How much longer will this bear market go on for?

Millyonare

A lot of people now have become addicted to "fear p*rn". They love the drama of saying everything will soon collapse and we're all doomed.

Fact is, the UK economy is on track to grow a healthy 3-4% in 2022. Everyone who wants one has a job. Wages are rising nicely. But that's not a narrative people want to hear. They want the EastEnders shouty drama buzz.

The UK pensions industry is a disgrace. Gambling grandad's pension with unaffordable debt multipliers. But it has been largely fixed in recent weeks, and in a year or two will be barely a blip in financial history.

Short version -- things are not as bad as we think.

Dyor, etc.

Swipe

Millyonare said:

A lot of people now have become addicted to "fear p*rn". They love the drama of saying everything will soon collapse and we're all doomed.

Fact is, the UK economy is on track to grow a healthy 3-4% in 2022. Everyone who wants one has a job. Wages are rising nicely. But that's not a narrative people want to hear. They want the EastEnders shouty drama buzz.

The UK pensions industry is a disgrace. Gambling grandad's pension with unaffordable debt multipliers. But it has been largely fixed in recent weeks, and in a year or two will be barely a blip in financial history.

Short version -- things are not as bad as we think.

Dyor, etc.

Please don't ruin Type_24's day

Type_45

It's not just the UK pension funds. And it hasn't been "largely fixed".

GazzaBloom

Interesting article showing 3 different strategies for dealing with a bear market.

Staying invested from highs just before the bear market and buying regularly throughout vs timing perfectly (next to impossible) vs waiting until bear market is over

https://seekingalpha.com/article/4471728-getting-in-at-the-worst-time

Many here know this already but our resident doom merchant may learn something.

Type_45

Can someone explain how the bond market situation has been "largely fixed"?

These funds have been borrowing against gilts to buy more gilts (and other things).  In some cases, they have done this 6x over, apparently.

And all this in a low interest rate environment.

Now rates are going up.... The original bonds which were used as collateral are worth less than they were.  So money must be raised to cover the difference.  

So gilts get sold.  The price of the gilts therefore goes down further as these margin calls are made.

The BoE steps in and buys some gilts to keep the price from collapsing.......  and this means the problem is "largely fixed"?


Does anyone here know how big this gilts-leveraging market is?  Clue:  It's a lot bigger than the £65bn the BoE just raised to stop pension funds from collapsing by buying gilts to prop up the price of gilts.

DannyCarey

It's almost like fiat currencies are worthless pieces of paper / digital numbers.

GazzaBloom

Type_45 said:

Can someone explain how the bond market situation has been "largely fixed"?

These funds have been borrowing against gilts to buy more gilts (and other things).  In some cases, they have done this 6x over, apparently.

And all this in a low interest rate environment.

Now rates are going up.... The original bonds which were used as collateral are worth less than they were.  So money must be raised to cover the difference.  

So gilts get sold.  The price of the gilts therefore goes down further as these margin calls are made.

The BoE steps in and buys some gilts to keep the price from collapsing.......  and this means the problem is "largely fixed"?


Does anyone here know how big this gilts-leveraging market is?  Clue:  It's a lot bigger than the £65bn the BoE just raised to stop pension funds from collapsing by buying gilts to prop up the price of gilts.

The recent spotlight on use of derivatives by UK pension companies brings in to question the effectiveness of governance and oversight of their risk management policies.

I don't know how widespread, to what extent or what companies are exposed to increased derivative risks being triggered by the sharp increase in interest rates, but on checking my and wife's pension fund KIIDs for the funds we are invested in, my pension fund states that derivatives are not used but my wife's says they are.

I sincerely hope for all our sakes that this isn't a sleeping giant time-bomb like 2007/8 all over again. As Warren Buffet is famously quoted as saying "it's only when the tide goes out that you learn who has been swimming naked”. 

Type_45

GazzaBloom said:

Type_45 said:

Can someone explain how the bond market situation has been "largely fixed"?

These funds have been borrowing against gilts to buy more gilts (and other things).  In some cases, they have done this 6x over, apparently.

And all this in a low interest rate environment.

Now rates are going up.... The original bonds which were used as collateral are worth less than they were.  So money must be raised to cover the difference.  

So gilts get sold.  The price of the gilts therefore goes down further as these margin calls are made.

The BoE steps in and buys some gilts to keep the price from collapsing.......  and this means the problem is "largely fixed"?


Does anyone here know how big this gilts-leveraging market is?  Clue:  It's a lot bigger than the £65bn the BoE just raised to stop pension funds from collapsing by buying gilts to prop up the price of gilts.

The recent spotlight on use of derivatives by UK pension companies brings in to question the effectiveness of governance and oversight of their risk management policies.

I don't know how widespread, to what extent or what companies are exposed to increased derivative risks being triggered by the sharp increase in interest rates, but on checking my and wife's pension fund KIIDs for the funds we are invested in, my pension fund states that derivatives are not used but my wife's says they are.

I sincerely hope for all our sakes that this isn't a sleeping giant time-bomb like 2007/8 all over again. As Warren Buffet is famously quoted as saying "it's only when the tide goes out that you learn who has been swimming naked”. 

As it says in the article I posted, it's £1.6 trillion. It was £500bn in 2013.

woolly_wombat

masonic said:

Type_45 said:

And you'll also feel it through the stock market collapsing. That's coming.

I'm reliably informed it will happen within the next two and a half months, and that there will be an 80% pulldown from the previous high, preceded by a melt-up.

Reliably informed by whom?

Alistair31

woolly_wombat said:

masonic said:

Type_45 said:

And you'll also feel it through the stock market collapsing. That's coming.

I'm reliably informed it will happen within the next two and a half months, and that there will be an 80% pulldown from the previous high, preceded by a melt-up.

Reliably informed by whom?

The sage of MSE, presumably.