The UK's trading balance has been substantially assisted by the money flowing through the City of London's financial community. Martin Hutchinson's 20 August essay in PrudentBear explores the possibility that the City will eventually lose its eminence, and the loss of revenue will have to be replaced by higher domestic taxation.
Thursday, August 23, 2007
Invisible earnings may disappear
The UK's trading balance has been substantially assisted by the money flowing through the City of London's financial community. Martin Hutchinson's 20 August essay in PrudentBear explores the possibility that the City will eventually lose its eminence, and the loss of revenue will have to be replaced by higher domestic taxation.
Twang money revisited
John Rubino's 19 August article in GoldSeek supports my contention that since credit works like money, a credit contraction destroys money, and this undermines our ability to make sound financial assessments:
"Prudent Bear’s Doug Noland has for years been pointing out that one of the drivers of the credit bubble has been the ever-broadening definition of money. As the global economy expanded without a hic-up, more and more instruments came to be used as a store of value or medium of exchange or even a standard against which to value other things—in other words, as money."
Now that lenders are pulling in their horns, central banks are creating more cash to replace the "loss", and the result must be a dilution of value in the currency.
"Prudent Bear’s Doug Noland has for years been pointing out that one of the drivers of the credit bubble has been the ever-broadening definition of money. As the global economy expanded without a hic-up, more and more instruments came to be used as a store of value or medium of exchange or even a standard against which to value other things—in other words, as money."
Now that lenders are pulling in their horns, central banks are creating more cash to replace the "loss", and the result must be a dilution of value in the currency.
Wednesday, August 22, 2007
UK debts mounting
And Rob Mackrill in today's email edition of The Daily Reckoning reveals that Britain has problems that, relative to the size of our economy, stand comparison with America's:
UK consumer debt now weighs in at £1,345bn - a sum that exceeds our entire output of goods and services, according to accountants Grant Thornton in a note this morning.
Official receivers and trustees in bankruptcy generally seem to do rather well out of this kind of mess - perhaps rather too well.
I had some clients who wound up their firm but pulled out all the stops to collect all debts and pay creditors as much as possible themselves; both clients and creditors benefited far, far more than if they had yielded to the usual arrangements - which I saw in other cases. Ordinary people are shaved going into debt and skinned coming out.
UK consumer debt now weighs in at £1,345bn - a sum that exceeds our entire output of goods and services, according to accountants Grant Thornton in a note this morning.
Official receivers and trustees in bankruptcy generally seem to do rather well out of this kind of mess - perhaps rather too well.
I had some clients who wound up their firm but pulled out all the stops to collect all debts and pay creditors as much as possible themselves; both clients and creditors benefited far, far more than if they had yielded to the usual arrangements - which I saw in other cases. Ordinary people are shaved going into debt and skinned coming out.
Safety first
Dan Denning comments on the recent rush for cash and safe bonds in The Daily Reckoning Australia today. He also repeats Marc Faber's point about an "earnings bubble" that skews p/e ratios:
Be careful about using low P/E ratios as a buying indicator. We read in this morning's paper that the average P/E on the ASX 200 is the lowest its been in 12 months. That doesn't automatically mean stocks are "good value." In fact, in the past, low P/E ratios have been a sign of the market top. Why?
At the height of an economic cycle, corporate earnings are high. When earnings rise faster than share prices, the P/E ratio will look low, flashing a "buy" signal. But this may be just the time that earnings themselves have peaked. That's definitely not the time to buy a stock.
And even commodity shares have to be chosen with care, when you factor-in rising costs.
Be careful about using low P/E ratios as a buying indicator. We read in this morning's paper that the average P/E on the ASX 200 is the lowest its been in 12 months. That doesn't automatically mean stocks are "good value." In fact, in the past, low P/E ratios have been a sign of the market top. Why?
At the height of an economic cycle, corporate earnings are high. When earnings rise faster than share prices, the P/E ratio will look low, flashing a "buy" signal. But this may be just the time that earnings themselves have peaked. That's definitely not the time to buy a stock.
And even commodity shares have to be chosen with care, when you factor-in rising costs.
Twang money
Richard Daughty (aka The Mogambo Guru) writes in The Daily Reckoning (21 August):
The big, big problem with the whole subprime/CDO/Armageddon market thing is that while the values on these assets can go down, the debts incurred to buy the assets don't.
Quite so. And since much of our money has been created ex nihilo by banks, then presumably it can also be reduced quickly by a credit crunch, so we have potential volatility in the money supply as in other things. Assessing things in money terms now seems to be like going to a tailor who makes all his measurements with an elastic band.
The big, big problem with the whole subprime/CDO/Armageddon market thing is that while the values on these assets can go down, the debts incurred to buy the assets don't.
Quite so. And since much of our money has been created ex nihilo by banks, then presumably it can also be reduced quickly by a credit crunch, so we have potential volatility in the money supply as in other things. Assessing things in money terms now seems to be like going to a tailor who makes all his measurements with an elastic band.
David Tice bearish on commodities
Prudent Bear's boss is cautious about natural resources - though still in the market for energy and precious metals (see page 2) - Institutional Investor article dated 14 August.
Marc Faber profile
Marc Faber at home in Chiangmai, Thailand (from Asia Inc profile - see below)Marc Faber is a very highly respected financial analyst and commentator. Listed below are some items by him, or about him, that may help you to get a sense of his character, outlook and opinions. I shall update this page from time to time.
SELECTED ARTICLES & INTERVIEWS
BIOGRAPHIES AND PROFILES
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