Coronavirus - Overall
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@Catogrande said in Coronavirus - Overall:
Yep, but rising interest rates attack capital values of bonds and make corporate and govvy debt more expensive to service. With interest rates where they are the longer term outlook for the safe haven of government and IG bonds is not particularly good. In the UK we’ve basically had a 40 year bull market in bonds as rates have reduced. Sooner or later that easy ride will turn to a painful ride and I’m not sure we’re placed to deal with it.
It's been a house of cards for some time. Debt servicing costs have been growing but seem cheap which poss. breeds complacency. It's less than 15 years ago BoE interest rates were 6% and that was considered low. What happens when the biubble bursts? Imagine the impact if mortgage & personal finance rates doubled to 6%....
And it sort of fucks over Modern Portfolio Theory which has been the cornerstone of investment professionals since the 1950’s and is much favoured by the compliance and regulatory regimes which dictate risk management.
My pension portfolio manager works on a basis of 50% loss of capital. Little in gilts, plenty in cash.
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@Catogrande said in Coronavirus - Overall:
@Tim said in Coronavirus - Overall:
@Catogrande 2% interest is an attack on capital value now?
Sure. On a 10 year bond a 2% increase in rates is about a 20% drop in capital values. Broad brush view but close enough.
On 30 year gilt 2% yield increase might be 36% capital hit. Quite the riskless investment!
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@Victor-Meldrew said in Coronavirus - Overall:
@Catogrande said in Coronavirus - Overall:
Yep, but rising interest rates attack capital values of bonds and make corporate and govvy debt more expensive to service. With interest rates where they are the longer term outlook for the safe haven of government and IG bonds is not particularly good. In the UK we’ve basically had a 40 year bull market in bonds as rates have reduced. Sooner or later that easy ride will turn to a painful ride and I’m not sure we’re placed to deal with it.
It's been a house of cards for some time. Debt servicing costs have been growing but seem cheap which poss. breeds complacency. It's less than 15 years ago BoE interest rates were 6% and that was considered low. What happens when the biubble bursts? Imagine the impact if mortgage & personal finance rates doubled to 6%....
And it sort of fucks over Modern Portfolio Theory which has been the cornerstone of investment professionals since the 1950’s and is much favoured by the compliance and regulatory regimes which dictate risk management.
My pension portfolio manager works on a basis of 50% loss of capital. Little in gilts, plenty in cash.
And if UK governemt increases borrowing by £200 bn, the extra 2% is £4 bn a year extra in interest.
Hence the absurdity of regulators pushing corporate pension funds to purchase ever more of the gilt-edged suckers.
Cash and equities is enough for most pension funds.
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@Victor-Meldrew said in Coronavirus - Overall:
@pakman said in Coronavirus - Overall:
Local Central Banks
Local Banks
Local Insurance companies and Pension/superannuation funds
Overseas Central banks
Other InvestorsIn the UK and Europe, and I think US, the Regulators twist the arms up the back of Cats 2 and 3 to be up to their gills in local government bonds, even though in Cat 3 case the returns are derisory for their beneficiaries. And, as the article intimates, Cat 1 is stepping up massively to buy. In UK that is both for new issues and secondary stock.
Gilts are becoming less used in UK pension funds as funds are switched out of traditional corporate pension schemes and into self-invested plans. The returns just don't outweigh the risk of other fixed-income instruments.
The current factors for converting defined benefit pensions into cash via a SIPP transfer are insanely good just now.
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@Victor-Meldrew Yeah we’ve been in interesting times since 2008 alright. Consider that up until recently you’d have had investment professionals with ten years experience that had never seen a rate rise or experienced harmful inflation. House of cards is apt. The only saving grace is that most Governments are aware of the precariousness and also that there is no benchmark response to where we are. FFS it’s been nearly 12 years since the GFC and we still don’t have an unwinding plan. Now the bat eating Chinese have fucked us over even further.
On a separate note, if your portfolio is cash heavy it’s probably a good place to be, though it’s difficult to be ballsy when adding risk back in to the portfolio. The last week or two will have caught out those with cash a bit. Or has it? 64k question.
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@pakman said in Coronavirus - Overall:
@Victor-Meldrew said in Coronavirus - Overall:
@Catogrande said in Coronavirus - Overall:
Yep, but rising interest rates attack capital values of bonds and make corporate and govvy debt more expensive to service. With interest rates where they are the longer term outlook for the safe haven of government and IG bonds is not particularly good. In the UK we’ve basically had a 40 year bull market in bonds as rates have reduced. Sooner or later that easy ride will turn to a painful ride and I’m not sure we’re placed to deal with it.
It's been a house of cards for some time. Debt servicing costs have been growing but seem cheap which poss. breeds complacency. It's less than 15 years ago BoE interest rates were 6% and that was considered low. What happens when the biubble bursts? Imagine the impact if mortgage & personal finance rates doubled to 6%....
And it sort of fucks over Modern Portfolio Theory which has been the cornerstone of investment professionals since the 1950’s and is much favoured by the compliance and regulatory regimes which dictate risk management.
My pension portfolio manager works on a basis of 50% loss of capital. Little in gilts, plenty in cash.
And if UK governemt increases borrowing by £200 bn, the extra 2% is £4 bn a year extra in interest.
Hence the absurdity of regulators pushing corporate pension funds to purchase ever more of the gilt-edged suckers.
Cash and equities is enough for most pension funds.
Different requirements for DB and DC pensions. The former is about amassing gains, the latter is about matching known liabilities. But broadly agree, it’s difficult to see value there.
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@Catogrande said in Coronavirus - Overall:
@Victor-Meldrew Yeah we’ve been in interesting times since 2008 alright. Consider that up until recently you’d have had investment professionals with ten years experience that had never seen a rate rise or experienced harmful inflation. House of cards is apt. The only saving grace is that most Governments are aware of the precariousness and also that there is no benchmark response to where we are. FFS it’s been nearly 12 years since the GFC and we still don’t have an unwinding plan. Now the bat eating Chinese have fucked us over even further.
On a separate note, if your portfolio is cash heavy it’s probably a good place to be, though it’s difficult to be ballsy when adding risk back in to the portfolio. The last week or two will have caught out those with cash a bit. Or has it? 64k question.
I'm trying to put some cash in each week. Harder when sudden burst of euphoria, but the norm is that there's a second dip before things really start up in earnest.
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@pakman said in Coronavirus - Overall:
@Catogrande said in Coronavirus - Overall:
@Victor-Meldrew Yeah we’ve been in interesting times since 2008 alright. Consider that up until recently you’d have had investment professionals with ten years experience that had never seen a rate rise or experienced harmful inflation. House of cards is apt. The only saving grace is that most Governments are aware of the precariousness and also that there is no benchmark response to where we are. FFS it’s been nearly 12 years since the GFC and we still don’t have an unwinding plan. Now the bat eating Chinese have fucked us over even further.
On a separate note, if your portfolio is cash heavy it’s probably a good place to be, though it’s difficult to be ballsy when adding risk back in to the portfolio. The last week or two will have caught out those with cash a bit. Or has it? 64k question.
I'm trying to put some cash in each week. Harder when sudden burst of euphoria, but the norm is that there's a second dip before things really start up in earnest.
I would be very wary of applying previous experience to today’s issues. What we are facing is very different to anything in living memory. Not saying it will all be doom and gloom, just that the old rules may well not apply. However regular contributions are a good way of allowing the volatility to work in your favour.
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@Catogrande said in Coronavirus - Overall:
On a separate note, if your portfolio is cash heavy it’s probably a good place to be, though it’s difficult to be ballsy when adding risk back in to the portfolio. The last week or two will have caught out those with cash a bit. Or has it? 64k question.
I'm really not that worried about the capital going up and down. I just need a steady stream of income and/or enough reserves for 2-3 years serious market turmoil. Bloke who manages my pension has seen a fair bit of financial life and we can both remember the '87 crash - and almost immediate recovery.
I think Coronavirus will have some profound changes on society and the economy. Less reliance on China and more on manufacturing perhaps and a poss. increase in productivity as people the the commute (and the time/effort wasted) isn't necessary 5 days a week.
But will Sunak & BoJo take a cold, hard look and the levels of UK government spending (much wasted) & overall tax burden and push thru radical changes? Or will we perhaps see some hypotheticated tax rises to pay for this ?
UK could come out of this far more dynamic or more like Japan.
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@Victor-Meldrew said in Coronavirus - Overall:
@Catogrande said in Coronavirus - Overall:
On a separate note, if your portfolio is cash heavy it’s probably a good place to be, though it’s difficult to be ballsy when adding risk back in to the portfolio. The last week or two will have caught out those with cash a bit. Or has it? 64k question.
I'm really not that worried about the capital going up and down. I just need a steady stream of income and/or enough reserves for 2-3 years serious market turmoil. Bloke who manages my pension has seen a fair bit of financial life and we can both remember the '87 crash - and almost immediate recovery.
In normal circumstances I would agree about capital volatility but as and when interest rates do start to increase and/or we see real inflation at some point then it is looking like a long hard road downhill for bonds, certainly in relation to the free ride we've seen from the early 70's till pretty much now. In re the 87 crash and the others that we've seen since, they were either bubbles (87) or a liquidity crash (08). What we have on our hands now is a consumption crash which is quite a different animal. Can we get through this quick enough to see companies survive to ensure jobs which will then allow consumption to return?
I think Coronavirus will have some profound changes on society and the economy. Less reliance on China and more on manufacturing perhaps and a poss. increase in productivity as people the the commute (and the time/effort wasted) isn't necessary 5 days a week.
But will Sunak & BoJo take a cold, hard look and the levels of UK government spending (much wasted) & overall tax burden and push thru radical changes? Or will we perhaps see some hypotheticated tax rises to pay for this ?
I would love to think that the current lot would cull a lot of the waste in Government but I just don't see that Genie ever getting put back in the bottle. One of the biggest stumbling points is that the people that would have to implement things would also be the people at risk. Turkeys and Christmas.
UK could come out of this far more dynamic or more like Japan.
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@Catogrande said in Coronavirus - Overall:
What we have on our hands now is a consumption crash which is quite a different animal. Can we get through this quick enough to see companies survive to ensure jobs which will then allow consumption to return?
There's likely to be a pent-up demand which could push up growth and poss. inflation, it's what happens when that tails off which worries me. Been out of the loop for too long, but I take a positive view that UK business is actually quite nimble and that will help the recovery somewhat.
It's the huge amount of debt held by governments, individuals and companies which should worry people. That has to be paid back sometime and reducing the value of the debt will surely hurt those holding the paper and in turn the economy.
I think tax increases across the board are likely as are significant National Insurance reforms - either turning it slowly into a German model or expanding it and, in reality, merging it with income and corporation tax.
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@Victor-Meldrew I think you are right about tax increases, although I have no idea how Boris will play this. Reality is that Income Tax + NI + VAT is already some of the highest in the world outside the Scandies & if he does raise, it goes against everything he's promised his voters.
Having said that, we are in a strange, and unprecedented times, so something will need to be done - I just don't know what that is.
I've said it before, and I'll say it again. An easy way to solve most of this countries economic issues is to charge for the NHS. Not 100% of course, in fact a very limited amount. 10 GBP to see a doctor, 100 GBP for surgery. The enemy of free stuff has always been waste.
But the political fallout would be catastrophic.
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@MajorRage said in Coronavirus - Overall:
I've said it before, and I'll say it again. An easy way to solve most of this countries economic issues is to charge for the NHS. Not 100% of course, in fact a very limited amount. 10 GBP to see a doctor, 100 GBP for surgery. The enemy of free stuff has always been waste.
This 100%
Free prescriptions in Wales. Lots take the piss.
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@Catogrande said in Coronavirus - Overall:
@Victor-Meldrew said in Coronavirus - Overall:
@Catogrande said in Coronavirus - Overall:
On a separate note, if your portfolio is cash heavy it’s probably a good place to be, though it’s difficult to be ballsy when adding risk back in to the portfolio. The last week or two will have caught out those with cash a bit. Or has it? 64k question.
I'm really not that worried about the capital going up and down. I just need a steady stream of income and/or enough reserves for 2-3 years serious market turmoil. Bloke who manages my pension has seen a fair bit of financial life and we can both remember the '87 crash - and almost immediate recovery.
In normal circumstances I would agree about capital volatility but as and when interest rates do start to increase and/or we see real inflation at some point then it is looking like a long hard road downhill for bonds, certainly in relation to the free ride we've seen from the early 70's till pretty much now. In re the 87 crash and the others that we've seen since, they were either bubbles (87) or a liquidity crash (08). What we have on our hands now is a consumption crash which is quite a different animal. Can we get through this quick enough to see companies survive to ensure jobs which will then allow consumption to return?
On the bonds front there's been a supercycle of interest rate falls for most of the last 35 years. UK yields are the lowest in 300 years! The system has been kept going by artifically low loans from BOE to banks, mandated holding of gilts by banks, procyclical capital reserve policies for insurance companies (which mandate selling when equities fall and countenance buying when dear) and mistaken belief that matching of 12 year + liabilities of pension funds with gilts is risk reducing (in fact the drop in returns makes deficits more likely, not less!).
But the authorities have massive skin in the game, so although I firmly believe the equilibrium yield for gilts is at least 2% higher than now, my instincts tell me the BOE will fight like hell to try and prevent that. King Canute, maybe?
I think Coronavirus will have some profound changes on society and the economy. Less reliance on China and more on manufacturing perhaps and a poss. increase in productivity as people the the commute (and the time/effort wasted) isn't necessary 5 days a week.
But will Sunak & BoJo take a cold, hard look and the levels of UK government spending (much wasted) & overall tax burden and push thru radical changes? Or will we perhaps see some hypotheticated tax rises to pay for this ?
I would love to think that the current lot would cull a lot of the waste in Government but I just don't see that Genie ever getting put back in the bottle. One of the biggest stumbling points is that the people that would have to implement things would also be the people at risk. Turkeys and Christmas.
Great example NHS, where administrators cram down on medical costs whilst rewarding their own flattulence with gold.
UK could come out of this far more dynamic or more like Japan.
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@MiketheSnow said in Coronavirus - Overall:
@MajorRage said in Coronavirus - Overall:
I've said it before, and I'll say it again. An easy way to solve most of this countries economic issues is to charge for the NHS. Not 100% of course, in fact a very limited amount. 10 GBP to see a doctor, 100 GBP for surgery. The enemy of free stuff has always been waste.
This 100%
Free prescriptions in Wales. Lots take the piss.
I know, it's crazy that drugs, in any form, can be free. So open to abuse.
I have hope for my idea though. The worshipping of the NHS may potentially give rise to people being ok with paying for it directly. And now that Corbyn is gone, and Covid has done it's thing in changing peoples mindsets, I see a glimmer of hope.
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@Victor-Meldrew said in Coronavirus - Overall:
@Catogrande said in Coronavirus - Overall:
What we have on our hands now is a consumption crash which is quite a different animal. Can we get through this quick enough to see companies survive to ensure jobs which will then allow consumption to return?
There's likely to be a pent-up demand which could push up growth and poss. inflation, it's what happens when that tails off which worries me. Been out of the loop for too long, but I take a positive view that UK business is actually quite nimble and that will help the recovery somewhat.
It's the huge amount of debt held by governments, individuals and companies which should worry people. That has to be paid back sometime and reducing the value of the debt will surely hurt those holding the paper and in turn the economy.
Reducing the value of debt won't impact pension funds that much (net). They bought higher up and their liabilities are generally treated as if they were bond payments so will be reduced at same time. Huge opportunity cost, but the pension regulator doesn't care (or understand) that. Main parties hit would be geared speculators with maturity mismatches and overseas investors.
I think tax increases across the board are likely as are significant National Insurance reforms - either turning it slowly into a German model or expanding it and, in reality, merging it with income and corporation tax.
NI WILL get reformed. Some general increases but even Tony Blair has pointed out that the only near term way out is to grow the economy, so entrepeneurs can't be spanked too hard?!
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@MajorRage said in Coronavirus - Overall:
@Victor-Meldrew I think you are right about tax increases, although I have no idea how Boris will play this. Reality is that Income Tax + NI + VAT is already some of the highest in the world outside the Scandies & if he does raise, it goes against everything he's promised his voters.
Having said that, we are in a strange, and unprecedented times, so something will need to be done - I just don't know what that is.
I've said it before, and I'll say it again. An easy way to solve most of this countries economic issues is to charge for the NHS. Not 100% of course, in fact a very limited amount. 10 GBP to see a doctor, 100 GBP for surgery. The enemy of free stuff has always been waste.
But the political fallout would be catastrophic.
The recent 50% fall in A & E activity suggests to me that a lot of visits are unnecessary. I agree that some type of charging would make sense.
Perhaps a £30 a visit, with a personal credit of £60 a year, and 50% refund if visit justified?
Sure someone can come up with much better system!
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@pakman said in Coronavirus - Overall:
@MajorRage said in Coronavirus - Overall:
@Victor-Meldrew I think you are right about tax increases, although I have no idea how Boris will play this. Reality is that Income Tax + NI + VAT is already some of the highest in the world outside the Scandies & if he does raise, it goes against everything he's promised his voters.
Having said that, we are in a strange, and unprecedented times, so something will need to be done - I just don't know what that is.
I've said it before, and I'll say it again. An easy way to solve most of this countries economic issues is to charge for the NHS. Not 100% of course, in fact a very limited amount. 10 GBP to see a doctor, 100 GBP for surgery. The enemy of free stuff has always been waste.
But the political fallout would be catastrophic.
The recent 50% fall in A & E activity suggests to me that a lot of visits are unnecessary. I agree that some type of charging would make sense.
Perhaps a £30 a visit, with a personal credit of £60 a year, and 50% refund if visit justified?
Sure someone can come up with much better system!
Working in private A&E in Auckland I would say this is definitely true. Even when they have to pay for it patients feel the need to bring their cold and flu into the clinic only to leave with the script for panadol that they could have bought at the pharmacy or already had at home
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@MajorRage said in Coronavirus - Overall:
@MiketheSnow said in Coronavirus - Overall:
@MajorRage said in Coronavirus - Overall:
I've said it before, and I'll say it again. An easy way to solve most of this countries economic issues is to charge for the NHS. Not 100% of course, in fact a very limited amount. 10 GBP to see a doctor, 100 GBP for surgery. The enemy of free stuff has always been waste.
This 100%
Free prescriptions in Wales. Lots take the piss.
I know, it's crazy that drugs, in any form, can be free. So open to abuse.
I have hope for my idea though. The worshipping of the NHS may potentially give rise to people being ok with paying for it directly. And now that Corbyn is gone, and Covid has done it's thing in changing peoples mindsets, I see a glimmer of hope.
Bands of payment based on ability to pay up to a maximum charge regardless of wealth seems the fairest all round.
And patients willing to help themselves. If you're not prepared to change lifestyle then you don't deserve expensive surgery, treatment etc