jimbo
Posts: 234
Likes: 42
|
Post by jimbo on Mar 7, 2014 1:09:40 GMT
One of the unwritten, never mentioned goals of QE is, I don't doubt, to reduce the real value of our crushing levels of public and private debt by the backdoor of gradual dilution and devaluation of the currency in which that debt is denominated.
My own opinion, for what it's worth, is that we will not see a managed rise in base rates to 2% by 2015. We may see a token rise of the order of 0.5% to maintain the illusion our central bankers have the matter well in hand ("The Taper", etc). This only has a chance of workig in the long run if our Government get their act together and cut spending, thereby bringing our deficit spending and the associated increase in our National Debt under control. Despite rhetoric to this effect, they have done neither since the 2010 elections and Labour would be far worse.
At some point, the sovereign bond markets will lose confidence in our Government's ability to repay our debt. At that point, the fall in the value of gilts (British Government Bonds) and resultant rise in the yields on these gilts could trigger an unmanaged surge in the base rate to eye-watering levels of 10%+. One only needs to look at the Greek Crisis of 2010/2011 to see the outcome of a sovereign bond market rout.
It is at this point that our central bankers will likely be seen as a bunch of bumbling academics who have created a QE-driven frankenstein. I would not want to hold general shares or bonds in such a situation...
Long and the short of it is, I don't expect base rates to rise meaningfully for the next 2 - 4 years, but when the rise does come, it will be a nasty shock to anybody who's struggling to repay debt in the current suppressed base rate climate.
|
|
|
Post by westonkevRS on Mar 7, 2014 6:35:55 GMT
Jimbo,
Nice summary, although perhaps a little black swan doomsday for my thinking, or hopes).
From my personal perspective I would still hold equities, especially global ones, whose earnings will rise with our inflation based on negative FX in a UK inflationary market. And therefore hold steady providing there isn't a global meltdown.
I would also think RS would still perform. I think our "spread" will always be better than banks and allow us to offer a savings/lending rate above banks and hopefully inflation. No guarantees, and I'm no trained economist (that might be a good thing....), but that's my personal opinion.
You gotta put your savings somewhere......
|
|
|
Post by p2plender on Mar 8, 2014 23:01:20 GMT
Very good and informative post Jimbo, thanks.
|
|
angrysaveruk
Member of DD Central
Back and to the left..
Posts: 1,015
Likes: 646
|
Post by angrysaveruk on Mar 9, 2014 1:13:05 GMT
Good post jimbo and I totally agree with what you are saying. I think it is important to bear in mind that the UK is basically an economic satellite of the US and that as long as the US economic "model" continues we will not see any major financial shocks. The thing is the world is on the edge of a precipice and all of the major economic powers from the Saudi's to Japan to Germany are trying to prop up the US for various policitical/military reasons. Interests rates will stay low until it all hits the fan now, the level of debt is just too high in the US (and UK). As long as the US is the world reserve currency the UK will probably just plod along under the US economic umbrella. Problem is the reason the US dollars is the worlds reserve currency is more to do with the US military than the US economy so just focusing on the economic common sense arguements doesnt give you the whole picture. If I thought there was a risk of an imminent shift of global politics I would be putting my money in physical gold (since we would probably end up returning to gold based currencies) rather than P2P lending
|
|
|
Post by yorkshireman on Mar 10, 2014 13:42:27 GMT
The reason? I can get 3% to 5% on instant access... Would be interested to know where you can earn those rates via a true instant access account - unless you're defining 'instant access' as being able to withdraw from ISAs/Bonds before their term matures, whilst suffering heavy penalties for doing so. Various current accounts with high street banks which admittedly have low maximum balance / "investment" limits but with judicious planning I have got the total to £53.5k with instant access and would be interested to know how to get to £60k! You simply need to set up “strategic” standing orders and possibly direct debits in some cases and Bob’s your uncle, you’re playing the banks at their own game.
And transfer a similar amount into your spouse’s name and you have £100k + at 3 – 5%!
The only downside is that one or two of these accounts are at “teaser” rates for 1 year but having said that, one large bank has operated these accounts for at least 4 years to my knowledge.
|
|
|
Post by yorkshireman on Mar 10, 2014 13:49:03 GMT
Would be interested to know where you can earn those rates via a true instant access account - unless you're defining 'instant access' as being able to withdraw from ISAs/Bonds before their term matures, whilst suffering heavy penalties for doing so. Various current accounts with high street banks which admittedly have low maximum balance / "investment" limits but with judicious planning I have got the total to £53.5k with instant access and would be interested to know how to get to £60k! You simply need to set up “strategic” standing orders and possibly direct debits in some cases and Bob’s your uncle, you’re playing the banks at their own game.
And transfer a similar amount into your spouse’s name and you have £100k + at 3 – 5%!
The only downside is that one or two of these accounts are at “teaser” rates for 1 year but having said that, one large bank has operated these accounts for at least 4 years to my knowledge.
And of course zero risk.
|
|
|
Post by yorkshireman on Mar 10, 2014 14:08:17 GMT
Various current accounts with high street banks which admittedly have low maximum balance / "investment" limits but with judicious planning I have got the total to £53.5k with instant access and would be interested to know how to get to £60k! You simply need to set up “strategic” standing orders and possibly direct debits in some cases and Bob’s your uncle, you’re playing the banks at their own game.
And transfer a similar amount into your spouse’s name and you have £100k + at 3 – 5%!
The only downside is that one or two of these accounts are at “teaser” rates for 1 year but having said that, one large bank has operated these accounts for at least 4 years to my knowledge.
And of course zero risk. PPS. I’ve expressed my opinion of Ratesetter’s monthly access account on here before and therefore won’t repeat it again but suffice to say that currently it looks pretty sick at 1.5 to 2.0 per cent monthly compared to the current accounts and sums of money I’ve described above.
Having said that, if and when RS rates beat the current account rates or the latter are withdrawn, I won’t hesitate to return to RS.
That’s the beauty of online finances, you can play the city boys and the banks at their own game.
|
|
|
Post by yorkshireman on Mar 10, 2014 14:22:19 GMT
One of the unwritten, never mentioned goals of QE is, I don't doubt, to reduce the real value of our crushing levels of public and private debt by the backdoor of gradual dilution and devaluation of the currency in which that debt is denominated. My own opinion, for what it's worth, is that we will not see a managed rise in base rates to 2% by 2015. We may see a token rise of the order of 0.5% to maintain the illusion our central bankers have the matter well in hand ("The Taper", etc). This only has a chance of workig in the long run if our Government get their act together and cut spending, thereby bringing our deficit spending and the associated increase in our National Debt under control. Despite rhetoric to this effect, they have done neither since the 2010 elections and Labour would be far worse. At some point, the sovereign bond markets will lose confidence in our Government's ability to repay our debt. At that point, the fall in the value of gilts (British Government Bonds) and resultant rise in the yields on these gilts could trigger an unmanaged surge in the base rate to eye-watering levels of 10%+. One only needs to look at the Greek Crisis of 2010/2011 to see the outcome of a sovereign bond market rout. It is at this point that our central bankers will likely be seen as a bunch of bumbling academics who have created a QE-driven frankenstein. I would not want to hold general shares or bonds in such a situation... Long and the short of it is, I don't expect base rates to rise meaningfully for the next 2 - 4 years, but when the rise does come, it will be a nasty shock to anybody who's struggling to repay debt in the current suppressed base rate climate. An excellent summing up of the overall situation and, taking the last paragraph into account, a reason for not investing in Ratesetter’s or indeed any 5 year product at current rates.
|
|
|
Post by westonkevRS on Mar 11, 2014 20:34:12 GMT
We've been doing some brisk borrower business recently pushing the lender 1-yr bond rate to 3.9% right now (peaked around 4.1% earlier for some lenders).
Nice spike for those willing to dive in.... I expect it'll revert by the end of the week unless this is the new normal.
|
|
pikestaff
Member of DD Central
Posts: 2,136
Likes: 1,484
|
Post by pikestaff on Mar 12, 2014 11:55:24 GMT
[...] Long and the short of it is, I don't expect base rates to rise meaningfully for the next 2 - 4 years, but when the rise does come, it will be a nasty shock to anybody who's struggling to repay debt in the current suppressed base rate climate. An excellent summing up of the overall situation and, taking the last paragraph into account, a reason for not investing in Ratesetter’s or indeed any 5 year product at current rates. I disagree, because: (1) you will have had 3 years at the higher rate to compensate for the risk of possibly being below prevailing rates in the last 2 years; (2) I do not expect market rates for deposits to go up anything like as fast as base rates; (3) I do not expect p2x rates to go up as fast as deposit rates. But I hope I don't change your mind! I'm happy to enjoy the excellent 5 year rates currently available and don't want them driven down.
|
|
angrysaveruk
Member of DD Central
Back and to the left..
Posts: 1,015
Likes: 646
|
Post by angrysaveruk on Mar 12, 2014 12:58:34 GMT
I disagree, because: (1) you will have had 3 years at the higher rate to compensate for the risk of possibly being below prevailing rates in the last 2 years; (2) I do not expect market rates for deposits to go up anything like as fast as base rates; (3) I do not expect p2x rates to go up as fast as deposit rates. But I hope I don't change your mind! I'm happy to enjoy the excellent 5 year rates currently available and don't want them driven down. Totally agree, deposit rates are not going to be anywhere close to 5.7% any time soon. Look at Japan, interest rates have been almost nothing for two decades so dont hold your breath. And a 5 year deposit has an average maturity of 2.5 years which is not that long at all. Yes there is a risk of P2P lending on ratesetter but the risk adjusted return is one of the best investments available at the moment in my opinion - a good part of your return is coming from cutting out the banks massive overheads. I wouldnt be at all suprised if P2P rates didnt drop with more money coming on the market after FCA regulation.
|
|
angrysaveruk
Member of DD Central
Back and to the left..
Posts: 1,015
Likes: 646
|
Post by angrysaveruk on Mar 12, 2014 13:02:49 GMT
We've been doing some brisk borrower business recently pushing the lender 1-yr bond rate to 3.9% right now (peaked around 4.1% earlier for some lenders). Nice spike for those willing to dive in.... I expect it'll revert by the end of the week unless this is the new normal. I notice that, one problem I have is I cant transfer money in fast enough to take advantages of these spikes. It is not a complaint since I think your company offers a very good service overall, but being able to transfer in money and deposit it within a few hours would certainly help some people and reduce these spikes in rates.
|
|
markr
Member of DD Central
Posts: 766
Likes: 426
|
Post by markr on Mar 13, 2014 8:53:59 GMT
I got matches at 5.8% again overnight. Patience is a virtue, good things come to he who waits, etc, etc
|
|
|
Post by p2plender on Mar 13, 2014 10:42:39 GMT
Rates may actually creep up as one or two new participants enter the ring. eMoneyunion being one. There's a thread started on this one which has a provision fund and appears aimed at 'safe as houses' payday borrowers..... I might have a flutter for fun.
Can't keep with all these sudden and new participants..
|
|
|
Post by westonkevRS on Mar 13, 2014 10:59:40 GMT
"safe as houses payday borrowers"..... Erm......
|
|