Again
Ouch!
Ouch indeed.
Lots of chat about the potential for a Frexit, with both far right and the newly created far left coalition being not so entente about all things Europe.
What price then a greater fracturing of Europeanism, rapidly spreading across Northern Europe, followed by three rebuilds, with the UK ‘rejoining’ the Northern Alliance, the Eastern states being courted by the Russians and the Latin countries muddling along best they can, devaluing their currency as needed to attract tourism.
Plus ca change and all that.
Just a thought.
We’re all doomed 
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Well, trips to a sun lounger somewhere warmer than the Arctic may get a bit cheaper.
Centreparks!
Yes, and history tells us pan-Europeanism fractures frequently. Some really interesting debates underway on how ‘de-globalisation’ is intensifying and baking in higher rates of inflation, and therefore higher neutral rates of interest. That’ll have an impact on our retirement. Don’t know if that is positive or negative – quite a lot of pension schemes have benefited from higher interest rates - but everything is so damn expensive these days.
Well Pierre et Vacances share price has been sliding for years so I imagine they’ve been running up their borrowings somewhat, spesh since Covid.
France has a massive economic problem, with corporate debt proportionately larger than the USA, eye wateringly expensive public services and welfare costs which are so far beyond unaffordable that the UK’s own Fiscal troubles look like small beer in comparison. Yet every time the Govt tries to cut costs, reform corporate shiz or raise taxes, everyone protests and goes on strike, which doesn’t help out much in what is still a largely agricultural economy that doesn’t make much that other people want.
That’s not to say other countries, including the UK, don’t also need to take a long hard look at what they spend their money on but for a ‘leading’ financial power in Europe, things look pretty dicey. Some of France’s borrowing costs are now higher than Portugal for example and it doesn’t look like things are going to improve any in the coming weeks.
Even if Frexit isn’t a strong possibility, I suspect things are going to be quite dicey across La Manche…
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There’s a great deal of hidden inflation coming through e.g. insurance costs have escalated far > reported inflation, and I’ve read and heard thoughts that normalised interest rates of 4/5% aren’t unhealthy, the view being that what was unhealthy, was targeting 2% and printing ‘cheap money’, which simply encouraged too much leverage and an ‘artificial environment’ (I think the phrase here is ‘no sh1t Sherlock’).
This all reads as a wind-back to early and pre-2008 levels (pre GFC). Of course, what it will mean is that the balance sheets of the central banks will take a pounding, as they hoovered-up bonds at much lower rates as part of easing programmes.
And, dare one mention it, (and avoiding specific political comment), the UK tax take is now thriving from biting on inflation gains, which have been well below the level of CPI (tested back say 3 years). And I cannot see pension providers unlocking their terms to provide higher than the usual market uplifts of max 5% p.a./lower CPI (private sector).
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Depends were your funds are. A lot of businesses actually do benefit from a bit of high inflation in time, as they can sneak in very profitable cost hikes which then become baked in. This leads to higher divs for investors, such as pension funds.
There is lots of debate about how much inflation is a good thing but the general consensus remains that 2 or 3% p.a. on average is about right. Too little for too long inevitably leads to inflation spikes, ‘Oh my god we’re in a cost of living crisis’, yeah well you had piss all inflation for over a decade, get over it. Too much leads to innumerable other problems and becomes self fuelling without drastic surgery.
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Funnily enough, the one area where I’ve witnessed deflation this year is pension contributions as the employer pension scheme has gone back into surplus. But, as @HappyListener points out, any net gains have been offset from rising insurance premiums.
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Good post Jamie, similar comments in the weekend papers.
French economy will take some sorting, as you mentioned, to realign economy to reality.
I think external events will play a very significant part in the longer term and not just for France, but those issues risk a thread drift, although some relevance to planning iro the topic.
IIRC some retirement terms are a decade earlier in the republic than uk.
Just a little puzzled by your agricultural sector comment, w/o stats.
Wiki suggests (2017) gdp by sector as (rounded) agric. 2%, ins. 20%, serv. 78%.
IIUC that could put at risk €11billion of farming subsidies!
What does the inverted yield curve for govt bonds tell us about probable future financial market events?
An interesting perspective on possible pension tax changes by Pete Matthew…
The past week and particularly Monday is just a reminder that us peasants can have our hard earned money taken from us at any time. Thousands wiped out and nothing you can do about it. How long does it take to earn that amount? Makes earnings and saving a few quid on the energy laughable.
I love the markets and hate them.
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It’s a random walk to the right with a line of best fit that has taken a steadily northward path for the last 125 years, despite several decades where it descended vertiginously and appeared to be spent here and there.
Otoh, it’s quite refreshing to see some market normalcy once again. Ages since I’ve seen some proper, pre-Covid type Summer market volatility. Compounded by US election year bounciness, Mid East twitches etc. this time around, magnified by the Algorithms and AI switches.
You’re now going get to round robins of rate cuts, ECB, BoE, FED…ECB, BoE, Fed for the next yer or two. And once the next Pres is known, the markets will react with an as yet unknown degree of positivity. Even if Harris wins and trump goes nuts.
Proper Santa rally ensues and all is well.
For now, just head down The Winchester and wait for it to all blow over.
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