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Niall Ferguson agrees that GBP is going to pop
We haven't been huge fans of this GBP/USD rally since mid March but like many other markets that continue to confound, there really isn't much to do but keep re-evaluating the fundamentals. Sad to say but the latest update isn't looking good for the UK.
In the latest salvo, Niall Ferguson chimes in with the budget deficit set to grow on increasing estimates of the UK bank bailouts and other political worries setting in (moat cleaning? must be a British thing...) but ultimately a significant devaluation of the currency looks increasingly likely (especially after repeated tests of the 1.66) . The most troublesome quote has to be "“We’re not Iceland or Ireland, but we’re closer to them than we are to the U.S.,” says Ferguson, author of “The Ascent of Money: A Financial History of the World” (Penguin, 2008)." Iceland, the land of the 3 hour bank collapse and the abandoned Range Rover? Ouch...
Ultimately the causes for concern have to be multiplied when we factor in the political expectations of social services in an economy like the UK. As an example - glamor shots in "Sicko" aside, the NHS has seen an increasing number of troubling reports coming out on the poor quality of their system and the cost implications would be tough to bear in normal economic times. Especially if the UK loses AAA status (and it's the only AAA country with a negative outlook), the collapse will be fast and furious. All signs are pointing that way including sovereign 5-year CDSs jumping to 81 and increasingly disappointing numbers coming out in June (trade, consumer and GDP especially).
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Great, my country down the sewers. Ah well, can't say it's undeserved.
How come the UK is on AAA negative outlook yet the US is not on negative outlook? Didnt' Japan actually get downrated a week back?
The ratings agencies are by-and-large US companies, and they all get paid in dollars. Don't expect a ratings action on the US any time soon. Maybe once were all safely in Vault 13 Moody's will put the US govt on credit watch negative, but by then, the only thing we'll care about is finding a water chip.
China established its own sovereign rating standards in May. Haven't heard anything about them since...wonder when it will have an agency up and what it will rate the US at?
http://news.xinhuanet.com/english/2009-05/23/content_11424836.htm
Prolly depends on how diversified they are out of US bonds.
I think the ratings are all relative... : p
There is so much hidden rot in the British economy that it generates its own form of life. Too bad that form of life is fatal to the British people. Let them learn cannibalism: that's all they're going to have to eat.
Maybe Posh will lend them some cash.
Really i am impressed from this post.
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why do these CA bankruptcy stories have NO impact on stocks? Same for maddoff, wallstreet pay, Obama, decline in commercial real estate, record unemployment, or 95% of the stuff here posted? All this market does is go up. day after day. week after week. month after month. All we need to do is buy tech stocks like GOOG AAPL BIDU and EWZ FXI....good finance articles....
why cant we get one of those big selloff days? maybe -500 points on the DJIA? And no rebound either.
Its coming. Remember, 1930 was a great year for stocks.
1930 was a horrible year for stocks! 1932 was a good year.
1930 was a horrible year for stocks! 1932 was a good year.
Really a good sharing.
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Why is there little to no impact on the markets from negative news? Pick your reason:
a. Baked in.
b. Better than expected.
c. Less-grim than expected.
d. The worsening is increasing at an increasingly slower rate.
e. All of the above.
Irrationality and greed, my man; saidin and saidar of the world.
The equity bubble that has been blown since March will leave green-shooters, hope-glimmerers, and mustard-seeders completely flabbergasted, much the same way this completely illogical 'rally' has left the rest of us feeling.
Your Answer: Program/Algo Trading. Those Cray CX-1s are not ready to let a decline occur, but when they do, it'll be fast.
What could be the trigger?
Ideas?
Something "External" and massive that "they" can't control. But rest assured their shorts are in place. Their (GS/JPM et all) big move IMO is setting up the public to take all the chips. Like plaing tx hold em - public keeps playing 7,2 and losing - will be forced to go all in vs a loaded deck - and will lose all leaving GS (et all) with ALL the chips.
Unbelievable that the UK got downgraded yet the US is just fine ... since everything here is makebelieve, i guess it makes sense...there must not be as much green sh@# in the UK.
The GBP is experiencing strength for the same reasons as US dollar ...how can we live in lala land forever?
It's in a lot of people's best interests (no pun intended) that the US rating remain AAA. If there's a downgrade, there's an enormous amount of US paper out there whose value would suddenly be more questionable than it already is. Nobody holding that paper, or issuing it, wants to see that. Also, if the USD loses value, selling things to the most indebted country in the world will get a whole lot more difficult. So, borrowing from the Grimm brothers, the Emperor has no AAA clothes, but nobody really wants to point that out. Of course, it doesn't hurt when Moody's and S&P have a vested self-interest in continuing the charade.
#3768
I have been assured by a very knowing American of my acquaintance in London, that a young healthy child well nursed is at a year old a most delicious, nourishing, and wholesome food, whether stewed, roasted, baked, or boiled ...”
A friend from outta town who had a relative in London, informed me that parboiled was the way to go. I never understood why he told me that, until now.
If the UK drops one, does it lose the "G"?
I'm surprised it has stayed up this long. As we know, when the Pound pops it pops a lot of pips. The JPY crosses look they are going to crack too. We're due for a nice little risk aversion run just about now.
TA
I'm not a great fan of Mr Ferguson and consider his musings no better or worse than the average stock picker. Sure the UK has many many problems but at least more of them are apparent now - MPs on the fiddle, bankers on the fiddle a bankrupt NHS and Social Security system etc etc but hey so have most other countries. What is left of British Industry after the last 30 years of gorgeing by Thatcherite vultures is basically sound but our oil has been frittered away so we probably need to reinvent ourselves. Most of our problems are down to our rotten political system and the immense power that has been taken away from the people by our Big Brother society - if you are in any doubt about it re-read 1984 which now seems quite benign compared to what has been allowed to happen.
The British people are like sheep or is it lemmmings but maybe some will awaken before its too late? if not I hate to admit Mr F may be right.