advertisement


Crisis? What Crisis?

paulfromcamden said:
I don't really understand the cheerleading for financial apocalypse. Or do they have such a thing about the 'casino banksters' that they don't mind loosing their shirt too?
Click to expand...
Exactly this. If you stick it to The Man it doesn't matter what it costs you. There were Pakistani shopkeepers in Manhattan cheering the terrorist attacks on the Twin Towers, without stopping to think about the fact that Mr Khan the security guard and his wife Mrs Khan the office cleaner were both dead and their children orphans, or that their own business was now goosed and they would be lucky to have anything more than a smouldering ruin after the inevitable retaliatory attacks. There are people here cheerleading Brexit despite the fact that as a result the pound is f*ed, petrol costs a fortune and there were no tomatoes in the shops 3 weeks ago. It doesn't matter, we showed those f*ing Germans who's boss.
So that's it precisely. Bear in mind also that people don't understand how their pensions work.
 
Spraggons Den said:
I never said it hasn't. I actually said:


I was making the points that the mega-rich are not new phenomena and that there were huge gaps in economic equality in the past, particularly before the inception of the welfare state.
Click to expand...
If that makes you in agreement with my post about income inequality rising with Thatcher, why then do you call evidence from the Bank of England to back up my argument “biased” and make remarks about cigars?

Of course the mega rich are not a new phenomenon, and of course there have been huge gaps in income in equality in the past and obviously the welfare state came in during a period of ‘Keynesianism’. Nobody said otherwise.
 
stevec67 said:
It's not a zero-sum game, as you well know.
Click to expand...
First of all I am really sorry for those here that have lost out. The whole pensions thing needs rethinking from the bottom up. But if people’s pensions are vulnerable to dramatic fluctuations like we seem to be at the moment, there should be some protection for those pensions.
 
ks.234 said:
First of all I am really sorry for those here that have lost out.
Click to expand...
It's not as simple as that. The only people "losing out" are those who have to crystallise their losses, for example if they feel compelled to buy an annuity from a lump sum right now. The rules have been changed around that so that you now have no need to buy anything, you can just draw the pension down as you see fit to give yourself an income in later life. I know that my own pension fund took a right beating in Covid. Then it recovered and resumed the upward curve. There is a shark's tooth out of it but either side of that there's nothing other than an upward slope that is resumed after the dip. I didn't actually lose anything. The thing is that the pension funds might have (say) 20% of their funds in government bonds for stability and 80% on the stock exchange for yield. If the FTSE takes a beating, the 80% goes down. But here's the rub, the smart pension providers, who do this for a living, wait until they think it's the bottom of the curve for X equities, and they then cash in some of their nice safe bonds (the 20%, which has an unchanged value) and buy *more of* the risky equities than they would have been able to for the same sum because they are now cheap. Assuming the stocks recover to a greater or lesser extent (yes, I know, but this is their job) then they are up on the deal. Meanwhile they could have left their money in bonds, alongsode the 20%, and they would not have suffered the hit but neither would they have been able to expand their holding when the market was down. This is why they manage funds. Otheriwse they would just take it to the Post Office and get 3% year after year, safe as houses.
The whole pensions thing needs rethinking from the bottom up.
Click to expand...
You think? I'm not so sure.
But if people’s pensions are vulnerable to dramatic fluctuations like we seem to be at the moment, there should be some protection for those pensions.
Click to expand...
There is. You can reduce your exposure to risk, at the expense of yield. My father did this one year with his pensions, cue zero growth and financial stagnation. You can invest in bonds at fixed % and use this for your pension. Safe as houses, the only problem being that you can safely guarantee that you'll get FA yield and a poor pension at the end of it compared to people who took on some risk.

Sensible financial management involves reducing your exposure to risk later on in life, because you can then live with low yield (you've made your money) but you can't live with a financial hit. When you are 40, OTOH, with 25 years to go, you can afford to take a risk provided the yields overall are high. If I'm making 10% every year for 25 years I don't mind if one of those years I take a 20% beating. I've made 10%^24 over the rest of the time, I don't care. The only thing I care about is that the 20% hit doesn't happen just as I'm about to cash it in.
 
stevec67 said:
You can invest in bonds at fixed % and use this for your pension. Safe as houses, the only problem being that you can safely guarantee that you'll get FA yield and a poor pension at the end of it compared to people who took on some risk.
Click to expand...

As probably you know Steve traditional pension 'lifestyling' suggests holding your age in bonds so you gradually reduce your exposure to higher return/higher risk equities as you near retirement and have less time to recover from any serious dips.

Problem is with inflation in double figures bonds have a negative return in real terms - 'return free risk' as the saying goes - whereas equities have historically maintained their value in periods of higher inflation.

In practice I think all you can do is allocate as you think best and cross your fingers.
 
paulfromcamden said:
As probably you know Steve traditional pension 'lifestyling' suggests holding your age in bonds
Click to expand...
I hadn't heard this figure, but yes, my advisor is starting to talk about "lifestyling" as I plan to have it all done in 5 years.

so you gradually reduce your exposure to higher return/higher risk equities as you near retirement and have less time to recover from any serious dips.
Click to expand...
Absolutely.

Problem is with inflation in double figures bonds have a negative return in real terms - 'return free risk' as the saying goes - whereas equities have historically maintained their value in periods of higher inflation.

In practice I think all you can do is allocate as you think best and cross your fingers.
Click to expand...
Sad but true. I'm fortunate, I have low outgoings, a house that's bought and paid for and that I can downsize as and when I want to, and a good enough income that I can put significant sums into a pension fund without having to live on Savers pasta and sliced bread. I could retire and live modestly tomorrow, it would probably involve me selling the house and getting something smaller and cheaper in due course, but I'd survive. Worst case is that I might have to take on some local work. There are an awful lot of people out there who don't have enough spare to save anything for the future, and they are going to be entirely dependent upon the state pension.
 
stevec67 said:
It's not as simple as that. The only people "losing out" are those who have to crystallise their losses, for example if they feel compelled to buy an annuity from a lump sum right now. The rules have been changed around that so that you now have no need to buy anything, you can just d……
Click to expand...

Yes, I get all of that, I was responding to @paulfromcamden who brought up people losing out, I presumed from his tone that there was some people, maybe himself, who have lost out and deserved sympathy. If the point you are making is that the only lossers are to those who have to liquidate their losses, then that is not a point I would argue against
 
ks.234 said:
Yes, I get all of that, I was responding to @paulfromcamden who brought up people losing out, I presumed from his tone that there was some people, maybe himself, who have lost out and deserved sympathy. If the point you are making is that the only lossers are to those who have to liquidate their losses, then that is not a point I would argue against
Click to expand...
That's what I'm saying. There was a time with certain work based pensions that you had to cash in the fund at the appointed date and buy an annuity or similar investment. My uncle got bitten by this, he retired and as he did so the market took a dive, so his sun shrank by X%, a significant loss. He had to take this. There is now a rule change that says that when you retire you can simply leave the fund and return to it later, draw it off in chunks, etc, as you see fit and within certain rules. This means that an individual won't get bitten by short term losses. He may have a fund of (say) £300k and upon retirement there's a 20% dip. He doesn't walk away from the £60k, he just freezes it and lets the fund sort itself out. 6 or 12 months later, assuming the fund has recovered, and failing a total financial collapse or incompetent management it will, to some extent at least, he can then close it. During the intervning perios there is nothing to stop him pulling off (say) 10% to live on, pay off loans, etc. Now OK this comes off the depleted sum but he's only taking the notional 20% hit on the £30k he chooses to draw, which is a blow but not shattering.
 
ks.234 said:
If that makes you in agreement with my post about income inequality rising with Thatcher, why then do you call evidence from the Bank of England to back up my argument “biased” and make remarks about cigars?

Of course the mega rich are not a new phenomenon, and of course there have been huge gaps in income in equality in the past and obviously the welfare state came in during a period of ‘Keynesianism’. Nobody said otherwise.
Click to expand...

You seem to ploughing your own furrow. I said stats were biased, not your argument. If there is one thing I remember from my social science degree is that stats are never neutral or innocent - how can they be when they are nearly always a gross simplification of a complex human world.
 
Spraggons Den said:
You seem to ploughing your own furrow. I said stats were biased, not your argument. If there is one thing I remember from my social science degree is that stats are never neutral or innocent - how can they be when they are nearly always a gross simplification of a complex human world.
Click to expand...
So what are you basing your argument on?
 
Spraggons Den said:
I never said it hasn't. I actually said:


I was making the points that the mega-rich are not new phenomena and that there were huge gaps in economic equality in the past, particularly before the inception of the welfare state.
Click to expand...
Nobody said otherwise. That there was mega rich and inequality in the past is not an argument against the fact that inequality grew with Thatcher. What is it that your argument against that observation?
 
kensalriser said:
Ah, well obviously you're the expert. Was there austerity everywhere in the world where the wealth gap also widened?
Click to expand...
No expert, which is why I would like to see the evidence that lower interest rates create wealth inequality. I can see how higher interest rates create wealth inequality, that is their purpose, but not how lower interest rates have the same effect
 
ks.234 said:
Nobody said otherwise. That there was mega rich and inequality in the past is not an argument against the fact that inequality grew with Thatcher. What is it that your argument against that observation?
Click to expand...

If your not disagreeing with me about my point and I am not disagreeing with you about your point - then what is there to argue about :).
 
Spraggons Den said:
If your not disagreeing with me about my point and I am not disagreeing with you about your point - then what is there to argue about :).
Click to expand...
But you did disagree, you disagreed that inequality grew under Thatcher and then dismissed as biased and inconclusive the clear evidence that shows that inequality did grow under Thatcher. But if you have changed your mind and now accept that evidence, then that’s fine, but it might’ve been best to avoid snarky comments about “no cigar” in the first place.
 
Bananahead said:
Can I please remind everyone that banks employ real people.

The takeover of Credit Suisse by UBS is likely to lead to around 40 000 job losses.
Click to expand...
This is very true, but surely the point is that we have too much dependence on dodgy banks like SVB and Credit Suisse.

The problem with SVB had everything to do with people wanting to take their money out. SVB was not insolvent, it was illiquid due to the bank run and AIUI.

Credit Suisse had similar problems with investors like the Saudi Bank ceasing their funding.

The bottom line is that safe banking with insured deposits is possible, though with smaller returns, yet we seem to now be in a situation where the riskier banks can threaten the economic stability of a global system.

Here is an excellent analysis of SVB from someone who used to have their own bank, was a bond trader and business man who also designed and built high end cars and speedboats

https://www.patreon.com/posts/episode-162-of-80157783
 
You must log in or register to reply here.


advertisement


Back
Top