How much longer will this bear market go on for?

sevenhills

Thumbs_Up said:

What about the USA?  Admittedly the dollar is the world’s principal reserve currency. But for how long?

You seem to be asking a question. Are you saying this level of debt is positive?
They have got away with it, but I don't follow USA economics.
When governments borrow they pump money into their economy, so their economies are growing in the short term, in the long term the debt needs to be repaid and is a negative.
How many years have the USA had excessive debt?

Thumbs_Up

Type_45 said:

There is life yet in the USA as the global power if it's steered in the right direction.  

Britain can only look on with envy, once the engine house of the world, world currency, world domination and brilliant minds to boot. The Americans must have studied our past history and took upon themselves not to follow the same path. History books will tell you we collectively won ww1 and ww2, that narrative has to change, Britain in the grand scheme of things Lost.

This is a very simplistic assumption I know! But I can still cry can’t I.

masonic

Type_45 said:

masonic said:

Type_45 said:

masonic said:

The plummeting pound and gilt markets give us a pretty good steer as to what investors think about the prospects for the UK following this budget. Our inflation problem was already looking to be the worst in the G7 and this is going to make it a lot worse. Hence the devaluing pound. Holding UK government debt has become more risky, so investors are selling it off and demanding a higher interest rate for the risk they'll be taking if they hold it. This has thrown a spanner in the works for the MPC, who have been trying to get a grip on inflation, and will now have to raise interest rates even higher, which will send the government's borrowing costs sky high just at a time when they are recklessly borrowing without abandon.

All of this to hand out some unfunded tax cuts, which will do the vast majority of people more harm than good and are unsustainable. No wonder the government had to suppress the OBR's impact assessment.

When you look at what they're doing, it's about two parts smoke and mirrors to about one part asset stripping the UK. The majority of people who would benefit from the reversal of the NI levy and reduction in basic rate tax, will already be worse off in real terms due to the inflationary effect of the budget. Those who might have benefited from the stamp duty changes will see any gains pared away by the now even higher interest rates on their mortgages. Businesses with debts are going to be put under further pressure in the same way. Even the roughly half a million people paying additional rate tax, who are the only ones to get a substantial bung, may have more money in their pockets, but will suffer in other ways due to the likely economic decay all around them. That's money the government is supposing will drive growth in the UK economy, but these people will already be living a very comfortable lifestyle, which a few thousand extra isn't going to materially change. So they will likely save or invest it, and if they are not fools, which most aren't, they will not keep it within the UK economy as it goes down the toilet.

Fiscal irresponsibility doesn't get much worse than this, and traditional conservatives must be looking on in disbelief.

On the two points in bold:

1)  They may want and need to raise interest rates.  But they won't be able to do so as the UK economy accelerates into a recession.  There will come a point where the data forces them to change course.  They can either raise rates to fight inflation, or lower rates to boost the economy.  They can't do both.  And in a *stagflationary environment they are snookered.

2)  This is the point of gold, silver and crypto.  They are outside of the UK economy and the financial system in general.

1) What we could see is a damaging war between the Bank of England and the Treasury. Interest rate policy has to reflect what foreign investment requires. Concerns over the depth of recession have to be secondary to that. There's also a huge volume of index linked government debt out there, so failure to continue on their inflation driven mandate will have its own costs. This has painted the UK into a corner, and any thoughts about loosening to take the edge off the current recession can now be put to bed. It is time to adopt the brace position.

2) Any asset that sits outside the UK economy is looking much more attractive today. That includes international bonds and equities, although equities could have further to fall. I think crypto will continue to be correlated with risk-on assets, and so presents an inferior proposition to companies, whose valuations are at least driven by their capability to grow earnings over the longer term. I am certainly not regretting allocating part of my portfolio to gold about a year ago, for the first time ever.

What does the brace position look like to you, regarding the average investor/person?

That's a very tricky question for someone like me to answer, as I'd consider myself to be in a very privileged position compared with the average person. I think those who will suffer the worst of the consequences will be facing some very tough times no matter what they do, but anything they can do to unshackle themselves from our economy could be worthwhile. The brace position is not something that is likely to change the outcome of someone who adopts it. When you hear it called out it is best not to set expectations very high.

coastline

There's a breakdown of the figures and charts in the link . In the video summary at the end the commentator states this will add £40bn of cuts on top of the Energy Package previously announced.

Mini-Budget response | Institute for Fiscal Studies (ifs.org.uk)

The NI increase was never going to pay for total care anyway . I'm sure older people will still be selling homes for basic costs which are at least 50K  a year.
If Labour had introduced an increase in Corporation tax from 19% to 25% they'd be getting hammered in the media. 
Never understood reductions in stamp duty as the estate agents will just put the price up .
Reduction in basic rate tax 20% down to 19% is a smokescreen for the personal allowance not going up. Just £1,000 means everyone misses out on £200 a year. We can only see if they honour it. ?
The markets ?  .Well if they decide the Dollar Index has gone too far then we'll be back to 1.20 to the pound in a flash. Same with the indices before you know it up 10%. For what ? That's the way it goes. Relax.

anonmoose

I am heavily in cash (not intentionally) and thought all I had to worry about was inflation. Now sterling adds another layer of complexity that I don't usually consider that much. How low can it go? Or do people think sterling can't continue south for much longer?  

kuratowski

anonmoose said:

Or do people think sterling can't continue south for much longer?  

I certainly would not say that.  If you look at other countries who adopt, shall we say, unorthodox fiscal policies, their currencies have tended to fall a lot further than ours has, so far.

Type_45

Thumbs_Up said:

Type_45 said:

There is life yet in the USA as the global power if it's steered in the right direction.  

Britain can only look on with envy, once the engine house of the world, world currency, world domination and brilliant minds to boot. The Americans must have studied our past history and took upon themselves not to follow the same path. History books will tell you we collectively won ww1 and ww2, that narrative has to change, Britain in the grand scheme of things Lost.

This is a very simplistic assumption I know! But I can still cry can’t I.

The WWs were pyrrhic victories which utterly broke the UK. Tragedies.

Type_45

masonic said:

Type_45 said:

masonic said:

Type_45 said:

masonic said:

The plummeting pound and gilt markets give us a pretty good steer as to what investors think about the prospects for the UK following this budget. Our inflation problem was already looking to be the worst in the G7 and this is going to make it a lot worse. Hence the devaluing pound. Holding UK government debt has become more risky, so investors are selling it off and demanding a higher interest rate for the risk they'll be taking if they hold it. This has thrown a spanner in the works for the MPC, who have been trying to get a grip on inflation, and will now have to raise interest rates even higher, which will send the government's borrowing costs sky high just at a time when they are recklessly borrowing without abandon.

All of this to hand out some unfunded tax cuts, which will do the vast majority of people more harm than good and are unsustainable. No wonder the government had to suppress the OBR's impact assessment.

When you look at what they're doing, it's about two parts smoke and mirrors to about one part asset stripping the UK. The majority of people who would benefit from the reversal of the NI levy and reduction in basic rate tax, will already be worse off in real terms due to the inflationary effect of the budget. Those who might have benefited from the stamp duty changes will see any gains pared away by the now even higher interest rates on their mortgages. Businesses with debts are going to be put under further pressure in the same way. Even the roughly half a million people paying additional rate tax, who are the only ones to get a substantial bung, may have more money in their pockets, but will suffer in other ways due to the likely economic decay all around them. That's money the government is supposing will drive growth in the UK economy, but these people will already be living a very comfortable lifestyle, which a few thousand extra isn't going to materially change. So they will likely save or invest it, and if they are not fools, which most aren't, they will not keep it within the UK economy as it goes down the toilet.

Fiscal irresponsibility doesn't get much worse than this, and traditional conservatives must be looking on in disbelief.

On the two points in bold:

1)  They may want and need to raise interest rates.  But they won't be able to do so as the UK economy accelerates into a recession.  There will come a point where the data forces them to change course.  They can either raise rates to fight inflation, or lower rates to boost the economy.  They can't do both.  And in a *stagflationary environment they are snookered.

2)  This is the point of gold, silver and crypto.  They are outside of the UK economy and the financial system in general.

1) What we could see is a damaging war between the Bank of England and the Treasury. Interest rate policy has to reflect what foreign investment requires. Concerns over the depth of recession have to be secondary to that. There's also a huge volume of index linked government debt out there, so failure to continue on their inflation driven mandate will have its own costs. This has painted the UK into a corner, and any thoughts about loosening to take the edge off the current recession can now be put to bed. It is time to adopt the brace position.

2) Any asset that sits outside the UK economy is looking much more attractive today. That includes international bonds and equities, although equities could have further to fall. I think crypto will continue to be correlated with risk-on assets, and so presents an inferior proposition to companies, whose valuations are at least driven by their capability to grow earnings over the longer term. I am certainly not regretting allocating part of my portfolio to gold about a year ago, for the first time ever.

What does the brace position look like to you, regarding the average investor/person?

That's a very tricky question for someone like me to answer, as I'd consider myself to be in a very privileged position compared with the average person. I think those who will suffer the worst of the consequences will be facing some very tough times no matter what they do, but anything they can do to unshackle themselves from our economy could be worthwhile. The brace position is not something that is likely to change the outcome of someone who adopts it. When you hear it called out it is best not to set expectations very high.

There is nowhere to hide, except for the wealthy who can profit (as always).

However, the brace position is clear and I've been trying to tell people this for months. Stock up, keep your fuel tank full, have a large cash allocation, gold/silver. I do not believe equities is any place to be during a global bust. 

Type_45

coastline said:

There's a breakdown of the figures and charts in the link . In the video summary at the end the commentator states this will add £40bn of cuts on top of the Energy Package previously announced.

Mini-Budget response | Institute for Fiscal Studies (ifs.org.uk)

The NI increase was never going to pay for total care anyway . I'm sure older people will still be selling homes for basic costs which are at least 50K  a year.
If Labour had introduced an increase in Corporation tax from 19% to 25% they'd be getting hammered in the media. 
Never understood reductions in stamp duty as the estate agents will just put the price up .
Reduction in basic rate tax 20% down to 19% is a smokescreen for the personal allowance not going up. Just £1,000 means everyone misses out on £200 a year. We can only see if they honour it. ?
The markets ?  .Well if they decide the Dollar Index has gone too far then we'll be back to 1.20 to the pound in a flash. Same with the indices before you know it up 10%. For what ? That's the way it goes. Relax.

A global credit squeeze is taking place.  Globally, people are scrambling for dollars to meet margin calls and rising interest rate payments vs their currencies. This isn't going to change because "people have decided the dollar has gone too far". 

The FTSE 100 has taken out the June low. The Dow has done likewise. And the S&P will follow suit. All of the economic news is bad. 

All summer I said it was a bear market rally. Nobody agreed. And here we are. The markets are being held precariously on the support lines. Those support lines will be breached and then the markets will fall much further. And the crash hasn't happened yet. 

Type_45

kuratowski said:

anonmoose said:

Or do people think sterling can't continue south for much longer?  

I certainly would not say that.  If you look at other countries who adopt, shall we say, unorthodox fiscal policies, their currencies have tended to fall a lot further than ours has, so far.

Something else I've been saying for many months. The GBP is being crushed. Intentionally.