south-star

And please,...in plain English

The way i look at it,we still have full employment,the economys doing ok,personal debt is increasing,but so what,interest rates are low,..so why is the stock market at a 6 year low?

Neil Smalley

Rumours,Bargains and lies..

JoeyDeacon

I would say the economy is just about ticking over because interest rates are low which is incouraging people to spend money they don't have (hence why debt is at it's highest level ever).

Once these people realise that it all has to be paid back at one stage or other then things are going to be very different. These muppets who have got themselves up to their eyeballs in debt are going to find themselves in a world of **** when things do go wrong.

Afterall we can't expect people to keep on spending money they don't have forever. Once this stops then the whole pack of cards will fall down.

Dave P

First and foremost uncertainty. Markets hate uncertainty and there is a hell of a lot of this around at the moment....so here are some of the reasons:

Will the States go into Iraq? what effect will it have on the world? fuel prices? etc.etc.

Then there is the uncertainty of company accounts, Worldcom, Enron, to name a few and in the UK Kwik Fit and Silvercross.

Then of course the dotcom bubble, huge companies heavily borrowed having to go to their bankers to stave off Bancruptcy, BT, France Telecom, Vivendi (who own Connex)GEC, Marconi...

Then the Banks, with all these huge debts banks are being downgraded because analysts are predicting they will up their provisions...

And then from a different angle Hedge Funds, these guys make a lot of their money from selling the market short, they sell shares they haven't got and borrow the stock from pension funds until the price falls then buy it back cheap. Lot's of sellers and no buyers equals a falling market.

And then a different angle again, during the last recession Central Banks were able to cut interest rates to stimulate consumer spending, but this time round with money practically free there isn't a lot of scope for this either.

Then of course there are the insurance companies who because of the low markets a lot of them don't have sufficient funds to cover potential claims against them, so they are all of to the markets for more money...

and the list goes on and on... so hope that helps.

Dave

DavidRB

Stock prices have a lot to do with confidence. Currently, a lot of companies are going bust, or making staff redundant because of poor sales/profit figures. There is an expectation of higher unemployment, housing market crash and a war with Iraq.

We're also still shaking out the bursting of the dot com bubble

south-star

Joey........good point,BUT....with interest rates so low,and many people i know having 0% credit cards,whats wrong with a bit of debt.Also you talk about it going wrong,..well IMO i dont see interest rates going up too much in the near future,as for unemployment,that seems pretty stable too.
I appreciate most debt is mortgage related though.

Dave........i agree about the dot.com bubble.Loads of companies ie NTL borrowed heavily in the expectation of ever higher returns.Another example is mobile phones,WAP phones have been a flop,so all that investmnet and only small,if any returns.Not good if you own part of that company(which is what shares are)

As for hedge funds.......too complicated mate

David.....there may be the expectation of higher unemployment,......but this is a 6 year,not 6 month low.Its been going on a while.



[Edited by south-star - 9/23/2002 6:30:23 PM]

south-star

What fascinates me though is Japan.They have nearly one third of all the worlds savings tucked away in low,and sometimes no interest rate accounts.Their stock market has been on a 13 year downward spiral.Basically all Japanese people are scared of loosing their job so are saving like mad.Also a lot of Japanese banks are still heavily in debt.

My point is one day,confidence will return and the Japanese will start spending all that cash.Then i expect the Nikkie to rise

Dave T-S

Quite simple. It's been over inflated for the last six years

Da Booga

Along the same vain if you had say £2k spare, would it be a good time to invest in the stock market and wait for the rise or will it stay low/go even lower?

Edited to say - sorry for hijacking the thread



[Edited by Da Booga - 9/23/2002 9:15:47 PM]

camk

wait till november before cvommiting a penny

Da Booga

Why?

south-star

Da Booga......dont forget Japan has seen a 13 year slide

As for Camk..what your reasoning behind your advice

stevem2k

I'm with camk ... don't invest any lump sums at the moment.

Plenty of value in the banks soon .. AL and Barc are favs, oil stocks are overbought on the back of the middle east - when they have previously failed to convert high oil prices into increased profits.

Big bear rally very soon, but the bottom for the ftse is still about 2800.

Here's a updated chart from the one I posted a couple of months ago Can't find the original thread.

(all imo, of course)

Cheers,
Steve

MGJohn

WHY?? - need you really ask? ... could it simply be that they have been OVER-valued for years and are now finding their true "no bullshine" level!

Put a 100,000 k "on paper" over valued price tag on your old Scooby - wont sell - put a true value price on it and queues could form to buy ....

Rest assured, those that really influence these things will boost the markets at some time in the future ... when it suits THEM and not YOU to do so ... just you wait and see.

TelBoy

The reason they're suffering at the moment is because the professionals are trying to bully the Central Banks of Europe, UK and US to cut interest rates.

Stocks at these levels are undervalued in many cases. But the market perceives the need for interest rate cuts to be high in view of recent economic data.

The central banks, particularly the Federal Reserve of the US, have hinted that they will only cut interest rates further in this cycle in the presence of an economic crisis or a crisis of confidence.

Hence the markets are trying to provide just this.

If the Fed cut tonight, stocks will go ballistically upwards, and will add fuel to the fire that the European Central Bank and the Bank of England's Monetary Policy Committee will both cut simultaneously on October 10th.

Terry

south-star

Telboy,you're trying to apply logic to something,that in my opinion,defies logic.
Interest rates are already low.Ok,not as low as Japan,but low all the same.And to me,the long term outlook is reasonable.Unemployment is stable and companies are doing ok.So why are pension companies keeping out of equities?

All this does is confirm my opinion that the stock market is 40% logic-60% emotion and,like a woman,is basically unpredictable.

As Kenneth Clark once said,95% of economists are idiots,and if you laid all the economists in the world end to end,they wouldn't even reach a conclusion

south-star

No offence to any economists here btw

My other point was about investing in Japan.My logic is to wait for two things to happen,..

1.For Japan to work its way out of its huge debts.
2.For some internal loosening/reform of attitudes to unemployment/job security.

Then i can see it taking off.There's a boom waiting to happen
Anyone agree.

TelBoy

SS,

Don't disagree about the emotion thing, in fact i'd say market direction at the moment is more like 70-80% emotion.

But i do disagree about the outlook. Germany is absolutely awful, UK manufacturing is almost at a standstill, and UK inflation is dipping under the Exchequers lower threshold. The only thing stopping BOE cutting rates is house price inflation, and that's cooling too now.

Tel

mutant_matt

Are you sure about that? In the finance sector at least, in the last 18 months, hundreds if not thousands of jobs are being shed each month. It's slowing down but it's still tough out there.

Matt.

merkin

SS, if you are waiting for a boom to happen, you will be waiting a LONG time trust me.
Japan is still run and contolled by a bunch of Octagenarians, who would rather fall on their own swords than implement change.
What was once a vibrant manufacturing and exporting economy is no more, partially due to cheaper competition (the opening up of China etc) and partially for about 30 other reasons which i wont rabbit on about unless you are particularly interested.

carl

This is a myth perpetuated by the government. You only have to look on this BBS to see how many people are being made redundant ATM.

merkin

And a very short answer to your first question (in plain english):

The Uk equity market is heavily influenced (some would say more heavily than appropriate) by the global economy, particularly the USA.

Global corporate debt levels are at unprecedented levels, particularly in the tech/media/telecom sectors, and companies are struggling to even make their debt repayment schedules.
Corporate America is in the midst of the most torrid time for decades, companies are consistently missing profit forecasts daily, and warning about the forthcoming quarters. until there is a reversal of this situation , which (imo) will take more than a couple of months, more like 1/2 years OR the US economy gets the war it needs, equity markets will continue to perform poorly.
On a bright note, Bond yields are at an all time high

[Edited by merkin - 9/24/2002 9:45:23 AM]

ADP

I agree with a lot that is said here, however I think that unemployment isnt stable, infact I beleive we will soon see a big rise. I speak from my own personal experience in the fact I am about to get laid off, but also so many of my friends in IT have also go the chop. That and all the World coms etc etc booting people out I really wonder how unemployment figures can be quoted as stable.

This worries me, if people dont have jobs, they cant pay off the big debts they owe, and the UK is strapped in debt at the moment with 0% cards, cheap mortgages etc.

So if this happens, I wonder if also we may see this affecting the housing market too. I reckon the bubble may burst for that (I dont mean big bang as before) but a definate fall.

The next year could be very interesting, invest and spend very cautiosly I say!

andy

camk

The reason to wait till November is that we're about to get another slew of Coprporate Earnings in the US and its not going to look good, there is no basis to believe things have improved and many companies have been banking on this Qtr to make their annual EPS. Therefore we'll see more downside from today, definately in the US and therefore probably in Europe.
We're at the latter stages IMHOO of a bear and what we're seeing today is the final chapter where the Bellweathers IBM,GE,Msoft etc are about to get walloped in a similar manner to the Techs. This will have a large effect on main indexes and will lead to further 'panic' as physcological levels are breached e.g. 1000 NAZ.
As ever my opinion only but I'm 95% out of the market at this time and have been for the last 4 weeks.

Cheers
Cammy

south-star

Actually Merkin,if you had the time,and inclination....i am interestd.Japan fascinates me

The Crushinator

We've started a sweepstake at w*rk, on how low the FTSE will go, between now and Oct 15th

I guessed 3281, and my mate guessed 3000! And he is usually quite bullish with his predictions!

camk

Here we go, as predicted GE now getting tagged by brokers as underperforming. We'll see lower lows than July I believe

http://biz.yahoo.com/rc/020927/manufacturing_ge_research2_1.html

stevem2k

2800 Crush

Steve

scud8

iTrader: (1)

The reason stock prices in this country have lost more than in the US is the government raid on the pension funds (abolishing advanced corporation tax) and recent changes to pension fund accounting rules. These changes have made it preferable for pension funds to be heavier in bonds and lighter in equities than in the past.

They therefore need to correct their portfolios, but they can't have a fire-sale as the bottom will drop out of the equity market. If you look at the trends, every slight upturn has almost immediately been followed by a further drop as the pension funds sell a proportion of their equities.

Hopefully this doesn't have too much further to run - but who knows.

Someone needs to teach Gordon Brown the Law of Unintended Consequences!

ChrisB

Down to 3695 and going down like a Stukka