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twinturboz said:
DonkeyApple said:
walm said:
twinturboz said:
Vw could do with a V or W shaped bounce, down 20% so far.
So far the market appears to be assuming 100% of the potential fine.The outstanding question is how much it will cost to put right going forward ON TOP of the potential fine.
Won't help the brand.
Porsche down 50% since April apparently!
I can't imagine anyone is rushing to buy a VAG product in the US today or that VAG owners aren't already wondering how much they've lost in residuals so must sue for?
Short term yes arguably more pain, possible management change/criminal charges but in the long term I'm sure they'll recover. Probably be all forgotten in a few years time. Does anyone know what % of their earnings come from the US market.
I would also counter that we may be in a medium/long term bear market which would be a very different situation to BP whoae stock price benefitted strongly from the QE era bull market.
DonkeyApple said:
Definitely an argument in the current market climate that the sell off is excessive and may represent an opportunity.
That is my opinion, but I've been wrong before!Currently buying raw materials and energy - which takes a strong stomach. Both are fiendishly cyclical. So, as ever, the question becomes, "where are we in the cycle?".
Are the Chinese going to stop what they've been doing for the last 20 years? I think not.
Ozzie Osmond said:
DonkeyApple said:
Definitely an argument in the current market climate that the sell off is excessive and may represent an opportunity.
That is my opinion, but I've been wrong before!Currently buying raw materials and energy - which takes a strong stomach. Both are fiendishly cyclical. So, as ever, the question becomes, "where are we in the cycle?".
Are the Chinese going to stop what they've been doing for the last 20 years? I think not.
The issue with basic commods is that we are producing more than we actually need so a drop in supply is what is really required to flip the cycle.
One thing is for sure and that is that cash doesn't really know where to go at the moment. It's avoiding equities, bonds and commods as none of them have clear medium to long term views.
To quote Jesse ' This week iy'll mostly be flipping a coin.'
DonkeyApple said:
I would also counter that we may be in a medium/long term bear market which would be a very different situation to BP whoae stock price benefitted strongly from the QE era bull market.
Forget Vw more interested in that statement, it's also my thinking that we have started a bear market. With the fed refusing to raise last week they've done nothing but add further uncertainty or in my mind a sell signal, where is this inflation that they have been talking about for years? The fed claims it's data dependent but it's fairly obvious to see now that they are market dependent. Forget a rate rise if this market starts to roll over soon their only choice is more Qe. All the previous crashes have been managed by cuts in interest rates what happens this time round negative rates?
twinturboz said:
DonkeyApple said:
I would also counter that we may be in a medium/long term bear market which would be a very different situation to BP whoae stock price benefitted strongly from the QE era bull market.
Forget Vw more interested in that statement, it's also my thinking that we have started a bear market. With the fed refusing to raise last week they've done nothing but add further uncertainty or in my mind a sell signal, where is this inflation that they have been talking about for years? The fed claims it's data dependent but it's fairly obvious to see now that they are market dependent. Forget a rate rise if this market starts to roll over soon their only choice is more Qe. All the previous crashes have been managed by cuts in interest rates what happens this time round negative rates?
A lot of inflation pre 2013 was due to the commodity bubble. Now that is burst and raw materials and the cost of transporting them are heading back to more realistic values then that'll take out some inflation potential from the market. Discounting of goods to generate cashflow to fund debt has stronger relevance than ever before due to just how highly leveraged all businesses are nowadays.
I think employment is a better initial measure as at least in theory it shows companies growing and being more confident.
But with the ability to just import labour even that doesn't lead to wage inflation directly and frankly that's the only metric that matters. Inflation is fundamentally a byproduct of people spending more. As households are already running huge debt then any real increase in spending power can only really stem from increases in household incomes.
And this brings us to one of the biggest economic conundrums of the 21st century. Traditional economics says that to increase household incomes sufficiently to generate spending you need wage inflation so that earners earn more. Except the biggest population demographic of earners in the UK don't have jobs. They are retired. If you want to get them spending you have to increase their incomes by increasing the yield paid in cash!!!!
There is an argument to be mulled over that increasing rates will increase inflation in 2015 due to the enormous impact of the Baby Boomers.
I'm not sure there has ever been a time in the West where this has been possible before?
DonkeyApple said:
But with the ability to just import labour even that doesn't lead to wage inflation directly and frankly that's the only metric that matters. Inflation is fundamentally a byproduct of people spending more. As households are already running huge debt then any real increase in spending power can only really stem from increases in household incomes.
Right but we've had no wage growth, was reading an interesting article last week about how technology is changing the global labour market. How a move to more automation will cut middle class jobs, which seems to be backed up by recent news of layoffs. Will be very interesting to see how this plays out.
In other news Vw down another 20% ish that makes it 60% from the year high
and €26 billion wiped off in 2 days. Edited by twinturboz on Tuesday 22 September 12:22
twinturboz said:
DonkeyApple said:
But with the ability to just import labour even that doesn't lead to wage inflation directly and frankly that's the only metric that matters. Inflation is fundamentally a byproduct of people spending more. As households are already running huge debt then any real increase in spending power can only really stem from increases in household incomes.
Right but we've had no wage growth, was reading an interesting article last week about how technology is changing the global labour market. How a move to more automation will cut middle class jobs, which seems to be backed up by recent news of layoffs. Will be very interesting to see how this plays out.
In other news Vw down another 20% ish that makes it 60% from the year high
and €26 billion wiped off in 2 days. Edited by twinturboz on Tuesday 22 September 12:22
I suspect primarily precisely because at the lower income levels the elasticity of labour importation appears absolutely massive. So since 2012 as the economy has been growing we have seen an increase in employment but absolutely no need to increase wages.
But this is very much traditional economics and relies on the historical fact that it was people who worked who had incomes and spending habits that fluctuated with that income. Sure, since the War we've have those on State incomes who could trigger inflation in key areas if the State increased benefits but I don't think that is a dominant effect. But what is different this time is that the most significant group of 'wage' earners in the UK are the Boomers whose income is directly linked to interest rates so when you raise rates in order to curb spending, thus inflation, what you will actually be doing is increasing spending by the Boomers. There is the really interesting twist that raising rates in the UK might directly raise inflation. Which is odd to say the least.
DonkeyApple said:
Exactly. While we have had sectorial wage inflation, we've not seen it across the majority of sectors or, more importantly, at the lower income levels.
I suspect primarily precisely because at the lower income levels the elasticity of labour importation appears absolutely massive. So since 2012 as the economy has been growing we have seen an increase in employment but absolutely no need to increase wages.
But this is very much traditional economics and relies on the historical fact that it was people who worked who had incomes and spending habits that fluctuated with that income. Sure, since the War we've have those on State incomes who could trigger inflation in key areas if the State increased benefits but I don't think that is a dominant effect. But what is different this time is that the most significant group of 'wage' earners in the UK are the Boomers whose income is directly linked to interest rates so when you raise rates in order to curb spending, thus inflation, what you will actually be doing is increasing spending by the Boomers. There is the really interesting twist that raising rates in the UK might directly raise inflation. Which is odd to say the least.
Not odd at all.I suspect primarily precisely because at the lower income levels the elasticity of labour importation appears absolutely massive. So since 2012 as the economy has been growing we have seen an increase in employment but absolutely no need to increase wages.
But this is very much traditional economics and relies on the historical fact that it was people who worked who had incomes and spending habits that fluctuated with that income. Sure, since the War we've have those on State incomes who could trigger inflation in key areas if the State increased benefits but I don't think that is a dominant effect. But what is different this time is that the most significant group of 'wage' earners in the UK are the Boomers whose income is directly linked to interest rates so when you raise rates in order to curb spending, thus inflation, what you will actually be doing is increasing spending by the Boomers. There is the really interesting twist that raising rates in the UK might directly raise inflation. Which is odd to say the least.
Many people only consider the stock market, they forget there is a bond market that is crying out for normalcy.
The Market really expected 1/4% last week from the Fed, it was priced in and it didn't happen.
If the Fed had moved it would have opened the door for UK.
Those moves would have strengthened the Dollar and given a little boost to emerging markets and the EU
The resultant increase in trade should (IMO) have been enough to outweigh the increase in US trade deficit.
Their reason/excuse for not raising was World Growth!!!!
The effect of inflation on business (stock market) is not the same as the effect on Governments. For business a little inflation is great and generates growth.
For a Government with index linked outgoings, not so good
I personally think there is political interference.
Fundamentally low interest, or the lowering of, will boost the market, but when applied too much or too long it will, or has, kept inflation down putting a lid on growth.
jeff m2 said:
DonkeyApple said:
Exactly. While we have had sectorial wage inflation, we've not seen it across the majority of sectors or, more importantly, at the lower income levels.
I suspect primarily precisely because at the lower income levels the elasticity of labour importation appears absolutely massive. So since 2012 as the economy has been growing we have seen an increase in employment but absolutely no need to increase wages.
But this is very much traditional economics and relies on the historical fact that it was people who worked who had incomes and spending habits that fluctuated with that income. Sure, since the War we've have those on State incomes who could trigger inflation in key areas if the State increased benefits but I don't think that is a dominant effect. But what is different this time is that the most significant group of 'wage' earners in the UK are the Boomers whose income is directly linked to interest rates so when you raise rates in order to curb spending, thus inflation, what you will actually be doing is increasing spending by the Boomers. There is the really interesting twist that raising rates in the UK might directly raise inflation. Which is odd to say the least.
Not odd at all.I suspect primarily precisely because at the lower income levels the elasticity of labour importation appears absolutely massive. So since 2012 as the economy has been growing we have seen an increase in employment but absolutely no need to increase wages.
But this is very much traditional economics and relies on the historical fact that it was people who worked who had incomes and spending habits that fluctuated with that income. Sure, since the War we've have those on State incomes who could trigger inflation in key areas if the State increased benefits but I don't think that is a dominant effect. But what is different this time is that the most significant group of 'wage' earners in the UK are the Boomers whose income is directly linked to interest rates so when you raise rates in order to curb spending, thus inflation, what you will actually be doing is increasing spending by the Boomers. There is the really interesting twist that raising rates in the UK might directly raise inflation. Which is odd to say the least.
Many people only consider the stock market, they forget there is a bond market that is crying out for normalcy.
The Market really expected 1/4% last week from the Fed, it was priced in and it didn't happen.
If the Fed had moved it would have opened the door for UK.
Those moves would have strengthened the Dollar and given a little boost to emerging markets and the EU
The resultant increase in trade should (IMO) have been enough to outweigh the increase in US trade deficit.
Their reason/excuse for not raising was World Growth!!!!
The effect of inflation on business (stock market) is not the same as the effect on Governments. For business a little inflation is great and generates growth.
For a Government with index linked outgoings, not so good
I personally think there is political interference.
Fundamentally low interest, or the lowering of, will boost the market, but when applied too much or too long it will, or has, kept inflation down putting a lid on growth.
DonkeyApple said:
Odd, as in the inverted demographic. We've not had a time in modern Western economics when the non working population, whose primary income is related to yields, spending power is greater thn the spending power of the working population whose income is primarily derived from being paid a salary.
Not sure where you are getting this from.We still don't.
I can PM you DB's latest household cashflow model but for 2015E they have £777bn from wages and salaries versus £514bn from social security, pensions, interest and dividend income.
Household budgets are looking good at the moment in the UK owing to zero/negative food and fuel inflation with continuing all time low mortgage payments combined with a tiny amount of wage inflation.
Raising rates would obviously hit quite a lot of the £127bn we spend every year paying the banks who own our houses.
And the amount passed on to savers wouldn't necessarily be 100% of the raise as the banks could happily trouser some of that delta.
Admittedly I haven't run or seen the exact numbers but I think a 50bp rise say would be a net NEGATIVE effect on household disposable income, even if 100% was passed on to savers, ceteris paribus.
DonkeyApple said:
jeff m2 said:
DonkeyApple said:
Exactly. While we have had sectorial wage inflation, we've not seen it across the majority of sectors or, more importantly, at the lower income levels.
I suspect primarily precisely because at the lower income levels the elasticity of labour importation appears absolutely massive. So since 2012 as the economy has been growing we have seen an increase in employment but absolutely no need to increase wages.
But this is very much traditional economics and relies on the historical fact that it was people who worked who had incomes and spending habits that fluctuated with that income. Sure, since the War we've have those on State incomes who could trigger inflation in key areas if the State increased benefits but I don't think that is a dominant effect. But what is different this time is that the most significant group of 'wage' earners in the UK are the Boomers whose income is directly linked to interest rates so when you raise rates in order to curb spending, thus inflation, what you will actually be doing is increasing spending by the Boomers. There is the really interesting twist that raising rates in the UK might directly raise inflation. Which is odd to say the least.
Not odd at all.I suspect primarily precisely because at the lower income levels the elasticity of labour importation appears absolutely massive. So since 2012 as the economy has been growing we have seen an increase in employment but absolutely no need to increase wages.
But this is very much traditional economics and relies on the historical fact that it was people who worked who had incomes and spending habits that fluctuated with that income. Sure, since the War we've have those on State incomes who could trigger inflation in key areas if the State increased benefits but I don't think that is a dominant effect. But what is different this time is that the most significant group of 'wage' earners in the UK are the Boomers whose income is directly linked to interest rates so when you raise rates in order to curb spending, thus inflation, what you will actually be doing is increasing spending by the Boomers. There is the really interesting twist that raising rates in the UK might directly raise inflation. Which is odd to say the least.
Many people only consider the stock market, they forget there is a bond market that is crying out for normalcy.
The Market really expected 1/4% last week from the Fed, it was priced in and it didn't happen.
If the Fed had moved it would have opened the door for UK.
Those moves would have strengthened the Dollar and given a little boost to emerging markets and the EU
The resultant increase in trade should (IMO) have been enough to outweigh the increase in US trade deficit.
Their reason/excuse for not raising was World Growth!!!!
The effect of inflation on business (stock market) is not the same as the effect on Governments. For business a little inflation is great and generates growth.
For a Government with index linked outgoings, not so good
I personally think there is political interference.
Fundamentally low interest, or the lowering of, will boost the market, but when applied too much or too long it will, or has, kept inflation down putting a lid on growth.
So you have a large group with discretionary spending, isn't that good thing? In general.
The salaried section of UK chose to spend all their money on overpriced housing.
I know they didn't have much of a choice, but that doesn't change what happened.
If one overextends, it is hardly the fault of those that didn't, Boomers or contemporaries.
walm said:
DonkeyApple said:
Odd, as in the inverted demographic. We've not had a time in modern Western economics when the non working population, whose primary income is related to yields, spending power is greater thn the spending power of the working population whose income is primarily derived from being paid a salary.
Not sure where you are getting this from.We still don't.
I can PM you DB's latest household cashflow model but for 2015E they have £777bn from wages and salaries versus £514bn from social security, pensions, interest and dividend income.
Household budgets are looking good at the moment in the UK owing to zero/negative food and fuel inflation with continuing all time low mortgage payments combined with a tiny amount of wage inflation.
Raising rates would obviously hit quite a lot of the £127bn we spend every year paying the banks who own our houses.
And the amount passed on to savers wouldn't necessarily be 100% of the raise as the banks could happily trouser some of that delta.
Admittedly I haven't run or seen the exact numbers but I think a 50bp rise say would be a net NEGATIVE effect on household disposable income, even if 100% was passed on to savers, ceteris paribus.
Factor in that the single largest cost for the average wage earner is the cost of housing and then look at the positive impact rising rates will have on those who earn from yield and you can see that having this enormous Baby Boomer demographic is something we haven't had before in an economic cycle. In fact, the Boomers were part of the wage earning element during the last cycle of upward rates.
When rates do finally start rising then if the Boomers are still alive and not locked away in the now dilapidated retirement homes they shoved up to keep their inlaws out of their living rooms then the masibe increase in their collective spending powers combined with their proven desire to spend will have a marked impact on the effect of rising rates to curb inflation.
jeff m2 said:
The Market really expected 1/4% last week from the Fed, it was priced in and it didn't happen.
I beg to disagree, the market was only placing a 30% chance of a rate rise and imo the opposite was priced in i.e. no rate rise. Which made it all the more significant when the bulls got everything they wanted yet the Us markets reversed anyway.jeff m2 said:
Ah, that odd
So you have a large group with discretionary spending, isn't that good thing? In general.
The salaried section of UK chose to spend all their money on overpriced housing.
I know they didn't have much of a choice, but that doesn't change what happened.
If one overextends, it is hardly the fault of those that didn't, Boomers or contemporaries.
Yup. You can't blame the Boomers for being born (not all of them anyway So you have a large group with discretionary spending, isn't that good thing? In general.
The salaried section of UK chose to spend all their money on overpriced housing.
I know they didn't have much of a choice, but that doesn't change what happened.
If one overextends, it is hardly the fault of those that didn't, Boomers or contemporaries.
).But the transit of this demographic bulge through society in time has had and continues to have interesting ramifications. One of which may transpire to be an impact on the strength of interest rates to reign in consumer spending.
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