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Worst FTSE falls in history.

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  • edited June 2016
    Lloyds shares must be worth a punt at the moment.
  • E-cafc said:

    You are confusing fluctuations in a country's exchange rates due to short term market sentiment and trading opportunities, and fluctions due to long term market sentiment and fundamental structural changes to that country's economy.

    Sorry, am not confusing anything. Why don't we wait and see how it all pans out.
    You do understand the implications of having our rating downgraded?
    I'm not sure I do, that's why I asked earlier.
  • Bought a few quids worth yesterday of Lloyds shares, ditto Barclays.

    They may go down more over next couple of weeks so certainly haven't bet the house on them but they look quite cheap at the mo.
  • edited June 2016
    @aliwibble

    Our government, like any responsible government in the western world, finances day to day expenses and investment in infrastructure by issuing debt in the form of Gilts. In other words they borrow money from the international money markets. The U.K.'s triple A rating means it is considered virtually risk free like US bonds. There are lots of funds, pension funds and other investors who will not, or are not allowed to, invest in anything that is not AAA. This means that in order to fully sell their Gilts, when we are downgraded to AA (which means we are now considered more of a risky investment) the UK have to offer higher interest rates. If you are investing in a more risky security it can only be justified with a higher return. This in turn means that more of the government's tax receipts have to be spent on paying the higher interest on all new Gilts.
  • The Vote showed how London doesn't understand the rest of England.

    Seeing all the Remain Celebs who can afford and do send their kids to private school or use private hospitals, slagging off the 17 million who wanted Leave so disingenuous, and patronizing.

    The vote showed the rest of the country don't understand us.
  • Australia
    Canada
    Denmark
    Germany
    Hong Kong
    Liechtenstein
    Luxembourg
    Netherlands
    Norway
    Singapore
    Sweden
    Switzerland

    Are the S&P AAA rated countries.

    They rate European Union as AA+
  • @aliwibble

    Our government, like any responsible government in the western world, finances day to day expenses and investment in infrastructure by issuing debt in the form of Gilts. In other words they borrow money from the international money markets. The U.K.'s triple A rating means it is considered virtually risk free like US bonds. There are lots of funds, pension funds and other investors who will not, or are not allowed to, invest in anything that is not AAA. This means that in order to fully sell their Gilts, when we are downgraded to AA (which means we are now considered more of a risky investment) the UK have to offer higher interest rates. If you are investing in a more risky security it can only be justified with a higher return. This in turn means that more of the government's tax receipts have to be spent on paying the higher interest on all new Gilts.

    @aliwibble

    i don't think this is quite right. There are very very few countries that have AAA status, France was downgraded to AA in 2013.

    Australia, Denmark, Germany, Hong King, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden and Switzerland are the only countries with a AAA rating from standard and poors. The US is only AA+ rated.

    A Uk downgrade from AAA to AA will not mean that pension funds will have to sell their existing gilts.

    I agree though the yield they are prepared to buy at will increase so the government's borrowing costs will rise which means less money for public services if we stick to austerity financing where receipts need to offset outgoing a including the increased interest costs.





  • You are confusing fluctuations in a country's exchange rates due to short term market sentiment and trading opportunities, and fluctions due to long term market sentiment and fundamental structural changes to that country's economy.

    Sorry, am not confusing anything. Why don't we wait and see how it all pans out.

    You don't cut off your arm and wait to see if it grows back..
  • edited June 2016

    @aliwibble

    Our government, like any responsible government in the western world, finances day to day expenses and investment in infrastructure by issuing debt in the form of Gilts. In other words they borrow money from the international money markets. The U.K.'s triple A rating means it is considered virtually risk free like US bonds. There are lots of funds, pension funds and other investors who will not, or are not allowed to, invest in anything that is not AAA. This means that in order to fully sell their Gilts, when we are downgraded to AA (which means we are now considered more of a risky investment) the UK have to offer higher interest rates. If you are investing in a more risky security it can only be justified with a higher return. This in turn means that more of the government's tax receipts have to be spent on paying the higher interest on all new Gilts.

    @aliwibble

    i don't think this is quite right. There are very very few countries that have AAA status, France was downgraded to AA in 2013.

    Australia, Denmark, Germany, Hong King, Liechtenstein, Luxembourg, Netherlands, Norway, Singapore, Sweden and Switzerland are the only countries with a AAA rating from standard and poors. The US is only AA+ rated.

    A Uk downgrade from AAA to AA will not mean that pension funds will have to sell their existing gilts.

    I agree though the yield they are prepared to buy at will increase so the government's borrowing costs will rise which means less money for public services if we stick to austerity financing where receipts need to offset outgoing a including the increased interest costs.

    Yes, I must admit I was not aware some of these countries (particularly the US) had been downgraded. But I have not worked in the city for more than 10 years now.
  • Your main point was spot on, U.K. government cost of borrowing will rise.
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  • edited June 2016
    @Alwaysneil

    If an investment fund has rules that state it can only invest in triple A stock won't this mean they have to replace stock that has been downgraded? I thought it did. Although what happens with already issued debt has no effect on the UK tax payer in terms of extra interest payments.
  • Yes, it would.

    if a fund had investment guidelines that required AAA government bonds (gilts or treasuries) up to a certain percentage of assets, they would have to sell assets that had a downgrade.

    There are no investment funds I am aware of that require investment only in AAA. There are so few AAA countries that this would be a crazy investment strategy.

    Insurance company regulation (and a very large percentage of UK pension money is JJ these companies) counts all these government issued securities as risk free (which seems a bit silly as a Greek bond is clearly more risky than a German one).

    Whether the UK is AAA or AA does not affect the capital required to be held against the risk of default in the same way it would for a corporate bond. But the investors would want a higher coupon.




  • Don't want to spoil things with any positives, but a weak pound means that the overseas earnings of UK companies, more than 65%, means their revenue increases (unless hedged).

    Also, the increase in UK gilt yields means their pension fund deficits shrink because the higher coupon means less capital is needed to generate the same revenue stream to pay pensions. This means extra cash will be available to companies to invest in the business rather than pay into the pension fund.
  • Don't want to spoil things with any positives, but a weak pound means that the overseas earnings of UK companies, more than 65%, means their revenue increases (unless hedged).

    Also, the increase in UK gilt yields means their pension fund deficits shrink because the higher coupon means less capital is needed to generate the same revenue stream to pay pensions. This means extra cash will be available to companies to invest in the business rather than pay into the pension fund.

    Why have so many non political UK economists, UK financial institutions, UK financial services firms and the BoE etc been so adamant that remain is the right move? The vast majority sought to stay bar a few obscure ones.

  • Don't want to spoil things with any positives, but a weak pound means that the overseas earnings of UK companies, more than 65%, means their revenue increases (unless hedged).

    Also, the increase in UK gilt yields means their pension fund deficits shrink because the higher coupon means less capital is needed to generate the same revenue stream to pay pensions. This means extra cash will be available to companies to invest in the business rather than pay into the pension fund.

    I'd be interested to see the backing for the foreign exchange movement impacts.

    Manufacturing buys a lot in which will be more expensive with falling pound.

    We sell a lot of services and while we can continue to sell into Europe without tarrifs then we are even more competitive.

    The increas in uk gilt yields means current assets are less valuable and that is the more important effect. Deficits will initially rose but as maturing assets are sold and rolled over that will have a beneficial impact as the discount rate on liabilities will rise and the liabilities therefore fall. As most companies are hedged on duration, and average duration is 10-15 years minimum, the beneficial effect will come in much later than the negative effect of the value falls.

  • Nicola sturgeon is irritatingly good. 'As a vacuum of leadership develops at Westminster.'
  • Don't want to spoil things with any positives, but a weak pound means that the overseas earnings of UK companies, more than 65%, means their revenue increases (unless hedged).

    Also, the increase in UK gilt yields means their pension fund deficits shrink because the higher coupon means less capital is needed to generate the same revenue stream to pay pensions. This means extra cash will be available to companies to invest in the business rather than pay into the pension fund.

    Pension fund deficits have increased massively over the last few days with the collapse of the stock market. Businesses will have to spend capital to reduce those deficits.

    The revenue streams from Gilts already held to pay monthly pensions will be unaffected by increased Gilt yields as those Gilts have already been paid for.

  • Don't want to spoil things with any positives, but a weak pound means that the overseas earnings of UK companies, more than 65%, means their revenue increases (unless hedged).

    Also, the increase in UK gilt yields means their pension fund deficits shrink because the higher coupon means less capital is needed to generate the same revenue stream to pay pensions. This means extra cash will be available to companies to invest in the business rather than pay into the pension fund.

    Pension fund deficits have increased massively over the last few days with the collapse of the stock market. Businesses will have to spend capital to reduce those deficits.

    The revenue streams from Gilts already held to pay monthly pensions will be unaffected by increased Gilt yields as those Gilts have already been paid for.

    I think it is wrong that deficits have increased. In actuarial valuations liabilities would be discounted. When interest rates rise liabilities reduce and hence reduce deficits and required contributions. One of the reasons for such current high deficits is the very low current interest rates.

    Having said all that I don't believe interest rates will increase once things settle down. Once there is a little more certainty about it our rating will be back up again.
  • Thanks guys that's helpful.
  • redman said:

    Don't want to spoil things with any positives, but a weak pound means that the overseas earnings of UK companies, more than 65%, means their revenue increases (unless hedged).

    Also, the increase in UK gilt yields means their pension fund deficits shrink because the higher coupon means less capital is needed to generate the same revenue stream to pay pensions. This means extra cash will be available to companies to invest in the business rather than pay into the pension fund.

    Pension fund deficits have increased massively over the last few days with the collapse of the stock market. Businesses will have to spend capital to reduce those deficits.

    The revenue streams from Gilts already held to pay monthly pensions will be unaffected by increased Gilt yields as those Gilts have already been paid for.

    I think it is wrong that deficits have increased. In actuarial valuations liabilities would be discounted. When interest rates rise liabilities reduce and hence reduce deficits and required contributions. One of the reasons for such current high deficits is the very low current interest rates.

    Having said all that I don't believe interest rates will increase once things settle down. Once there is a little more certainty about it our rating will be back up again.
    Investments for pensions due to start paying in 10 or more years time will be primarily invested in stock markets and property. I don't see how a collapse in stock market values does not mean that these pensions do not incur increased deficits.
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  • redman said:

    Don't want to spoil things with any positives, but a weak pound means that the overseas earnings of UK companies, more than 65%, means their revenue increases (unless hedged).

    Also, the increase in UK gilt yields means their pension fund deficits shrink because the higher coupon means less capital is needed to generate the same revenue stream to pay pensions. This means extra cash will be available to companies to invest in the business rather than pay into the pension fund.

    Pension fund deficits have increased massively over the last few days with the collapse of the stock market. Businesses will have to spend capital to reduce those deficits.

    The revenue streams from Gilts already held to pay monthly pensions will be unaffected by increased Gilt yields as those Gilts have already been paid for.

    I think it is wrong that deficits have increased. In actuarial valuations liabilities would be discounted. When interest rates rise liabilities reduce and hence reduce deficits and required contributions. One of the reasons for such current high deficits is the very low current interest rates.

    Having said all that I don't believe interest rates will increase once things settle down. Once there is a little more certainty about it our rating will be back up again.
    Investments for pensions due to start paying in 10 or more years time will be primarily invested in stock markets and property. I don't see how a collapse in stock market values does not mean that these pensions do not incur increased deficits.
    Because a deficit has 2 sides. It is the difference between assets and liabilities. Liabilities are pensions that have to be paid. If you are paying a pension in 10 years time it is discounted, generally by corporate bond yield rate. so assets could fall but liabilities fall more so deficits fall or maybe even become a surplus.

  • It's all very exciting ain't it not knowing what could happen next

    I am really looking forward in how we can mould our new look UK

    Wow..... are you being serious? Or is it just a joke?......
  • se9addick said:

    It's interesting that falls in other European markets and in the US overnight were far worse than the FTSE. I think the reason for this is the perception that the EU will now disintegrate as more countries vote to leave. In this scenario the UK will benefit. The perception that individual countries can not survive on their own two feet, make trade deals, manufacture, secure their borders, impose their own laws, and not prosper, is complete rubbish. The end of globalisition will be fantastic, think of how Greece nearly brought down the world economy and rolled on for years, terrifying markets around the world, all because they couldn't devalue their currency. All markets moving in tandem is good for no one. There should be no correlation between the Greek market and Australia for example. One should be able to pick winners and discard losers, but this has become increasingly difficult with global markets all moving together. Any country (or individual) that works hard and governs itself well, deserves, and should be allowed to prosper.
    The sooner the EU implodes altogether, the better. It may take some time to play itself out, but eventually, yesterday's decision will prove to be a turning point for the better.

    "The end of globalisation" - are you mad ? There is no end of globalisation (thank god). We've just made ourselves less well equipped to benefit from it.

    You sound like a modern day Luddite.
    http://www.brisbanetimes.com.au/world/us-election/britains-brexit-just-killed-globalisation-as-we-know-it-20160626-gps0js.html
  • Everyone should be aware that markets don't like uncertainty and always fall in the short term.

    This is always the time to buy and I've been trading since 9am.

    How's it going catching those falling knives?
  • Bought a few quids worth yesterday of Lloyds shares, ditto Barclays.

    They may go down more over next couple of weeks so certainly haven't bet the house on them but they look quite cheap at the mo.

    Ouch! I feel your pain.
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