Brits do emigrate, the number is roughly a third of a million per year, net immigration figures would be much higher without the outflow. Most go to the antipodes and North America.

I don’t understand the negative attitudes of many towards the UK, but I guess age and having lived in Canada has inoculated me against left wing anti European self hatred views that seem so prevalent these days. 

Thrugelmir

BananaRepublic said:

Thrugelmir said:

masonic said:

Thrugelmir said:

BananaRepublic said:

Thrugelmir said:

BananaRepublic said:

itwasntme001 said:

BananaRepublic said:

itwasntme001 said:

It is what happens when you have 0% interest rates, massive fiscal and monetary stimulus in many major economies and human nature driven by greed.

The interesting question is why did we not do all this in previous recessions like 2008 or early 90s?  I think the answer is inflation and the political will to unleash it.  Now it seems inflation is not a concern so they have more room for stimulus.  So every trade is essentially a view on inflation and no one can forecast inflation well at all.

The covid recession is fundamentally differerent from the GFC. Back then credit dried up, people couldn’t borrow, it hit the economy quite widely. This recession is hitting some parts of the economy badly, others not at all. Cafes and restaurant jobs will bounce back quickly, even though some businesses will go under staff will be rehired by new owners. There are many people working from home or on furlough, spending less than usual. Trades have been busier than usual, DIY is booming, people are having house extensions, loft conversions etc. 

We have as a nation run up huge debt, and somehow we will have to pay for that. Some say a wealth tax is coming. Whatever happens, spending on public services may be squeezed. 

That is because 2008 was a financial crisis and everything was done to recapitalise banks (and QE was seen as a way to kick start the economy).  But my point was that why wasn't any fiscal stimulus done back then to encourage growth - it seems it was only monetary (QE) and even that was not nearly as forthcoming as we saw last March?  Now you have huge fiscal stimulus after 10 years of austerity in the UK and 5-6 years in the US (until Trump cut corporate taxes).

To me it seems like policy makers are becoming less and less concerned about inflation because they saw QE did not generate any, so why not push ahead with fiscal.

For me the question is why testing and track and trace were so royally messed up. 

Ever built something from scratch in a matter of weeks?  Unfortunately Alexa is actually pretty dumb. Other countries systems aren't a roaring success either. 

They had months, not weeks. Some countries such as South Korea managed it. China has the virus under control. It might be our inability to obey lockdown, or government projects.

South Korea has had viruses previously.  Chinese state control is something that many would object to. Not just the Covidiots either. There's objections in Singapore now as appears that the data is going to be used for other purposes. The grass is far from being greener taken as a whole.

Germany did quite a good job though. Not an example of a country with previous experience.

Had a system in place for another reason. Though that in itself has proved insufficient. 

I'm surprised more people haven't emigrated over the years. Given the negative attitude towards their own country. 

I don’t understand the negative attitudes of many towards the UK, but I guess age and having lived in Canada has inoculated me against left wing anti European self hatred views that seem so prevalent these days. 

Fortunate to have travelled a lot over the years. What comes through is that history lives on through generations. Never forgotten. 

Alexland

bowlhead99 said:

I can well imagine some people will be thinking 'haha, I'm great at picking funds and allocating my portfolio' while more circumspect investors may be feeling almost guilty that their portfolios are still going up and expecting it to reverse at any time.

A good article in the Telegraph this morning (read page source to bypass paywall)

https://www.telegraph.co.uk/business/2021/01/12/bond-yield-spike-signals-bubble-trouble-equity-markets/

In short the yield curve has been getting steeper in recent weeks as bond traders are expecting higher interest rates in future which would reduce support for asset prices however we are still seeing speculative FOMO 'tulip bubbles' in Bitcoin, Tesla, and even Pokemon trading cards. A good quote from Chuck Prince in mid 2007 that "as long as the music is playing, you've got to get up and dance" and we reflect about how that ended up.

I agree with Charlie Munger's 'playing with fire' comments and would expect the next 10 years of global asset returns to be lower just a matter of how unpleasant that journey is going to be. Bonds look awful, cash could take advantage of dips but would be bad if we see inflation, gold might be a better safe haven but equities still look like the best long term option so sensible people are "still dancing". It seems to be a balance between reducing exposure to speculative or overpriced assets while not going too deep into value (strong balance sheets required for this pandemic) which leads us back to trying to find good companies at fair prices which should be able to grow their prices and dividends over time to beat inflation.

Although most of our money is in global trackers we switched our recent home bias City CTY (which had developed a premium and has gone deep value to maintain that 5% yield without using capital reserves) into Murray Income MUT (which had developed a discount and was a better mix at a 4% yield) as even after costs we are about 8% up on NAV.

itwasntme001

Alexland said:

bowlhead99 said:

I can well imagine some people will be thinking 'haha, I'm great at picking funds and allocating my portfolio' while more circumspect investors may be feeling almost guilty that their portfolios are still going up and expecting it to reverse at any time.

A good article in the Telegraph this morning (read page source to bypass paywall)

https://www.telegraph.co.uk/business/2021/01/12/bond-yield-spike-signals-bubble-trouble-equity-markets/

In short the yield curve has been getting steeper in recent weeks as bond traders are expecting higher interest rates in future which would reduce support for asset prices however we are still seeing speculative FOMO 'tulip bubbles' in Bitcoin, Tesla, and even Pokemon trading cards. A good quote from Chuck Prince in mid 2007 that "as long as the music is playing, you've got to get up and dance" and we reflect about how that ended up.

I agree with Charlie Munger's 'playing with fire' comments and would expect the next 10 years of global asset returns to be lower just a matter of how unpleasant that journey is going to be. Bonds look awful, cash could take advantage of dips but would be bad if we see inflation, gold might be a better safe haven but equities still look like the best long term option so sensible people are "still dancing". It seems to be a balance between reducing exposure to speculative or overpriced assets while not going too deep into value (strong balance sheets required for this pandemic) which leads us back to trying to find good companies at fair prices which should be able to grow their prices and dividends over time to beat inflation.

Although most of our money is in global trackers we switched our recent home bias City CTY (which had developed a premium and has gone deep value to maintain that 5% yield without using capital reserves) into Murray Income MUT (which had developed a discount and was a better mix at a 4% yield) as even after costs we are about 8% up on NAV.

I think it is too early to tell whether or not "reflation" is back and thus whether rises in yields are sustainable and a start of an uptrend.  Too much debt in the system, unemployment still high, lots of small businesses struggling and virus concerns won't retreat anytime soon (vaccine roll out will take some time globally).

We have seen this play out many times before - market thinks reflation will be back but then soon after yields fall back lower.  FED has been trying to boost inflation expectations by signalling "printing money" (when it fact it is not printing at all) and buying linkers - which seems to have worked in the break-even market (back to 2018 levels) but will all this translate to higher sustainable realised inflation?

FED seems to be worried about bubbles in certain areas but they won't taper anytime soon.  We know how that ended in 2018.

That said, I think inflation pressure are building - you have unfavourable demographics globally, the start of MMT and fiscal imprudence and signs of globalisation reversing.  Coupled with the debt (= low growth), you have IMO a situation where stagflation is the long term scenario playing out.

I can't see how financial assets (equities and bonds) can deliver a +ve real returns long term under this scenario - you will have bonds and growth stocks suffer due to rising yields (I doubt growth stocks will boost earnings growth by enough to compensate for the rising yields - e.g. Amazon, Tesla, bond proxies like consumer staples will have more competition over time) and value stocks suffer from a weak economy and too much debt (both in the economy generally and value stocks tend to have more debt).