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A slump isn’t over before there is terror in the media; and whilst there is fear there is currently no headline saying “CRASH”.
As such, I’m not optimistic that this summer slump is over.
All the warning signs are flashing. The pound has collapsed against the Yen, a sign of a sudden flight to havens. Gold just went through the roof. As such you would have though the Greek euro exit was happening this weekend (2/3 June).
Maybe the market is just scared that a long weekend might be the break necessary for the Euro to Drachma swap over? In any event nothing has happened yet.
The collapse of the pound this week might have something to do with another £50bn of QE in the UK. That’s £1,000 a head of our population.
It will of course go straight back to the government via the now classic route;
BoE buys bonds of varying quality or maturity from banks who then buy government bonds from the Treasury, who pay its employees and various non-productive overheads with the money. The money then flies out of the country in £50bn of trade deficit. Hence the money won’t support our economy for long but instead help India and China.
If this flood of money did stay in the UK we would get inflation, so by shipping our money abroad via unproductive overheads we only get poorer. The pound falls, import prices rise and we get inflation in the end.
The trade imbalance is one of the core problems the UK faces. When the imbalance is so large a country must get poorer.
This is obvious if you actually go outside of the UK and notice how poor the average British are becoming. Compared to the UK, most of the world once seemed shoddy and rundown, now it is the UK that looks increasingly like a poor country.
Such is the price of an inefficient, unproductive and badly guided economy.
Meanwhile back in the markets it likely that it will take weeks to see the bottom of this summer’s slump. Meanwhile I’ll be looking to buy bargains, whilst avoiding the new generation of stock market outrage like Clinton Cards.
It’s going to be a grind.
