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  • Location: Dorset
  • Location: Dorset

    As harve has touched on, re inflation and interest rates, its a hell of complicated set up to understand correctly (nobody does imho), the news always presents it very clean, simplistically and wrong. i.e inflation of 1.5% is good, inflation of 3.5% bad, interest rates up, slows demand, interest rates down increases demand. But reality is very very different.

    Inflation is a problem for domestic demand(even at 2%), if GDP remains around 0%, wage increase is 0% and benefits etc are at 0%. Inflation is equally more of a problem depending on where the inflation falls i.e for luxury goods inflation is very low if not negative (particularly for high value consumer electricals i.e the falling price of a 40inch flatscreen TV). However currently demand is being massively squeezed by people paying of debt, having less money coming in, seeing costs of essentials rising and also importantly seeing Overtime etc at lower levels that a few years ago.(unpaid overtime is becoming more and more common).

    Also added into this but excluded from the inflation figures is a growing black economy where wages are falling as competition increases.

     

    Re interest rates, BofE interest rates bare little resemblence to how money is borrowed or priced or indeed to M0-M4 money supply. We are actually awash with money as a country much more than previous years however the money is all going into shrinking balance sheets, not being spent and so not effecting short term inflation. However it is pushing up asset prices, first it was commodities(gold), then bonds, now Stock Markets, however very little impact in the real world.

     

    The effective rate in interest on capital has fallen nowhere near the headline rate again i.e on a tracker mortgage you might have been offered .5% above base rate 5 years ago. however you might be offered 1.5% above base rate now. Credit cards seem to have a total disconnect from the % falls of headline rates.

    Deposits do however follow headline rates closely, which means we tend to have a foot in both negatives i.e falling saving rates, but little fall in borrowing rates.

     

    Growth is not something on the horizon imho, not falling into a deep recession will be an achievement no matter whos in charge.

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    As harve has touched on, re inflation and interest rates, its a hell of complicated set up to understand correctly (nobody does imho), the news always presents it very clean, simplistically and wrong.

    Go Greek strikes Go.... It's not often I support strikes, but in this I do. They are absolutely right that Greece does not need more lending. It can't afford what it owes full stop, they still need t

    Afraid not, old bean; China has been a Communist People's Republic since, when, 1947? Just because it's a Tory government that's doing all the kow-towing makes not a jot of difference...But I bet that

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    Posted
  • Location: Camborne
  • Location: Camborne

    Unburnable carbon 2013: Wasted capital and stranded assets

    This new research from Carbon Tracker and the Grantham Research Institute on Climate Change and the Environment at LSE calls for regulators, governments and investors to re-evaluate energy business models against carbon budgets, to prevent $6trillion carbon bubble in the next decade.

     

    http://www.carbontracker.org/wastedcapital

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    Posted
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet

    Second quarter in a row that the UK has beaten both France and Germany then.

     

    Here is a more comprehensive table...

     

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    Posted
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet

    Interesting news coming out of Spain.

     

    Unemployment fell for the second month in a row, this time by 98,000 (may be seasonal as the tourist season begins).

     

    Of more interest however is that Germany forcing its model on Spain appears to be working, while manufacturing declined (better than expected though), Spanish exports are actually surging as companies are forced to look for new customers. In the long run, it could work out.

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    Posted
  • Location: Bramley, Hampshire, 70m asl
  • Location: Bramley, Hampshire, 70m asl

    Interesting news coming out of Spain.

     

    Unemployment fell for the second month in a row, this time by 98,000 (may be seasonal as the tourist season begins).

     

    Of more interest however is that Germany forcing its model on Spain appears to be working, while manufacturing declined (better than expected though), Spanish exports are actually surging as companies are forced to look for new customers. In the long run, it could work out.

     

    But there are still 4.76 million Spaniards out of work, including over half of all 18 to 25 year olds!...the fall, as you point out , is merely down to seasonal jobs.

     

    The increase in exports is excellent news, but I'm wary about getting caught up in the euro-recovery excitement. For instance,unsuprisingly, given the massive unemployment issues, domestic demand is crumbling and with Portugal threatening to reawaken the euro-jitters I wonder how sustainable this healthy eport demand (mainly to other EU countries) is.

    Portugal ....10 yr bond yields up to over 8% and the stock market down 7%......and immediately we see Spanish markets down 3% and bond yields there heading towards 5%.

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    Posted
  • Location: Camborne
  • Location: Camborne

    On the mineral front this is a tad surprising.

     

    After millennia of mining, copper nowhere near “peakâ€

     

    New research shows that existing copper resources can sustain increasing worldwide demand for at least a century, meaning social and environmental concerns could be the most important restrictions on future copper production.

     

    Researchers from Monash University have conducted the most systematic and robust compilation and analysis of worldwide copper resources to date. Contrary to predictions estimating that supplies of this important metal would run out in around 30 years, the research has found there are plenty of resources within the reach of current technologies.

     

    http://www.rdmag.com/news/2013/07/after-millennia-mining-copper-nowhere-near-%E2%80%9Cpeak%E2%80%9D

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    Posted
  • Location: Camborne
  • Location: Camborne

    Arctic region's economic output at $1 trillion and growing, but U.S. falling behind

     

    At the beginning of the Pacific Northwest Economic Region (PNWER) conference in Anchorage this week, a group of panelists pointed out the potential of Arctic development to bolster the economic presence of a region already worth about $1 trillion in gross domestic product -- and the fact that the U.S. and Canada may already be falling behind when it comes to taking advantage of the Arctic's potential.

     

    http://www.alaskadispatch.com/article/20130715/arctic-regions-economic-output-1-trillion-and-growing-us-falling-behind

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    • 2 months later...
    Posted
  • Location: Bramley, Hampshire, 70m asl
  • Location: Bramley, Hampshire, 70m asl

    Still no agreement re the US debt ceiling......and Thursday isn't that far off

    .......despite recent optimistic noises from both democrats and republicans I can see this deadline being missed.

     

    meanwhile some large US banks are already refusing to accept short dated US treasuries as collateral.

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    Posted
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet

    Still no agreement re the US debt ceiling......and Thursday isn't that far off

    .......despite recent optimistic noises from both democrats and republicans I can see this deadline being missed.

     

    meanwhile some large US banks are already refusing to accept short dated US treasuries as collateral.

     

    If it comes down to it Obama will use the 14th amendment and risk impeachment, i am 95% sure there will be no default.

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    Posted
  • Location: Bramley, Hampshire, 70m asl
  • Location: Bramley, Hampshire, 70m asl

    If it comes down to it Obama will use the 14th amendment and risk impeachment, i am 95% sure there will be no default.

     

    Might be interesting times ahead then with brown stuff about to hit the fan . Economic and Constitutional chaos just around the corner??

     

    "US debt limit talks in disarray after House GOP fails to back Senate deal". "Democrats reject proposed US House fiscal plan" ....

     

     

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    Posted
  • Location: Camborne
  • Location: Camborne

    UMD Researchers Address Economic Dangers of 'Peak Oil'

    Researchers from the University of Maryland and a leading university in Spain demonstrate in a new study which sectors could put the entire U.S. economy at risk when global oil production peaks ("Peak Oil"). This multi-disciplinary team recommends immediate action by government, private and commercial sectors to reduce the vulnerability of these sectors. 

     

    While critics of Peak Oil studies declare that the world has more than enough oil to maintain current national and global standards, these UMD-led researchers say Peak Oil is imminent, if not already here—and is a real threat to national and global economies. Their study is among the first to outline a way of assessing the vulnerabilities of specific economic sectors to this threat, and to identify focal points for action that could strengthen the U.S. economy and make it less vulnerable to disasters.

     

    http://www.umdrightnow.umd.edu/news/umd-researchers-address-economic-dangers-peak-oil

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    Posted
  • Location: Sheffield South Yorkshire 160M Powering the Sheffield Shield
  • Weather Preferences: Any Extreme
  • Location: Sheffield South Yorkshire 160M Powering the Sheffield Shield

    Interesting that China and Germany are having a housing bubble problem. UK following of course.

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    Posted
  • Location: Camborne
  • Location: Camborne

    Norway’s SWF to divest from coal

     

    Norway’s $800bn Sovereign Wealth Fund (NBIM) is likely to divest from coal assets as the Labour Party now signals that the Pension Fund should withdraw from coal.

     

    http://energiogklima.no/nyhetsblogg/bjartnes/norways-swf-to-divest-from-coal/?utm_source=twitterfeed&utm_medium=twitter

     

    And

     

    http://www.huffingtonpost.ca/cameron-fenton/climate-change-warsaw_b_4193850.html?utm_hp_ref=tw

     

    To think we could have had a SWF.

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    Posted
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet

    Norway’s SWF to divest from coal

     

    Norway’s $800bn Sovereign Wealth Fund (NBIM) is likely to divest from coal assets as the Labour Party now signals that the Pension Fund should withdraw from coal.

     

    http://energiogklima.no/nyhetsblogg/bjartnes/norways-swf-to-divest-from-coal/?utm_source=twitterfeed&utm_medium=twitter

     

    And

     

    http://www.huffingtonpost.ca/cameron-fenton/climate-change-warsaw_b_4193850.html?utm_hp_ref=tw

     

    To think we could have had a SWF.

     

    Norway’s SWF to divest from coal

     

    Norway’s $800bn Sovereign Wealth Fund (NBIM) is likely to divest from coal assets as the Labour Party now signals that the Pension Fund should withdraw from coal.

     

    http://energiogklima.no/nyhetsblogg/bjartnes/norways-swf-to-divest-from-coal/?utm_source=twitterfeed&utm_medium=twitter

     

    And

     

    http://www.huffingtonpost.ca/cameron-fenton/climate-change-warsaw_b_4193850.html?utm_hp_ref=tw

     

    To think we could have had a SWF.

     

    We still can and will eventually Knocker, i'm moderately sure of it. One of the few good things the Tories are doing is looking into that.

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    Posted
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet

    For those of us who follow the markets i think we're starting to reach a crunch point that may interest some, harm others and present opportunities for others yet.

     

    Historically indexes have stayed within a relatively narrow price to earnings bound however there have been notable exceptions like the Great Depression, the DotCom crash and the Great Recession (the name for the crisis just gone for those who don't know). On all of these occasions the price to earnings ratio of the major markets passed 20, went to new highs and then corrected lower than 10 over a period of 2-3 years for the last two.

     

    While the FTSE is still around 14 the NASDAQ index (a relatively major market) has passed 21 with the S&P hot on its tails at almost 19.

     

    http://online.wsj.com/mdc/public/page/2_3021-peyield.html

     

    Now clearly correlation does not equal causation however when one considers that tapering is occurring causing yields to rise, hedging is decreasing as confidence in the developed economies is rising further putting pressure on yields and both 5 and 10 year treasuries are now paying real incomes (historically suggests lower demand for stock) then signs of a stock market correction are building.

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    Posted
  • Location: Canmore, AB [4296ft above sea level] & North Kent [350ft above sea level]
  • Location: Canmore, AB [4296ft above sea level] & North Kent [350ft above sea level]

    This time last year I was advising my clients to move into European markets and particularly the European equity mutual fund I manage at RBC. Its 31% up in 12 months. They are happy, I'm happy.

     

    Investment Outlook - New Year 2014

     

    Over the past five years, the after-effects of the financial crisis have been the dominating influence on the market, reflected in low nominal interest rates and, until recently, below-average stock valuations. The process of normalization has continued in both the global economy and financial markets, encouraged by fading fiscal austerity, rising risk appetite and the emergence of bold structural reforms designed to uncover new sources of economic growth. It appears that a regime change has occurred as interest rates have largely normalized, equity valuations appear close to fair value, and some critical headwinds to the recovery are either less important or have fallen away completely.

     

    Macro trends remain fairly good

     

    Economic leading indicators point to slightly better-than-normal economic growth in the coming year, a welcome change after years of sub-par activity. In the U.S., in particular, there is good reason to expect the economy to accelerate into 2014 as the initial hit from higher rates is consequential, but not devastating, and U.S. housing retains considerable upside despite its recent wobbles. Economic data is no longer exceeding expectations as readily as it did over the summer, but this is mainly because economic prognosticators have revised their outlooks higher, as opposed to any deterioration in the data itself.

     

    A central theme from the past quarter was the outperformance of developed nations versus emerging markets. While the divergence has moderated somewhat, consensus GDP forecasts have continued to rise for developed countries and fall for emerging markets over the past three months. Our own economic forecasts have remained ahead of this trend, with favourable outlooks for several developed nations and below-consensus calls for emerging markets.

     

    Political complications present a risk to our forecasted economic trajectory. For emerging markets, the main challenge is a bumper crop of elections in 2014 that are stifling needed but unpopular economic reforms in India, Indonesia and Brazil. As a result, these countries have among the least upside in 2014 until they can set aside election-motivated populist considerations. In the developed world, the challenges are more varied. For Europe, a key risk remains the unpopularity of fiscal austerity and the structural reforms that generally go with it. In the U.S., the 17-day government shutdown in October and debt ceiling near-miss provided the latest chapter of political discord between Republicans and Democrats ahead of midterm elections in the fall of 2014. Another continuing resolution to fund the government will be needed by January 15, 2014, and the debt ceiling will have to be raised again at some point over the first half of the year.

     

    Tapering coming soon?

     

    The Fed appears to feel some anxiety about the extent of its bond buying, and recent Fed minutes continue to reveal a desire to taper fairly soon. However, after its surprise non-taper in September, there is no longer much clarity on the criteria that the Fed is using to signal the start of tapering. The imminent arrival of a new Fed chairman in the form of Janet Yellen is unlikely to materially change this trajectory. Yellen appears to have dovish inclinations, but not necessarily any more profound than current Chairman Bernanke. Our expectation is for tapering to begin in late 2013 or early 2014. However, any hike in short-term policy rates likely remains several years away.

     

    When the taper does eventually arrive, there should be several repercussions. Bond yields may again edge higher, though the bulk of the anticipatory action has already occurred. Equities are unlikely to benefit from such action in the short run, but the fact that the Fed is responding to a future of enhanced economic growth should eventually balance the score. The more vulnerable emerging markets – those with significant current-account deficits, in particular – could suffer another round of capital outflows with assorted consequences.

    The U.S. dollar bull market is still in its early stages, with the 10% rise over the past two years taking it about one-third of the way through a typical six-year bull market. The greenback's strength has been confirmed by weakness in all major currencies with the exception of the euro, which performed better than many investors expected. However, we believe that the single currency will eventually be dragged down by deterioration in Eurozone growth and inflation, and the resulting consequences for monetary policy. The euro weakness versus the U.S. dollar will likely be more acute than for the British pound, the Canadian dollar and the Japanese yen. Occasional setbacks for the greenback are to be expected, but the U.S. dollar should continue to rise, with the pace and intensity of the change varying by currency.

     

    Bond yields stabilize

     

    Bond yields are essentially unchanged over the past quarter, after having risen materially last spring. The correction happened in a few short months, and real and nominal interest rates are now trending close to levels indicated by our models. We continue to look for moderately higher bond yields over the coming year for several reasons. First, the Fed should begin tapering shortly, leading to a further increase in yields. Economic growth appears set to accelerate and this is a classic driver of higher interest rates. Finally, inflation should edge higher, further stimulating yields. However, there is a limit to how quickly or how much further yields can rise as there is a self-correcting mechanism in place – when yields rise too far, the economy suffers and central banks soften their tone which helps to pull bond yields back down.

     

    Moderating return expectations for equities

     

    Global stock markets continued to rally through 2013. Equities have taken clear inspiration from the ameliorating economic environment, bringing equity-market valuations toward historically normal levels. Much of the rally this year has been due to expanding P/Es, as the market removed the valuation discount associated with lingering risks from the financial crisis. At this level, valuations are close to the long-term average and near equilibrium. Earnings growth has been lagging for some time, which isn't all that surprising given the economic headwinds that corporations have faced. While equity markets can continue to rise on the premise of future earnings growth, stocks are more volatile when prices depend on high valuations rather than corporate earnings. There is some evidence, however, that earnings growth could begin to pick up. Companies continue to cut costs and invest in productivity, and an uptick in global growth would certainly be positive for corporate bottom lines. Going forward, the improved macroeconomic environment should continue to be a tailwind for stocks, but I recognize that strong gains in recent years and much less favourable valuations means that I need to moderate our total-return assumptions going forward.

     

    Taking advantage of trading opportunities

     

    With both stocks and bonds moving closer to fair value, I have shifted to a more neutral asset allocation, although still with a tilt to equities. While yields are likely to shift higher as monetary stimulus is removed, much of the correction was likely completed over the summer. During the summer, I adjusted THE bond weighting much closer to the neutral allocation, closing off the extreme underweight position I held when yields were near all-time lows.

    Edited by canadiancoops
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    Posted
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet
  • Location: Leeds/Bradford border, 185 metres above sea level, around 600 feet

     

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    • 4 weeks later...
    Posted
  • Location: Camborne
  • Location: Camborne

    Disaster of Opportunities, explains the relationship to the annual $2 trillion in fossil fuel subsidies, and the fact that the world economy will not crash like many in big oil would like us to believe, as global manufacturers can easily replace the needed energy with Green Technology in a relatively short time span 3 to 5 years and create millions of new jobs in the process creating the needed growth to get our economy back on track ..!As an example the annual $2 trillion alone could build 350,000 Wind Turbines with enough energy to cover all the 1.4 billion households in the world..?

     

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    Posted
  • Location: Camborne
  • Location: Camborne

    The recent earthquake near Chile made me ponder a touch. Chile produces a third of the world's copper. The Collahuasi mine, was close to the centre of the tremor, but it reported no damage. Neither Codelco, the biggest of them all, nor Antofagasta suffered disruption to production. But what would be the effect if production had been severely disrupted or even ceased? The answer is above my pay grade.

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    Posted
  • Location: Camborne
  • Location: Camborne
    Fossil fuels face $30 trillion losses from climate, renewables

     

    The global fossil fuel industry faces a loss of $US28 trillion ($A30.2 trillion) in revenues over the next two decades, if the world takes action to address climate change, cleans up pollution and moves to decarbonise the global energy system.

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    Posted
  • Location: Powys Mid Wales borders.
  • Location: Powys Mid Wales borders.

    "Cluster Of Central Banks" Have Secretly Invested $29 Trillion In The Market.

    http://www.zerohedge.com/news/2014-06-15/cluster-central-banks-have-secretly-invested-29-trillion-market

    Another conspiracy "theory" becomes conspiracy "fact" as The FT reports "a cluster of central banking investors has become major players on world equity markets."

     

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