Broad Oak: your emotional support animal

Tuesday, July 15, 2008

How far can the FTSE fall?

The FTSE hit a long-term low at 3,287 at the close of 12 March 2003. If it were to drop to 5,000 now, that would still mean about 8% p.a. compound growth.

8 comments:

Wolfie said...

I'd say level at 4,800 after the overshoot rebound.

sobers said...

It'll definitely go below 5000 fairly soon. Too much bad information coming out at the moment.

Two things will cause the markets to reverse the downward trend.

(a) inflation moving downwards allowing reduced interest rates, and/or
(b) Oil price falls as the current speculative bubble unwinds.

(a) won't happen (in the UK anyway) until December onwards as the annual effects of higher oil/petrol prices begin to fall out of the index. (b) could happen at any point when the markets finally realise that the Far Eastern economies will need much less oil when their main markets (us in the West) go into recession and stop buying their exports.

On the principle of buying at the point of maximum pain, my feeling all along has been that the world will look like it's about to end early next year. So thats the point to buy at. If the oil price bubble bursts before then, buy ASAP after that event.

mutleythedog said...

I wonder what this means? Hmmmmm......

dearieme said...

But it peaked at 6930, did it not?

SACKERSON said...

Wolfie, Sobers: heartening (in a way) to see that I'm not on my own here.

Hi, Mutley - just trying to show the context, some people might think we're already at some terrible low but we got much lower in 2003. In fact I suspect that's what triggered the loosening of the money supply as measured by the BoE's M4 statistics.

DM: yes, at the height of the tech bubble. So symbolic that that should be at the very end of the last Millennium. And yes, if you're implying that the next peak could also be much higher, if you take 6930 and add 9 years' worth of inflation - but when will that peak come?

Wolfie said...

I don’t think we will see another peak like that and our more recent bull was nothing more than an echo of dot-com collapse slapping eastern globalisation bubble using post petro-cycle oversupply cash as fluid transport. I like fluid dynamics as analogies. The energy will be absorbed by the inward investment, followed by slow-motion implosion of China (as we know it). BRICS was a pyramid scheme dreamed-up at Goldmans.

dearieme said...

I've never seen any reason to assume that China will remain as one Empire: historically, it has broken up and then been re-united repeatedly.

SACKERSON said...

Wolfie: give it 10 years to reach a new inflation-adjusted peak?

DM: Does new technology make the centre powerful enough to hold the periphery?