The Business/Finance/Economics Thread

[david-avfc]

I admit to not having a great grasp of higher financial affairs. My philosophy is based on the economics of Mr. Micawber. So I wonder how good an indicator markets are of approaching economic dangers. The markets certainly seemed to anticipate the seriousness of the impending damage Corvid-19 was about to wreak long before governments, and certainly our own, wised up to the coming storm. Do markets anticipate or react?

They tend to both anticipate and react (or overreact) quickly to wider events and news flow.

Market movements did pre-empt the economic impact of Covid quite well, although moving forwards perhaps too bullish, particularly on some of the US large technology companies (which have a huge sway in the overall stock market) which markets have appeared to assume will be largely unaffected by these events which seems illogical. The US S&P index which represents the US market is at the same level as this time last year (or as at literally this minute 0.14% down from 14th May 2019) which seems completely counterintuitive considering we are in the middle of a natural disaster and a complete economic meltdown

 

[david-avfc]

Martin Wolf says he is expecting to see some winding back of globalisation after the pandemic. That's probably a very good thing for Europe. It's really, really bad news for China.

Europes biggest trade partner is China so would be particularly bad for Germany for example who export lots of goods over there. As for China, a growing “middle class” and hugely favourably demographics I’d still have faith in China to do well.

 

[The Fear]

The new Guvnor of the Bank of England was interviewed by Peston last night, it was quite interesting, saying there is no need to go through austerity again, the level of debt the Bank will take on/buy is massive and they will be willing to hold that long term. And pointed out the cost of debt now is at an all time low.

 

[BodyButter]

Europes biggest trade partner is China so would be particularly bad for Germany for example who export lots of goods over there. As for China, a growing “middle class” and hugely favourably demographics I’d still have faith in China to do well.

What do you like about their demographics? There is a lot of concern in China that their population is aging much faster than they'd like. They tried to encourage population growth by removing the one child policy but it hasn't had any meaningful effect.

 

[david-avfc]

What do you like about their demographics? There is a lot of concern in China that their population is aging much faster than they'd like. They tried to encourage population growth by removing the one child policy but it hasn't had any meaningful effect.

Mainly just the sheer size of their population, 1.4bn I believe, which is bigger than North America, Europe and Japan combined. Their domestic market is basically the same size as all other developed markets in the world, so huge scope for companies to become world leaders potentially without even leaving their own market (look at the values of Alibiba and Tencent for example).

Perhaps not “demographics” but the country is still relatively rural and agricultural, and with the infrastructure and technological improvements in the country it could easily be assumed that trend towards urbanisation will continue resulting in productivity gains and rapid increases in individual wealth

On the ageing population issue, interesting point and not one I’ve hugely considered previously. Ultimately in my mind this is a bigger concern for Japan and parts of Europe which are already mature economies with “nowhere to go” and as such a declining workforce will have more of a notable impact, compare that to China the impact of an ageing population will surely be more than offset by all of the other growth factors. Perhaps something to consider in the very long term rather than the next decade or two

 

[Pangloss]

The cost of debt is at an all time low but won't remain that way, rates cannot remain close to zero permanently so low rates now hardly means a free lunch.

 

[BodyButter]

Mainly just the sheer size of their population, 1.4bn I believe, which is bigger than North America, Europe and Japan combined. Their domestic market is basically the same size as all other developed markets in the world, so huge scope for companies to become world leaders potentially without even leaving their own market (look at the values of Alibiba and Tencent for example).

Perhaps not “demographics” but the country is still relatively rural and agricultural, and with the infrastructure and technological improvements in the country it could easily be assumed that trend towards urbanisation will continue resulting in productivity gains and rapid increases in individual wealth

On the ageing population issue, interesting point and not one I’ve hugely considered previously. Ultimately in my mind this is a bigger concern for Japan and parts of Europe which are already mature economies with “nowhere to go” and as such a declining workforce will have more of a notable impact, compare that to China the impact of an ageing population will surely be more than offset by all of the other growth factors. Perhaps something to consider in the very long term rather than the next decade or two

There is a thread on it somewhere on here called The Population Problem. China's birthrate is 1.68, the UK's is 1.79, Japan's is 1.43. The replacement rate is 2.0. Anything below that means the country is in population decline.

 

[BodyButter]

The cost of debt is at an all time low but won't remain that way, rates cannot remain close to zero permanently so low rates now hardly means a free lunch.

We may possibly have reached peak capitalism anyway. I read somewhere that all of the gains on the US stock market from the past ten years have been from stock buy backs. The Nikkei has been trading sideways for 30 years.

That could mean that low or negative interest rates are here to stay and that The West is heading for a stagnant economy like Japan's going forward.

 

[Fulford]

There is a thread on it somewhere on here called The Population Problem. China's birthrate is 1.68, the UK's is 1.79, Japan's is 1.43. The replacement rate is 2.0. Anything below that means the country is in population decline.

That figure for the UK will make Boris happy.

 

[Pangloss]

We may possibly have reached peak capitalism anyway. I read somewhere that all of the gains on the US stock market from the past ten years have been from stock buy backs. The Nikkei has been trading sideways for 30 years.

That could mean that low or negative interest rates are here to stay and that The West is heading for a stagnant economy like Japan's going forward.

Low rates a choice at the end of the day and there ought to be a correction at some point. Lessons from Japan have not been learned.

 

[BodyButter]

Low rates a choice at the end of the day and there ought to be a correction at some point. Lessons from Japan have not been learned.

With low birth rates and a push back against immigration, the only way is down (or possibly sideways).

 

[danvilla2]

Governments around the world always try and prop up the coming during the bad times, but they’ve used all their levers for the past decade and I was reading something by Adam Posen (IIRC) - who I find really interesting - who doesn’t think QE will work this time round. At some point we’re probably letting the economy truly bottom out without propping it up but no government wants that on their CV.

If we want to restart this economy I would think radically. Rather than QE, which surely takes time to filter to the front line and to me by logic just inflates asset prices as certain organisations just get more cash they don’t know what to do with it.

Anyway, radical suggestion - increase personal allowance to £20k. Will cost the government a huge chunk of money hundreds of billions, but what we need is people spending on day to day transactions, from the high street to consumer goods to cars to houses. The economy is damaged because consumers on the front line aren’t spending, it came quickly so if we fix that element it’ll go away quicker (not that it’ll be quick).

 

[The Fear]

Anyway, radical suggestion - increase personal allowance to £20k. Will cost the government a huge chunk of money hundreds of billions, but what we need is people spending on day to day transactions, from the high street to consumer goods to cars to houses. The economy is damaged because consumers on the front line aren’t spending, it came quickly so if we fix that element it’ll go away quicker (not that it’ll be quick).

Ha, yes, like it, especially if you tell people if they don't spend, the Gov takes the money back!!!!!!!!!

 

[mike_field]

Yup - put money in hands, it'll get spent. Give it to banks, it stays in their pockets.

 

[Fulford]

Shearings coaches have gone bust.

 

[CDX_EIRE]

The real country who is fucked is Saudi, they need Brent crude oil at approx $80 just to break even, it's currently $26. They've been spending big on their Yeman genocide as well.

I'd wager a crisis in that country and I cannot wait, I hope it fucking burns.

Absolutely, pull the plug on the one thing that gives them any sort of relevance on the world stage.

It will be interesting to see how the electric vehicle market affects world oil prices too. Naturally, power for those vehicles has to come from somewhere but it seems like America is looking to be self-reliant or maybe they bled Iraq dry and have it all stored in the midwest.

 

[kefkat]

That figure for the UK will make Boris happy.

Shh! He's got enough kids. At the last known count its 6 with another never confirmed either way

 

[CDX_EIRE]

In a week you'll have lost another $100 at least. Eat the loss and move on.

Well I held Delta and Boeing and got out of both about a month ago with a nice profit.

Managed to boost my account by 30% - I've gone mad learning about the market and stocks and so on. New podcast I listen to is Dumb Money. Pretty good.

Peloton and Spotify are my two biggest holdings and they're doing well.

I had one day in the market where I got really stressed. I had too many options open and the market took a dump. Luckily only lost $300. Learned a valuable lesson.

 

[danvilla2]

There is a thread on it somewhere on here called The Population Problem. China's birthrate is 1.68, the UK's is 1.79, Japan's is 1.43. The replacement rate is 2.0. Anything below that means the country is in population decline.

Surely China can just relax their child policies, I know the “one child policy” has been abolished but they’ll smash the kids out especially if they have two girls and need a boy to take over selling exotic animals at barely legal food markets.

 

[BodyButter]

Surely China can just relax their child policies, I know the “one child policy” has been abolished but they’ll smash the kids out especially if they have two girls and need a boy to take over selling exotic animals at barely legal food markets.

You'd think there would be an explosion in the birth rate but there was barely a blip after they enacted the two child policy.

It's part of the culture now to have only one child.

When I was in school, almost all of my friends were one of 3 kids. Now, most of my friends who have kids have one or two. It's not just the money, people just don't see the point in having lots of kids these days.