Stock market is a "fully-fledged epic bubble" and will burst
Discussion
loafer123 said:
BorkBorkBork said:
loafer123 said:
BorkBorkBork said:
Yes you do. It’s about demand. If you reduce demand you reduce the pass through. That’s why rates have to go up across the US, the EU and the UK.
Diverting large amounts of spending power (personal and commercial) to energy costs has reduced demand massively for everything else.It’s totally unsustainable, and we’re only kicking the can down the road and potentially creating larger problems if we don’t curtail credit. We need to shift capital to where is works best, and fuel growth rather than lurching from crisis to crisis, and only applying sticking plasters as we go.
Yes, this will be painful. But this is a time for bold decisions, so we don’t suffer even more in the future. The age of cheap money needs to end.
Surely expensive money just makes life more difficult for those at the bottom…they can’t afford to buy a house or a car as the servicing costs are too high?
I have some sympathy for the popping bubbles of printed money, but crashes are a terrible way to do it and pretty futile as an ageing population delivers low inflation and low interest rates as the velocity of money falls…you are trying to push water up a hill to stop that.
loafer123 said:
Surely expensive money just makes life more difficult for those at the bottom…they can’t afford to buy a house or a car as the servicing costs are too high?
I have some sympathy for the popping bubbles of printed money, but crashes are a terrible way to do it and pretty futile as an ageing population delivers low inflation and low interest rates as the velocity of money falls…you are trying to push water up a hill to stop that.
That’s not true. The very poorest rarely get access to any kind of cheap credit, it’s usually extortionate no matter the BoE interest rate. I think you are referring to those with good enough credit scores and ample discretionary spend to qualify for cheap credit, and those are the people who need to stop spending. Especially if they are increasing their debt to do so, which many are.I have some sympathy for the popping bubbles of printed money, but crashes are a terrible way to do it and pretty futile as an ageing population delivers low inflation and low interest rates as the velocity of money falls…you are trying to push water up a hill to stop that.
BorkBorkBork said:
loafer123 said:
BorkBorkBork said:
The rates need to rise much further yet. Inflation won’t be resolved until rates are much closer to the rate of inflation. Yes, some of it is pass through from energy prices, but the BoE need to at least match the Fed. I’d like to see at least 5%, but ideally higher, for an extended period, into 2024.
Energy prices are the major thing to show through in inflation, but you do little to reduce those by increasing rates.I recall £1.40 petrol and BMW Z4s at £16,500 in early 08.
By Jan 09 £0.89 petrol and £10,000 for an equivalent Z4.
Look at Jan 08 > Jan 09.
The Fed, and CBs generally don’t give a crap about recessions or soft landings when inflation is set to eat their breakfast, lunch and dinner.
They’re out to crush demand and that means triggering a recession.
They just don’t want to be too aggressive about it and look like the aggressor, more the saviour.
A bit more detail to back up my theory that the reaction to the crisis is already here in some sectors:
Judging by the empty shopfronts in many small towns, I'd say retail has been at least as hard hit too. Demands may already be cooling, so I can see an argument to say rates do not need to go too much higher, although FWIW I'd be more comfortable seeing them at sensible, positive levels. Say 2 - 4%.
Judging by the empty shopfronts in many small towns, I'd say retail has been at least as hard hit too. Demands may already be cooling, so I can see an argument to say rates do not need to go too much higher, although FWIW I'd be more comfortable seeing them at sensible, positive levels. Say 2 - 4%.
Digga said:
A bit more detail to back up my theory that the reaction to the crisis is already here in some sectors:
Judging by the empty shopfronts in many small towns, I'd say retail has been at least as hard hit too. Demands may already be cooling, so I can see an argument to say rates do not need to go too much higher, although FWIW I'd be more comfortable seeing them at sensible, positive levels. Say 2 - 4%.
It’s an odd time to show charts covering the pandemic lockdowns and stimulus, and then using it to indicate things about inflation and policy tightening.Judging by the empty shopfronts in many small towns, I'd say retail has been at least as hard hit too. Demands may already be cooling, so I can see an argument to say rates do not need to go too much higher, although FWIW I'd be more comfortable seeing them at sensible, positive levels. Say 2 - 4%.
I’d agree we could go slower on rates, but the issue now is inflation getting embedded in salaries, and driving more inflation.
Businesses will be equally crushed by rising salaries, and stock markets hit by reducing profits, all with a background of stagnant growth.
Inflation needs to be stopped and a recession is the healthiest way to do it.
Malinvestment stopped and removal of the unfit.
Mr Whippy said:
It’s an odd time to show charts covering the pandemic lockdowns and stimulus, and then using it to indicate things about inflation and policy tightening.
I’d agree we could go slower on rates, but the issue now is inflation getting embedded in salaries, and driving more inflation.
Businesses will be equally crushed by rising salaries, and stock markets hit by reducing profits, all with a background of stagnant growth.
Inflation needs to be stopped and a recession is the healthiest way to do it.
Malinvestment stopped and removal of the unfit.
Yes, I do understand what you're saying, hence why I still believe rates need to rise, even if I also believe the government need to act fast on energy costs if they are not to loose even more businesses, especially SME's and particularly in the manufacturing sector.I’d agree we could go slower on rates, but the issue now is inflation getting embedded in salaries, and driving more inflation.
Businesses will be equally crushed by rising salaries, and stock markets hit by reducing profits, all with a background of stagnant growth.
Inflation needs to be stopped and a recession is the healthiest way to do it.
Malinvestment stopped and removal of the unfit.
Another interesting chart from the series:
Retail and leisure is very hard to use as a bell weather right now because it was so massively over inflated prior to Covid that it was always going to contract heavily on the back of the slightest slowdown in mass consumer borrowing and spending.
Arguably, just the cultural shift during Covid of so many households realising just how much better their quality of life was when they weren't spending more than they were earning on consumer pursuits could have been enough to trigger a contraction.
While those industries are claiming there is a staff shortage, I tend to be more of the opinion that there has been an excess of businesses for some time and that the only solution is a contraction to fit the labour pool.
Arguably, just the cultural shift during Covid of so many households realising just how much better their quality of life was when they weren't spending more than they were earning on consumer pursuits could have been enough to trigger a contraction.
While those industries are claiming there is a staff shortage, I tend to be more of the opinion that there has been an excess of businesses for some time and that the only solution is a contraction to fit the labour pool.
The whole shopping culture was and is an anathema to me. Fortunately Mrs Digga too. The less time we spend in shopping malls and town or city centres shopping the better.
Far rather spend time doing than shopping. Running, cycling, walking, climbing stuff. Sadly, over lockdown, it seems a lot of the wrong sort of people discovered the outdoors and filled it with Lucozade bottles.
Far rather spend time doing than shopping. Running, cycling, walking, climbing stuff. Sadly, over lockdown, it seems a lot of the wrong sort of people discovered the outdoors and filled it with Lucozade bottles.
DonkeyApple said:
While those industries are claiming there is a staff shortage, I tend to be more of the opinion that there has been an excess of businesses for some time and that the only solution is a contraction to fit the labour pool.
I’ve been thinking that for some time as well. It felt like the Eastern European workforce were keeping the number of establishments artificially high due to their acceptance of low pay and living standards.Less restaurants, cafes and coffee takeaways is hardly disastrous for the country.
Simpo Two said:
Digga said:
The whole shopping culture was and is an anathema to me. Fortunately Mrs Digga too. The less time we spend in shopping malls and town or city centres shopping the better.
Replaced by online spend though?In terms of online, I suspect gambling has been the big winner having reached utterly epidemic proportions in the U.K. now.
Simpo Two said:
Digga said:
The whole shopping culture was and is an anathema to me. Fortunately Mrs Digga too. The less time we spend in shopping malls and town or city centres shopping the better.
Replaced by online spend though?rossub said:
DonkeyApple said:
While those industries are claiming there is a staff shortage, I tend to be more of the opinion that there has been an excess of businesses for some time and that the only solution is a contraction to fit the labour pool.
I’ve been thinking that for some time as well. It felt like the Eastern European workforce were keeping the number of establishments artificially high due to their acceptance of low pay and living standards.Less restaurants, cafes and coffee takeaways is hardly disastrous for the country.
European labour is an interesting one. In many ways the retail owners are today reaping what they sowed. They spent twenty years pocketing cash by being able to use super cheap and reliable labour and not investing in indigenous labour. Those owners simply need to adjust their models and expectations to fit the labour market and they need to now pay more to overcome the simple fact that as an industry it declines to create an indigenous labour force.
In our industry we're now employing more Europeans than before Brexit. The reason being that they're now even cheaper as we don't have to pay them a huge premium to work in London. The same people now work from their homes back in their country so they're more than half the price of local labour.
rossub said:
DonkeyApple said:
While those industries are claiming there is a staff shortage, I tend to be more of the opinion that there has been an excess of businesses for some time and that the only solution is a contraction to fit the labour pool.
I’ve been thinking that for some time as well. It felt like the Eastern European workforce were keeping the number of establishments artificially high due to their acceptance of low pay and living standards.Less restaurants, cafes and coffee takeaways is hardly disastrous for the country.
With various tiers of regional and national travel restrictions remaining in place for some time, their ability to return to the UK at all, let alone without fear of being trapped there, was limited.
Thiswas by no means just a UK problem, but on that point, how the heel does France still have over 7% unemployed?!
rossub said:
Less restaurants, cafes and coffee takeaways is hardly disastrous for the country.
Most of the 'proper' shops in my nearest town have been replaced by such things, and also mobile phone shops. All the industry is long gone, replaced by blocks of flats, with more going up all the time - perhaps so the Council gets more tax. The infrastructure however is not upgraded, because that costs money.I look at all the people sitting in the bars and cafes all day with their £3 coffees and £5 pints and fancy overpriced vegan snacks, and wonder what they do for a living, and hope they have enough left for their fuel bills.
Beyond excessive shopping habits and activities, for many businesses revenues simply went to 0s during pandemic.
In terms of Real Estate (US), the biggest two home builders started to offload their land inventory. Last time they did this in large scale, it was in 2008 but this was due to clear up their balance sheets, now its different. Could not see similar approach here though for the house builders (yet).
Today bitcoin shows still around 19k USD, so I would say we have not seen the bottom yet.
In terms of Real Estate (US), the biggest two home builders started to offload their land inventory. Last time they did this in large scale, it was in 2008 but this was due to clear up their balance sheets, now its different. Could not see similar approach here though for the house builders (yet).
Today bitcoin shows still around 19k USD, so I would say we have not seen the bottom yet.
I was stuck at an EV charger with a mate the other day. It was opposite a Costa drive through.
We watched for an hour a procession of folk who genuinely looked like money was valuable to them hurling it out of their car window.
A few weeks back while having lunch in Oxford I watched numerous builders and general sort of workers along with teenagers pouring into an on trend coffee shop type thing and coming out with both hands full.
Above that base poverty level where all of us should be happy to support there appears to be an army of people who just need a massive slap back into reality. The farce of people complaining about the cost of their rent and their bills when every day they walk into a coffee shop and voluntarily pay £5 of someone else's rent and utility bills in exchange for a 1p cup and 2p of flavoured water. There is a madness that has turned people perfectly capable of paying their own way in life, even in this climate, into filthy beggars demanding to be on benefits.
We watched for an hour a procession of folk who genuinely looked like money was valuable to them hurling it out of their car window.
A few weeks back while having lunch in Oxford I watched numerous builders and general sort of workers along with teenagers pouring into an on trend coffee shop type thing and coming out with both hands full.
Above that base poverty level where all of us should be happy to support there appears to be an army of people who just need a massive slap back into reality. The farce of people complaining about the cost of their rent and their bills when every day they walk into a coffee shop and voluntarily pay £5 of someone else's rent and utility bills in exchange for a 1p cup and 2p of flavoured water. There is a madness that has turned people perfectly capable of paying their own way in life, even in this climate, into filthy beggars demanding to be on benefits.
DonkeyApple said:
European labour is an interesting one. In many ways the retail owners are today reaping what they sowed. They spent twenty years pocketing cash by being able to use super cheap and reliable labour and not investing in indigenous labour. Those owners simply need to adjust their models and expectations to fit the labour market and they need to now pay more to overcome the simple fact that as an industry it declines to create an indigenous labour force.
In terms of efficient and modern business practices and fair labour, there are two great examples out there but no one wants to look. Denmark, and Switzerland.DonkeyApple said:
I was stuck at an EV charger with a mate the other day. It was opposite a Costa drive through.
We watched for an hour a procession of folk who genuinely looked like money was valuable to them hurling it out of their car window.
A few weeks back while having lunch in Oxford I watched numerous builders and general sort of workers along with teenagers pouring into an on trend coffee shop type thing and coming out with both hands full.
Above that base poverty level where all of us should be happy to support there appears to be an army of people who just need a massive slap back into reality. The farce of people complaining about the cost of their rent and their bills when every day they walk into a coffee shop and voluntarily pay £5 of someone else's rent and utility bills in exchange for a 1p cup and 2p of flavoured water. There is a madness that has turned people perfectly capable of paying their own way in life, even in this climate, into filthy beggars demanding to be on benefits.
A lot of people would regard a reasonable bean-to-cup coffee machine as expensive. In reality, even a decent one works out at less than £2 per day over a year. Splash out a bit more for a decent flask (new Thermos ones are brilliant and keep stuff hot nearly all day) and why do you need expensive, environmentally damaging disposable coffee cups?We watched for an hour a procession of folk who genuinely looked like money was valuable to them hurling it out of their car window.
A few weeks back while having lunch in Oxford I watched numerous builders and general sort of workers along with teenagers pouring into an on trend coffee shop type thing and coming out with both hands full.
Above that base poverty level where all of us should be happy to support there appears to be an army of people who just need a massive slap back into reality. The farce of people complaining about the cost of their rent and their bills when every day they walk into a coffee shop and voluntarily pay £5 of someone else's rent and utility bills in exchange for a 1p cup and 2p of flavoured water. There is a madness that has turned people perfectly capable of paying their own way in life, even in this climate, into filthy beggars demanding to be on benefits.
One thing I've noticed, of many of the lockdown 'new to the outdoors' types was their almost mindless need to have some sort of drink or beverage in hand. this despite probably never strolling more than a quarter mile from the car. Ever.
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