Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
A very well informed post, as always, which i read carefully. However I do respectfully take issue with the anti-Euro stance. The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
October is certainly going to be very interesting and could see a huge shift with various policies.
Zero covid seems to come and go and far too much power is given to local officials which just leads to uncertainty and little idea of what’s happening from place to place.
Almost all of the banking issues seems to be with ‘rural banks’ and giving loans for infrastructure projects is some seriously odd areas.
As for Taiwan, I honestly can’t see that happening, sanctions would be one final nail in the coffin and the decision makers must be aware of how brutal that would be, much easier just to talk about it as a distraction without ever actually doing anything.
Would the west have the appetite for truly sanctioning China in the event of a Taiwan invasion ?
China are taking a keen interest in Russian sanctions at moment and just yesterday there were reports of Europe fearing the Russian gas being turned off so I don’t think these sanctions are really working on Russia.
7543 for me please - I'm banking on the midterms nullifying the Dems ability to pass any meaningful legislation thus giving the markets a modicum of certainty ......... like I know Jack shit
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
October is certainly going to be very interesting and could see a huge shift with various policies.
Zero covid seems to come and go and far too much power is given to local officials which just leads to uncertainty and little idea of what’s happening from place to place.
Almost all of the banking issues seems to be with ‘rural banks’ and giving loans for infrastructure projects is some seriously odd areas.
As for Taiwan, I honestly can’t see that happening, sanctions would be one final nail in the coffin and the decision makers must be aware of how brutal that would be, much easier just to talk about it as a distraction without ever actually doing anything.
I suspect you're right re the sabre rattling. At the very least, China will have looked at Russia and realised it needs a lot more preparation. I think it will always prefer the de-stabilisation route but even that has just taken a serious set-back. However, I don't the the West can use sanctions in the same way - there are plenty of countries, notably Germany, Italy, France, who are luke-warm at best or anti- the current sanctions because of the pain it's causing. China would be impossible given how embedded our supply chains are.
But that's also the reason I think that China has peaked and that we're all in for a rough ride - the West is going to have to reverse a lot of that supply chain dependence and that will reverse the globalisation deflation effect that has allowed easy money for 20 years without stoking inflation.
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
A very well informed post, as always, which i read carefully. However I do respectfully take issue with the anti-Euro stance. The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
I did warn there was confirmation bias in there! Unless it becomes a proper currency I do believe the Euro is (eventually!) doomed.
You are quite right that parity means nothing in itself, but is the direction of travel saying, 'The FED is doing the right thing, and the BOE and, particularly the ECB, are late to the party.' Credit spreads on government debt are rising again in the usual suspects, notably Italy. The ECB will struggle to control this without causing serious damage. The EU also has bad form - remember it tried to ban sovereign credit default swaps at the height of the Euro crisis, which was a blatant attempt to cover up government debt issues? Note that there was a brief rally in EURUSD on Thursday after the 50bp rise and then immediately dropped again. EURGBP looks set to decline ...
I have no idea why Slovakia's inflation is lower than Czech's. Given the latter controls its own currency, it should be able to control its economy better - local central bank competence and politics, like the UK?
The upshot of all this, is I'm very wary of autumn but am really struggling to think what the best investment strategy is. A lot of 'stuff' coming to a head in October: energy rises, China politics, a tricky earnings and forecast quarter, more interest rate rises and possible company failures/redundancies. Good things could happen: eg some sudden resolution in the war, equities show that they can maintain pricing power, supply-induced inflation drops.
My industry (Private Equity) is seeing this as a sensible valuation correction and looking to deploy again next year. They're also having no trouble raising new money. But they are also managing existing 'assets' hard to retain returns, which will mean redundancies. The small companies I am personally invested/involved in are also having no trouble raising investment, albeit at 'sensible' valuations of 25 times earnings, not the mental 55-65 of last year. But the two that are involved in lending are seeing rising delinquency and quite a bit of fraud.
My current view is: hold plenty of cash, only invest in companies that have low debt and generate cash and be patient about going into commodities and real assets, as I think there will be a flush to pay off margin calls when the market falls again. But maybe I'm being too pessimistic and will miss out on another ramp!
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
A very well informed post, as always, which i read carefully. However I do respectfully take issue with the anti-Euro stance. The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
I did warn there was confirmation bias in there! Unless it becomes a proper currency I do believe the Euro is (eventually!) doomed.
You are quite right that parity means nothing in itself, but is the direction of travel saying, 'The FED is doing the right thing, and the BOE and, particularly the ECB, are late to the party.' Credit spreads on government debt are rising again in the usual suspects, notably Italy. The ECB will struggle to control this without causing serious damage. The EU also has bad form - remember it tried to ban sovereign credit default swaps at the height of the Euro crisis, which was a blatant attempt to cover up government debt issues? Note that there was a brief rally in EURUSD on Thursday after the 50bp rise and then immediately dropped again. EURGBP looks set to decline ...
I have no idea why Slovakia's inflation is lower than Czech's. Given the latter controls its own currency, it should be able to control its economy better - local central bank competence and politics, like the UK?
The upshot of all this, is I'm very wary of autumn but am really struggling to think what the best investment strategy is. A lot of 'stuff' coming to a head in October: energy rises, China politics, a tricky earnings and forecast quarter, more interest rate rises and possible company failures/redundancies. Good things could happen: eg some sudden resolution in the war, equities show that they can maintain pricing power, supply-induced inflation drops.
My industry (Private Equity) is seeing this as a sensible valuation correction and looking to deploy again next year. They're also having no trouble raising new money. But they are also managing existing 'assets' hard to retain returns, which will mean redundancies. The small companies I am personally invested/involved in are also having no trouble raising investment, albeit at 'sensible' valuations of 25 times earnings, not the mental 55-65 of last year. But the two that are involved in lending are seeing rising delinquency and quite a bit of fraud.
My current view is: hold plenty of cash, only invest in companies that have low debt and generate cash and be patient about going into commodities and real assets, as I think there will be a flush to pay off margin calls when the market falls again. But maybe I'm being too pessimistic and will miss out on another ramp!
Hi mate
This won't be of interest to anyone else (and probably not to you either) but at the moment CZ has a bank rate of 7.25%, and Poland is I think not far off it. Both have much higher inflation rates than Slovakia. In the case of CZ the central bank has been very determined to keep a "strong and stable" rate against the Euro. High inflation here (17%) is quite connected to the labour shortage (which pre-dates even the pandemic, and even the 70,000 Ukrainian refugees who have officially found jobs has not dented it). I don't want to make too much of all that, beyond saying that right now Slovakia is quite smug about being in the eurozone. On the other hand the Baltic states are also in the zone and have much higher inflation rates.
My comment was perhaps more triggered by @golfaddick reporting that the "professionals" advised "Avoid Europe". That's typical City talk which I've heard for the last 30 years. Europe? All 27 EU countries plus Switzerland and Norway? Give me a break. My best performing asset this year is a stock (I started buying a few in search of income). One was Danish pharma Novo Nordisk. I only knew them because they became a client in the final year before I closed my biz. They specialise in diabetes treatments and have a dominant position in the sector. Working with them was much like the positive experience I had with other Scandi companies ; you could see the long-term thinking and lack of hubris. a few weeks ago, though, they announced positive results of a clinical trial for..an anti-obesity drug. Yet in doing so they admitted they were still unsure exactly how it works. You wouldn't get GSK or Pfizer coming out with that. Anyway I am up 20% on my holding which I've built up in the last few months. Yesterday I listened to Thorsten Bell in a podcast explaining that the poorest sector of French society has 20% more income than the equivalent sector in the UK, and that the UK investment levels are rapidly falling behind the rest of the G7. Just titbits, but perhaps some of the City boys just need to up their European stock-picking, rather than trashing the richest continent on the planet.
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
A very well informed post, as always, which i read carefully. However I do respectfully take issue with the anti-Euro stance. The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
I did warn there was confirmation bias in there! Unless it becomes a proper currency I do believe the Euro is (eventually!) doomed.
You are quite right that parity means nothing in itself, but is the direction of travel saying, 'The FED is doing the right thing, and the BOE and, particularly the ECB, are late to the party.' Credit spreads on government debt are rising again in the usual suspects, notably Italy. The ECB will struggle to control this without causing serious damage. The EU also has bad form - remember it tried to ban sovereign credit default swaps at the height of the Euro crisis, which was a blatant attempt to cover up government debt issues? Note that there was a brief rally in EURUSD on Thursday after the 50bp rise and then immediately dropped again. EURGBP looks set to decline ...
I have no idea why Slovakia's inflation is lower than Czech's. Given the latter controls its own currency, it should be able to control its economy better - local central bank competence and politics, like the UK?
The upshot of all this, is I'm very wary of autumn but am really struggling to think what the best investment strategy is. A lot of 'stuff' coming to a head in October: energy rises, China politics, a tricky earnings and forecast quarter, more interest rate rises and possible company failures/redundancies. Good things could happen: eg some sudden resolution in the war, equities show that they can maintain pricing power, supply-induced inflation drops.
My industry (Private Equity) is seeing this as a sensible valuation correction and looking to deploy again next year. They're also having no trouble raising new money. But they are also managing existing 'assets' hard to retain returns, which will mean redundancies. The small companies I am personally invested/involved in are also having no trouble raising investment, albeit at 'sensible' valuations of 25 times earnings, not the mental 55-65 of last year. But the two that are involved in lending are seeing rising delinquency and quite a bit of fraud.
My current view is: hold plenty of cash, only invest in companies that have low debt and generate cash and be patient about going into commodities and real assets, as I think there will be a flush to pay off margin calls when the market falls again. But maybe I'm being too pessimistic and will miss out on another ramp!
Hi mate
This won't be of interest to anyone else (and probably not to you either) but at the moment CZ has a bank rate of 7.25%, and Poland is I think not far off it. Both have much higher inflation rates than Slovakia. In the case of CZ the central bank has been very determined to keep a "strong and stable" rate against the Euro. High inflation here (17%) is quite connected to the labour shortage (which pre-dates even the pandemic, and even the 70,000 Ukrainian refugees who have officially found jobs has not dented it). I don't want to make too much of all that, beyond saying that right now Slovakia is quite smug about being in the eurozone. On the other hand the Baltic states are also in the zone and have much higher inflation rates.
My comment was perhaps more triggered by @golfaddick reporting that the "professionals" advised "Avoid Europe". That's typical City talk which I've heard for the last 30 years. Europe? All 27 EU countries plus Switzerland and Norway? Give me a break. My best performing asset this year is a stock (I started buying a few in search of income). One was Danish pharma Novo Nordisk. I only knew them because they became a client in the final year before I closed my biz. They specialise in diabetes treatments and have a dominant position in the sector. Working with them was much like the positive experience I had with other Scandi companies ; you could see the long-term thinking and lack of hubris. a few weeks ago, though, they announced positive results of a clinical trial for..an anti-obesity drug. Yet in doing so they admitted they were still unsure exactly how it works. You wouldn't get GSK or Pfizer coming out with that. Anyway I am up 20% on my holding which I've built up in the last few months. Yesterday I listened to Thorsten Bell in a podcast explaining that the poorest sector of French society has 20% more income than the equivalent sector in the UK, and that the UK investment levels are rapidly falling behind the rest of the G7. Just titbits, but perhaps some of the City boys just need to up their European stock-picking, rather than trashing the richest continent on the planet.
One can always quote particular stocks of European companies doing well or bucking the trend. That doesn't disprove any assertion that Europe as a whole should be avoided.
That's not a biased opinion as I don't really have one - I'm holding most of my assets as cash at the moment having divested my interests in the markets a couple of years ago, so very little skin in the game now.
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
A very well informed post, as always, which i read carefully. However I do respectfully take issue with the anti-Euro stance. The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
I did warn there was confirmation bias in there! Unless it becomes a proper currency I do believe the Euro is (eventually!) doomed.
You are quite right that parity means nothing in itself, but is the direction of travel saying, 'The FED is doing the right thing, and the BOE and, particularly the ECB, are late to the party.' Credit spreads on government debt are rising again in the usual suspects, notably Italy. The ECB will struggle to control this without causing serious damage. The EU also has bad form - remember it tried to ban sovereign credit default swaps at the height of the Euro crisis, which was a blatant attempt to cover up government debt issues? Note that there was a brief rally in EURUSD on Thursday after the 50bp rise and then immediately dropped again. EURGBP looks set to decline ...
I have no idea why Slovakia's inflation is lower than Czech's. Given the latter controls its own currency, it should be able to control its economy better - local central bank competence and politics, like the UK?
The upshot of all this, is I'm very wary of autumn but am really struggling to think what the best investment strategy is. A lot of 'stuff' coming to a head in October: energy rises, China politics, a tricky earnings and forecast quarter, more interest rate rises and possible company failures/redundancies. Good things could happen: eg some sudden resolution in the war, equities show that they can maintain pricing power, supply-induced inflation drops.
My industry (Private Equity) is seeing this as a sensible valuation correction and looking to deploy again next year. They're also having no trouble raising new money. But they are also managing existing 'assets' hard to retain returns, which will mean redundancies. The small companies I am personally invested/involved in are also having no trouble raising investment, albeit at 'sensible' valuations of 25 times earnings, not the mental 55-65 of last year. But the two that are involved in lending are seeing rising delinquency and quite a bit of fraud.
My current view is: hold plenty of cash, only invest in companies that have low debt and generate cash and be patient about going into commodities and real assets, as I think there will be a flush to pay off margin calls when the market falls again. But maybe I'm being too pessimistic and will miss out on another ramp!
Hi mate
This won't be of interest to anyone else (and probably not to you either) but at the moment CZ has a bank rate of 7.25%, and Poland is I think not far off it. Both have much higher inflation rates than Slovakia. In the case of CZ the central bank has been very determined to keep a "strong and stable" rate against the Euro. High inflation here (17%) is quite connected to the labour shortage (which pre-dates even the pandemic, and even the 70,000 Ukrainian refugees who have officially found jobs has not dented it). I don't want to make too much of all that, beyond saying that right now Slovakia is quite smug about being in the eurozone. On the other hand the Baltic states are also in the zone and have much higher inflation rates.
My comment was perhaps more triggered by @golfaddick reporting that the "professionals" advised "Avoid Europe". That's typical City talk which I've heard for the last 30 years. Europe? All 27 EU countries plus Switzerland and Norway? Give me a break. My best performing asset this year is a stock (I started buying a few in search of income). One was Danish pharma Novo Nordisk. I only knew them because they became a client in the final year before I closed my biz. They specialise in diabetes treatments and have a dominant position in the sector. Working with them was much like the positive experience I had with other Scandi companies ; you could see the long-term thinking and lack of hubris. a few weeks ago, though, they announced positive results of a clinical trial for..an anti-obesity drug. Yet in doing so they admitted they were still unsure exactly how it works. You wouldn't get GSK or Pfizer coming out with that. Anyway I am up 20% on my holding which I've built up in the last few months. Yesterday I listened to Thorsten Bell in a podcast explaining that the poorest sector of French society has 20% more income than the equivalent sector in the UK, and that the UK investment levels are rapidly falling behind the rest of the G7. Just titbits, but perhaps some of the City boys just need to up their European stock-picking, rather than trashing the richest continent on the planet.
One can always quote particular stocks of European companies doing well or bucking the trend. That doesn't disprove any assertion that Europe as a whole should be avoided.
That's not a biased opinion as I don't really have one - I'm holding most of my assets as cash at the moment having divested my interests in the markets a couple of years ago, so very little skin in the game now.
Of course @bobmunro your point in the first para is correct. I expected someone to make that point. The points made by Thorsten Bell in this BBC4 Analysis podcast are more substantial and backed up by facts which, perhaps unsurprisingly, I haven't heard emanating from mainstream British media. Not that I have much time for the "Sick Man of Europe" tag because that would be to fall into the same lazy rhetoric as Golfie's analysts, many of whom I suspect were in nappies when Germany briefly wore that tag. I'm not particularly pro European markets, either. Of course many of them will head into recession. But so will the UK. I'm mainly in cash too, although I have a portfolio to build, recommended by our resident IFA. It's main goal is income and a solid base for a senior citizen, and I think Golfie has done a very good job with the brief. It does have a European fund in it, possibly in an attempt to shut me up. That went well.
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
A very well informed post, as always, which i read carefully. However I do respectfully take issue with the anti-Euro stance. The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
I did warn there was confirmation bias in there! Unless it becomes a proper currency I do believe the Euro is (eventually!) doomed.
You are quite right that parity means nothing in itself, but is the direction of travel saying, 'The FED is doing the right thing, and the BOE and, particularly the ECB, are late to the party.' Credit spreads on government debt are rising again in the usual suspects, notably Italy. The ECB will struggle to control this without causing serious damage. The EU also has bad form - remember it tried to ban sovereign credit default swaps at the height of the Euro crisis, which was a blatant attempt to cover up government debt issues? Note that there was a brief rally in EURUSD on Thursday after the 50bp rise and then immediately dropped again. EURGBP looks set to decline ...
I have no idea why Slovakia's inflation is lower than Czech's. Given the latter controls its own currency, it should be able to control its economy better - local central bank competence and politics, like the UK?
The upshot of all this, is I'm very wary of autumn but am really struggling to think what the best investment strategy is. A lot of 'stuff' coming to a head in October: energy rises, China politics, a tricky earnings and forecast quarter, more interest rate rises and possible company failures/redundancies. Good things could happen: eg some sudden resolution in the war, equities show that they can maintain pricing power, supply-induced inflation drops.
My industry (Private Equity) is seeing this as a sensible valuation correction and looking to deploy again next year. They're also having no trouble raising new money. But they are also managing existing 'assets' hard to retain returns, which will mean redundancies. The small companies I am personally invested/involved in are also having no trouble raising investment, albeit at 'sensible' valuations of 25 times earnings, not the mental 55-65 of last year. But the two that are involved in lending are seeing rising delinquency and quite a bit of fraud.
My current view is: hold plenty of cash, only invest in companies that have low debt and generate cash and be patient about going into commodities and real assets, as I think there will be a flush to pay off margin calls when the market falls again. But maybe I'm being too pessimistic and will miss out on another ramp!
Hi mate
This won't be of interest to anyone else (and probably not to you either) but at the moment CZ has a bank rate of 7.25%, and Poland is I think not far off it. Both have much higher inflation rates than Slovakia. In the case of CZ the central bank has been very determined to keep a "strong and stable" rate against the Euro. High inflation here (17%) is quite connected to the labour shortage (which pre-dates even the pandemic, and even the 70,000 Ukrainian refugees who have officially found jobs has not dented it). I don't want to make too much of all that, beyond saying that right now Slovakia is quite smug about being in the eurozone. On the other hand the Baltic states are also in the zone and have much higher inflation rates.
My comment was perhaps more triggered by @golfaddick reporting that the "professionals" advised "Avoid Europe". That's typical City talk which I've heard for the last 30 years. Europe? All 27 EU countries plus Switzerland and Norway? Give me a break. My best performing asset this year is a stock (I started buying a few in search of income). One was Danish pharma Novo Nordisk. I only knew them because they became a client in the final year before I closed my biz. They specialise in diabetes treatments and have a dominant position in the sector. Working with them was much like the positive experience I had with other Scandi companies ; you could see the long-term thinking and lack of hubris. a few weeks ago, though, they announced positive results of a clinical trial for..an anti-obesity drug. Yet in doing so they admitted they were still unsure exactly how it works. You wouldn't get GSK or Pfizer coming out with that. Anyway I am up 20% on my holding which I've built up in the last few months. Yesterday I listened to Thorsten Bell in a podcast explaining that the poorest sector of French society has 20% more income than the equivalent sector in the UK, and that the UK investment levels are rapidly falling behind the rest of the G7. Just titbits, but perhaps some of the City boys just need to up their European stock-picking, rather than trashing the richest continent on the planet.
One can always quote particular stocks of European companies doing well or bucking the trend. That doesn't disprove any assertion that Europe as a whole should be avoided.
That's not a biased opinion as I don't really have one - I'm holding most of my assets as cash at the moment having divested my interests in the markets a couple of years ago, so very little skin in the game now.
Of course @bobmunro your point in the first para is correct. I expected someone to make that point. The points made by Thorsten Bell in this BBC4 Analysis podcast are more substantial and backed up by facts which, perhaps unsurprisingly, I haven't heard emanating from mainstream British media. Not that I have much time for the "Sick Man of Europe" tag because that would be to fall into the same lazy rhetoric as Golfie's analysts, many of whom I suspect were in nappies when Germany briefly wore that tag. I'm not particularly pro European markets, either. Of course many of them will head into recession. But so will the UK. I'm mainly in cash too, although I have a portfolio to build, recommended by our resident IFA. It's main goal is income and a solid base for a senior citizen, and I think Golfie has done a very good job with the brief. It does have a European fund in it, possibly in an attempt to shut me up. That went well.
I could like and lol your post but chose the latter based on the ending!
Can't believe I'm the fifth most pessimistic of the group. I sincerely hope (most of) you are right but I'm very worried about China and a Euro crisis. Hopefully that's just my confirmation bias ****ing with me.
What about China are you concerned about?
the fact they're deploying tanks to stop people going on a bank run, that one of their largest property developers defaulted at the beginning of the year and their property market is stalling. Something really dodgy is going on.
Thanks @kentaddick, this is what I'm concerned about. They are also using the health app to stop deposit holders travelling to protest that they can't get to their money. Construction industry suppliers are defaulting on mortgage payments because property companies aren't settling their bills (and not just Evergrande).
China unravelling has been a long time coming. Massive misallocation of capital from central planning on a scale never seen before. And I think it will come in a big bang as they have the ability to control information and market behaviours for a long time before they can't contain it. Together with their Zero Covid policy, lots of people are unhappy with the government right now, which is a good excuse for a war to distract them. There are all sorts of rumours that there's a move to oust Xi before he is confirmed life-time leader in October.
As for the European banking market - that was never cleaned up, unlike here and in the States and so many of their banks are technically insolvent. The reason it's never been cleaned up is the merry go round with government debt. Rising interest rates will blow that right open. The Euro is already struggling to retain parity with the dollar. That could be very ugly all by itself.
A very well informed post, as always, which i read carefully. However I do respectfully take issue with the anti-Euro stance. The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
I did warn there was confirmation bias in there! Unless it becomes a proper currency I do believe the Euro is (eventually!) doomed.
You are quite right that parity means nothing in itself, but is the direction of travel saying, 'The FED is doing the right thing, and the BOE and, particularly the ECB, are late to the party.' Credit spreads on government debt are rising again in the usual suspects, notably Italy. The ECB will struggle to control this without causing serious damage. The EU also has bad form - remember it tried to ban sovereign credit default swaps at the height of the Euro crisis, which was a blatant attempt to cover up government debt issues? Note that there was a brief rally in EURUSD on Thursday after the 50bp rise and then immediately dropped again. EURGBP looks set to decline ...
I have no idea why Slovakia's inflation is lower than Czech's. Given the latter controls its own currency, it should be able to control its economy better - local central bank competence and politics, like the UK?
The upshot of all this, is I'm very wary of autumn but am really struggling to think what the best investment strategy is. A lot of 'stuff' coming to a head in October: energy rises, China politics, a tricky earnings and forecast quarter, more interest rate rises and possible company failures/redundancies. Good things could happen: eg some sudden resolution in the war, equities show that they can maintain pricing power, supply-induced inflation drops.
My industry (Private Equity) is seeing this as a sensible valuation correction and looking to deploy again next year. They're also having no trouble raising new money. But they are also managing existing 'assets' hard to retain returns, which will mean redundancies. The small companies I am personally invested/involved in are also having no trouble raising investment, albeit at 'sensible' valuations of 25 times earnings, not the mental 55-65 of last year. But the two that are involved in lending are seeing rising delinquency and quite a bit of fraud.
My current view is: hold plenty of cash, only invest in companies that have low debt and generate cash and be patient about going into commodities and real assets, as I think there will be a flush to pay off margin calls when the market falls again. But maybe I'm being too pessimistic and will miss out on another ramp!
Hi mate
This won't be of interest to anyone else (and probably not to you either) but at the moment CZ has a bank rate of 7.25%, and Poland is I think not far off it. Both have much higher inflation rates than Slovakia. In the case of CZ the central bank has been very determined to keep a "strong and stable" rate against the Euro. High inflation here (17%) is quite connected to the labour shortage (which pre-dates even the pandemic, and even the 70,000 Ukrainian refugees who have officially found jobs has not dented it). I don't want to make too much of all that, beyond saying that right now Slovakia is quite smug about being in the eurozone. On the other hand the Baltic states are also in the zone and have much higher inflation rates.
My comment was perhaps more triggered by @golfaddick reporting that the "professionals" advised "Avoid Europe". That's typical City talk which I've heard for the last 30 years. Europe? All 27 EU countries plus Switzerland and Norway? Give me a break. My best performing asset this year is a stock (I started buying a few in search of income). One was Danish pharma Novo Nordisk. I only knew them because they became a client in the final year before I closed my biz. They specialise in diabetes treatments and have a dominant position in the sector. Working with them was much like the positive experience I had with other Scandi companies ; you could see the long-term thinking and lack of hubris. a few weeks ago, though, they announced positive results of a clinical trial for..an anti-obesity drug. Yet in doing so they admitted they were still unsure exactly how it works. You wouldn't get GSK or Pfizer coming out with that. Anyway I am up 20% on my holding which I've built up in the last few months. Yesterday I listened to Thorsten Bell in a podcast explaining that the poorest sector of French society has 20% more income than the equivalent sector in the UK, and that the UK investment levels are rapidly falling behind the rest of the G7. Just titbits, but perhaps some of the City boys just need to up their European stock-picking, rather than trashing the richest continent on the planet.
Hi @PragueAddick, totally agree, you can't write off Europe or consider it as one homogeneous block. It doesn't share the same language, legal system, fiscal system, government debt system, or even history with democracy, with large parts under communist or fascist rule in living memory. Some of it went through the Reformation, some of it didn't!
Which is why it's an unlikely mutual currency zone let alone the basis for an effective superstate any time soon. Back when the Economist, and even the FT :-), believed in free markets and small government (early 90s!) they did an analysis of ideal mutual currency zones - countries beginning with the letter M did better than the Eurozone. Whilst large companies earning overseas revenues will probably be fine (Novo is in my portfolio, btw, via an investment trust), small to medium companies, which are my preferred investment area, might not due to currency risk.
On a related point, I've had much more success investing in companies where I've had some dealings with them and can see they operate well and have good management, even if it's just as a customer. Most of my worst have been when I didn't! It's now a big criterion for selection if I could just stay disciplined!
As for the City, they're followers, I take no notice of any analysts as too many are kids who know nothing about how companies work and could never run one themselves. How many times do you see them downgrade a stock once it's bleedin' obvious to everyone, including the market? S4 Capital has been red flagged by my Sharescope software for months as specifically having dodgy reporting of numbers via a thing called the Beneish M-score. Then it plummets from 8.50 to 2.50 due to 'financial control and system issues'. Then the analysts continue to rate it a buy and are surprised and 'disappointed' when - two months later - the issues still aren't fixed and it drops another 45%! Anyone who knows how companies work would know that a highly competent, talented team would take 18 months to fix those kinds of issues in a multinational built up rapidly via acquisition - it's a common, well-understood problem.
Short-termism, and a buy-side run by the middle class officer class who are too bright to join the army but couldn't run a whelk stall, is a nightmare for raising capital and growing companies in this country. The public markets are dying, which is a real problem for retail investors, as private equity is hard to get exposure to for most.
I thought Q2 would be ok - too early for the cost pressure to affect earnings too much. Rising costs are in the numbers but the best companies are passing those through (and jacking up inflation more). I think Q3 might see a few more pessimistic revenue forecasts, which is a different problem, so I still see October as the crunch time.
But I'm optimistic for next year, particularly the second half. The market is also waking up to the fact that cloud adoption is a monster tailwind and the likes to Microsoft and Amazon are cleaning up.
Strange times in the stock market. I've been cautiously dripping cash in for a while, and am slightly in the red, or at least I was until this week. This rise feels like a false dawn to me and there are so many potential triggers for a big drop that something has surely got to give in the near term. I picked up two whole Amazon shares a couple of months ago (high roller, me) before the split so I'm feeling smug, but I have learned that that feeling is temporary and something will put me back in my box. Seems largely US led - I don't see any good news in the UK, we are just hanging on to their coat tails for the time being.
The US is heading for recession. Technically they are already there with 2 quarters of negative growth but they calculate it differently (of course they do). Europe is still being backed into a corner by Putin regarding Gas supplies & the UK is one of the slowest growing economies of the G20. Cant see too much to cheer about tbh. I went for a low finishing value for the FTSE on December and although it has gone up thus month I fear there is more pain around the corner. Interest rates & inflation are still going up & who knows what the new conservative leader will do come September.
Agree with all the above. I’ve started forcing myself to rethink what constitutes an “investment”. Sitting on cash from the house sale, i desperately search for safe interest on cash deposit with a max commitment of 6 months. Property- I’ve given up on the dream of a little place on a coast, and instead see as an investment the improvement of the house we have. £25k to convert to renewable energy and tell Putin what to do with his gas, I may not live to see the ROI on the energy bills alone, but it will add to the value of the house, because there’s no way back from this switch, and the subsidies won’t last forever.
Otherwise I’m only topping up my portfolio each month if the prices across the board shows at least a 3% decrease on the previous month’s buy. Each month. Similarly today I looked at “selling into strength” a sick Baillie Gifford fund, but bottled it and sold 50% of it. Mug punter defensive strategy😉
I’m about to sell my place and will be sitting on a hefty sum and have no idea what or where to invest (similar I think to Prague Addick). Unfortunately, I’ve no idea what you financial guys are on about, its like reading trying to read a foreign newspaper.
I’m about to sell my place and will be sitting on a hefty sum and have no idea what or where to invest (similar I think to Prague Addick). Unfortunately, I’ve no idea what you financial guys are on about, its like reading trying to read a foreign newspaper.
All depends on your attitude to risk and when/what you need the money for. Theres some decent cash accounts right now (compared to a year ago) so dump it in a few of those until you know what you want to do. Maybe some premium bonds also.
Interest rate review on Thursday with the Bank of England, ‘experts’ predicting a 0.5% increase (there not always right!) will be interesting to see if it’s already priced into the market!
I’m about to sell my place and will be sitting on a hefty sum and have no idea what or where to invest (similar I think to Prague Addick). Unfortunately, I’ve no idea what you financial guys are on about, its like reading trying to read a foreign newspaper.
I've done all the qualifications to be a financial adviser but I have certain reservations about 'the business' of financial advice, so decided not to go into it. However, for someone in your apparent position, who isn't familiar with the options, professional financial advice is worth exploring.
The most important thing to understand is that there are so many factors to take into consideration, starting with your personal circumstances, insurance cover and attitude to risk, before you even think about where and how to invest money.
Despite my reservations about the industry in general, there are good advisers out there and I wouldn't hesitate to talk to @golfaddick, of this parish. He may not be very optimistic about our football team but he's consistently given excellent investment advice on here.
Interest rate review on Thursday with the Bank of England, ‘experts’ predicting a 0.5% increase (there not always right!) will be interesting to see if it’s already priced into the market!
US markets had quite a bounce this week on the back of the .75% rate increase.
Interest rate review on Thursday with the Bank of England, ‘experts’ predicting a 0.5% increase (there not always right!) will be interesting to see if it’s already priced into the market!
The consensus around investment managers is that it will be 0.5%, but rates will peak around 3% next year & then may actually fall back to around 2%-2.5%. BOE dont want rates higher than necessary as we could be heading for a recession.
Comments
The Czech Republic where I live, and have to hold cash, is not in the Eurozone. Its little brother Slovakia, economically similar structure but an undeveloped eastern region, is. Do please compare the inflation rate of the two countries.There is nothing particularly significant about parity with the dollar. The eurozone doesnt collapse if it falls to 99 cents, and the performance against the dollar is mirrored by that of sterling's. Whatever the Czech koruna does against the euro, it does against sterling, and I don't enjoy it right now as I have liquid assets mainly in sterling.
I well remember Uk based "analysts" in 2008 predicting the end of the euro by the end of that year. Well, here we are, 14 years later. And the new generation of "analysts" are at it again it seems. "Avoid Europe" they say. While easing themselves into their Merc or Beemer. Plus ca change...
Zero covid seems to come and go and far too much power is given to local officials which just leads to uncertainty and little idea of what’s happening from place to place.
Almost all of the banking issues seems to be with ‘rural banks’ and giving loans for infrastructure projects is some seriously odd areas.
China are taking a keen interest in Russian sanctions at moment and just yesterday there were reports of Europe fearing the Russian gas being turned off so I don’t think these sanctions are really working on Russia.
But that's also the reason I think that China has peaked and that we're all in for a rough ride - the West is going to have to reverse a lot of that supply chain dependence and that will reverse the globalisation deflation effect that has allowed easy money for 20 years without stoking inflation.
You are quite right that parity means nothing in itself, but is the direction of travel saying, 'The FED is doing the right thing, and the BOE and, particularly the ECB, are late to the party.' Credit spreads on government debt are rising again in the usual suspects, notably Italy. The ECB will struggle to control this without causing serious damage. The EU also has bad form - remember it tried to ban sovereign credit default swaps at the height of the Euro crisis, which was a blatant attempt to cover up government debt issues? Note that there was a brief rally in EURUSD on Thursday after the 50bp rise and then immediately dropped again. EURGBP looks set to decline ...
I have no idea why Slovakia's inflation is lower than Czech's. Given the latter controls its own currency, it should be able to control its economy better - local central bank competence and politics, like the UK?
The upshot of all this, is I'm very wary of autumn but am really struggling to think what the best investment strategy is. A lot of 'stuff' coming to a head in October: energy rises, China politics, a tricky earnings and forecast quarter, more interest rate rises and possible company failures/redundancies. Good things could happen: eg some sudden resolution in the war, equities show that they can maintain pricing power, supply-induced inflation drops.
My industry (Private Equity) is seeing this as a sensible valuation correction and looking to deploy again next year. They're also having no trouble raising new money. But they are also managing existing 'assets' hard to retain returns, which will mean redundancies. The small companies I am personally invested/involved in are also having no trouble raising investment, albeit at 'sensible' valuations of 25 times earnings, not the mental 55-65 of last year. But the two that are involved in lending are seeing rising delinquency and quite a bit of fraud.
My current view is: hold plenty of cash, only invest in companies that have low debt and generate cash and be patient about going into commodities and real assets, as I think there will be a flush to pay off margin calls when the market falls again. But maybe I'm being too pessimistic and will miss out on another ramp!
This won't be of interest to anyone else (and probably not to you either) but at the moment CZ has a bank rate of 7.25%, and Poland is I think not far off it. Both have much higher inflation rates than Slovakia. In the case of CZ the central bank has been very determined to keep a "strong and stable" rate against the Euro. High inflation here (17%) is quite connected to the labour shortage (which pre-dates even the pandemic, and even the 70,000 Ukrainian refugees who have officially found jobs has not dented it). I don't want to make too much of all that, beyond saying that right now Slovakia is quite smug about being in the eurozone. On the other hand the Baltic states are also in the zone and have much higher inflation rates.
My comment was perhaps more triggered by @golfaddick reporting that the "professionals" advised "Avoid Europe". That's typical City talk which I've heard for the last 30 years. Europe? All 27 EU countries plus Switzerland and Norway? Give me a break. My best performing asset this year is a stock (I started buying a few in search of income). One was Danish pharma Novo Nordisk. I only knew them because they became a client in the final year before I closed my biz. They specialise in diabetes treatments and have a dominant position in the sector. Working with them was much like the positive experience I had with other Scandi companies ; you could see the long-term thinking and lack of hubris. a few weeks ago, though, they announced positive results of a clinical trial for..an anti-obesity drug. Yet in doing so they admitted they were still unsure exactly how it works. You wouldn't get GSK or Pfizer coming out with that. Anyway I am up 20% on my holding which I've built up in the last few months. Yesterday I listened to Thorsten Bell in a podcast explaining that the poorest sector of French society has 20% more income than the equivalent sector in the UK, and that the UK investment levels are rapidly falling behind the rest of the G7. Just titbits, but perhaps some of the City boys just need to up their European stock-picking, rather than trashing the richest continent on the planet.
That's not a biased opinion as I don't really have one - I'm holding most of my assets as cash at the moment having divested my interests in the markets a couple of years ago, so very little skin in the game now.
Which is why it's an unlikely mutual currency zone let alone the basis for an effective superstate any time soon. Back when the Economist, and even the FT :-), believed in free markets and small government (early 90s!) they did an analysis of ideal mutual currency zones - countries beginning with the letter M did better than the Eurozone. Whilst large companies earning overseas revenues will probably be fine (Novo is in my portfolio, btw, via an investment trust), small to medium companies, which are my preferred investment area, might not due to currency risk.
On a related point, I've had much more success investing in companies where I've had some dealings with them and can see they operate well and have good management, even if it's just as a customer. Most of my worst have been when I didn't! It's now a big criterion for selection if I could just stay disciplined!
As for the City, they're followers, I take no notice of any analysts as too many are kids who know nothing about how companies work and could never run one themselves. How many times do you see them downgrade a stock once it's bleedin' obvious to everyone, including the market? S4 Capital has been red flagged by my Sharescope software for months as specifically having dodgy reporting of numbers via a thing called the Beneish M-score. Then it plummets from 8.50 to 2.50 due to 'financial control and system issues'. Then the analysts continue to rate it a buy and are surprised and 'disappointed' when - two months later - the issues still aren't fixed and it drops another 45%! Anyone who knows how companies work would know that a highly competent, talented team would take 18 months to fix those kinds of issues in a multinational built up rapidly via acquisition - it's a common, well-understood problem.
Short-termism, and a buy-side run by the middle class officer class who are too bright to join the army but couldn't run a whelk stall, is a nightmare for raising capital and growing companies in this country. The public markets are dying, which is a real problem for retail investors, as private equity is hard to get exposure to for most.
Rant over :-)
I thought Q2 would be ok - too early for the cost pressure to affect earnings too much. Rising costs are in the numbers but the best companies are passing those through (and jacking up inflation more). I think Q3 might see a few more pessimistic revenue forecasts, which is a different problem, so I still see October as the crunch time.
But I'm optimistic for next year, particularly the second half. The market is also waking up to the fact that cloud adoption is a monster tailwind and the likes to Microsoft and Amazon are cleaning up.
I picked up two whole Amazon shares a couple of months ago (high roller, me) before the split so I'm feeling smug, but I have learned that that feeling is temporary and something will put me back in my box.
Seems largely US led - I don't see any good news in the UK, we are just hanging on to their coat tails for the time being.
The most important thing to understand is that there are so many factors to take into consideration, starting with your personal circumstances, insurance cover and attitude to risk, before you even think about where and how to invest money.
Despite my reservations about the industry in general, there are good advisers out there and I wouldn't hesitate to talk to @golfaddick, of this parish. He may not be very optimistic about our football team but he's consistently given excellent investment advice on here.