Economy crash =/= stock market crash?

coastline

Type_45 said:

Prism said:

Type_45 said:

AlanP_2 said:

Type_45 said:

Nebulous2 said:

Type_45 said:

beavere38 said:

"Black Tuesday tomorrow?  Or Black Wednesday?  Perhaps."

Who knows, I'm not going to try and predict exactly what will happen. I still believe the top is in on the markets. If the Dow, FTSE and Dax make new highs then I am wrong. The market is massively overvalued and full of private investors using an unprecedented amount of margin. Valuations are based on potential future earnings. What could possibly go wrong? 

It is sounding like 1929 all over again. Once the first domino falls the rest will follow.

How do you know that governments won't just keep printing money and kick the can down the road?   

When money is printed it goes into the stock market, as you can see over the past 14 months of rises.

Only some of it has gone into the stock market. A tremendous amount of it has gone into people's pockets / bank accounts. Where it goes from there is a bit of an unknown and that uncertainty means valuing stocks is more difficult at the moment.

I'm seeing indications that my acquaintances are prepared to spend more than I would have expected. 

That's not my understanding.  When QE happens it goes to the banks, not the general public.

None of the QE has landed in my bank account.  

Furlough money, loans and grants to businesses - all funded by QE. Whether you personally have received any of that lot is nothing to do with QE though.

That's not where QE has gone.  Someone who knows more than me will have to explain to you.

Indirectly it is. QE money buys existing government bonds/gilts from banks and pension funds. This gives them a surplus of cash. The government then issues new gilts to borrow more from those banks and pension companies. Some of that cash also ends up in private loans and equities too.

Your opinion is noted, but as I say, we're waiting for someone who knows more than me to explain.

From the BofE itself and a summary from the BBC.

Quantitative easing | Bank of England

What is quantitative easing and how will it affect you? - BBC News

One bonus for the government has been the yearly interest payments. They have remained stable as new bonds have been issued around 0.8%.

Public Spending Chart for United Kingdom 2010-2022 - Central Government Local Authorities (ukpublicspending.co.uk)

sevenhills

coastline said:

From the BofE itself and a summary from the BBC.

Quantitative easing | Bank of England

What is quantitative easing and how will it affect you? - BBC News

One bonus for the government has been the yearly interest payments. They have remained stable as new bonds have been issued around 0.8%.

Public Spending Chart for United Kingdom 2010-2022 - Central Government Local Authorities (ukpublicspending.co.uk)

From your link - "So QE works by making it cheaper for households and businesses to borrow money – encouraging spending."

I thought the Bank of England itself set interest rates. Ask anyone that has taken out a loan or mortgage, they won't mention QE!

Prism

sevenhills said:

coastline said:

From the BofE itself and a summary from the BBC.

Quantitative easing | Bank of England

What is quantitative easing and how will it affect you? - BBC News

One bonus for the government has been the yearly interest payments. They have remained stable as new bonds have been issued around 0.8%.

Public Spending Chart for United Kingdom 2010-2022 - Central Government Local Authorities (ukpublicspending.co.uk)

From your link - "So QE works by making it cheaper for households and businesses to borrow money – encouraging spending."

I thought the Bank of England itself set interest rates. Ask anyone that has taken out a loan or mortgage, they won't mention QE!

Mortgage and loan rates are based on the yield of government bonds which is partly based on the BoE interest rates and lowered even further by QE.

sevenhills

Prism said:

Mortgage and loan rates are based on the yield of government bonds which is partly based on the BoE interest rates and lowered even further by QE.

But that is not what the BoE says, it's worded totally differently. We had £275 billion of QE in 2012 with no change in interest rates, so QE did not make it cheaper for households and businesses to borrow money

Prism

sevenhills said:

Prism said:

Mortgage and loan rates are based on the yield of government bonds which is partly based on the BoE interest rates and lowered even further by QE.

But that is not what the BoE says, it's worded totally differently. We had £275 billion of QE in 2012 with no change in interest rates, so QE did not make it cheaper for households and businesses to borrow money

That is pretty much exactly what it says..

'This pushes down on the interest rates offered on loans (eg mortgages or business loans) because rates on government bonds tend to affect other interest rates in the economy'

Interest rates are based on gilt yields. QE buys bonds which effectively pushes the yields down, or at least keeps them low. There are obviously other factors at work too but its fair to say that the interest rates of loans are lower than they otherwise would have been without QE.

Nebulous2

Type_45 said:

Prism said:

Type_45 said:

Prism said:

Type_45 said:

AlanP_2 said:

Type_45 said:

Nebulous2 said:

Type_45 said:

beavere38 said:

"Black Tuesday tomorrow?  Or Black Wednesday?  Perhaps."

Who knows, I'm not going to try and predict exactly what will happen. I still believe the top is in on the markets. If the Dow, FTSE and Dax make new highs then I am wrong. The market is massively overvalued and full of private investors using an unprecedented amount of margin. Valuations are based on potential future earnings. What could possibly go wrong? 

It is sounding like 1929 all over again. Once the first domino falls the rest will follow.

How do you know that governments won't just keep printing money and kick the can down the road?   

When money is printed it goes into the stock market, as you can see over the past 14 months of rises.

Only some of it has gone into the stock market. A tremendous amount of it has gone into people's pockets / bank accounts. Where it goes from there is a bit of an unknown and that uncertainty means valuing stocks is more difficult at the moment.

I'm seeing indications that my acquaintances are prepared to spend more than I would have expected. 

That's not my understanding.  When QE happens it goes to the banks, not the general public.

None of the QE has landed in my bank account.  

Furlough money, loans and grants to businesses - all funded by QE. Whether you personally have received any of that lot is nothing to do with QE though.

That's not where QE has gone.  Someone who knows more than me will have to explain to you.

Indirectly it is. QE money buys existing government bonds/gilts from banks and pension funds. This gives them a surplus of cash. The government then issues new gilts to borrow more from those banks and pension companies. Some of that cash also ends up in private loans and equities too.

Your opinion is noted, but as I say, we're waiting for someone who knows more than me to explain.

Sure, I am am happy that they will explain that some of the QE money has in fact gone into furlough and business loans.

OK, well we've heard a lot from you, Prism.  Let's wait and see what an informed, considered opinion looks like on this matter and then we can bring you in after that.

So you have no idea what QE is, but you've made up your mind what it is not? 

Keeping away from the fact that you made a rapid swerve from 'printing money' to QE, the wikipedia link I gave you earlier gives a starting point. 

Quantitative easing - Wikipedia

"A central bank enacts quantitative easing by purchasing, regardless of interest rates, a predetermined quantity of bonds or other financial assets on financial markets from private financial institutions. This action increases the excess reserves that banks hold. The goal of this policy is to ease financial conditions, increase market liquidity, and encourage private bank lending."

In other words it increases liquidity in the market and that money flows where it will - whether that is where the central bank wants it to go or not. 

Anyone want to buy a non-fungible token? 

Thrugelmir

sevenhills said:

coastline said:

From the BofE itself and a summary from the BBC.

Quantitative easing | Bank of England

What is quantitative easing and how will it affect you? - BBC News

One bonus for the government has been the yearly interest payments. They have remained stable as new bonds have been issued around 0.8%.

Public Spending Chart for United Kingdom 2010-2022 - Central Government Local Authorities (ukpublicspending.co.uk)

I thought the Bank of England itself set interest rates. Ask anyone that has taken out a loan or mortgage, they won't mention QE!

Bank BOE base is the rate that is charged to banks and other financial institutions for loans (with a maturity of 1 day).  Normally to provide short term cash liquidity to stay within regulatory  requirements. Though the BOE in the past, after the GFC for example, has run special schemes to ensure the smooth flow of mortgages when international banks left the UK market, 

Thrugelmir

Type_45 said:

beavere38 said:

"Black Tuesday tomorrow?  Or Black Wednesday?  Perhaps."

Who knows, I'm not going to try and predict exactly what will happen. I still believe the top is in on the markets. If the Dow, FTSE and Dax make new highs then I am wrong. The market is massively overvalued and full of private investors using an unprecedented amount of margin. Valuations are based on potential future earnings. What could possibly go wrong? 

It is sounding like 1929 all over again. Once the first domino falls the rest will follow.

How do you know that governments won't just keep printing money and kick the can down the road?   

When money is printed it goes into the stock market, as you can see over the past 14 months of rises.

All eyes are on the Fed. First indications that tapering is coming under consideration. When the Fed moves impacting the $, there's going to be a ripple effect. Interest rate rises are on the horizon also. 

sevenhills

Thrugelmir said:

All eyes are on the Fed. First indications that tapering is coming under consideration. When the Fed moves impacting the $, there's going to be a ripple effect. Interest rate rises are on the horizon also. 

So with a massive amount of QE in 2020, it cannot push down interest rates very much.

Type_45

Thrugelmir said:

Type_45 said:

beavere38 said:

"Black Tuesday tomorrow?  Or Black Wednesday?  Perhaps."

Who knows, I'm not going to try and predict exactly what will happen. I still believe the top is in on the markets. If the Dow, FTSE and Dax make new highs then I am wrong. The market is massively overvalued and full of private investors using an unprecedented amount of margin. Valuations are based on potential future earnings. What could possibly go wrong? 

It is sounding like 1929 all over again. Once the first domino falls the rest will follow.

How do you know that governments won't just keep printing money and kick the can down the road?   

When money is printed it goes into the stock market, as you can see over the past 14 months of rises.

All eyes are on the Fed. First indications that tapering is coming under consideration. When the Fed moves impacting the $, there's going to be a ripple effect. Interest rate rises are on the horizon also. 

People have been saying that since 2009.