Just how far can Covid 19 drive down the markets?

[NRS]

DonkeyApple said:

In my mind the time to consider oil is as more and more countries come out of lockdown and people start having to buy oil again. It’ll then take time to see what the real demand level is in the post C19 economy and then the oil producers will be able to manipulate the price back up in a stable fashion.

I guess one of the problems with oil is the huge stockpiles that are being created now and need to be gone through before we start seeing big increases back up to $75 first?

[DonkeyApple]

NRS said:

DonkeyApple said:

In my mind the time to consider oil is as more and more countries come out of lockdown and people start having to buy oil again. It’ll then take time to see what the real demand level is in the post C19 economy and then the oil producers will be able to manipulate the price back up in a stable fashion.

I guess one of the problems with oil is the huge stockpiles that are being created now and need to be gone through before we start seeing big increases back up to $75 first?

Yup. It could take a couple of years but unlike many markets we know the price has to go up or the people who run the oil producing countries will be butchered in their beds along with their families and we also know that it is a bent market run by a cartel so they can control supply etc.

[FredClogs]

DonkeyApple said:

One of the biggest risks facing a consumer economy such as ours is the tiny potential, mentioned at the beginning of this thread, for the lockdown to trigger a sentient moment among everyone who has been shopping to excess and making themselves ill due to the long term financial damage caused by spending all excess income on consumables that they earn more than enough to live a good life but had become lost in a haze of endless shopping:

https://www.telegraph.co.uk/women/life/have-money-...

He says linking to an article behind a pay wall... Some people like buying fresh socks, expensive trainers, spending on hobbies and some people like over priced grandiose opinions masquerading as editorial news... Seems a waste of money to me especially when they're free on PH.

The reason people aren't saving cash anymore is because it's been rendered useless by interest rates which lag inflation and equity investing is (as we've seen of late) full of pitfalls, most people would rather spend their money rather than see it eroded or thrown up some city traders nose (in their opinion). But they only ever saved through a necessity or motivated by the morals of the social contract, which is now well and truly in breach, torn up and consigned to the shredder.

Human culture and civilisation is built on our desire for the shiny, these artifacts and trinkets define us and who we are and it was that way a long time before Sports Direct opened its doors. Any money saved will only ever eventually tend towards handbags and gladrags.

[Phooey]

https://www.bloomberg.com/news/videos/2020-04-15/r...

Ray Dalio. Just tried to listen to this whilst at work so didn't really concentrate on it 100%, and even then there's too much content for my amateur investing skills (or lack of) to process, but my ears did prick up when he said you'd be "crazy" to hold bonds right now

[bitchstewie]

Phooey said:

https://www.bloomberg.com/news/videos/2020-04-15/r...

Ray Dalio. Just tried to listen to this whilst at work so didn't really concentrate on it 100%, and even then there's too much content for my amateur investing skills (or lack of) to process, but my ears did prick up when he said you'd be "crazy" to hold bonds right now

Dalio is someone I'd listen to a lot but it's worth remembering he struggled to call this one right too i.e. he didn't.

As with anything there are bonds and there are bonds.

[DonkeyApple]

FredClogs said:

DonkeyApple said:

One of the biggest risks facing a consumer economy such as ours is the tiny potential, mentioned at the beginning of this thread, for the lockdown to trigger a sentient moment among everyone who has been shopping to excess and making themselves ill due to the long term financial damage caused by spending all excess income on consumables that they earn more than enough to live a good life but had become lost in a haze of endless shopping:

https://www.telegraph.co.uk/women/life/have-money-...

He says linking to an article behind a pay wall... Some people like buying fresh socks, expensive trainers, spending on hobbies and some people like over priced grandiose opinions masquerading as editorial news... Seems a waste of money to me especially when they're free on PH.

The reason people aren't saving cash anymore is because it's been rendered useless by interest rates which lag inflation and equity investing is (as we've seen of late) full of pitfalls, most people would rather spend their money rather than see it eroded or thrown up some city traders nose (in their opinion). But they only ever saved through a necessity or motivated by the morals of the social contract, which is now well and truly in breach, torn up and consigned to the shredder.

Human culture and civilisation is built on our desire for the shiny, these artifacts and trinkets define us and who we are and it was that way a long time before Sports Direct opened its doors. Any money saved will only ever eventually tend towards handbags and gladrags.

It’s not been rendered useless at all. It offers next to no yield itself but it is the mechanism through which you earn money, how you then save is not to sit on zero yielding cash but to convert it to assets that either do have a yield or expected capital growth.

This is precisely the flawed logic of the spender and the man maths logic that they should borrow and spend because cash has a low yield. You don’t invest in cash and the asset through which you do typically invest have as a result seen strong capital growth.

I also believe the Telegraph allows visitors a certain number of free articles per month so others may not have used up their allocation.

[anonymous-user]

DonkeyApple said:

It’s not been rendered useless at all. It offers next to no yield...

This from Wikipedia, "An individual who lends money for repayment at a later point in time expects to be compensated for the time value of money, or not having the use of that money while it is lent. In addition, they will want to be compensated for the expected value of the loss of purchasing power when the loan is repaid."

A "saver" is lending their money to the bank and should receive a fair rate of return ahead of inflation. During the past 12 years the world has been turned upside down with banks lending at 20% while paying 0.1% to depositors, well below inflation.

[Condi]

rockin said:

A "saver" is lending their money to the bank and should receive a fair rate of return ahead of inflation. During the past 12 years the world has been turned upside down with banks lending at 20% while paying 0.1% to depositors, well below inflation.

Lending at 20%? What nonsense, you can get a mortgage for 1.2%. The bank is working for a 1.1% margin.

You're right, its all a bit wrong, but not because the bank is taking 19.9% out of it

[FredClogs]

Condi said:

rockin said:

A "saver" is lending their money to the bank and should receive a fair rate of return ahead of inflation. During the past 12 years the world has been turned upside down with banks lending at 20% while paying 0.1% to depositors, well below inflation.

Lending at 20%? What nonsense, you can get a mortgage for 1.2%. The bank is working for a 1.1% margin.

You're right, its all a bit wrong, but not because the bank is taking 19.9% out of it

Credit card lending is a fair chunk of lending in the UK, average household has £2600 on the flexible friend a quick Google reveals. Arranged overdraft use is not cheap either these days, used to be free for my account not that long ago.

DA point isn't that though, it's that we should all be more market savvy, save our cash and use it to buy inflation busting assets, leveraged commodities or other people's riskier debts, old cars, fancy wines, 14 black, you know that kind of thing... Obviously you've got to get out before the bubble bursts, I mean that's just common sense, you deserve to be poor if you don't know that.

It's possible that those people who chose to spend their money instead of saving it aren't quite as daft and irresponsible as some think and are infact just enjoying life, hunting and gathering, as we all are and so long as we all just keep exchanging money for stuff and stuff for money when it comes our way we'll probably be alright in the end.

[Adam B]

FredClogs said:

Credit card lending is a fair chunk of lending in the UK, average household has £2600 on the flexible friend a quick Google reveals.

vs (another quick Google) average mortgage size of:

"Outstanding mortgage lending stood at £1.486 trillion in Q3 2019
There are 10.94 million mortgages in the UK
Based on this, the average mortgage debt amounts to £135,831

I have an average £2/3k on c/c but it is paid off every month - does the £2600 include people who pay off full balance monthly?

[DonkeyApple]

rockin said:

DonkeyApple said:

It’s not been rendered useless at all. It offers next to no yield...

This from Wikipedia, "An individual who lends money for repayment at a later point in time expects to be compensated for the time value of money, or not having the use of that money while it is lent. In addition, they will want to be compensated for the expected value of the loss of purchasing power when the loan is repaid."

A "saver" is lending their money to the bank and should receive a fair rate of return ahead of inflation. During the past 12 years the world has been turned upside down with banks lending at 20% while paying 0.1% to depositors, well below inflation.

But why are people viewing cash as such an o we weight investment? It was never seen as a significant part of any investment strategy prior to 2008 and manifestly not after so why does its yield matter when you would never be sitting there 100% cash or even 10% cash?

That’s the point of the decade long complaint from spenders is it not? Their argument is that contrary to any form of investment that has ever gone before, during or after, they are saying that they would be invested 100% in cash and as that would give such terrible returns they should therefore spend the money instead.

Beyond retaining a cash float for the old 12 months of not working or a relatively predictable emergency no one has ever sat on cash as their long term investment plan. You earn cash. You convert it to other assets when saving. And those typical assets have done rather well over the last decade.

[2Btoo]

DonkeyApple said:

But why are people viewing cash as such an o we weight investment? It was never seen as a significant part of any investment strategy prior to 2008 and manifestly not after so why does its yield matter when you would never be sitting there 100% cash or even 10% cash?

That’s the point of the decade long complaint from spenders is it not? Their argument is that contrary to any form of investment that has ever gone before, during or after, they are saying that they would be invested 100% in cash and as that would give such terrible returns they should therefore spend the money instead.

Beyond retaining a cash float for the old 12 months of not working or a relatively predictable emergency no one has ever sat on cash as their long term investment plan. You earn cash. You convert it to other assets when saving. And those typical assets have done rather well over the last decade.

I suspect you are preaching to the converted here DA. However I also suspect that a lot of the people who use the form of man-maths you described don't really understand investing and hence don't consider it as an option.

Putting it another way, if £1000 in a bank account meant you had ONLY two options - to spend it on tat or to watch it's value diminish over time - then what would you do? I'd be heading to the tat shop as quickly as I can before they put the prices up. It's only the fact that I know I can turn my cash into an asset whose value will outstrip inflation that I have a third option. People can and should learn this for themselves but of course they don't; it's difficult and 'risky' and takes time and effort. Throw into this the eternal appeal of something that's pretty and shiny and makes the neighbours think you are more wealthy than you really are and you can (almost) understand the appeal.

[NRS]

Adam B said:

FredClogs said:

Credit card lending is a fair chunk of lending in the UK, average household has £2600 on the flexible friend a quick Google reveals.

vs (another quick Google) average mortgage size of:

"Outstanding mortgage lending stood at £1.486 trillion in Q3 2019
There are 10.94 million mortgages in the UK
Based on this, the average mortgage debt amounts to £135,831

I have an average £2/3k on c/c but it is paid off every month - does the £2600 include people who pay off full balance monthly?

And those who bounce around between the 0% rate cards?

[DonkeyApple]

NRS said:

And those who bounce around between the 0% rate cards?

We know that that isn’t a big number because the zero deal is a marketing hook to get a customer in who then goes on to build up a nice big negative balance which they then cannot pay off when the deal ends so starts paying 20% interest.

It probably only takes about three to four runs around the account transfer merrygoround before the balance is too big to transfer. One of the le sees always gets the client in the end.

If it wasn’t highly profitable to get clients in by offering zero interest then the deals wouldn’t be available. So that kind of tells us that the number of people who hop endlessly between deals and never increase their balance to risk hitting the trap is very small.

[NRS]

DonkeyApple said:

We know that that isn’t a big number because the zero deal is a marketing hook to get a customer in who then goes on to build up a nice big negative balance which they then cannot pay off when the deal ends so starts paying 20% interest.

It probably only takes about three to four runs around the account transfer merrygoround before the balance is too big to transfer. One of the le sees always gets the client in the end.

If it wasn’t highly profitable to get clients in by offering zero interest then the deals wouldn’t be available. So that kind of tells us that the number of people who hop endlessly between deals and never increase their balance to risk hitting the trap is very small.

I had wondered, as anything a business offer is likely only because it makes them money. However have no idea about how you transfer money between them etc as not considered it myself. Just got the impression it was relatively easy to do from others - but presumably that is like stock gamblers etc. They'll tell you it's super easy and a great idea when it works, and then suddenly go quiet when it doesn't.

[DonkeyApple]

2Btoo said:

I suspect you are preaching to the converted here DA. However I also suspect that a lot of the people who use the form of man-maths you described don't really understand investing and hence don't consider it as an option.

Putting it another way, if £1000 in a bank account meant you had ONLY two options - to spend it on tat or to watch it's value diminish over time - then what would you do? I'd be heading to the tat shop as quickly as I can before they put the prices up. It's only the fact that I know I can turn my cash into an asset whose value will outstrip inflation that I have a third option. People can and should learn this for themselves but of course they don't; it's difficult and 'risky' and takes time and effort. Throw into this the eternal appeal of something that's pretty and shiny and makes the neighbours think you are more wealthy than you really are and you can (almost) understand the appeal.

Yup. I think it crucial to split out low income earners from this as their situation is completely different and in crude terms they have no real need or ability to save the closer they are to the welfare floor. So what I am talking about here is average income earners and above. This group wouldn’t be sitting on cash as their main savings/investment. You’d be holding enough to cover short term liabilities and in reality the yield is irrelevant in such small sums. Beyond your cash buffer all excess cash would be being converted into assets very quickly whether that’s paying down a mortgage or buying global equities etc.

Arguably the one time that the low yield on cash is a genuine irritation is when someone is needing to save a deposit for a home for example as this takes many years but not enough years to warrant converting the cash into less liquid assets.

[anonymous-user]

DonkeyApple said:

But why are people viewing cash as such an o we weight investment? It was never seen as a significant part of any investment strategy prior to 2008 and manifestly not after so why does its yield matter when you would never be sitting there 100% cash or even 10% cash?

I don't think what you've said is right at all.

It was not in the least bit unusual for people to have cash savings and nothing else. Even in pension arrangements it was common for people to invest in the "deposit fund".

The whole thrust of many banks' TV advertising was "put your money with us and watch it grow".

[Groat]

rockin said:

I don't think what you've said is right at all.

It was not in the least bit unusual for people to have cash savings and nothing else. Even in pension arrangements it was common for people to invest in the "deposit fund".

The whole thrust of many banks' TV advertising was "put your money with us and watch it grow".

In the late 80's 10%+ interest was commonplace for cash deposit accounts. And only a few sophisticated or HNW investors put their money anywhere apart from bank accounts, and that usually via stockbrokers (remember them?) or bank-based wealth managers.

Life Insurance Salesmen were morphing into 'financial advisers' but 90-95% of their business was selling LA and pension products. Their knowledge of investment and the products they advised was highly limited and almost entirely insurance company products, including the dreaded annuity which was of course a very different beast back then producing 10%+ income commonly for pensionistas.

But generally anyone with a few bob kept it in the bank or building society. In cash.

Edited by Groat on Thursday 16th April 18:39

[FredClogs]

DonkeyApple said:

Beyond retaining a cash float for the old 12 months of not working or a relatively predictable emergency no one has ever sat on cash as their long term investment plan. You earn cash. You convert it to other assets when saving. And those typical assets have done rather well over the last decade.

I think I'd disagree, I'm in my mid forties, my parents are perhaps more Adventurous investors than most working class or even middle class people but I know pre 2008 they didn't have any money saved or invested in anything other than cash, they did however change their behaviour after 2008. My in laws however never changed their behaviour, my FIL is lucky to have been a life long public servant of one type or another and built himself a reasonable retirement based on not having to concern himself with how his pension is funded, he's not stupid but any sort of investment that's not 100% guaranteed would be anathema to him, premium bonds is his riskiest proposition and a lottery ticket every week, and a fixed odds footy card.

My grandparents generation, I strongly suspect, did nothing but cash savings, obviously property did well but that was happenstance rather than active investing really. Interest rates through the 80s and 90s must have averaged 7% if my memory is correct (I've not checked) most normal people would take that over equity investing, commodity etfs or buying btl property if they could get it now.


Most normal people chose not to involve themselves directly in markets, not because its so difficult to understand but because theyre rightly cynical of them or at least they did until 2008.

[NRS]

What was inflation when you earned 7% on your cash in the bank though? Remember those mortgage interest rates for example...? (I don't actually, but have heard enough stories about how hard it was paying 15% for example).