FTSE100 is up at 9,800 or so. Therefore:
I recently discussed Thomas Piketty’s suggestion that when R > G — meaning that the rate of growth in the returns to capital (including gains) exceeds that of the economy as a whole (G) — inequality is bound to rise. Throw in falling wage rates, and right now, this is happening at an almost record pace.
Hmm. FTSE100 was 6,300 or so in 1999. With inflation – and recall, stock indices are not inflation adjusted – that’s 12,200 or so now. Real GDP has risen, the value of the stock market index has not in those same real terms. R is not greater than G. Thus Piketty – and Spud – are spouting nonsense. QED.
Surely our host isn’t cherry picking? 1999 is a big local high. By early 2003, the index was down at about 3,500. Why else would a 26 year comparison period be chosen? Even overlooking this choice of dates, the total real (inflation adjusted) return, with dividends reinvested, in the FTSE100 is something like 2%. It has all come from the income.
“This, I can assure you, is not sustainable. Anyone who pretends it might be is deluding themselves. The crash has not happened yet, but it will.”
The thing is that if you’re a massive nerd (like me) you read in depth. And the big thing with the FTSE100 is that around half of its sales are overseas. Sure, Tesco and M&S which are overwhelmingly about the UK, but there’s also Burberry, Rio Tinto, AstraZeneca. It’s much more of a global index. What happens with UK wage growth is going to affect Whitbread*, sure but Airtel Africa’s sales are about what goes on in Chad, Niger and Kenya.
That’s why it’s not going to “crash”. CAPE, P/E, EPS of the FTSE 100 are on the high side, but nothing excessive. I hold some ISF (FTSE100 ETF) and keep wondering whether to put it elsewhere, that the price might not have much value. But it’s not like the lunatic S&P 500.
“And the big thing with the FTSE100 is that around half of its sales are overseas.”
75%
50% is FTSE250.
Really? I’m losing it. I could have sworn it was 50. But I do remember avoiding the 250 because it was much more exposed to the UK economy and thinking that the 100 was more like a global index (and that the more British bits were solid, boring, recession-proof).
The FTSE250 has barely moved in 5 years. Roughly 2-3% per year.
When was the last time you looked in to it? The FTSE100 companies isn’t a static list and there may have been a lot of churn.
I think turnover of 80-90% of firms happens about every 20 years or so, so with the index base date being 1984, it might have only happened twice.
Around 18 months. I was clearing up some old little pensions and decided to put them into my SIPP. The money was in Europe, Asia/Pacific, UK funds. So then which ETF for each. And 100 instead of 250 was decided by the exposure.
I don’t understand why the 100 is used at all. Back in days of yore it was useful because it was constantly recalculated. So it was an indication of what markets were doing within that day. But that’s in the time when prices were obtained by walking round & asking the jobbers & the index was calculated by hand. It can be done so much better now, why bother with the old crock? Tradition & inertia?
Gold pricing is so goofy, someone should be hanged.
I’ll tell you a general, real problem going on right now, which I’ve not heard anyone talk about, which is how the 2008 housing crash, apps and cheap trading have led to a lot more bad investors.
Go back to 2000, everyone got a pension or bought into unit trusts. And while these people were overpaid, useless cunts, they at least didn’t do much investing in what were absolute scams. They had a basic understanding of things.
Now, you can do it direct, cut out the expensive middleman. Which on the one hand is great, but on the other, people who don’t have even a basic understanding of markets, or an industry are prone to scams and overexhuberance, and not hedging bets.
Right now, there’s loads of people talking up rare metals. And talking up AI. And of course, they see a link, that chips need metals. But they neither understand that LLMs are a terrible investment, nor how rare metals are. We’re more and more prone to investments looking as mad as Beanie Babies.
Chesterton’s Fence torn down, then?
Bit of that. I think SIPPs are great. I think pension companies and financial advisors are parasitic cunts who do a lot of busy work to make themselves look clever when most of it is just an age/risk matrix to decide where to put the money. You do better with a SIPP if you (roughly speaking) invest in the same places. Buy some ETFs that buy Nat West, Home Depot, McDonalds, AstraZeneca etc. Maybe put a little into some mad stock you fancy.
I think there’s a lot of truth to this, but it does also provide amusement.
I opened a Robinhood account last year and stuck a couple of grand into the Nancy Pelosi Tracker and the Inverse Cramer Tracker, just for the lols.
As things stand I have made 46.4% out of Pelosi and 48.9% out of Cramer.
To be fair, drunk on my own success, and again for the badinage, three months ago I stuck a further grand into a World War III tracker (which was investing in arms manufacturers, tinned food specialists, and camping equipment suppliers basically).
Within a fortnight I was up about 8% there, and I remember messaging my brother chuckling when Trump started talking about nuclear testing, on the basis that sentiment would worse (and thus the tracker would improve).
Instead it dived and I decided to get out having lost 4%
I think Beanie Babies might be a better investment in the long run that some AI stocks….
Not quite that bad. Many of the companies that are making money from it also have other solid businesses. Like about 1/4 of Oracle’s value is database and ERP software. If this goes tits up, you’ll still keep 25% of your investment.
Go back to 2000, everyone got a pension or bought into unit trusts. And while these people were overpaid, useless cunts…
What, WB, is the connection between buying unit trusts in 2000 and being an overpaid useless cunt?
Not unit trusts, just people selling pensions.
Typical mistake from idiots – Throw in falling wage rates – the rate of increase in wages is down, but that’s not the same as them falling. Just not rising as quickly as previously.
Is it even possible for R to be greater than G in the long term? Where does the R come from, if not from G? I guess R could be greater then G in a given country, if the
Evil JoozCapitalists invested their ill-gotten gains abroad, but if one takes the world as a whole its just not possible, surely? Returns can only come from productive investment, which in turn must create growth of at least the same amount.There’s an assumption with these lefty types that there is an optimum level of tolerable inequality. But they never tell you what that level is. If it is zero, then they’re all on for a paycut. If it is not zero, what is it, and what is the basis of working it out? If they can’t tell us, then we can’t ever know whether the problem has been solved.It will remain forever ‘unsolved’.
If they can’t tell us, then we can’t ever know whether the problem has been solved. It will remain forever ‘unsolved’.
I think you’ll find that’s a feature, not a bug.
An ominous post:
‘The break is almost over. There will be work to do soon’
The Evil that men do lives on and on!!!!
Frightening. I fear that my quantum mechanics books can’t take another beating. They’ve suffered enough already.
The good is oft interred with their bones.
The question Murphey and Piketty need to ask themselves is which is most important: reducing absolute poverty or inequality? Hopefully even they would agree that inequality isn’t the biggest issue. The follow up question would then be is inequality necessary to reduce absolute poverty? They would assuredly say “no, just the opposite”, yet without inequality the incentive to do better is eroded to nothing.
A white surgeon has significantly more utility than a rapey Pakistani curry chef.
Should both be considered to be the same value (equality) or do we recognise that inequality is inherent when value is relative?
It’s a familiar theme for Murphy. He predicts a crash every few months, probably due to the poor choices he’s made. I wonder if his money is all in gilts and cash deposits. Occasionally he’s right in the same way as a stopped clock is right twice a day.
From some of his earlier comments it’s all on cash.
Please tell me he has a swimming pool full of 5p coins to dive into.
I believe I commented to that effect very soon after the Piketty book came out. It was obvious balls and no one apart from me pointed it out