More paradox. Good news is bad news.. ie lower inflation, surely a good thing for uk citizens.. is bad news for the gbp and therefore uk wealth as it means policy makers have a green light again to start those printing presses again.
https://mninews.marketnews.com/content/uk-input-prices-deflationary-core-output-lowest-sep05
No matter credit bubbles and a savings depression. Give me another hit baby.
https://mninews.marketnews.com/content/uk-data-rising-london-prices-drive-home-values-higher
Save £3000 month from the age of 18 or become a policeman.
http://www.guardian.co.uk/money/blog/2013/apr/27/pensions-system-failed-what-answer
That was the choice apparently.
rsj
GDP stuff
http://www.bbc.co.uk/news/business-22288585
Service Sector is 77% of UK economy.
dyor.
imho
rsj
So Im going to stick my neck out here and guess that the IMF's solution to all the UK's problems is......wait for it....more money printing. LTEC Lagarde has already told us it doesnt lead to inflation so what can go wrong?
Luck all
Hmmm does anyone remember that report by some Lord or another saying that pensioners should "work" for their state pension.......
No mention of why pensioners might need to work in retirement of course.
Luck all
Lending contracting again in the uk.. as house prices rise to close to record levels again and as rents continue to rise as real incomes fall. House prices as a multiple to salary are at records. See any issues with this? About as sustainable as burning your house down for heat. Rich
http://www.buytolet.com/cml-mortgage-lending-fell-slightly-in-february/
Just as BTL soars upwward.. rent arrears hitting new records.. well done the boe.. no problem here. Market functioning perfectly.. Imagine a boom just as real wage enabled demand is moving the other way as real incomes are squeezed.
http://www.buytolet.com/buy-to-let-mortgage-market-enjoys-strong-rebound/
The reason.. The central planners interventions are screwing up all markets as capital is increasingly mis-allocated. Text book!
Rich
Rich, not sure if this is under the right topic, so please feel free to move.
QE will never be reversed.
Good for holders of sterling.. Next up ECB..
FRANKFURT (MarketWatch) -- The Bank of England on Thursday offered no surprises, leaving the size of its bond-buying program unchanged and holding its key lending rate at a record low 0.5%. The bank' Monetary Policy Committee left its asset purchaes, the centerpiece of its quantitative-easing strategy at 375 billion pounds ($564 billion).
Another shred of good news for the uk.. Services pmi improved and did not decline as expected. This together with the near miss in manu pmi (48.3) is much better stuff. Vs the euro area is strong. Vs the US its marginally weaker. GBP holders breath a sigh of relief, for now.
Its hard to see how the euro can rise vs sterling given the various data points that are coming through. The one issue is whether the BOE monetize here again today. If they kick off another qe program expansion then for sure the gbp can fall. It would not entirely surprise me as we have an fx war at present given the boj's latest moves last night. Should the boe expand the ecb would be left looking pretty exposed i must say. The euro could monetarily increase in value vs the gbp etc if she is the only one in the room to be pursing a hard currency line. Though clearly this would lead to collapse in her economy as she is capital lite and her real economy starved of credit and orders would fall off a cliff. With unemployment over 12% already. 26.3% in spain revolution would be in the air which wouldn't be pretty at all. Next move BOE..
Rich
Details
http://www.bbc.co.uk/news/business-21948429
rsj
Tricky. The BOE wants them to raise more capital and yet the Government wants them to increase balance sheets via increasing lending to gov, business and consumer. The problem here is the capital issue and the BOE knows it.
The UK competes for capital, even over night excess reserves, with other countries, unless you impose capital controls, note.
If the BOE did more qe and widened the scope of qe this would help as the banks could be net sellers of high yield debt and even gilts so long as the qe program covered all the new issue government debt for the next year. Its possible but the Uk is increasingly in a squeeze here.
Watch the secondary market yield price for treasuries. If the boe comes under pressure on the overnight rate things would certainly get interesting.
Also note the cyprus issue which is burning on brightly.
Unsurprisingly Krugman comes out as an advocate of capital controls.. and states that the reason for the US housing bubble in 2007/8 was due to inflows of foreign capital. (I think he may have finally and completely lost the plot). Interesting why vast inflows of capital into the US system, according to Krug, would have lead to the US losing so much of her value in that decade or why so much investment and fund flow went to EM markets? Or why EM reserves mushroomed in the same period. No.. nothing to do with the US monetary policy. All to do with foreigners.
http://www.nytimes.com/2013/03/25/opinion/krugman-hot-money-blues.html?_r=0
As an aside, have you noticed a trend in the neo Keynesians. I have. They always and every where blame 'foreigners' for their mistakes which is why socialists lead you wars and free market capitalists towards peaceful commerce.
Great wrongs and minority oppressions can be done in the name of the greater good. Its always been thus. Hayek is a must read, on this and so many, issues.
Banks
http://www.bbc.co.uk/news/business-21948429
dyor
rsj
So Im more of an onion man myself but the Mash covers things from this side of the pond.....the more ludicrous Real Life becomes the harder it is to tell the "satirical" news sites from any other news based web page!
Im sure the daily mail are cutting and pasting as I type!
Luck all
Are house prices in the uk really rising? Are wages rising or falling? Trade weighted it seems to me that house prices and incomes, in the uk drifting ever downward, inflation adjusted are they in fact, on a compounded basis, collapsing? Belgravia aside of course. Rich
http://www.bloomberg.com/news/2013-03-12/u-k-inflation-expectations-gauge-rises-to-most-in-4-1-2-years.html
This is brilliant.. The uk maintains a 3% capital ratio rule. UK combined bank balance sheets are 400% of uk gdp btw. Lessons truly learnt from the near total insolvency and collapse of the uk banking system. Congratulations to our political and banking elites! From Reuters:
"UK says will stick with 3 pct bank leverage ratio until 2018
LONDON, March 11 (Reuters) - Britain said it did not plan to
impose far stricter rules on how much banks could leverage their
capital as it was not currently needed and it will review the
rules in 2017 when global regulations are clearer.
Britain plans to impose a "leverage ratio" of 3 percent on
its banks, meaning they can leverage their capital by up to 33
times, but an influential panel of lawmakers said the rules
should be far stricter.
"Our view is that at this time we should follow the
international approach, to press for countries to have a power
to set a higher ratio for 2018 following a review in 2017," said
Britain's Financial Secretary to the Treasury Greg Clark, as
part of a debate on banking reforms.
Just noticed your post from three weeks ago here Rich.
It's UK PMI services tomorrow. Sterling has had a better day today and moved up a little against the dollar and the euro.
I can't say that I have a view on what the figures will be tomorrow but I may try a short trade similar to last week's for the revision of GDP. In other words, an order to open short a few pips below the market price looking for a spike downward should the results disappoint.
JMK
The uk runs on credit.. Its all important for the uk. http://www.bloomberg.com/news/2013-03-04/u-k-fourth-quarter-lending-drops-led-by-lloyds-santander-1-.html
Bollox (excuse the non tech phrase). UK construction pmi fell. Expectations were for a rise. Its not looking good. On the plus side sterling hasnt fallen out of bed, the support holding for now but on market weakness she looks very vulnerable. http://uk.reuters.com/article/2013/03/04/uk-construction-pmi-idUKBRE92307B20130304
Everything is relative of course. Who would have thought that a score of 51.5 services pmi would be one of the best services index figures in the world. But it is!
From Reuters..
LONDON, Feb 5 (Reuters) - Sterling rose against the dollar
on Tuesday after better-than-expected services PMI data,
although gains were expected to be limited ahead of a Bank of
England meeting later in the week.
Activity in the dominant UK services sector returned to
growth in January, with the Purchasing Managers' Index rising to
51.5, beating the forecast of 49.5. [ID:nL9E8MC07K]
The data helped alleviate concerns that the British economy
is slipping into its third recession in four years after just
one quarter of growth.
Those worries have weighed heavily on sterling since data
showed the economy contracted in the fourth quarter of 2012, and
the pound hit a 5-1/2 month low of $1.5674 on January 28.
Sterling <GBP=D4> was last up 0.1 percent on the day at
$1.5782, having earlier hit a session high of $1.5805 after the
PMI data. Charts showed it faced strong technical resistance
around $1.5889, the 200-day moving average.
"The PMI data supports the picture that potentially the GDP
number for Q4 could be isolated," said Lee McDarby, head of
dealing for corporate and institutional treasury at Investec.
A strong rise in UK retail sales in January also helped lift
the pound. [ID:nL9E7JB01L]
Some strategists said while sterling should be able to
consolidate around $1.58, further gains could be difficult given
some marginal speculation that Bank of England policymakers may
announce more quantitative easing on Thursday.
"For sterling there's probably quite a lot of negative
economic performance priced in. After the barrage the pound has
had in the first month of 2013 I would expect it to hold its own
but it may be too much to ask for a push to $1.60," McDarby
said.
Despite the better-than-expected PMI data sterling failed to
make headway against the euro.
The single currency <EURGBP=D4> rose 0.3 percent to 86.01
pence after above-forecast euro zone PMI data outweighed
concerns about political instability in Spain and Italy.
The euro has also made sharp gains against the pound so far
this year, hitting a 15-month high of 87.17 pence on Friday.
Its ok, around expectations. Long gbp is a reasonable trade vs the euro. imo.
https://mninews.marketnews.com/content/cips-pmi-shows-uk-manufacturing-expands-slightly-jan
A bad set of numbers from the uk. -0.3%.. But hang on is this really so bad.. Bare in mind that -0.2% of the fall was simply due to disruptions in the north sea oil and gas facilities. So the uk (ex north sea issues was -0.1% for q4).. This would place her above almost all her euro rivals. Ie German q4 gdp was -0.5%, Spain -0.6% France topped the lot at -0.2%.. But ex north sea production issues the uk would have shrunk the least of all her euro rivals inc Germany. Imo the pound is a buy here vs the euro! The greatest issue is political here and the talk of UK exist from the eu.. Boris Johnson as major of london clearly gets the seriousness of the situation and is rapidly trying to pour cold water on the issue!
Here Johnson.. "99.9% sure the UK is staying inside the EU".
Here Uk Gdp..
http://uk.reuters.com/article/2013/01/25/uk-gdp-idUKBRE90O0CD20130125
P.s. unemployment stands at 7.7% in the uk..
france 10.3%,
Spain 26.2%,
Italy 11.1%,
Germany 6.7%
USA 7.8%,
Euro area 11.8%.. etc etc..
The uk is pipped by Germany but aside from them only canada 7.1% and Australia at 5.4% beat the uk.
Looking at this from a different perspective the uk deficit is a disaster at 8% for 2012. Its not a valid point to suggest the deficit is high as social security due to labor unemployment is leading to a higher deficit no. On the contrary in fact. Imagine what would occur to the uk deficit if unemployment increases in a higher interest rate environment etc. The UK stands with the USA, Japan, Spain.
Greece for a moment. Her perpetual budge cuts have created in a structural surplus, by the way.. Ie if Greece decided to drop out of the euro zone and reneg on her interest payments on her debts she would be a surplus country like Germany! That's really quite a turn around isn't it. If i were a leader of Greece i would be licking my lips and turning East. The only danger would be a German invasion as they would be furious but domestically and for the future of the Greek people it must be a viable option..
Well Rich,
I am moving house now as I think the window of opportunity to move will close very soon. i.e. I think liquidity in the market in my area / price range will dry up. There is already evidence of this. Bargains are snapped upped but "reasonably" priced houses hang around for a while at the upper end.
Of course if pounds sterling take a real kicking London may benefit from external buyers
The quote following I think is from Jim Rogers but it could have been somebody else.
"You only see who has been swimming naked when the tide goes out".
These crazily low interest rates are the "7 years of feast" and people would be advised to use these years of feast wisely. Alas, many do not seem to be doing so. Though quite a bit of debt is being paid down by us limeys.
When interest rates rise we shall see how people are swimming.
imho
Absolutely the same trends exist as 4 years ago.. Rising debt ie in public debt, large bank balance sheets 400% of uk gdp, structural imbalances trade deficits, rising property prices as incomes fall. The government is trying to push consumers to add debt ie funding for lending but the problem here is the race to expand debt by allowing ever lower deposits and ever lower rates vs falling income.
The epi-centre of debt battle is disposable income. Real incomes are falling on one side but as interest rates go to zero disposable income for many (with debt) has risen in real terms. On aggregate the battle for disposable income continues but without structural change the trend is clear - ie down! This interest rate rise in disposable incomes is only due to rates being at 50 year lows. When inflation rises as real incomes continue to fall and interest rates rise.. Then its game over UK as the housing capital appreciation scheme will be over as will the rising rents (far above incomes). Its simply maths, no emotion involved at all here. (Emotionally, in fact, i would far far prefer the uk to do well, not badly as i have exposure to the uk in various forms from direct investment to inheritance investment).
Being objective, i have to say, its quite a disaster actually. The more they push the ponzi agenda without trying to improve the structural issues the worse the eventual collapse will be. It really could be devastating imo. When inflation starts world wide then the structural issues will be clear and uk house prices could collapse downward by 50% or more even as the currency loses half its value. Liquidity would totally evaporate from the housing market just as the uk baby boomers are retiring.
Of course its just my opinion.
http://www.telegraph.co.uk/finance/jobs/9814528/Income-fails-to-match-inflation-again.html
http://www.telegraph.co.uk/finance/economics/9812102/Mortgages-cheapest-since-height-of-crisis.html
Check the real disposable incomes for the uk here:
http://www.tradingeconomics.com/united-kingdom/disposable-personal-income
Its a wonderful chart this. You can clearly see where/how disposable income rose due to bringing forward future earnings through adding debt to the balance sheet for the public and consumer sectors. Only in the last decade (in 5!) have consumer debt levels hit their limits. The public sector has stepped in to increase disposable incomes via adding debt, qe and low interest rates. But the real incomes must fall from here as the structural headwinds continue and public sector and consumer debt levels reach their high water marks. You can keep interest rates as zero only so long as inflation remains low but the global situation is changing. World wide money supply growth is immense and hundreds of millions of middle class consumers are being added (with zero debt note!) in the rest of the world. As interest rates rise again the uk consumer and therefore disposable incomes will fall dramatically. Even using the massaged inflation stats (7 measures in the uk!). The implications for fund flows as well as house and rent prices are immense. The uk banking sector with 400% of gdp on their balance sheets are exposed. The serious concern here would be that the banking sector would need another bail out when world wide inflation is high. This would cut the pound in half and also further kill disposable incomes. Dear oh dear.. what a sea of doom. Allocate widely.. be nimble not dogmatic to survive these coming storms!!! DYOR of course but on these macro issues i believe my record is not a bad one.
Luck to all
Rich
Cameron postpones speech due to algeria? Really?
Not great but ive just bought some pounds back vs the euro. The euro vs pound is over done at least on the short term.
Dropping like flies.
http://www.bbc.co.uk/news/business-21047652
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