Wednesday 19 May 2010

Germany kills the Bull market; OBR next?

OK, so we all knew that the Bull market in shares was going to come to an end. An over 50% gain in the FTSE just seemed unrealistic.

However, the panic in Germany that has allowed them to ban short selling of bonds is the act of a Country that has strong elements of the Lehman Crisis.

With hindsight the worse thing about the Lehman crisis, as with all financial panics, is that the lack of information led to a frenzy which worked itself into a stock market collapse. The European debt issue seems to have now entered the same phase, with a real panic by Governments about what to do.

What is worrying is that it is Germany that is panicking. Germany has not debt issue of its own and German government bonds are probably the safest in the developed world. That this has happened has seriously spooked markets that were looking for a reason to fall.

Hard to see the FTSE now being able to stay above 5000 in the Short term, which will equate to a 10% drop for the year so far. Long-term, a consistent fall is going to see the end of the Bull market which started in March '09. A bull market which can only last just over a year is rather depressing...

Also work has interrupted the flow from me of late, but generally I support the Tory idea of an Office for Budget responsibility. It should be able to stop any future repeat of the new Labour spending disaster...but right now, in the deep end of an economic crisis, a bunch of bad sounding figures emerging is not going to help anything. People won't see that that £2 trillion debt has a 50-year time horizon (i.e. £40billion a year) when considering pensions etc. They will only hear the bad news in the current market panic.

George Osborne should set the office up, but if it takes a year to find the right staff and get going then that will be no bad thing.


Anonymous said...

So in essence, sell all your shares?! ;-)

how does this affect your AIM positions?

Old BE said...

Sell your shares and spend the cash on nice things, it's going to be a long way down from here for all of us. Having said that there might be a period when German cars are quite cheap!

CityUnslicker said...

Anon - down £5k today, rubbish!

lost half of all gains for the year now. Time to sell, but many are long term so I am going to hold and top up when funds are available. Eyes wide open to this being a possibly big mistake!

roym said...

those blinking huns!

seeing as the US never rescinded their NSS ban, does that mean London will become the nexus for this most evilest of acts?!

Bill Quango MP said...

Just for balance Wes..

If an IVA does fail because an individual can not keep up with the repayments (or agree new terms with the trustee and creditors), then bankruptcy becomes a real possibility. Because a significant proportion of IVA repayments go first to the Insolvency Practitioner, people who have a failed IVA often find they had not paid as much of the debt off as they had expected.

Anonymous said...

Don't feed the troll!!!

Anonymous said...

germany has horrific impending doom debt issues. their banks, esp the landesbanken, are stuffed to the gills with greek govies. if greece defaults, the landesbanken (who remember are owned by the states, ie the taxpayer) will need another bail-out. however you look at greece, any default will hit the german taxpayer. any attempt to avoid default, through a bailout, will be funded by, you guessed it, the german taxpayer. i'd be mightily aggrieved if i were deutsch.

Steven_L said...

Never mind your hostile takeover attempts on Kurdish oil CU - the Swiss central bank tried to ruin my Euro short today!

Neutral??? Yeah right, I hope they get invaded by hoardes of unemployed PIIGS.

Weekend Yachtsman said...

I have no intention of selling my shares.

Not when inflation is over 5% and my dividends are the only investment I have that pays over that rate.

In fact, if there's a dip I might well buy more.

Call me stupid if you want, but if all this paper is doomed anyway, as it may very well be, I might as well get the best yield I can before it all turns to confetti.

jms301 said...

The ConDems need to trumpet how terrible the Labour hangover is in order to avoid a mauling from the electorate when we get our 'double dip', whilst it might look like dangerous political point scoring if it keeps labour out for longer there's an argument it's for the long term good.

Also a bull for 1 year? Sounds like the thunderbolt 'recovery' to me!

PS. your comment system is asking me to login with my google account although I'm logged into g-mail... smells phishy!

CityUnslicker said...

I doubt there will be a double dip, I really do. interest rates are negative, inflation is kicking in. More likely we get strong growth with stagflation.

hovis said...

"strong growth with stagflation?"
Unless I misunderstand an oxymoron shurely?