Thursday 16 July 2009

5 Green Shoots, sitting on the wall

The FTSE jumped nearly 3% yesterday and stands near the 4400 level, going over that would signal at least a short term-up trend. Which would be nice.

I am in the camp that we may see a big dip in the markets come September and conversations in the City suggest I am in the majority with this view. On the other hand, the 'Herd' is generally wrong on both the upside and the downside. Here are 5 reasons things may actually be at the bottom:

1) Goldmans makes a stonking profit, as does Intel. Big US corporates showing signs of life is a good thing for their economy and Anglo-Saxon economies as a whole.

2) The Gold price has been very stable, at around $930, for sometime now. Also gold buying pressure is slowly dropping off, which suggests less fear about global conditions.

3) The papers are full of the Banks making too much money, yes it is true, but also this means they will have better capital positions to return to health.

4) Land Securities, a major UK property player, is about to start making moves in the UK commercial property sector again. For the first time in 2 years, another sign of bottoming out.

5) Chinese growth is rebounding and their dodgy figures will show 8% growth this year. Together with US and Indian growth, this give the world hope that there will be large export markets to target.


Anonymous said...

If you create a lot of government debt and then inject it into the economy you will see it start to pop up elsewhere, finally ending up as GDP growth. If the government then continues to create ever increasing amounts of debt you will see increasing GDP growth. Once the government finds it can no longer create more debt, it will find the economy will collapse. Since this is the path we are on then the question is not "will the economy take another tumble?" but "when will the economy take another tumble?". I'm predicting near the end of this year.

When it happens it will be far worse than the so-called recession we have had so far. The economy will collapse completely and we will be in serious trouble. So far we have tried to absorb the problems of the recession by injecting enormous quantities of government debt world-wide. It hasn't really helped that much - but can you imagine how bad things would be once the debt stops propping up the economy? It's only a matter of time before we find out.

Saturn V said...

Isn't the idea the real economy picks up at some point, and takes over from the artificial economy.
Then, if the debt incurred is spread over 30 years we won't really notice.

It might work.

James Higham said...

I am in the camp that we may see a big dip in the markets come September

You don't need to be in a camp. Everything points to it.

Anonymous said...

"Isn't the idea the real economy picks up at some point, and takes over from the artificial economy."

If everyone made unemployed during this year is absorbed in government projects, how exactly can we ever get out of the downward spiral when too few people are working in real wealth creation? This is exactly the situation we were in during the 70s with far too many people engaged in failing industries subsidised by the Labour government to prop them up and too few people engaged in new profitable business.

Electro-Kevin said...

What we really need to be doing is shedding loads and loads of private sector jobs whilst expanding the public sector.

I see that Nu Lab are well on the case.

CityUnslicker said...

Anon - 12.56 - Well, that is a view with a lot of weight behind it. of course, the Government will realise this and print money continually until we have multiple gilt sales failures. Conceivably this could be well into next year.

In addition, I think it is incorrect to state the economy will stop. Why will everyone suddenly stop working? Where is the evidence for this in history.

What happens is one of hyperinflation or a massive currency crash. My money in on the latter. The currency shock will enable us all to live on, but as prisoners on the island. NULab will be pleased.

Mick said...

Green shoot No. 6 - my mate John just got his old job back as a fork-lift driver in a Builder's yard.

But overall I'm with Anon - this wall of debt isn't going anywhere and we're charging at it full tilt. I'm expecting blood on the streets next Winter.

Laban said...

"this give the world hope that there will be large export markets to target"

Does 'the world' include the UK ? I'm just wondering what we're going to export to China and India ? Whisky, OK. Some luxury goods. Formula One cars.

We make some good cars - or Nissan, Toyota and Honda do. But how many of them will be leaving Southampton for Calcutta or Shanghai - my bet would be 'not many'.

Of course, we could sell them what the Adam Smith Institute called "new products and services ... for which the UK can find ready markets".