Itsallaguess wrote:dave559 wrote:
Anyone care to share their thoughts on the current situation?
Go and spend some time on Yahoo, looking at the historical chart of the FTSE -
https://tinyurl.com/ybujt2fhUnderstand that markets can and will have prolonged periods where prices drop. Also understand that markets then recover.
Both process may take many years, so make sure that you have a financial coping-mechanism that means that you're not likely to be a forced seller, for whatever reason, in a market that may be in one of it's regular 'down-periods'.
It also needs to be borne in mind that sometimes a downturn can be more substantial.
Alongside the long term FTSE, take a look at the long term Nikkei.
https://uk.finance.yahoo.com/chart/%5EN225 Set the interval to 1month, and view all data
It is barely back to where it was in 1991. And as for the peak a couple of years before that, 30yrs on, it's still got a substantial way to go before those investors will see break even.
My view is that in global terms, I actually think that things will be less turbulent. It's true that much of the global economy revolves around USA and to a lesser extent China, etc, and sure, if the US slows down, there will be a knock on effect. And no doubt, there will be an initial over-reaction globally - we just saw over the previous weeks how the slightest nervousness in the US / US trade policy has people rushing for the exits around the world. But this sort of over-reaction is the sort that outside of the US, markets will recover from. These are the some of the kind of blips that you're thinking about.
Others can come from things like the credit crunch.
But then there are other kinds of market down turns. And these can stem from fundamental changes in countries. And for nearly 20 yrs, I've generally felt comfortable that these were low probability things in the UK. Though that didn't stop me telling my pensions advisor 15yrs ago to put my work pension into 50:50 UK/Foreign, on the basis that over several decades, low probability of bad things in the UK could come to pass over those timescales.
From the UK perspective my view is now that the risks are now as high as they've been for many decades.
The brexit vote has now put in place a structural change to the british economy. Unless the gov caves and goes for a v. lightweight BRINO, it is otherwise going to introduce 'friction' in trade. I see this sort of friction at work when we deal with America. To introduce it into our dealings with the EU is bonkers.
I have no doubt that it is going to make Britain less attractive to foreign investors - companies, like the one I work for, have seen Britain as an english speaking location on the inside of the single market. An investment in the UK gave inside, friction free access across the whole of the EU. We've had staff in the UK, load some of a smaller (but still expensive) systems onto the back of a van, and drive overnight to deliver to customers in Spain. They could do this because they knew there'd be no holdups at either customs or immigration.
Constrast this with dealing with the US, and we've had installation staff turned away at the border and put on the next flight home. We've had multi-million pound systems held up in US customs for several _weeks_ awaiting paper work on trivialities (wanting to know the material content of safety clothing that was thrown in the container at the last minute just to ensure the installation guys had the necessary gear - ridiculous)
I've seen for myself how much hassle and arguments the different H&S regulations between the US and EU cause. If Britain decides it wants to diverge from EU regs (which seems to be what the brexiteers want), then add into the mix a 3rd UK set of regs, and really, I can truly see many multinationals putting the UK in the backseat and moving serious production to the much larger EU market. (Which is where, up until now, they thought they were when in the UK).
And the idea that "free trade deals" are going to compensate for all this is simply nonsense. Trump has already proclaimed that America will win his trade wars. And he's right. Why? Because America has a big market. It is important. The EU has a big market. It is important. A UK on its own, outside the EU... whatever.
And then on the UK side, you don't just have the regulations. Alas, where I work, we've had a disproportionate number of non-UK nationals quit over the past 12 months. Unbelievably, some who've been here for a few years now and felt to us like they were established as part of the team, they've already now quit and gone back to their countries of origin, and they don't even have jobs lined up when they get there.
None of them were pushed by the business. None of them have been pushed by the government. These are highly skilled people, the sort the brexiteers claim they would love to stay - these are the sorts of immigrants the brexiteers say they want. It seems to me, these sorts of immigrants don't want the brexiteers.
And that's all just brexit.
But brexit very well could (in my view, is likely) to lead to a secular underperformance in the UK over the next decades.
Then to top it all off, we've now got Corbyn and McDonnell promising a 10% nationalisation of British companies with more than 250 workers. And done so without any compensation to the shareholders. It's presented as a worker inclusion policy - in practise, look at the details, and you see that the worker only gets the first £500 dividends - this allows them to dress it up as an employee share inclusion scheme - but then consider that the government keeps anything and everything above that. The worker doesn't own the shares - the worker cannot sell the shares. The shares are in effect being held for the benefit of the government.
It is in all practical terms a 10% nationalisation of the entire economy (of the companies that are big enough to matter).
And once that principle is enshrined, why stop there? If workers are justified 10%, why not 15%? Why not 30%?
If these were fringe policies, I wouldn't be worried. But labour are neck and neck with the conservatives. And voters (remainers) like me, are really struggling to comprehend voting for a Tory government so now aligned with UKIP / Farage / the far right / etc.... . Until I saw McDonnell's 10% nationalisation proposal, I would - against every fibre in my body - have actually considered voting labour at the next election as a protest against Tory brexit - assuming labour were to make more anti-brexit noises.
So I'm floating on where to vote, but I can quite easily see that others - the majority who haven't saved their lives to buy shares, and who think shares are something held by the 'elite', the idea of a (disguised) 10% nationalisation barely registers with them as an issue. And the opinion polls would seem to back that up.
So right now, in my view, the UK has some serious potentially serious bumps going forwards - a brexit that is likely to cause a relative, secular decline, and the risk of a socialist Crobyn government that is likely to magnify any brexit damage with their soviet style policies. Though this latter is - one would hope - more likely to be cyclical... a labour government could be voted out in 5 to 10 years, and the damage from that start to put right (though examples like Venezuela show that that isn't a given). Brexit on the other hand is much harder (TBH, impossible) to see being reversed.
Don't get me wrong. Sure, Corbyn will be a disaster economically for the UK. But brexit isn't project fear. We might not even see a recession from brexit (Crobyn, otoh, is a different matter).
Imv, the effects of brexit aren't going to be large - but they are going to be persisten. And that is going to be the killer. A slow and steady underperformance relative to the other world economies. Perhaps 1% to 2% less growth than would otherwise have been the case. The GBP has already started showing characteristics of more normally associated with 3rd world / developing country currencies.
The upshot for me, is the best I can see for the UK economy going forwards is being pulled up by a rising tide globally. But always slightly lagging behind that tide. It might only be a 1% to 2% relative under performance each year, but over 10 to 20 years that could compound into quite a difference.
As such, I'm hoping that the general global malaise at the minute is going to provide some good buying opportunities for higher yield ETFs in Europe / Emerging markets / Asia / South and Central America.
I'm not necessarily going to sell my current UK holdings. But any new savings, dividends, and proceeds from ordinary sales of current holdings (for other reasons), for me are all going to be primarily invested with a large eye getting the money out of the UK and into non-UK based assets.
The only thing that would change my mind is a people's vote that
decisively reverses brexit (which I believe without Brexit, the Tories would have a landslide at the moment). But I just cannot see a people's vote happening. Let alone the result being a decisive reversal of the brexit decision - not even the most favourable opinion polls suggest anything better than a whisker thin margin for remain. Which wouldn't really help.
So for me, for the foreseeable future, it's as per the above - shift when the opportunity arises to non-UK based investments. Globally, yes, the downturns are just noise. But for the UK, secular change is afoot in the economy.