Quantitative Easing – and – The Mad Hatters Tea Party
Quantitative Easing – and – The Mad Hatters Tea Party [Spot the Difference]. With the latest pronouncements on quantitative Easing [QE], you might be forgiven that the world has gone slightly MAD.
The Bank of Japan for example has been propping up the Japanese market by making very large capital investments into Japanese companies is now one of the largest investors in the Japanese Market, holding as much as 10% in the major Japanese Companies.
The Bank of England has launched a further series of QE (following Brexit), presumably this was done at the behest of the alarmist director of the Bank of England Mr Carney, (who recently let slip that his childhood nickname was “Carnage”).
As well as buying gilts, the BoE has been buying corporate bonds, not only those of British companies but firms like McDonalds and Apple. This latest round of QE from the BOE is rather questionable, we don’t believe that we need any further QE and surely buying the bonds of selected companies might be viewed by some as providing a subsidy and by others as favouritism.
As governments globally are all seemingly printing money, then surely they are debasing their fiat currency. It’s not surprising therefore, that with all of this money sloshing around, and no interest to be had by making deposits and a question mark over property – the equity markets are the only place to go, hence the uplift in global equities.
Are we actually better off? I don’t think so. We just have a temporary illusion of being better off due to the miss-pricing of assets.
Illusion and Reality, where would you rather be placed as an investor?
The table was a large one, but the three were all crowded together at one corner of it: `No room! No room!’ they cried out when they saw Alice coming. `There’s PLENTY of room!’ said Alice indignantly, and she sat down in a large arm-chair at one end of the table.
`Have some wine,’ the March Hare said in an encouraging tone.
Alice looked all-round the table, but there was nothing on it but tea. `I don’t see any wine,’ she remarked.
`There isn’t any,’ said the March Hare.
`Then it wasn’t very civil of you to offer it,’ said Alice angrily.
`It wasn’t very civil of you to sit down without being invited,’ said the March Hare.
`I didn’t know it was YOUR table,’ said Alice; `it’s laid for a great many more than three.’
If you hold investments in collective funds whether in investment portfolios or your pensions, you need to be aware of the financial events that are driving equities, of course it is very reassuring to see your pensions and investments go up in value, if the price increases arise as a result of financial manipulation and not from market fundamentals then that is a worry.
There are other concerns of course with fairly persistent rumours from the USA that their jobs figures are being manipulated to keep the stock market high and with the FED seemingly in overdrive to hide their colossal debt mountain. What’s more it’s election year and the choice is between a highly dysfunctional individual who may get elected as President of the USA, or Donald Trump.
As I have previously stated, these concerns are not constrained to myself, several leading fund managers are reducing the amounts held in equities and diversifying into other assets such as gold and currency trading.
We believe that investors should now increase their investment allocations to capital preservation style funds, and if you are a follower of my blog you will be aware of other types of investment that we believe are worthwhile now.
`Your hair wants cutting,’ said the Hatter. He had been looking at Alice for some time with great curiosity, and this was his first speech.
`You should learn not to make personal remarks,’ Alice said with some severity; `it’s very rude.’
The Hatter opened his eyes very wide on hearing this; but all he SAID was, `Why is a raven like a writing-desk?’
`Come, we shall have some fun now!’ thought Alice. `I’m glad they’ve begun asking riddles. I believe I can guess that,’ she added aloud.
`Do you mean that you think you can find out the answer to it?’ said the March Hare.
`Exactly so,’ said Alice.
`Then you should say what you mean,’ the March Hare went on.
`I do,’ Alice hastily replied; `at least–at least I mean what I say–that’s the same thing, you know.’
The last financial crisis was created by the banks and institutions and the stupidity of politicians and a complete lack of governance from the FSA and the Bank Of England (largely because Gordon Brown had meddled to such an extent that the responsibilities of both these organisations overlapped and their aims unclear so no one knew what they were doing and who was responsible for what.
The politicians promised to reform our banks but George Osborne stalled any real reform and put hurdles in the way of the new challenger banks, so they large banks have largely stayed as the malevolent institutions that they were before the crisis.
I haven’t touched on the Chinese debt crisis or the concerns about most European banks …
I don’t know about you, but that makes me very concerned indeed. If you share my concerns, and wish to make arrangements to protect your future click HERE.