The Big Bailout of the Eurozone (Another crisis coming? - Seriously)

[seafoid]

German bond yields are below 1%. The EZ is heading for deflation. Very bad news for debt dynamics and the prospects of government debt being paid off in full. Inflation reduces the real value of debt. Deflation increases it.

QE on the way in the EZ?

I am not sure QE works against deflation. AFAIK it just rises asset prices but they are v high already . Inflation and debt forgiveness might help but there is a lot of opposition from germany and undercapitalised german banks stuffed with sov bonds. It could get very messy again.

I finished the above recently. Amazing stuff. It doesn't forecast a dollar crisis so much as say it is absolutely inevitable. It forecast 4 possible outcomes after such a crisis, the most likely of which is the least desirable - chaos.

The book discusses the Tea Party's success in preventing Obama raise Government spending a few years ago and thus left him with the only alternative to create growth. QE.

The book then tracks the effects of that QE. It agrees with you and says QE had only a small effect on deflation - IN THE US -. However a nasty side effect was to export inflation to other currencies. The author argued that this was the tipping point that triggered the so-called Spring Tide revolutions, the civil war in Syria and following on from that I guess you could add the rise of ISIS.

QE in the Euro zone might not have quite as much impact, but there could be some unintended consequences elsewhere.

When all the economies are shaky some will try to gain an advantage by devaluing or exporting more but what might work for one can't work for all. It is the same with deleveraging.  The overall context is still very poor and even in the US wages are not rising at a sufficient level to get the economy motoring on its own steam again.

A lot of assets are probably overvalued and in any case they can't rise much further - eg Irish bonds are at a yield of 2% which is nuts 

There was a notable quote in the FT a while ago " It is easier to forecast the long-term than the short. And the long-term does not look good."

[armaghniac]

Light at the end of the tunnel?
The economy grew by 1.5pc between April and June and 7.7pc year-on-year new figures show.

http://www.independent.ie/business/irish/economy-will-grow-by-45pc-this-year-michael-noonan-30596909.html

[seafoid]

Light at the end of the tunnel?
The economy grew by 1.5pc between April and June and 7.7pc year-on-year new figures show.

http://www.independent.ie/business/irish/economy-will-grow-by-45pc-this-year-michael-noonan-30596909.html

It is good news but what is driving it ? The wider picture for european growth remains fragile.

[armaghniac]

Light at the end of the tunnel?
The economy grew by 1.5pc between April and June and 7.7pc year-on-year new figures show.

http://www.independent.ie/business/irish/economy-will-grow-by-45pc-this-year-michael-noonan-30596909.html

It is good news but what is driving it ? The wider picture for european growth remains fragile.

Ireland does a lot of business with UK/USA, who are printing money, yet Sterling is appreciating.
The good thing is that the rest of Europe will improve eventually and this will help things carry on.

[Hardy]

FT editorial today:


Ireland shows struggling Europe the way ahead
Strong growth demonstrates that tough choices do pay off

The world has watched transfixed as Scotland wrestled with its destiny. But now that its future is settled, it is Scotland's Celtic neighbour Ireland that should be drawing attention.

It was revealed last week that Ireland enjoyed astonishing growth in the second quarter. At an annualised rate of 7.7 per cent, this is a pace unseen since the heady days of the early 2000s. After becoming the first country to exit its EU bailout, it is now forecast to continue growing strongly. As countries such as France and Italy stagnate, while bickering about long overdue reforms, they should take note of exactly how the Irish have done this.

In some ways Ireland has been fortunate. Its two biggest trading partners, the US and Britain, are both growing strongly. Its low bond yields owe more to the decisive actions of Mario Draghi, European Central Bank president, than to any decisions made in Dublin.

But this is not just the luck of the Irish. For seven years its government and long-suffering people have taken the toughest of choices. The costs of a bloated public sector were reduced with swingeing wage cuts and slashing the payroll. Private sector wages have fallen by more than 2 per cent annually in the past four years, restoring competitiveness to industry. Above all, the government recognised the serious risk played by its shattered banking system and took steps to rebuild it. Through its "bad bank", the National Asset Management Agency, it made banks come clean about their losses. By forcibly swapping toxic assets for safer government debt, it cleared the way for lending to start again.

These early glimmers of optimism should not be mistaken for a return to the carefree days of easy growth. Ireland is not yet out of the woods. At about 120 per cent of gross domestic product, its public debt is set to remain at dangerous levels for many years. Private debt is even worse; despite the work of Nama, more than 10 per cent of bank loans are classified as non-performing. Ireland still has to fix an unbalanced housing market, where empty "ghost estates" coexist with a serious shortage of property in Dublin.

The hangover from years of heedless expansion has left Ireland with no choice but to seek growth in other ways rather than starting the party all over again. Whereas before the crisis personal consumption grew at more than 6 per cent a year, it will now play little role in driving the economy. Continual pay cuts and double-digit unemployment have left the shell-shocked Irish shopper unwilling to spend.

Instead, Ireland must rely on exports and on attracting overseas investment. Wage restraint has restored competitiveness, which alongside a flexible English-speaking labour force, make it a choice destination for multinational companies such as Pfizer, Dell and Apple. As a result, Ireland has a healthy current account surplus and investment growth of 15 per cent per year.

The European economy remains in a depressed state. For struggling eurozone nations it must be tempting to place their hopes in more effective action at an EU level. But recent efforts to pep up demand look insufficient. And for small, open economies such as Ireland external conditions are far less important than steps taken at home.

These are early days for Ireland's recovery. Few countries soared as high or crashed as hard. It remains a long way from its previous peak. Yet it provides growing evidence of how countries that shape up after a crisis can recover strongly despite an unfavourable international outlook. Others should learn from its example.

- (Copyright The Financial Times Limited 2014)

[Billys Boots]

Every voter should be made read that every day before they switch on their radio/tv or pick up a 'news'-paper.

[bcarrier]

RTE misleading with "15th annual increase" thing. Its the 15th month in a row showing an annual increase. 

http://www.rte.ie/news/business/2014/0924/645942-house-prices/

[magpie seanie]

Every voter should be made read that every day before they switch on their radio/tv or pick up a 'news'-paper.

What do you mean by that? 

[Hardy]

RTE misleading with "15th annual increase" thing. Its the 15th month in a row showing an annual increase. 

http://www.rte.ie/news/business/2014/0924/645942-house-prices/

Not a surprise. RTE journalists often boast about how they can't count. Even their financial journalists seem to be barely numerate. Though I do notice that for the last few political poll results, they haven't been reporting "Independents up 5 percent" when their share goes from 20% to 25%. Maybe they've all been given a course in primary school sums.

[muppet]

As the US carefully ends QE3 it is worth having a look at how these policies have affected the markets.

Here is a look at the S&P 500 index versus Quantative Easing by the Fed:

https://www.tradingview.com/v/cFnIIKNf/

[seafoid]

As the US carefully ends QE3 it is worth having a look at how these policies have affected the markets.

Here is a look at the S&P 500 index versus Quantative Easing by the Fed:

https://www.tradingview.com/v/cFnIIKNf/

Muppet

It's not really clear yet that the Fed can wean the markets off QE3

The plan was to raise interest rates but the markets went into a spasm last week over this and the various central banks had to come out and reassure them that interest rates would be staying low for a good while more.

A lot of equities are way overvalued .

The standard measure is price to earnings ratio but some academics have developed other arguably better measures and one of these is the Shiller Price to earnings ratio or CAPE and this shows basically a zero return for US equities over the next 10 years

The problem with Price to earning ratio is that it assumes the current price is logical and this may not always be valid.

there is a chart here showing the 2 compared

http://www.ft.com/cms/s/0/651be648-0394-11e4-8ae4-00144feab7de.htmlk 

http://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
The price-to-earnings ratio, or P/E ratio, is an equity valuation multiple. It is defined as market price per share divided by annual earnings per share.[2]

http://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio

The cyclically adjusted price-to-earnings ratio, commonly known as CAPE,[1] Shiller P/E, or P/E 10 ratio,[2] is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (Moving average), adjusted for inflation.[3] As such, it is principally used to assess likely future returns from equities over timescales of 10 to 20 years, with higher than average CAPE values implying lower than average long-term annual average returns. It is not intended as an indicator of impending market crashes, although high CAPE values have been associated with such events.[4]

[Mike Sheehy]

As the US carefully ends QE3 it is worth having a look at how these policies have affected the markets.

Here is a look at the S&P 500 index versus Quantative Easing by the Fed:

https://www.tradingview.com/v/cFnIIKNf/

Muppet

It's not really clear yet that the Fed can wean the markets off QE3

The plan was to raise interest rates but the markets went into a spasm last week over this and the various central banks had to come out and reassure them that interest rates would be staying low for a good while more.

A lot of equities are way overvalued .

The standard measure is price to earnings ratio but some academics have developed other arguably better measures and one of these is the Shiller Price to earnings ratio or CAPE and this shows basically a zero return for US equities over the next 10 years

The problem with Price to earning ratio is that it assumes the current price is logical and this may not always be valid.

there is a chart here showing the 2 compared

http://www.ft.com/cms/s/0/651be648-0394-11e4-8ae4-00144feab7de.htmlk 

http://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
The price-to-earnings ratio, or P/E ratio, is an equity valuation multiple. It is defined as market price per share divided by annual earnings per share.[2]

http://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio

The cyclically adjusted price-to-earnings ratio, commonly known as CAPE,[1] Shiller P/E, or P/E 10 ratio,[2] is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (Moving average), adjusted for inflation.[3] As such, it is principally used to assess likely future returns from equities over timescales of 10 to 20 years, with higher than average CAPE values implying lower than average long-term annual average returns. It is not intended as an indicator of impending market crashes, although high CAPE values have been associated with such events.[4]

Thanks for the helpful Wikipedia links. Plebs like us always like to be guided by professionals such as yourself.

btw, what exactly is your line of work Seafoid ? No need for any revealing details. "Financial services" or suchlike will do.

[seafoid]

As the US carefully ends QE3 it is worth having a look at how these policies have affected the markets.

Here is a look at the S&P 500 index versus Quantative Easing by the Fed:

https://www.tradingview.com/v/cFnIIKNf/

Muppet

It's not really clear yet that the Fed can wean the markets off QE3

The plan was to raise interest rates but the markets went into a spasm last week over this and the various central banks had to come out and reassure them that interest rates would be staying low for a good while more.

A lot of equities are way overvalued .

The standard measure is price to earnings ratio but some academics have developed other arguably better measures and one of these is the Shiller Price to earnings ratio or CAPE and this shows basically a zero return for US equities over the next 10 years

The problem with Price to earning ratio is that it assumes the current price is logical and this may not always be valid.

there is a chart here showing the 2 compared

http://www.ft.com/cms/s/0/651be648-0394-11e4-8ae4-00144feab7de.htmlk 

http://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
The price-to-earnings ratio, or P/E ratio, is an equity valuation multiple. It is defined as market price per share divided by annual earnings per share.[2]

http://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio

The cyclically adjusted price-to-earnings ratio, commonly known as CAPE,[1] Shiller P/E, or P/E 10 ratio,[2] is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (Moving average), adjusted for inflation.[3] As such, it is principally used to assess likely future returns from equities over timescales of 10 to 20 years, with higher than average CAPE values implying lower than average long-term annual average returns. It is not intended as an indicator of impending market crashes, although high CAPE values have been associated with such events.[4]

Thanks for the helpful Wikipedia links. Plebs like us always like to be guided by professionals such as yourself.

btw, what exactly is your line of work Seafoid ? No need for any revealing details. "Financial services" or suchlike will do.

I work for Hillel outreach

[Mike Sheehy]

As the US carefully ends QE3 it is worth having a look at how these policies have affected the markets.

Here is a look at the S&P 500 index versus Quantative Easing by the Fed:

https://www.tradingview.com/v/cFnIIKNf/

Muppet

It's not really clear yet that the Fed can wean the markets off QE3

The plan was to raise interest rates but the markets went into a spasm last week over this and the various central banks had to come out and reassure them that interest rates would be staying low for a good while more.

A lot of equities are way overvalued .

The standard measure is price to earnings ratio but some academics have developed other arguably better measures and one of these is the Shiller Price to earnings ratio or CAPE and this shows basically a zero return for US equities over the next 10 years

The problem with Price to earning ratio is that it assumes the current price is logical and this may not always be valid.

there is a chart here showing the 2 compared

http://www.ft.com/cms/s/0/651be648-0394-11e4-8ae4-00144feab7de.htmlk 

http://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
The price-to-earnings ratio, or P/E ratio, is an equity valuation multiple. It is defined as market price per share divided by annual earnings per share.[2]

http://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio

The cyclically adjusted price-to-earnings ratio, commonly known as CAPE,[1] Shiller P/E, or P/E 10 ratio,[2] is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (Moving average), adjusted for inflation.[3] As such, it is principally used to assess likely future returns from equities over timescales of 10 to 20 years, with higher than average CAPE values implying lower than average long-term annual average returns. It is not intended as an indicator of impending market crashes, although high CAPE values have been associated with such events.[4]

Thanks for the helpful Wikipedia links. Plebs like us always like to be guided by professionals such as yourself.

btw, what exactly is your line of work Seafoid ? No need for any revealing details. "Financial services" or suchlike will do.

I work for Hillel outreach

tut, tut Seafoid. This has nothing to do with jews. Why do you need to bring them into any argument that we have. Are you trying to appeal to some demographic or something ?

So, how do you square your well paid rent seeking job with your obviously socialist/Marxist politics ?

Do terms like "affluence" and "corporate interests" only kick in beyond the boundary of Ballinasloe ?

[seafoid]

As the US carefully ends QE3 it is worth having a look at how these policies have affected the markets.

Here is a look at the S&P 500 index versus Quantative Easing by the Fed:

https://www.tradingview.com/v/cFnIIKNf/

Muppet

It's not really clear yet that the Fed can wean the markets off QE3

The plan was to raise interest rates but the markets went into a spasm last week over this and the various central banks had to come out and reassure them that interest rates would be staying low for a good while more.

A lot of equities are way overvalued .

The standard measure is price to earnings ratio but some academics have developed other arguably better measures and one of these is the Shiller Price to earnings ratio or CAPE and this shows basically a zero return for US equities over the next 10 years

The problem with Price to earning ratio is that it assumes the current price is logical and this may not always be valid.

there is a chart here showing the 2 compared

http://www.ft.com/cms/s/0/651be648-0394-11e4-8ae4-00144feab7de.htmlk 

http://en.wikipedia.org/wiki/Price%E2%80%93earnings_ratio
The price-to-earnings ratio, or P/E ratio, is an equity valuation multiple. It is defined as market price per share divided by annual earnings per share.[2]

http://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-earnings_ratio

The cyclically adjusted price-to-earnings ratio, commonly known as CAPE,[1] Shiller P/E, or P/E 10 ratio,[2] is a valuation measure usually applied to the US S&P 500 equity market. It is defined as price divided by the average of ten years of earnings (Moving average), adjusted for inflation.[3] As such, it is principally used to assess likely future returns from equities over timescales of 10 to 20 years, with higher than average CAPE values implying lower than average long-term annual average returns. It is not intended as an indicator of impending market crashes, although high CAPE values have been associated with such events.[4]

Thanks for the helpful Wikipedia links. Plebs like us always like to be guided by professionals such as yourself.

btw, what exactly is your line of work Seafoid ? No need for any revealing details. "Financial services" or suchlike will do.

I work for Hillel outreach

tut, tut Seafoid. This has nothing to do with jews. Why do you need to bring them into any argument that we have. Are you trying to appeal to some demographic or something ?

So, how do you square your well paid rent seeking job with your obviously socialist/Marxist politics ?

Do terms like "affluence" and "corporate interests" only kick in beyond the boundary of Ballinasloe ?

I think it's about sustainability, Mike
Where people put their money and what they get in return.

I think the financial system is unstable and that there another crash on the way.
We are just feeding a big debt bubble

http://www.ft.com/cms/s/0/4df99d28-4590-11e4-ab10-00144feabdc0.htm

What do you think ?