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Posted by robin in Financial Articles Market Commentary Monday March 23, 2009 1:54 pm
Killer stat of the day from David Smith in The Sunday Times…
“Half a century ago a liquidity ratio of 30% was the norm for UK banks. More recently 5% was considered acceptable.”
The comment was attributed to Peter Cooke, a former head of banking supervision at the Bank of England.
And talking of banks, the editor of the FT’s financial blog expresses a fear that Barclays might “unravel” after the story, initially denied, that it is looking to sell Barclays Global Investors for £5bn - a business considered “a jewel in the bank’s crown”.
Selling the family silver, to mangle ones metaphors, smacks of desperation. If a sale fails to materialise will Barclays join the sad collection of bust British banks bailed out by the already overburdened taxpayer? If so, I’m with those who mutter darkly of civil unrest in the wings.
- On a separate note, that prescient beacon of bearishness at SocGen, strategist Albert Edwards who forecast the FTSE 100 would fall into 3,000 when it was over 6,000 and was preaching doom long before it became fashionable, says of the recent stock market rally:
“Is this rally the real thing? Have we really reached bottom? It would be wrong to say I do not agonise that I might not be missing a turn. I’m riddled with self-doubt.”
Humility… admirable. It appears in some of the savviest investors too. They can readily admit their mistakes and limitations. Buffett is a prime example. He advises investing within your circle of competence and even he doesn’t gets it right every time, as he recently acknowledged on the purchase of ConocoPhillips at the height of the oil price spike.
Though somehow it’s hard to picture him riddled with self-doubt…
Quantitative easing…inflation teasing?
Posted by robin in Financial Articles Market Commentary Monday March 16, 2009 4:42 pm
Spring sunshine. Strong enough now to feel it’s heat on your back.
With it London at last morphs from grey urban jungle to aspirational metropolis.
The economic gloom continues - the G20 meet is the “probably the global economy’s last chance to avoid a depression,” writes Wolfgang Munchau in today’s FT - but it’s easier to take with a blue sky above. (Let’s ignore for the moment the ides of climate change.)
Maybe the stock market has noticed Spring too. It starts the week positively, continuing last week’s 6% gain for the FTSE 100. There’s an encouraging report from a British bank. Barclays has enjoyed a ’strong start’ to the year` reports The Telegraph.
For the average investor it’s all a bit academic at this point. Like a bloodied boxer who has been decked repeatedly, managing to stagger to his feet for the final count. The lure of the investment game has long since died. Unfortunates holding long-only equities in ISAs, SIPPs, personal pension plans and endowment policies are punch drunk and glassy- eyed, some mutter darkly about reinvested deposit savings under the mattress.
The received wisdom of investment orthodoxy has been skewered along the way. Equities go up in the long-term they say. They may do, it just may not coincide with your life span. Diversify they say. Yes but when the universal floor of easy credit suddenly gives way, all asset classes fall together.
Now we have quantitative easing to confront deflation. The electronic printing of money by the Bank of England to buy up gilts. £75bn worth, about a third of the entire market according to one commentator and a further £75bn has been earmarked. This combined figure is about three times the stock of notes and coins in circulation says Edward Chancellor in the FT. He goes on to warn of the inflation threat that might flow from it. Both Japan in 1932 and the Fed after the war tried it. Both saw double-digit inflation as a consequence. “Owners of Treasury bonds suffered heavy losses.”
This is clearly one in the eye for the deflationists and follows similar warnings from Buffett, Faber and numero uno bond investor, PIMCO. Leading London hedgie Crispin Odey believes “a major leap in inflation is almost certain”, according to a report in the London Evening Standard. On such weighty authority, where now is the best place to put your money? Gold, perhaps, now in high fashion both as a currency and inflation hedge and equities, too, maybe, though hardly fashionable. ‘Linkers’ too suggests Chris Dillow in the Investors Chronicle - index-linked gilts - though not if you’re worried about yields going up.
Where’s the worst place for your money? Treasury bonds, says Chancellor. “Owners of gilts should be quaking in their boots,” he warns. Presumably some are following the first undersubscribed gilt auction yesterday (25th March). for 11 years.
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