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Ftse To Reach 8000

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Presenters on either Sky or BBC salivating over the possibility of the FTSE reaching 8000 by end of 2014. Absolutely no mention of the fact that this is dependent on the continuing supply of funny money.Is it that they honestly have no concept of this, or is it that they do, but choose not to mention it. Either way, it`s pretty shocking.

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I don't believe the FTSE will reach 8000 by the end of 2014. But the idea isn't that outlandish.

If you look at the really long term stock market trends the indices tend to have flat periods (of about 15 to 20 years duration) interspersed with multi-year periods of dramatic growth. The FTSE has been basically flat for 14 years since the peak of 2000, but in the meantime corporate profitability has improved substantially. Furthermore, you can put together a decent portfolio today yielding about 5%, much better than bond yields (which in itself is extraordinary), I've been playing the market for nearly forty years and in my experience it's pretty rare to get such a great yield.

So put all that together and it's easy to make a cogent case for big FTSE gains.

Personally I think there are still a few imminent shocks to come, most probably from Europe, plus the "green shoot" journalism feels a bit overdone to me. However, I believe there's a very, very strong likelihood that ten years from now the FTSE will be massively higher than the 6500 level it's bounced around for most of 2013.

The big gains from houses, bonds, and gold are in my view over and done for the next generation, I think it's the turn of equities once again.

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The big gains from houses, bonds, and gold are in my view over and done for the next generation, I think it's the turn of equities once again.

Lots of people think that. The problem with thinking that in my view is that it relies on the next 50 years being the same as the last 50. So we need a demographic bulge of young people entering the workforce, we need 14 people in employment for every retired person, we need cheap energy, we need interest rates with room to fall and we need a wealth/manufacturing base within the country to export to developing nations.

Do we have any of those things?

I think it's too simplistic to just think "Oh, it's the turn of equities again".

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Lots of people think that. The problem with thinking that in my view is that it relies on the next 50 years being the same as the last 50. So we need a demographic bulge of young people entering the workforce, we need 14 people in employment for every retired person, we need cheap energy, we need interest rates with room to fall and we need a wealth/manufacturing base within the country to export to developing nations.

Do we have any of those things?

I think it's too simplistic to just think "Oh, it's the turn of equities again".

Eh?

I'm saying things in the next twenty years won't be the same as the last twenty years. Houses, gold, and bonds won't rise like they have over the last twenty years, but equities will.

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Unless Osborne can pull another trillion pounds out of his ass to keep up the pretense that the UK is successful and prosperous then look out below for everything denominated in sterling.

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Eh?

I'm saying things in the next twenty years won't be the same as the last twenty years. Houses, gold, and bonds won't rise like they have over the last twenty years, but equities will.

You're implying that markets move in cycles, that bonds and gold have had a good run and now it is the turn of equities, just like it was back in the late 70s. I'm saying that the simplistic idea that markets move in cycles is just that, simplistic. I'm saying that the conditions that existed at the start of the last multi-year equity bull run don't exist now, so assuming it's time for a multi-year equity bull run just because we haven't had one for a while might be flawed.

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You're implying that markets move in cycles, that bonds and gold have had a good run and now it is the turn of equities, just like it was back in the late 70s.

Good point.

Cycles are what the world looks like through the lens of history, but of course each upward leg has its own unique and individual explanation. So what could drive the FTSE up from here?

Could be a wall of money argument when it becomes apparent there's only losses in prospect for bondholders.

Or a European wide recovery when the disastrous Euro experiment is picked apart.

Maybe technology lifts or even creates a whole new sector.

And the UK population is expanding, perhaps a new wave of immigration will drive it faster than predicted.

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Cycles are what the world looks like through the lens of history, but of course each upward leg has its own unique and individual explanation. So what could drive the FTSE up from here?

I can see only one reason for the FTSE to rise from here. The debasement of the £ and increases therefore purely in nominal terms.

(Actually that's not quite true, debasement of the £ and the effect of corporate earnings being largely denominated in foreign currency and earned in foreign lands is a significant factor too).

I definitely don't buy the theory that we're at the start of a 'recovery'.

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I definitely don't buy the theory that we're at the start of a 'recovery'.

I think what i said was, "Personally I think there are still a few imminent shocks to come, most probably from Europe, plus the "green shoot" journalism feels a bit overdone to me". So hardly a "start of a recovery" theory.

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The FTSE may well rise as investors move from money in the bank earning 1% to money in the market which makes 5%...course, this demand will raise the price and bust your yield...exactly what has happened in the US.

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I can see only one reason for the FTSE to rise from here. The debasement of the £ and increases therefore purely in nominal terms.

(Actually that's not quite true, debasement of the £ and the effect of corporate earnings being largely denominated in foreign currency and earned in foreign lands is a significant factor too).

I definitely don't buy the theory that we're at the start of a 'recovery'.

As the value of the FTSE 100 is made up of multinational companies, its performance is linked more to the global economy than to the UK. The world economy is recovering.

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As the value of the FTSE 100 is made up of multinational companies, its performance is linked more to the global economy than to the UK. The world economy is recovering.

atishhhbullshitooooo

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The standard of financial reporting on Sky is as bad if not worse then the BBC, i'm sure they just ask the coalition what to say then repeat it word for word.

Randall being the exception.

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Which bit? A somewhat infantile response from you.

growth...its ALL QE...and thats not growth in anything other than the imagination of the bankers and the Governments.

Infantile is what these people need us to be.

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Good point.

Cycles are what the world looks like through the lens of history, but of course each upward leg has its own unique and individual explanation. So what could drive the FTSE up from here?

Could be a wall of money argument when it becomes apparent there's only losses in prospect for bondholders.

Or a European wide recovery when the disastrous Euro experiment is picked apart.

Maybe technology lifts or even creates a whole new sector.

And the UK population is expanding, perhaps a new wave of immigration will drive it faster than predicted.

Most FTSE 100 stocks are international these days anyway.

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8000 :rolleyes:

The FTSE bull market ended over half a year ago on May 22, 2013 and it's been correcting sideways whilst the US markets climbed higher. It's on the cusp of a major puke once the US markets turn down.

Agreed. And Bernanke's second housing bubble looks like it's about ready to go down the rat-hole too.

http://www.testoster...its-differ.html

And even as the current housing bubble continues to inflate, just like the last one, cracks have been appearing for months. One of them widened today. The National Association of Realtors' Pending Homes Sales Index – a precursor for actual home sales – rose a scant 0.2% in November. But it "rose" only because October had been conveniently revised down today, giving the debacle a positive spin. Compared to the October index as originally reported, pending home sales in November actually dropped 0.4%.

This wasn't a one-month fluke. And it confirmed a host of other measures. Pending home sales peaked in June, before the toxic mix of higher mortgage rates and higher prices started wreaking havoc on affordability. Then pending homes sales began to drop. By October, the fourth month in a row of declines, they'd dropped below the level of October last year, putting a damper on what had been a booming market. At the time, NAR chief economist Lawrence Yun blamed "the government shutdown in the first half of last month" that had "sidelined some potential buyers." A sharp rebound was expected in November. But that didn't happen. In November, pending homes sales were 1.6% below last year.

"The market is flattening," the report conceded.

No downturn is allowed at the NAR, whose members make money only if homes change hands, and they make more money if they do so at a higher price. Ever higher volumes and prices are a built-in bias for any NAR forecast. A "flattening" is the worst-case scenario, same as during the last housing bust. So it predicts that existing home sales should remain flat in 2014 (5.1 million units) but then rise in 2015 to 5.3 million, despite higher mortgage rates and presumably higher prices.

But somebody has to pay for it, and that's the hollowed-out American middle class. They face a stark scenario: last year, the payment for a 30-year mortgage with a fixed rate of 3.6% for a $270,000 home would have been $1,226 per month. If the home's price rose 20%, as has been the case in many locations, and the rate rose to 4.62%, the payment these days would be $1,665 per month. A 36% jump in monthly expense (not counting taxes and insurance), for the same frigging home!

This is the insanity of the current housing bubble. It's different from the insanity of the last housing bubble only in its details. And buyers, just like last time, are hitting a wall. Similar data has been pouring in for months. Repressed interest rates and the newly printed money chasing after assets, any assets, have distorted prices. And now that rates are rising, the prices have moved out of reach, and the hangover is starting to set in.

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