Finance Reaper

Olympic Legacy for the Finance-Reaper

I have not blogged for 6 weeks as the hot summer kept me away from the computer. As you can see from the photos below, I have been enjoying the benefits of the Olympic Legacy at the Lee Valley White Water course.

 

Given the major Central Banks have kept flushing the monetary system with fresh money, nothing has changed. Equities are seen as the only haven for money, and indeed who could question that when outright central bank purchases (of equities) are taking place. This, coupled with the aggressive share buy-back programmes so many companies are being encouraged to do (by Goldman and the likes) it makes sense to bury your concerns and trust in the powers that be. Except, that is, they are exactly the same powers that encouraged the crazy debt fuelled boom of the millennium which resulted in the 2008 crash.

An update on my pet concerns..

China… How can you believe anything that comes out of that country. With the major trading nations ( x China) of the far east seeing continued slowdown in trade, how can China be growing at all let alone 7.5%. I have blogged at length on the subject of over capacity in many of the heavy industries. The government are only now talking of tackling this problem in the likes of Shipbuilding, Steel and Aluminium. They are proposing to merge or close up to two thirds of the 1650 shipbuilding yards. With Steel, export or die will be the push as it is unlikely domestic demand will be sufficient to maintain the size of its productive capacity. Following the Premiers comments in June to the boss of BHP (re high Iron Ore prices)  Wang Jiahua, executive vice-president of China Mining Association — the Chinese version of the Minerals Council of Australia — told a Melbourne Mining Club luncheon of 650 people last week that there was a mismatch between the (strong) profits of Australia’s iron ore producers and the losses being posted by their Chinese customer base.

Japan…The Yen will take another lurch lower in the 4th quarter 2013 as the nations debt is downgraded (further) following the governments failure to implement the sales tax increase slated for 2014 and 15. Of course, this is just my opinion. The debt is growing rapidly and I fear it is already beyond saving. I have blogged many times on the subject re demographic and debt. Further weakening of the Yen will accelerate my theory of global deflation.

UK…I am sorry, but I cannot feel in slightest way positive about the economy. Osborne is using every trick in the book to push the housing market. That’s just crazy. It is already way over priced on a valuation to earnings basis. Yes, with interest rates at record low levels people are tempted but what are they really getting. Recent reports are that the percentage of people (42%) struggling to make it to the next pay day is growing fast. Those people that are only paying interest on credit cards or loans has gone up by 50% and 100% respectively since February. Lump sum Pension drawdowns from the age of 55, Equity Release from property, Pay-Day loans and PPI payouts are just some of the ways spending is holding up. With inflation above wage growth for the past 5 years, eventually the avenues to expand/ maintain spending will close. God help us then. The Government are still running up £120 bn of spending above tax receipts. It is not difficult to squeeze some growth with all that going for it. Sadly, the growth is in services which in the long run will get us no where. The UK is still set to fail and fail big! As I blogged in the past, a critical element to my theory of house price decline will be when the government sees sence and allows vacant retail space to be converted into housing. Well, they are now proposing just that. Along with the big rise in Buy to Let vacancies recently, I think these two points are the first chilly winds facing the lending institutions who have lent so recklessly to landlords. Another point recently in the news is the zero hour employment contracts. I warned back in early 2012 that employment growth was in areas such as coffee shops or grocery delivery drivers. These are not the sort of salaried employment that will drive average wage or taxation growth, again as I warned.

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THE REAPER AT PLAY! Pictures thanks to Sam Ridley…his first location shoot