Wednesday 26 August 2015

FTSE struggling to hold 6000...

FTSE 100 (^FTSE)

"A summer blip"

That was the confident tone I head on speaking to friends and associates working in the Banks on Monday this week. The adults were away and there was low volume, allowing hedgies and their algorithms to have their fun by hitting stop losses.

No need to worry, China has a history of the Government interfering in the economy to keep everything on track.

Yet I now note the US markets were not very re-assured by the Chinese panic interest rate reduction announced yesterday. Indeed, the market fell. The FTSE in the UK today is down another 1% and struggling to hold above 6000 points. Indeed, the long terms chart looks like it is ready to make a decisive break up or down - I don't get the feeling that an 'UP' is on the cards right now.

When the Central bank cannot provide re-assurance to the markets through emergency policy then something fundamental is really wrong in the economy. China is an interesting conundrum as it is unlikely to do anything as radical as fall into outright recession. The markets there too have been juiced with retail investors who are being robbed by the professionals as is ever the case and this may make the situation appear worse than it is.

However, I am mildly worried. September is upon us and after that October. It is 7 long years since 2008. These months have a terrible history of igniting the woe in the markets and the economy.

What will happen when the adults come back next week?


andrew said...

The thing is that in the west, there is a long tradition of governments being mostly open and truthful.
So people mostly believe them.

In the east, there is no such tradition, so whilst there is more fear, there is less trust.

Where you have a market, to price things properly and take appropriate action you need information you can trust rather than arbritary rules.

Please note I did not mention democracy.
I recommend 'why nations fail to all (again). A nasty travesty of the books central point is if the government is 'extractive' ie moves resources from the many to the few too much or too often, sooner or later that system will fail.
China was one of their cases.

Blue Eyes said...

Aren't we due a hurricane too?

This is China's White Wednesday. The government will come to realise that it cannot control the beast it has unleashed, and so will eventually stop trying. Then China can move from being a dirigiste government/friends-in-important-places economy to being a bit more markef-oriented. Then we will really see the dragon roar.

The world economy still has a huge amount of room for expansion. The longer term prospects are excellent.

dearieme said...

"What will happen when the adults come back next week?"

Sell, sell, sell.

Bill Quango MP said...

I keep picking that book up..then putting it back down.
I can't face another heavy book. The economics of choice and Max Hastings WW1 has worn me out and worn me down.

I think a Stephen King in between. But then I shall get right on it!

CityUnslicker said...

BQ - I have read almost no books since my MBA which was 20 years ago....a heavy economic tract per week with full write upfor two years nearly killed me; I can manage newspapers and the odd bit og sci fi only!

Electro-Kevin said...

I hope you're right, Blue.

James Higham said...

Since when have you become a bear?

Sackerson said...

@James: since he became aware of gravity - ot at least, the gravity of this situation.

@Blue Eyes: time for a piece on the usefulness or otherwise of books?

Blue Eyes said...

Actually I am mulling a book review. I doubt I will write a post telling CU how to organise his spare time, though.

CityUnslicker said...

BQ and I havea relative who has never read a book in his life, including at school. More successful than both of us put together x10; anecdotal conclusion can only be that books are over-rated...

dearieme said...

"More successful than ...": successful at what?