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Shouldn't The Stock Market Go Down?

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I fully agree that the house prices need to come down a lot. But how come the stocks are getting higher when most people in this site believe that the economy is in a bad shape? Please don't say that the people in the City don't understand economics. That simply is not true!

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There's been a massive growth in money supply over the last few years due to running artificially low interest rates. That money has to go somewhere: for years it went into housing, but that bubble has now burst... most likely it's now moving to the stock market.

Seriously, there's very little linkage between the stock market and the real economy these days.

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im not going to comment on the recent FTSE movements.

however, the FTSE 100 was at 4700 in 1997.

today it is about 5200.

that makes a 10% increase in 8 years -or c 1.25% p.a.

well below the inflation rate.

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im not going to comment on the recent FTSE movements.

however, the FTSE 100 was at 4700 in 1997.

today it is about 5200.

that makes a  10% increase in 8 years -or c 1.25% p.a.

well below the inflation rate.

It peaked at around 7000 points though, you've missed that out.

It collapsed in line with the dot.com fallout.

I know, I lost the value of my ISA :angry:

I'm now £680 ish above my original investment now, due to it recovering since circa June 2004 (The peak of the housing market, strangely enough!)

:)

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So you're saying this is another bubble?

I don't know: I'm just pointing out that the stock price tells you little about the health of a company.

Frankly, most of the money I've made in the stock market is due to Bill Gates. I'd own shares in tech companies that were pootling along and then he'd mention the company's name in an interview and the shares would go up several dollars in a couple of days... it didn't matter whether anything had changed at the company, just that people with money thought they'd park it there for a while in hope of a rise.

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The stock markets mainly a reflection of the corporate input/output of the economy, I think the overall level of consumption by consumers is something like 15% of GDP, the rest being Govn which is 30-40% of GDP and business at 40%+, then the black market filling the rest. So a downturn in consumer spending etc and the collapse of a small % of business such as retailers and house builders might not have a huge impact on the overall picture

Also future earnings and the best return on investment are maybe good reasons why the stock market is doing well. Not sophisticated enough to know where its heading, but I have read the current lack of volatility in stock markets might be due to no consensus in opinion between bears and bulls if the economies of the world are looking rosey or on the edge.

There are a lot of companies with lots of cash etc at the moment which is one reason that shares are attractive as they have to find something to do with this. If they cannot find a good way of investing it such as buying new factories etc.(which itself is a worry as such decisions create wealth!) they have to really return it to shareholders, hence a good place to put your money might be in shares.

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I fully agree that the house prices need to come down a lot. But how come the stocks are getting higher when most people in this site believe that the economy is in a bad shape? Please don't say that the people in the City don't understand economics. That simply is not true!

The current strength has a lot to do with oil and in particular BP and Shell which combined make up something like 20%(?) of the FTSE 100

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Absolute values mean very little. The SM may have been trading at the same level 8 years ago, but how much money were the companies actually making? I don't know the answer to that, but I suspect that it was less than they are now. All I do know that the market trades on about 13 times this year's earnings, which historically isn't expensive; this is despite having risen 23% in the last year. And as others have pointed out, over 2/3 of FTSE-100 earnings come from overseas, and is dominated by a dozen or so multinationals which make up half of the FTSE-100; the stock market is a very different beast to what it was 10 or 15 years ago.

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But ftse 100 and ftse 250 include all the sectors and are both showing very healthy growth indeed.

It's really very simple.

If people are putting money into the stock market, the FTSE goes up.

If people are taking money out of the stock market, the FTSE goes down.

That has no direct relation to the underlying economy, only to a belief that the stock market is more or less likely to make money than other areas.. It's just far more volatile than the housing market, as you can sell shares in seconds while houses can take years to sell.

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Guest growl

Okay. I think I mentioned this about a week or two ago on the forum somewhere.

My dates and figures may be slighty out and one of you clever guys out there can find the exact ones.

But if memory serves me right. There was a stock market crash in the late eighties. This was then followed by the house price crash. The country then went into the reccession of the early nineties. But strangley when the HPC happened the stock market started to recover. I think about two years after the initial stock crash.

Why is this?

When the stock market crashed people who had money piled it into property. But it was too late and accelerated the bubble. Then when people lost money in the HPC they started to reinvest in the stock market.

Also when companies shed their workforce, and it is usually middle management, or workers that they can do without. People will then buy shares in that company, because and I hate to say this because it effects peoples lives - they have trimmed the flak. So the company should be more efficient. So people invest.

Also the more the bank of England cuts interest rates, the more they hurt savers. So those people also start to put their extra money into shares, and when they make a better return - confidence returns to the stock market.

Of course the dot com boom was something that we didn't have before. But then we had a larger manufacturing sector.

All Gordon did was delay the reccession by turning the nation in credit junkies. Then his mate Blair diverted our attention by talk of WMD. He started a war and the stock market fell to I believe 4300. But it quickly recovered and as savers have been hit and the real people in the know have pulled their money out of property so the stock market has started to climb.

The one rotten egg in the basket though is oil. Which is why although I have invested in the stock market recently. It is always a risk, so I also have savings and money elsewhere. Not I might add property anymore. That boat has sailed and it won't be back for for at least five years.

:)

PS The poster who mentioned that the market was 7000 was correct. We've still a way to go.

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I firmly believe the world is an unprecedented growth phase, whipped up by S/E Asia, India, China, S America and now Africa (mobile phone sales are taking off in Africa).

Remember guys that the FTSE is but one part of the equity arena. FTSE is tethered to other SM around the world where growth is the name of the game.

UK companies will play a large part in this global growth, be it water or insurance.

Retail sales of packaged investments such as Unit Trusts were up double this June on last June.

Look at any Unit Trust or other investment managers brochure and u will find a plethora of diferent equity arenas.

The FTSE should only make up a modest proportion of any investment portforlio IMO.

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I firmly believe the world is an unprecedented growth phase

Possibly/probably

UK companies will play a large part in this global growth

Indeed. FTSE is an international index. It DOES NOT really reflect or anticipate the UK economy.

Retail sales of packaged investments such as Unit Trusts were up double this June on last June.

Thus get the hell out!!!

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Possibly/probably

Indeed.  FTSE is an international index.  It DOES NOT really reflect or anticipate the UK economy.

Thus get the hell out!!!

FP, there is no such thing as a risk free decent wealth adding investment.

At some point in your life you got be at the party or you will be forever a wage slave.

Sure its all ifs and buts, investment always is. My 'considered' gamble sits well with me.

I think you will regret missing out on this lttle party.

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Guest Charlie The Tramp

One of my favourite posts. :)

Lest we forget.

On Monday October 19th 1987 fifty billion pounds or ten per cent, was wiped off the value of public-quoted companies in London by a tidal wave of selling that began when dealers reached their desks at 7am and never stopped.

It was the worst day for shares in the last century. The previous sharpest one day fall was on March 1st 1974 after Labour`s undecisive election victory, when shares fell 7.1 per cent.

The crash followed Wall Street`s panic performance the previous Friday and heavy selling on Monday in Tokyo. No Market escaped the shockwaves. The Hong Kong market closed for the whole week, while Wall Street the same day had its worst day ever, with the Dow Jones industrial average falling 508 points to 1,739, wiping 22.5 per cent off share values, almost double the drop on the worst day of the Great Crash in October 1929.

John Phelan, then chairman of the New York Stock Exchange, said: "This is the nearest thing to a financial meltdown I`ve ever come across."It was the end of the bull market of the past five years, which has seen a three and a half fold rise in average share prices. There you go all you bulls

The collapse was blamed by analysts variously on the US budget and trade deficits, rising interest rates, and computer-controlled "programme trading"

Now look at the US position today, Oh dear.

This was followed by the first real property boom in the UK, not by investors, but Margaret Thatcher`s everyone should own their own property, the right to buy fiasco, and the property can only go up mentality. No BTL investors en masse then.

Where did the market investors go, never really found out, could it be they had lost most of their assets.

CTT

I think Dr Bubb said that this cycle ends the coming Autumn, but I will go for Late Spring 2007. <_<

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There are times when markets behave rational, and irrational. Look at the irratonal rise in sterlin upon wide conviction of a rate cut.....this is pure irrationality but thats fine, cos all is fair in WAR and markets are a war for profits, the propaganda financial news media is tooled aud shooting salvos to take your cash and move it higher up the pyramid....

If you got paper profits on your stocks. please make sure you dont let them become paper losses.

The trick is one of confidence. look into what the INdex ACTUALLY measures and you'll find at the core no rhyme or reason to the wieghting of its components and thus to its true value....

Financial planner is on the money. Im not saying theres not money to be had but comon, havnt you notices all the inticements and offers that big consumer corps have been giving us through the supermakets but it not sustainable is it....

there will always be selscted winners and loosers but you got to be selective why trust any one with your cash....i know no time, well studies show investment professionals get returns worse than the market, on average.... so how you gonna find some one above average....hmmm.

take care all

Sp1

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There are times when markets behave rational, and irrational. Look at the irratonal rise in sterlin upon wide conviction of a rate cut.....this is pure irrationality but thats fine, cos all is fair in WAR and markets are a war for profits, the propaganda financial news media is tooled aud shooting salvos to take your cash and move it higher up the pyramid....

If you got paper profits on your stocks. please make sure you dont let them become paper losses.

The trick is one of confidence. look into what the INdex ACTUALLY measures and you'll find at the core no rhyme or reason to the wieghting of its components and thus to its true value....

Financial planner is on the money. Im not saying theres not money to be had but comon, havnt you notices all the inticements and offers that big consumer corps have been giving us through the supermakets but it not sustainable is it....

there will always be selscted winners and loosers but you got to be selective why trust any one with your cash....i know no time, well studies show investment professionals get returns worse than the market, on average.... so how you gonna find some one above average....hmmm.

take care all

Sp1

I'm not being funny or nasty, but that made absolutely no sense to me whatsoever. Would you mind editing it, adding a little more punctuation and using a spellchecker, please?

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I think Dr Bubb said that this cycle ends the coming Autumn, but I will go for Late Spring 2007.  <_<

Charlie, you've put back your prediction for the stock market crash. Weren't you saying Spring 2006 a few months ago?

I may be wrong I wouldn't swear to it :rolleyes:

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Guest Charlie The Tramp
Charlie, you've put back your prediction for the stock market crash.  Weren't you saying Spring 2006 a few months ago?

I may be wrong I wouldn't swear to it  :rolleyes:

Sorry typo error of lost time, today I thought this year was 2006, you are perfectly correct.

Since retiring I no longer know which day of the b****y week it is. :(

Edited by Charlie The Tramp

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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