Peston - ‘Devestating recession has already begun’

[satsuma]

My feeling is we will have stagflation where its not possible to increase wages to match higher prices.  Add to this the impact of the sanctions on business and liquidity and we have two drags on the economy, lack of demand and lack of liquidity.  The only possible way out is some sort of quick resolution in Ukraine which is unlikely as the Russians have their eye in Kyiv and the Ukrainians are not willing to hand it over without a fight. 

[Money Frugality]

4 hours ago, anonguest said:

Not only that, it is barely higher than it was 22 years ago!

Adjusted for inflation its down ~70% minus divies of course 

 

[Dorkins]

12 minutes ago, Money Frugality said:

Adjusted for inflation its down ~70% minus divies of course 

Weak equity prices are good news for working age people building up their DC pensions.

The thing that terrifies me is how little investable capital there is in existence:

On 07/08/2021 at 18:08, Dorkins said:

Fun fact: if all investable equities and bonds in the UK were shared between all UK adults they would each have about £200k (roughly £50k equities £150k bonds) yielding £6k per person. Of course people aim to reach peak wealth at retirement, so if you redistribute it assuming people build up capital as they work and draw it down in retirement you might get to about £300k at retirement, which at 4% drawdown would yield a £12k pension per adult. That's how much investable yield we are all chasing, and of course most of that will go to the wealthiest 10%. Everybody else with their DC pension is fighting over the scraps, the only question is whether they will retire with a £1k pa DC pension or a £5k pa DC pension.

[Odysseus]

5 minutes ago, Dorkins said:

Weak equity prices are good news for working age people building up their DC pensions.

The thing that terrifies me is how little investable capital there is in existence:

Don’t worry my house is my pension init 

[anonguest]

35 minutes ago, Money Frugality said:

Adjusted for inflation its down ~70% minus divies of course 

 

I believe, but may be wrong, that for most (all?) of those 22 past years the divi yield on the FTSE-100 has been close to or even marginally more than (official) inflation figures? And certainly it has had a somewhat higher yield for all of that time than other major global 'blue chip' global indices, such as the Dow Jones Industrials?

But your point is quite valid. To have next to no capital gain after 20+ years is a 'poor show' indeed - and, like the Nikkei after its own bust the decade earlier, shows just how overpriced it got in the run up to the peak of the 'dotcom' bubble in late 1999.

Edited March 10, 2022 by anonguest

[Si1]

4 hours ago, anonguest said:

?

But your point is quite valid. To have next to no capital gain after 20+ years is a 'poor show' indeed - and, like the Nikkei after its own bust the decade earlier, shows just how overpriced it got in the run up to the peak of the 'dotcom' bubble in late 1999.

It implies to me that there's been little innovation or productivity growth in that time. Does that make sense?

[anonguest]

11 minutes ago, Si1 said:

It implies to me that there's been little innovation or productivity growth in that time. Does that make sense?

Not necessarily.  I think, as said, it just reflects how overpriced/expensive the FTSE was in late 1999 that it's taken two decades to 'work off' those excesses - so that now it could be argued to be much better value.  Though economic storm clouds rapidly coming into view are a complicating factor.

 

[Dorkins]

14 minutes ago, Si1 said:

It implies to me that there's been little innovation or productivity growth in that time. Does that make sense?

Or that there has been little accumulation of capital in general e.g. commercial buildings, equipment

[scottbeard]

12 minutes ago, Si1 said:

It implies to me that there's been little innovation or productivity growth in that time. Does that make sense?

It could be either, or a bit of both.

The fact that the dividend yield was about 2% in 1999 and today is more like 3% suggests very strongly that compared to today the FTSE was overvalued by about 33% at its 1999 peak of around 6,900 and should really have been more like 4,600.

(In other words, the value in 1999 was 2/3 value and 1/3 bubble).

 

[Dorkins]

2 minutes ago, anonguest said:

Not necessarily.  I think, as said, it just reflects how overpriced/expensive the FTSE was in late 1999 that it's taken two decades to 'work off' those excesses - so that now it could be argued to be much better value.  Though economic storm clouds rapidly coming into view are a complicating factor.

 

Fair point, FTSE yields were low in 1999 so as you say, it is now better value in terms of buying yield.

[Si1]

1 hour ago, Dorkins said:

Or that there has been little accumulation of capital in general e.g. commercial buildings, equipment

Capital isn't just matter, it's technology too, or the things that matter is made into. I would suggest a Tesla gigafactory is worth more than a 70s British Leyland factory per acre

[Si1]

1 hour ago, Dorkins said:

Fair point, FTSE yields were low in 1999 so as you say, it is now better value in terms of buying yield.

Fair point

[SE10]

8 hours ago, “Nasty Piece of work” said:

It is unfortunate we have a proven liar as PM, with CB capability and is busy fluffing Boomers.

What's new?

[hughjass]

Larry, there are many in Local Govt who work less thasn 5 days in the Public sector. At the last office I worked in Id say abouyt a 1/3rd did less than 5 days , Friday was like the Marie Celeste.

  10 hours ago, scottbeard said:

If you look at just the State pension ours is lower, but once you take into account private pensions it isn't.  We have a lot more people currently receiving final salary pensions than anywhere else.

There are private pensions on top of state pensions in Europe as well but these have to be paid into just as in the UK , not all employers have offered work place pensions in the past so many are reliant on the State also the retirement age is lower and there is options to cut to 4 days a week once you hit 50. 

[reddog]

2 hours ago, hughjass said:

 

Larry, there are many in Local Govt who work less thasn 5 days in the Public sector. At the last office I worked in Id say abouyt a 1/3rd did less than 5 days , Friday was like the Marie Celeste.

  10 hours ago, scottbeard said:

If you look at just the State pension ours is lower, but once you take into account private pensions it isn't.  We have a lot more people currently receiving final salary pensions than anywhere else.

There are private pensions on top of state pensions in Europe as well but these have to be paid into just as in the UK , not all employers have offered work place pensions in the past so many are reliant on the State also the retirement age is lower and there is options to cut to 4 days a week once you hit 50. 

Is it also something to do with the public sector having ridiculously generous / naive Flexi time arrangements?

 

I used to work in an ex British Rail office, which maintained the old flexitime deal, you could get something like 2 days a month of in Flexi time  just by physically being in the office a bit longer each day (believe me there was no extra work done in the extra time)

[skinnylattej]

14 hours ago, Si1 said:

It implies to me that there's been little innovation or productivity growth in that time. Does that make sense?

Productivity growth in some parts of manufacturing has been very slow, as cheap labour has been used in place of capex.  There is still industrial plant built in the 1960's in use.

Often foreign companies are more innovative than UK companies.  I believe that part of the reason is that UK companies are run by accountants, whereas European companies tend to have more scientists and engineers at board level.

 

[spyguy]

16 hours ago, Si1 said:

It implies to me that there's been little innovation or productivity growth in that time. Does that make sense?

Or a shrinking working age population ....

 

[scottbeard]

12 hours ago, hughjass said:

• Larry, there are many in Local Govt who work less thasn 5 days in the Public sector. At the last office I worked in Id say abouyt a 1/3rd did less than 5 days , Friday was like the Marie Celeste.

  10 hours ago, scottbeard said:

If you look at just the State pension ours is lower, but once you take into account private pensions it isn't.  We have a lot more people currently receiving final salary pensions than anywhere else.

There are private pensions on top of state pensions in Europe as well but these have to be paid into just as in the UK , not all employers have offered work place pensions in the past so many are reliant on the State also the retirement age is lower and there is options to cut to 4 days a week once you hit 50. 

Isn't that just part-time working though?  I only work 4 days a week, but obviously get 4/5ths of a full time salary.

[wighty]

21 hours ago, Money Frugality said:

Adjusted for inflation its down ~70% minus divies of course 

 

You're not comparing like with like. The companies in the FTSE 100 now are far different than in 2000. 

Some sections that have remained were hammered and never recovered. Banks for example.

 

 

[scottbeard]

24 minutes ago, wighty said:

You're not comparing like with like. The companies in the FTSE 100 now are far different than in 2000. 

Some sections that have remained were hammered and never recovered. Banks for example.

The point is still true though that if you invested in a FTSE100 index-tracker in 1999 and held to today you would have got a nice pile of dividends but no capital growth.

HOWEVER that is because 1999 was an absolutely TERRIBLE time to invest as it was the peak of a big stock bubble, rather than telling you anything useful about today.

[wighty]

1 hour ago, scottbeard said:

The point is still true though that if you invested in a FTSE100 index-tracker in 1999 and held to today you would have got a nice pile of dividends but no capital growth.

HOWEVER that is because 1999 was an absolutely TERRIBLE time to invest as it was the peak of a big stock bubble, rather than telling you anything useful about today.

Of course if you invest via a tracker, which is the least risk.

The FTSE100 are very large caps that are dividend rather than growth.

The FTSE250 is a better comparison. Started out at 5000 in 2000, now 20,000

[dugsbody]

On 10/03/2022 at 10:27, winkie said:

So rather than measure how much money people have, better to measure how happy and secure they feel, how confident they are with those that lead them and the future.

This is an interesting one. People in the UK have a very low satisfaction with our democracy, yet refuse to change it to something that other nations are happier with.

This isn't surprising, just irritating. Humans have a remarkable ability to let tribal instincts get in the way of what is actually good for them.

[dugsbody]

1 hour ago, scottbeard said:

The point is still true though that if you invested in a FTSE100 index-tracker in 1999 and held to today you would have got a nice pile of dividends but no capital growth.

No-one accumulates all their savings in a big pile of cash then suddenly invests a massive lump sum in one go and never again.

People would have been buying in at all the lows between then and now and most certainly would have seen capital gains.

[dugsbody]

2 hours ago, scottbeard said:

Isn't that just part-time working though?  I only work 4 days a week, but obviously get 4/5ths of a full time salary.

I'm debating that in the future. I may start at four days, but one of the problems I've heard is there isn't enough difference between four days and five from the employers perspective and you still end up doing five days of work compressed into four. Whereas three days a week seems to work out better on that front.

How do you find it?

[kzb]

On 10/03/2022 at 09:50, scottbeard said:

Now this is my field....and I disagree.   If you look at just the State pension ours is lower, but once you take into account private pensions it isn't.  We have a lot more people currently receiving final salary pensions than anywhere else.

Hang on...every French employee is basically in a final salary pension scheme, it is part of the state pension.