Crisis what crisis?

[Guest pelmetman]

My prediction is we have only just opened the door of a depression:D

As a thick bloke I do hope I am proved wrong(lol)(lol)  

[CliveH]

 

We are seeing the markets flexing their muscles against politicians.

 

Companies in general are doing OK - where they struggle is because of political uncertainty and companies and the markets do not like that.

 

Standard & Poor's downgraded USA Bonds because of the US politicians holding the market to ransom re paying its bills - a pathetic childish act that will mean more expensive borrowing for the US for many years.

 

On this side of the pond, we have complete numptiness in the Eurozone. Such that one pundit has predicted the exit from the Euro of several countries.

 

It will be interesting to see how Merkel does in the German election.

 

I will try and find the article and post it - it does make very interesting reading.

 

Oh and one thing that is worth doing is to stop watching the BBC news, it is so biased it is untrue - it is also so behind the likes of CNN and Sky in events like Libya that it is actually embarrassing.

 

Whilst it does have a huge skew to things financial - Bloomberg is well worth a look.

 

But a quick summary is:-

 

a) Business and companies are doing well considering and are poised to do well.

 

b) Politicians in general on both sides of the pond and certainly in Europe need a reality check (and preferably a huge kick up the ar$e)

 

c) The coalition here needs to continue to work at getting the deficit down, but also need to revamp how they work to SUPPORT UK industry - the recent tendering process for rail rolling stock is a classic.

 

i.e. go for the "cheapest" option from Germany (in this case) and then find thousands of £'s of tax payers money to pay benefits for redundant UK workers.

 

You have to ask yourself what the hell are they doing?

 

By the time the rolling stock is paid for as well as the opportunity cost of NOT awarding the contract to a UK company, then the total cost to us in the UK is far far more than the supposed savings.

 

[Dave225]

I agree with many of Clive's comments, not necessarily all.

 

Watching the BBC is like reading the Guardian newspaper, Oh I forgot it is the Guardian newspaper. No others are allowed within the Beeb's hallowed walls. I also agree that our politicians are probably globally about the most incompetent and probably corrupt bunch we have ever seen, no matter which nationality. Decision making is something none of them have ever learnt, aprt from wher to hold a Bunga Bunga Party, and yes, bad decisons can be made as well as good, but that removes uncertainty. We all know that in an election the Party named 'None of the above' would win hands down.

 

The markets are indeed pushing the polticians in part due to the comments above, but also the markets are themselves being far more volatile than is necessary, or desirable. Short selling, panic selling, speculating all done by so called financial professionals are having a negative effect on anything positive that is being done. And as for the bankers, never have we seen such a bunch of greedy crooks. The bosses of nationalised banks are now getting higher salaries and bonuses than before the 2008 crisis, that tells you a lot about their priorities.

 

There is now talk, as yet speculative, that the BofE will reduce interest rates to 0.25% or even 0% to protect borrowers. The fact that this will dry up any savers that may be foolish enough to put money into any account seems to be beyond their small brain cells. No money going in means no money coming out. Then their only source of revenue will be charges or getting more loot from the tax payers.Any funds they do have are ringfenced for capital stock, or bonuses.

 

There are answers and solutions out there but until somebody grabs his/her b...s, or female equivalent we will continue a slow descent. We no doubt will mudle through this immediate problem but we will still end up lower than where we were. etc etc. In additon, anything done in the EU usually involves pain for the UK, it is the nature of that beast. Although we do have good Companies we still are dominated far far too much by service industries, a mistake made in years gone by in pursuit of the quick buck. Even our public servicies seem to think they are big Companies, but never ever make a profit, so why they think they deserve big bonuses is beyond me. Service industries in turn are ruled by the short term gain due to their very nature, the primary solution to any problem is always to cut costs, from the bottom up. So no one will accept the pain necessary to get the best result. All that is happening is that they are turning more and more to penalising the weakest members of society to achieve the short term result.

[CliveH]

Interest rates are a bit of a non-starter at the moment - there are deals out there if you know where to look (or dare I say where to get advice from :-D ) - for example we have just set up for a client an IoM account with Alliance & Leicester via an offshore investment bond that guarantees 4.63% pa for 5 years. I am concerned at the 5 year lock in but they are not. One downside is that the minimum investment is £100K.

 

As for the article I mentioned I reproduce it here:-

 

............................................................................................................

 

Investec's Max King says equity markets are no longer a reliable economic indicator and forecasts a breakup of the eurozone.

 

 

The economist Paul Samuelson once pointed out that Wall Street had confidently predicted nine out of the last five recessions.

 

 

The August drop in equity markets, similar in scale to that seen a year ago, has resulted in what, in our view, is more likely to prove to be another false warning.

 

The last 11 years have contained two of the worst four bear markets since 1900 so it is no surprise that investors have become highly risk-averse, rushing for the exit at the first sign of trouble. Equity markets have therefore become an even less reliable leading economic indicator.

 

We note:

 

• Forecasts of global economic growth for this year and next have been revised down from a little over to a little under 4% on a purchasing power parity basis and about 1% lower using GDP weights.

 

We would suggest that far from this being an economic disaster, the world is in the sweet spot for growth; any higher and commodity prices would be pushed to fresh peaks, leading to higher inflation, a squeeze on consumers and an inevitable economic reversal.

 

If developed markets are to see faster growth, then emerging markets must slow down to compensate. This is hardly a desirable outcome.

 

• US companies continue to perform despite the sluggish domestic economy. Thanks to a falling dollar, rising exports and a domestic economy no longer driven by credit expansion and government spending,

 

US corporate revenues have increased by an underlying 8.4% in the last year, and earnings by much more. If companies can do this well with sluggish growth, investors may have grounds to mitigate their fears over its continuation.

 

• Forecasts of earnings growth are fading, yet there is no sign of the collapse discounted by current valuations. The aggregate of global forecasts points to mid-teens growth this year and next, putting the global market on a valuation of barely 10 times 2012 earnings.

 

The valuation of just over 12 times earnings historic earnings has only been lower in the last 25 years in early 2009, when earnings were forecast to fall some 25%. The valuation based on forward earnings is therefore as low as it was at the height of the credit crisis, if not lower. This would suggest that the downside may be extremely limited.

 

• To achieve significant upside, investors need to see a cure of the cancer eating away at the global financial system - the eurozone crisis. Without growth, which a lack of competiveness in Southern Europe makes impossible, there can be no escape from the fiscal, debt and banking crisis engulfing the region.

 

We believe this can only end one way - with at least six countries leaving the eurozone. Provided that central banks provide the liquidity to support their banks, which will inevitably face major losses, this should have the same consequences as previous break-ups of unsustainable malfunctioning currency unions: it will pave the way for economic recovery and higher equity markets.

 

We would see a partial euro break-up as potentially very positive, providing a signal to establish a more positive view on equities. In our view, we are almost at crunch point.

 

Max King is a strategist at Investec and manager of the Multi-Asset Protector fund

 

 

.............................................................

 

I would not say that Max King is any sort of oracle - but I would say that from where I stand - what he is saying makes a great deal of sense, in particular about the strength of the companies out there that are desperate for some good political leadership, and his comments on the politicians themselves who seem to be hell bent on currency suicide in supporting an unsupportable Euro in its current form.

 

Another report today by a European commentator says similar but here it states that some countries from the old Eastern bloc are far stronger economically than the southern Euro states (the 6 [?] Max King mentions) and that if we could shed the corrupt southern euro states and take on the dynamic ex-eastern bloc states the euro would be stable.

 

[CliveH]

Just picked this up:-

 

 

RBS predicts 'violent' Greek default by December

06 Sep 2011 | 13:26

Dan Jones

Categories: Economics / Markets

Topics: Greece | Eurozone | Government bonds

 

RBS expects Greece will experience a hard default this December in a move it says will cause "violent contagion" in global markets.

 

 

In a note to clients, RBS European rates strategist Harvinder Sian said Greece will default on or around the IMF's 11 December review of its fiscal reforms.

 

 

The note pointed to the inability to implement reform, over-aggressive austerity targets, an absence of further compromise from the IMF and EU and the increasing difficulty of passing laws through the Greek parliament as factors influencing its forecast.

 

"The only reason for suspecting the 11 December review is still the more pivotal date [than the 11 September review] is the idea Greece has at one more iteration of promises to make and policymakers have every reason to close their eyes and hope, and give the benefit of doubt until the situation is so clearly negative that nothing can be done", Sian said.

 

If and when Greece defaults, a violent contagion will require ECB interventions and possibly a global reaction, he added.

 

"Private capital simply will not come back to these sovereign and related capital markets as the risks of a dissolution to the euro rises," the note said.

 

It added the ultimate solution is "huge ECB intervention in European government bonds and perhaps private bond markets".

 

Sian, who also raised the possibility of global assistance via the easing and lending or buying of sovereign and private debt, said markets are only now beginning to price in a "dark scenario".

 

"Bonds (and treasuries) can trade to a much lower yield level if the crisis unfolds on a Greek default and we will only change our bullish call when the facts change towards a EMU healing process, even if this means sub-1% yields", he said.

 

"In any case, a Greek default is coming and is a pivotal factor is our assessment that all European government bonds ex-Germany at this stage are still speculative investments."

 

 

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So yet again a bank (RBS) predicts what is likely to happen but hides from what is needed to sort the mess. The article above shows that the banks (RBS at least but they all sing from the same wunch hymn sheet) want yet more government bailout via a EuroBond.

 

What a mess.

 

It means that the billions piled into Greece by the Germans in particular has simply disappeared. And the banks answer is more of the same.

 

The only thing to do is to let Greece go - the banks will have to then shoulder the losses and yes if some go bust then let them! and allow Greece to run its own economy. The rest of southern Europe should do the same.

 

The alternative is for us in the stronger economies (not by much but we are - just!) to keep throwing good money after bad to prop up a corrupt state(s) and to keep bankers in their jobs.

 

And "Joy to the World!!" all this will most likely hit the fan just before Christmas.

 

[Colin Leake]

We sways seem to have a knack of looking on the black side. If the economy expands by less than expected it's a disaster. No it's not it's still expanded! If retail sales are less than five points better than in the same month last year then they are moaning it's a disaster of epoch proportions. No chaps it's not.

 

If the economy drops by say .01 percent that that's it we are doomed. No we are not it's a very small amount.

 

Let's see a little more optimism and a get up and get attitude I say.

[Guest pelmetman]

Colin Leake - 2011-09-06 4:55 PM  Let's see a little more optimism and a get up and get attitude I say.

 

Had a interesting conversation with my younger brother today:D............I say interesting perhaps I should say hysterical(lol)......We were talking about how our respective businesses were doing, I am a small minded self employed oike, my brother has always suffered from ambition:D.......he now has a blind company that needs to turn over 33k...........a MONTH to break even8-)..........he say's things are tough but its harder for his partner who has never been self employed before(lol).............His partner missed a repayment on his mortgage for the first time ever.................My brother the entrepreneurial one has done this many times and knows how to live from hand to mouth and finds it like me amusing:D................ as for the banks.................We only have one letter for them;-)......replace the letter B with a W in the the word BANKERS...........................................................................can you work out where the W goes(lol)

SO DON'T BELIEVE THE CRAP THAT THE B*STARDS SAY THAT THEY ARE HELPING SMALL BUSINESSES.................Lets do ourselves a favour and LET THE BANKS FAIL;-)   

[Dave225]

While I sympathise with 'pelmetman' , he is missing the point a little bit. I full y agree that the banks have behaved atrociously, and are still doing so but to allow them to fail would open Pandora's Box of horrors that would make his difficulties in a small business seem totally irrelevant. In fact he would not have any business, although maybe then he would feel differently. We need a method that allows people to go about their daily lives and using money is the current method. It allows you to buy the things you need and allows businesses to trade. Some may suggest lets go back to bartering, which works on a small scale certainly, but can never work on a global scale. by the time you had travelled to Timbuctoo to swop your chickens for fresh eggs or camel meat, or whatever, it would all be off by the time you came back. Money, or the paper version allows you to trade without actually having to do direct swops and we need a means to faciltate that. We created the banks to perform that task and yes, they have failed us miserably, but that does not mean that the system has failed as well. We need to sort out the failures in the banks, not close them down, and that takes probably a commitment our current leaders seem to be scared to take. I feel we should follow the example in the US where a number of bankers have been thrown in the slammer for their sins, here they get a pension for life.

 

The current crisis in the EU will be resolved, the markets will see to that but it will probably take time and lead to the fall of some political leaders, something for which I have no sympathy. The money is there it is just not in the right place, again something the bank chiefs should be held to account for,.

[Guest pelmetman]

All right then Dave, let one or two fail;-)..........Nothing like a kick up the bum to wake up the mind(lol)

Oh by the way I'm doing very nicely thank you Dave,(14 weeks holiday so far this year:-D) as unlike my brother I never expanded small minded and happy that's me;-)

[Mel B]

pelmetman - 2011-09-25 8:07 PM

Oh by the way I'm doing very nicely thank you Dave,(14 weeks holiday so far this year:-D) as unlike my brother I never expanded small minded and happy that's me;-)

 

... that is completely untrue ... Sue tells me that your waistline has definitely expanded .... :D

[Guest pelmetman]

Mel B - 2011-09-26 9:49 PM  ... that is completely untrue ... Sue tells me that your waistline has definitely expanded .... :D

I'll have you know Mel............I am a mere shadow of my former self:D..................Due to a dodgy curry8-)

[Dave225]

14 weeks??? Well, you beat me. I managed 94 days in Spain and did have a 2nd half planned for just about now but money concerns made me reconsider. Of course receiving messages from friends down there telling me how hot is has been and how they need to cool off in the pool, has made me feel even better especially when the temp here managed a measely 9 for quite aw while. Now I just have to repair the window I threw the brick at.

 

Anyway He Ho! next year is not too far away and the plan is defintely 4 months away. If I blow all our cash doing t, I will then join the queue at the Benefits Office for my handouts. Did I forget to mention I am actually from Eritrea/Somalia/Zimbabwe/Scotland or any other country with problems and of course need all the help i can get. Can i stil use face blacking??????? I wonder

 

By the way i note we have bypassed billions now and are all talking about trillions to sort this all out. How many pensioners on State Pension will it take to make a trillion I wonder?

[Guest pelmetman]

Dave225 - 2011-09-27 6:04 PM  Did I forget to mention I am actually from Eritrea/Somalia/Zimbabwe/Scotland or any other country with problems and of course need all the help i can get. Can i stil use face blacking???????

Just say your from Dale Farm in an Irish accent;-)

Oh, by the way I miss counted...........we have had 15 weeks skiving this year:D