Tuesday 28th March 2017
Belts tighten as gloom hits 40-month high….
We have no musical training at Money Truths – but we know how to blow our own trumpet….
I was talking about the specter of inflation as early as last September – when the latest-available CPI inflation figure was 0.6% and economists were worrying about deflation and the effects of falling prices….
I was marching to the beat of a different drum. Taking the contrarian stance. But I know how quickly the economic weather can turn….
And I understand how much damage a sustained period of credit expansion and abnormal near-zero interest rates can do to an economy….
It came as no surprise that consumer prices rose by 2.3% in February – exceeding forecasts, shooting past the Bank of England’s (BoE) 2% target and hitting the highest level since 2013….
It was inevitable. If you increase the money supply with billions-of-pounds worth of fresh credit, rising prices are the unavoidable effect.
Back in September I was certain rising prices were coming. Now they have arrived….
Transport costs were the biggest driver behind last month’s rise. People are paying more to get to work, do the school run and head into town….… Click here to read more
Tuesday 21st March 2017
Old wrongs make a new right?
Banks were at the root of the 2008 global financial crisis….
They were too keen to provide mortgages to borrowers ill-equipped to make the repayments – and large numbers of those loans went bad.
Those losses were compounded (and dwarfed) by losses incurred on reckless bets made by the same banks on bonds backed by those very same securities.
The banks found themselves in deep trouble – in the hole for tens of billions.
Some banks went down the plughole. Others had to be bailed out by national governments.
Markets crashed. People lost homes. Businesses went bust. Jobs were lost. It was a mess. A lot of people had a hard time.
- Trust in the system evaporated….
The downturn led to a recession that lasted until 2012. Economists say it was the worst recession since the Great Depression.
Banks came in for a lot of flak – most of it deserved.
Working under feather-weight regulation that was patently unfit for purpose, bankers – fueled by greed – had been running rampant. The bonus culture that permeates the industry had gone berserk….
No long-term speculation was too stupid, reckless or dangerous if it delivered bonus short-term.… Click here to read more
Tuesday 14th March 2017
A little bit of history repeating….
The US S&P 500 index is pretty much as high as it has ever been….
Since March 2009, when the global financial crisis was casting its long shadow, the S&P 500 stocks have grown almost 250%. It’s been a genuine boom-time for stock market investors.
400 of the individual stocks that make up the S&P 500 index have doubled in value – at least – since 2009….
40 of those stocks have gained 1000%….
The 10-best-performing S&P 500 stocks of all have surged at least 2000%….
We are caught-up in one of the longest-running bull-markets in history. Investors who have been in the market for a few years are sitting on a big pile of gains.
It’s been the stock-market ride of a lifetime. Few can stomach the notion that the ride must come to an end. Investors have been on a rollercoaster with track that only heads one way – up.
Many of those sat in the cars appear to have forgotten that what goes up must eventually come back down to earth. And that the higher you go, the harder and faster you fall….
- Optimism rules and fuels….
… Click here to read more