And yet the UK economy is flatlining, still, after 4 years. Maybe some signs of growth but from the 2008 nadir you would perhaps expect the FTSE still to be around 5500 or so given the weak growth. Maybe topping 6000 due to high inflation and divis.
But in the recent past it has been trotted out that the FTSE is a very global index. That the index is more closely linked moreover to the commodities market. Well the commodities market is way off its multi-year highs and the commodity companies in the FTSE are having a very tough year.
Instead the index is up mainly led by defensive stocks; this I find very topsy-turvy. Surely the riskier stocks which have been smashed up would rise the most as risk appetite returned. But no, AIM shares remain in the doldrums, if not worse and are to be found at basement prices.
So there is no return to risk, just a buying of defensives by those who have QE money to spend but have no desire to take any risks at all.
So is the QE'd world of 2013 - a very strange place indeed don't you think?
13 comments:
Please ofrgive my ignorance, what do you think of as defensive?
Yes.
Flanders did a piece on this in the last week or two. I think her conclusion was that people were investing in stocks rather than bonds or gold as "safe haven" investments. I suppose London property comes in there to some extent too.
Andrew - Defensives are things people need whathever - supermarkets, utilities, guns, that sort of thing.
BE - I think there is probably an all time low of real people putting their money into the markets. Retail investors have been utterly screwed by the current set-up. This is QE easy money being placed somewhere liquid to get a yield; but only by the big boys.
Thinking about it from the other perspective, though: if a criticism of the current economy is that businesses aren't "investing" surely the QE money ending up in the equity markets is a Good Thing because it makes it easier for businesses to finance investment?
Although only FTSE-100 businesses...
Personally I think stock are up because they are actually accessible to the retail punter (like me). And CU has it right - things people need only! Recently supermarkets again for Timbo. Just collecting the divi's and getting out again as soon as the price re-stabilises and they are in the bag.
Let's face it competing with a max 3% at the B.S. is not hard in the current market. My only fear is I will be in when the correction comes :( if I get caught out -in I can afford to just hold and collect more divi's for a few years.
And the implications are?
The lights going out, riots on the streets, nationalisation of the food supply and the End Of Britain.
There is a lot of money out there that just needs to find a home. Keeping fully invested prevents you declaring a profit and thus attracting the attentions of the tax-man. This money is sloshing around all over the place. We know that a lot of "hot" money is leaving China (presumably because the investment outlook which was giving good growth over the last ten years is now looking very risky indeed) so where would it go if you are looking to weather the storm of an increasingly storm-tossed global investment market?
Gold yields aren't looking so good and are riskier than you might think right now. Forget anywhere in the EU as the cancer of the Euro spreads. Government bonds are low risk but so are the returns. UK FTSE companies in low-risk sectors are a good bet. Returns are good and most are inflation proof - they simply put their prices up and the customer just has to pay as they are effectively running cartels/monopolies in many cases.
Nothign to argue with there Ryan, good comment.
Yes, Ryan is right. Look at the recent rise of Rollls Royce (makers of half the worlds jet engines, a safe business bar global Armageddon, which is everyone's put)and say Cranswick, profitable suppliers of pork. Meanwhile my own investments in EMED and Xcite look more, ah, long-term holds than ever.
""And yet the UK economy is flatlining, still, after 4 years. Maybe some signs of growth but from the 2008 nadir you would perhaps expect the FTSE still to be around 5500 or so given the weak growth. Maybe topping 6000 due to high inflation and divis."" great post......
great topic i read this day ...really is very interesting "" But in the recent past it has been trotted out that the FTSE is a very global index. That the index is more closely linked moreover to the commodities market. Well the commodities market is way off its multi-year highs and the commodity companies in the FTSE are having a very tough year. ""
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