What goes up …. The UK and US Stock Markets

Dear All,

This information has come from Tim Price via Southbank Investments. They are selling Investment advice. But nonetheless, the data is interesting.

Click on Slides to enlarge

What goes up must come down!!!

The question becoming When?

Well, high national debt figures have resulted in artificially low interest rates for some time. As interest rates creep higher this stimulant effect on the economy will reverse.

Please note that this information is supplied for interest reasons only. It does not constitute advice in any way.

The UK economy is joined at the hip to that of the United States

 

The CAPE Ratio

The CAPE ratio is a measure of how over valued or undervalued the stock market is.

It is the ratio of the Share price to Earnings per share, which is the ratio of what you pay to the return you can get – Its Value.

Right now it stands at over 30. This is only the third time in history that point has been crossed. The previous two being the 1929 crash and the dot-com crash. The long-term average is 16.8 so the US stock market is 80% overvalued.

In addition, the FAANG’s are distorting the market – Think dot-com crash.

FAANG’s are Facebook, Amazon, Apple, Netflix and Google – The Tech Stocks.

In March and April 2017, these 5 stocks supported the losses of the 495 other companies in the S&P 500

Passive Investment

Surely stock brokers know this?

Well NO, Machines follow trends until they crash, then they bail quickly, causing a crash.

Passive investment is where machines follow the stock market as a whole.

Margin Debt

Margin Debt is where people borrow money, to invest in the stock market.

Fine in a rising market, but as markets fall this creates a rush for liquidity at any cost and creates a crash.

All time low interest rates encourage this behaviour.

Today, Margin Debt as a % of GDP, is now higher than the dot-com crisis or the global banking crisis.

In Summary

It feels as if we are teetering on the edge. This has nothing to do with Brexit, it is global.

The low interest rates prolong the good times but only postpone the bad.

This is why Trump is doing his best for the US economy.

It is Why we must do out best for the UK economy. That means innovation and export.

This is why we are holding our event at the end of the month with Peter Lilley at Hatfield House.

 

Nick

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