ASSET PRICES TO FALL?

Ambrose Evans-Pritchard reports that the Bank for International Settlements (BIS) is worried that the world has too much debt.

Since 2007, combined public and private debt in the the developed economies has jumped by 36 percentage points to 265pc of GDP.

"Global debt levels are dangerously high and central banks cannot keep the game going indefinitely."

An increase in interest rates by the US Federal Reserve could create an economic crisis.

BIS fears emerging market maelstrom as Fed tightens.

If the 'bubble' bursts, there could be a drop in the value of various 'assets' such as gold, shares (equities), bonds and houses.

Banks are worried?

Deutsche Bank plans to cut staff by 25pc



The above graph shows that currently the price of bonds, shares and property is above historical norms.

According to Deutsche Bank, there is the chance that profits or valuations will return to their historical norms.

If that happens, Deutsche reckons the average real return from equities over the next 10 years will be negative. 

The same is true for Treasury bonds, European corporate bonds and American residential property.

Read more: http://www.afr.com/

DON'T PANIC ON THE ECONOMY

It's a Wonderful Life. THE FILM HATED BY THE RICH ELITE

Some financial experts are warning of a coming 'correction' in the stockmarkets.

Some suggest that stocks and shares are still the best place to invest for the long term.

This is because alternative assets (eg. gold, property, cash, bonds) are also vulnerable in an economic crisis and do not necessarily earn as much income as stocks and shares.

Diversification may be the answer, with a holding that includes hedge funds and short-dated bonds.

The greatest threat to the economy is the vast gap between the super-rich minority and the relatively poor majority.

Dr. Paul Craig Roberts, at Global Research, writes:

(No Economy For Americans.)

1. The US Federal reserve has pumped money into the banks, thus causing artificially high stock and bond prices.

2. US corporations have been involved in buying their own shares, thus causing artificially high stock prices.

3. US corporations have borrowed from the banks in order to buy their own shares.

4. The bosses of these corporations have increased their bonuses as a result of the artificially high stock prices.

5. In the real world, ordinary people's wages have been falling and shop sales have not been rising.

6. The US economy has been designed to help the rich elite.


The rich elite will seduce us, trick us and intimidate us. They have no loyalty to any particular country.

Some people think that the pound sterling will fall.

Tim Worstall  writes that If Scotland Leaves, England Will Benefit As The Pound Falls

According to Worstall:

1. A falling pound will be good for the UK as it will make exports cheaper.

2. Sterling, a reserve currency, is too high in value.

Jordan Rochester of Nomura

According to Worstall:

3. Japan's biggest bank, Nomura, has advised clients to reduce investments in the UK, because the pound is going to suffer a big fall.

Namura's foreign exchange strategist, Jordan Rochester, says: "Sterling could fall at least 15% in a worst-case scenario." 

According to Worstall:

This is not convincing.

4. Sterling, a reserve currency, is some 20% over valued. 

If the pound drops, England's chronic trade imbalance could be to some extent be rectified and domestic employment could pick up.



The Daily Mail reports:

David Cameron has pleaded with business chiefs to publicly warn against Scottish independence.

The Prime Minister asked company bosses, such as the Chairman of Tesco, to 'highlight the dangers of a Scottish exit in any way we can'.

dailymail.co.uk/

..

What do we think:

As it happens, Tesco is doing badly on the stockmarket because it is a badly run supermarket chain, not because Scotland might gain independence.

The stock markets have not yet been much shaken by events in Ukraine and the Middle East.

And, in the long term, they won't be much shaken by events in Scotland.



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