‘How many more times must I tell you – I’m not a banker!’
Bad Bank Practice
Chancellor Jeremy Hunt has asked the City watchdog to speed up a probe into whether people have had bank accounts closed due to their political views
It follows a row over the closure of former UKIP leader Nigel Farage’s Coutts account.
Mr Hunt requested the Financial Conduct Authority (FCA) to ‘urgently investigate how widespread this practice is, and put a stop to it’. The FCA reportedly said Mr Hunt’s request is ‘in line with our plans‘.
It comes after Mr Farage obtained a report from Coutts which indicated his political views were considered as a factor in his account closure. Mr Farage had his account re-instated and has launched a campaign against account closures which has received support from government ministers.
Express or suppress?
The FCA is already preparing to look into this, and banks also face government reforms over account closures. Mr Hunt reportedly said: ‘You can agree or disagree with Nigel Farage but everyone wants to be able to express their opinions’.
‘In today’s society, you need a bank account function and so a threat to be de-banked is a threat to your right to express your opinions‘.
Mr Hunt expressed the FCA has the power to fine banks ‘very large sums of money if they find this practice widespread’.
‘Room 101’
Room 101 phrase origin
The phrase ‘Room 101’ comes from George Orwell’s dystopian novel Nineteen Eighty-Four, published in 1949.
In the novel, Room 101 is a torture chamber where prisoners are subjected to their worst fears and nightmares. The name of the room was supposedly inspired by a conference room at the BBC Broadcasting House, where Orwell used to work and attend ‘boring‘ meetings.
Cutural reference
Room 101 has become a popular cultural reference, especially in the UK, where it is used to describe something that is ‘undesirable’ and to be ‘locked away’.
There is also a BBC comedy television series called Room 101, where celebrities are invited to discuss their pet hates and persuade the host to consign them to oblivion in Room 101.
So, now you know.
‘Sorry Mr. ‘Fragile’, but I’m afraid your account is closed, as we simply just don’t like you!’
Bank of England says inflation rate 5% by Christmas 2023?
That’s still 3% above the target of 2%
The Bank of England’s forecasting, which has a major impact on the UK economy, is being reviewed and has been criticised.
After the Bank raised interest rates for a 14th time in a row in an effort to slow price rises in Augts 2023, officials have predicted inflation to fall from the current rate of 7.9%, to ‘around 5%‘ by the end of the year. The Bank puts rates up when they are concerned that too much spending will send prices spiralling.
So, in light of its estimating techniques being challenged, how much faith should we put in ‘5% by Christmas’?
For the last two years, the Bank of England has been underestimating the likely rate of inflation in the short term. MPs have been critical of the Bank’s forecast, and its officials have acknowledged they have got some judgements wrong in their forecasting.
The Central Bank has also announced a review into how it makes forecasts.
This was one of the questions put to the Bank of England governor
Mr Baron: Good morning, everyone. In looking at the bank rate going forward, some of us, it is fair to say, have long believed that central banks, including the Bank of England, have been well behind the curve with regard to inflation. As the Chair has said, forecasting has been awry. The Bank of England is one among others that has been too slow in raising interest rates, allowing inflation to mushroom well above the 2% target.
I have put it as strongly as suggesting that it has been a woeful neglect of duty. It is causing real pain out there for people and businesses. We should always remember, as we sit in our, sometimes, white ivory towers, having these debates, that we are talking about people’s lives and businesses that are having to grapple with double-digit inflation and interest rates perhaps going up too quickly. I think that you get it, but it is useful to remind ourselves of that.
Why should the public have confidence in your ability to get it right going forward? What lessons do you think that you have learned? What are you going to do differently? I am not hearing a satisfactory answer to that...
See the full report here – be prepared, it’s an acquired taste and a long read…
More wrong than right
However, some critics have argued that the BoE’s forecasts are often too optimistic or pessimistic, and that they fail to capture the impact of major shocks or structural changes in the economy. For example, the BoE was widely criticised for underestimating the severity of the 2008 financial crisis and overestimating the negative effects of Brexit on the economy. Some have also questioned the usefulness of the BoE’s forecasts for guiding monetary policy decisions, as they may be influenced by political or psychological factors.
Therefore, it may be wise to take the BoE’s forecasts with a grain of salt, and not to rely on them too much for making economic or financial decisions. The BoE’s forecasts are not useless, but they are not infallible either. They are one of many sources of information and analysis that can help us understand the state and prospects of the UK economy, but they should not be treated as gospel truth.
The Bank of England has been wrong with too many forecasts, so why bother? Target 2%, actual above 10%!
I rest my case.
‘All animals are equal, but some animals are more equal than others’
George Orwell 1903 – 1950
This is the famous quote in the novel Animal Farm where it suggests ‘we are all equal, but some are more equal than others’.
Animal Farm is a fable by George Orwell that criticizes the corruption of power and the dangers of totalitarianism.
It appears in the last chapter of the novel, when the pigs have changed the original commandment of ‘All animals are equal‘ to justify their tyranny and privilege over the other animals. It is an example of how the pigs use language to manipulate and deceive the other animals, and how they betray the ideals of the ‘revolution’ that Old Major inspired.
Draw your own conclusions and comaparisons to ‘human’ behaviour…
Hunt – caught in a trap
According to the chancellor Jeremy Hunt, the UK economy is caught in a trap
The UK and other advanced economies are facing a low-growth trap that is hard to escape. This means that the potential growth of the economy, which depends on factors such as productivity, innovation, investment, and labour force, is very low and insufficient to meet the demand and expectations of the people.
Brexit
The UK economy has been hit by huge global shocks that have disrupted its normal functioning and recovery. These include the Covid-19 pandemic, which caused lockdowns, restrictions, and health crises; the energy crisis, which led to soaring gas prices and supply shortages; and the Brexit transition, which created uncertainty and trade barriers.
Inflation
The UK economy is also struggling with high inflation, which erodes the purchasing power of consumers and businesses. Inflation is driven by various factors, such as rising energy costs, global supply chain bottlenecks, labour shortages, and pent-up demand.
The Bank of England has raised interest rates to 5.25% as of August 2023 – the highest level since 2008, to curb inflation and maintain price stability. The Bank of England inflation target is 2%.
The plan?
The chancellor reportedly has vowed to stick to the plan that he believes will bring down inflation and boost growth in the long term.
He said that he will unveil a plan in the autumn statement that will show how the UK can break out of the low-growth trap and become one of the most entrepreneurial economies in the world. He also said that he will not ‘veer around like a shopping trolley‘ and change course in response to short-term pressures.
I don’t care that they stole my idea . . I care that they don’t have any of their own
Nikola Tesla 1856 – 1943
This quote is attributed to Nikola Tesla, a Serbian-American inventor, engineer and physicist who is best known for his contributions to the development of alternating current electricity, wireless communication and radio.
Western EV makers look to tech to compete in the world’s top EV market, China
Leader
China has been leading the global electric vehicle (EV) market for years, thanks to its large domestic demand, generous government subsidies, and well-established battery and electronics industry. However, the west is not giving up on the race to electrify the transport sector and reduce greenhouse gas emissions.
Europe reportedly surpassed China in terms of new EV registrations in 2020, driven by stricter emission regulations, higher consumer awareness, and more diverse and affordable models. The United States also saw a growth in EV sales, despite the Covid-19 pandemic and lower fuel prices. How are western countries and companies now competing with China in the EV market?
Global automakers such are using advanced tech such as driver-assist software to compete in the world’s largest EV market – China. ‘China’s domestic brands are leading the market in the development and implementation of advanced assisted driving systems, capitalizing on their early-entry advantages in the electric and intelligent vehicle sector‘, a recent report suggests.
BofA reportedly said it expects China to still be the world’s largest EV market in 2025, standing at 40%-45% market share.
Strategy
One of the strategies is to invest more in research and development, innovation, and collaboration. Western automakers are trying to improve the performance, efficiency, and cost of their EVs by developing new technologies and designs, such as advanced batteries, smart and autonomous features, and sustainable materials. They are also partnering with other players in the EV ecosystem, such as battery suppliers, charging network operators, software developers, and regulators, to create synergies and overcome challenges.
Another strategy is to adapt to local market conditions and consumer preferences. Western automakers are aware that China is not a homogeneous market, but rather a complex and dynamic one with different regional characteristics, customer segments, and competitive landscapes. They are tailoring their products and services to meet the specific needs and expectations of Chinese consumers, such as offering more connectivity options, longer driving ranges, and lower prices. They are also leveraging their global brand reputation, quality standards, and customer loyalty to differentiate themselves from local competitors.
Niche markets
A third strategy is to diversify their portfolio and target niche markets. Western automakers are not only focusing on passenger cars, but also exploring other types of EVs, such as commercial vehicles, motorcycles, scooters, and buses. They are also targeting niche markets that have high growth potential or specific demands, such as luxury cars, sports cars, or green cars. By doing so, they can tap into new customer segments and create more opportunities.
The EV market is expected to grow rapidly in the coming years, as more countries and regions adopt policies and measures to support the transition to low-carbon mobility. China will remain a dominant player in the global EV scene, but the west will not lag behind.
How do EV’s compare to traditional vehicles?
Electric vehicles (EVs) are becoming more popular and competitive with traditional cars in terms of performance and cost. Here are some of the main differences and similarities between EVs and traditional cars:
Performance: EVs have a faster acceleration and are more efficient than traditional cars. They can reach high speeds in a short time, thanks to their instant torque rovided by the electric motor. They also have a smoother and quieter ride, as they do not have gears or transmissions. However, traditional cars perform better at high speeds and have a longer driving range than EVs. They can also handle different terrains and weather conditions better than EVs, as they have more power and stability.
Cost: EVs have a higher retail price than traditional cars, on average. But EVs may be a better financial deal for consumers over the long term. That’s because maintenance, repair and fuel costs tend to be lower than those for fossil fuel cars. EVs have fewer moving parts and fluids, which means they require less servicing and repairs. They also run on electricity, which is cheaper and cleaner than fossil derived fuels. However, traditional cars have lower upfront costs and more financing options than EVs. They also have a higher resale value and more availability than EVs, as they are more common and therefore familiar to buyers.
Environmental impact: EVs are more environmentally friendly than traditional cars, as they do not emit greenhouse gases or pollutants that contribute to air quality problems. They can also use renewable energy sources, such as solar or wind power, to charge their batteries and use fossil derived energy too.
However, EVs are not completely carbon-neutral, as they still depend on the electricity grid, which still uses fossil fuels to generate power. They also produce emissions during their manufacture and disposal processes.
Traditional cars, on the other hand, are a major source of carbon emissions and environmental damage, as they burn fossil fuels and release harmful substances into the atmosphere such as carbon monoxide and carbon dioxide. They also consume natural resources and create waste during their production and operation.
As the EV population grows, so too will the energy requirement – and it will most likely be met moreso by fossil fuels in the short term as well as by renewables.
According to various sources, electric cars are generally cheaper to run than petrol cars in terms of fuel, road tax, maintenance, and insurance. However, the initial purchase price of electric cars is usually higher than petrol cars, so the overall cost of ownership may depend on how long you plan to keep the car and how much you drive it.
Running cost examples of electric cars vs petrol cars – (Spring 2023 data)
- According to British Gas – fully charging a typical 60kW electric car at home costs £15.10 and gives you a 200-mile range, whereas filling up a petrol car with a similar range costs over £104. Electric cars also pay zero road tax, while petrol cars pay between £30 to £2,365 per year depending on their CO2 emissions. Electric cars also tend to have lower maintenance and insurance costs than petrol cars.
- According to Regit – charging an electric car like the Vauxhall Corsa-E costs roughly £9.50 in electricity for a 200-mile range, while fuelling a petrol car with a similar range costs £41.63 in petrol. Electric cars also save money on road tax, maintenance, and congestion charges compared to petrol cars.
- According to Which? – the electric Mini Cooper SE costs £8,000 more to buy than the petrol Mini One, but it costs £2,591 less to run over three years, mainly due to fuel savings. The electric car also pays no road tax or congestion charges, while the petrol car pays £155 and £11.50 per day respectively.
- According to Auto Express – the annual running costs of an electric car are 21% less than those of a petrol car, excluding the purchase price. The average annual running cost for an electric car is £1,742, compared to £2,205 for a petrol car.
- According to RAC – the annual running costs of an electric car like the Nissan Leaf are £1,233 less than those of a petrol car like the Ford Focus, excluding the purchase price. The electric car costs £1,062 per year to run, while the petrol car costs £2,295
Conclusion
There are many factors that affect the running costs of electric cars vs petrol cars, and different sources may have different assumptions and methods of calculation. However, the general trend is that electric cars are cheaper to run than petrol cars in most cases.
Hydrogen and hybrids are fast becoming future contenders. Watch this space…
What China’s new stance in microchip battle means
Gallium and germanium
No, nor me – never heard of them, but they are extremely important elements needed in microchip manufacturing and China is the world’s largest producer.
Germanium and gallium are two elements that are used in the production of semiconductor chips, which are essential for various electronic devices and technologies. They have different properties and applications, and they are both considered critical materials.
Germanium
Germanium is a metalloid, which means it has properties of both metals and non-metals. It is a shiny, hard, gray-white element that is brittle and can be cut easily with a knife. It has a high melting point of 938°C and a low boiling point of 2830°C. It is mainly obtained as a by-product of zinc production, but it can also be extracted from coal.
Germanium is used in, solar cells, fibre optic cables, infrared lenses light-emitting diodes (LEDs), and transistors. It is also used in some alloys to improve their strength and hardness. Germanium is essential for the defence and renewable energy sectors, as well as for space technologies. It can resist cosmic radiation better than silicon, and it can enhance the performance and efficiency of some semiconductors.
Gallium
Gallium is a metal that has a very low melting point of 29.8°C, which means it can melt in your hand. It is a soft, silvery-white element that can be easily cut with a knife. It has a high boiling point of 2403°C. It is mainly obtained as a by-product of processing bauxite and zinc ores.
Gallium is used in the electronics industry to produce heat-resistant semiconductor wafers that can operate at higher frequencies than silicon-based ones. It is also used in LEDs, solar panels, microwave devices, sensors, and lasers. Gallium is important for the development of new technologies such as electric vehicles, high-end radio communications, and Blu-Ray players. It can also improve the power consumption and reliability of some semiconductors.
China the largest producer
China is the largest producer and exporter of both germanium and gallium, accounting for about 60% and 80% of the global supply. However, China has recently announced new export restrictions on these two elements, requiring special licences for exporters. This move is seen as a response to the western sanctions on China’s access to advanced microchip technology.
The export curbs could affect the global supply chain of semiconductor chips and have implications for various industries and markets
‘A new idea must not be judged by its immediate results’
Nikola Tesla 1856 – 1943
This quote is attributed to Nikola Tesla, a Serbian-American inventor, engineer and physicist who is best known for his contributions to the development of alternating current electricity, wireless communication and radio.
Bank of England raises interest rate by 0.25% to 5.25% – highest in the G7
15 year high… and counting
The Bank of England (BoE) announced another increase in its base rate, from 5% to 5.25%, the highest level in over 15 years as of 3rd August 2023. This is the 14th consecutive rise since December 2021, when the BoE started to tighten monetary policy in response to rising inflation.
The Bank said that inflation, which fell to 7.9% in June, remained well above its 2% target and that further action was needed to bring it down. It also cited the risks posed by the global economic situation, especially the conflict in Ukraine and the slowdown in China.
Affect on borrowers
The rate hike will affect millions of borrowers and savers across the UK. Fixed-rate mortgages will not change until the end of their term, but new deals will be hit borrowers hard. Savers may see some benefit from higher interest rates, but only if banks and building societies pass on the increase, which they are slow to do.
Bear in mind that for the past 15 years many have benefitted from ultra low interest rates and cheap money, this is not the ‘norm’. And now, as more ‘normal’ interest rates return it will initially disrupt financial stability for some, and it will be difficult for many for a time. But money has been cheap and mortgages have always been the cheapest way to borrow long term and that is still the case – even if it doesn’t feel like it right now.
Expected
The Bank of England’s decision was widely expected by market analysts, but some have warned that further rate rises could damage the UK economy, which is already showing signs of weakness. House prices are falling, manufacturing activity is contracting and consumer confidence is low.
The prime minister, Rishi Sunak, said he was disappointed that inflation was not falling faster, but claimed that he was making progress and that there was ‘light at the end of the tunnel‘.
And a train too if he isn’t careful!
UK has the highest interest rate in the G7
Interest rates have been increasing across the world in recent months.
The Bank of England’s latest rate hike means the UK now has the highest rates in the G7 – a group of the world’s seven largest so-called ‘advanced’ economies.
That’s higher than France, Germany, Italy, Japan, Canada and the U.S.
If you think the UK’s got it bad, spare a thought for these countries where interest rates are rampant
- Zimbabwe: 95%
- Argentina: 97%
- Ghana: 30%
- Malawi: 24%
- Iran: 23%
- Turkey: 10.50%
Let’s not talk about inflation, just yet…
‘Everything is fine, nothing to see here!’
Dream or reality – did this really happen?
The party-gate scandal lead to SERVING members of the UK government being fined, including the then prime minster (since sacked by the party) – and the then chancellor of the exchequer (now our serving prime minister).
You really can’t make this stuff up.
It rains in the UK!
Why are we so surprised when it rains in the UK?
Latest reports suggest that the number of people heading out to the shops fell for the first time in July in 14 years as the UK struggled with one of the wettest months on record.
Overall footfall was down by 0.3% (that doesn’t seem high to me) – in the first drop in July since 2009, latest reports suggest. High Streets were hit hardest but shopping centres and retail parks got a boost in visitor numbers.
Not all bad
Soft play areas and cinemas have enjoyed a business boost. Also holiday parks are taking last minute bookings as discounts are offered.
Aside from the rain, the rising cost of living and rail disruption were also behind the fall. Shoppers have been battling with one of the wettest Julys on record, according to provisional reports.
High Streets in coastal towns were especially hard hit, with footfall dropping 4.6%, as the rain kept people away from beaches.
July’s figures also appeared to demonstrate the harsh reality of the impact of interest rate rises on consumers, combined with rain and the continuing transport and rail turmoil traveller have to endure in the UK.
Moving on
Digressing from the real report here, which is the slowdown in UK shopping habits due to the rain – we ought to remember that in the South West there is a hose pipe ban. This ban has been in force since summer 2022! And, the UK looses excessive amounts of water through leaks.
Ironic isn’t it. All that rain and we just don’t store enough! How do other ‘hot’ countries manage? Anyway, at least we can go shopping, or not as the case may be!
Ripple suggests U.S. banks will want to use XRP cryptocurrency for fast international money transfers, after July 2023 ruling
Banks may use XRP Ripple as a payment system to replace SWIFT
XRP Ripple is a payment settlement system and currency exchange network that can process transactions globally. It is designed to facilitate cross-border payments by using XRP, a cryptocurrency, as a bridge currency between different fiat currencies.
XRP advantage is cost and speed
XRP Ripple claims to offer several advantages over SWIFT, the system most financial institutions use for international money transfers. XRP transactions can be completed in as little as 3 to 5 seconds and transaction fees are just 0.0001 XRP. SWIFT, on the other hand, can take up to 5 business days and charge higher fees.
Not so Swift
However, despite XRP Ripple’s efforts to disrupt the industry, SWIFT has not been idle. The interbank payments network has recently launched SWIFT Go, a new service that enables businesses and consumers to send low-value cross-border payments anywhere in the world in seconds with full transparency and security.
SWIFT has also reportedly completed a successful cross-border payment from Australia to Singapore in only 13 seconds in a trial.
Adoption?
Therefore, it is not clear whether banks will adopt XRP Ripple as a payment system to replace SWIFT, or whether they will stick with the incumbent network that has been improving its speed and efficiency. The outcome may depend on factors such as regulation, customer demand, and market competition.
It may also depend on costs and speed guarantees – banks will love to save money on money transfers.
Now that an international money transfer can be completed in seconds and not days – what will the client be charged?
Summary
Ripple is confident U.S. banks will start wanting to use XRP for cross-border transactions after a judge gave the firm a partial victory in its fight against the SEC.
A judge ruled that XRP cryptocurrency Ripple is closely associated with, but was not in itself necessarily a security, in a development with major implications for the digital asset industry.
It wasn’t a total victory for Ripple, however – the judge also ruled that sales of XRP by Ripple to institutional buyers do count as unregistered sales of securities.
Nintendo’s Record Profit Boosted by Zelda’s Success
Revenue up 50% year-on-year, thanks to Zelda
Nintendo Co. has reported a new high for its first-quarter profit, thanks to the blockbuster launch of its latest Legend of Zelda game.
The Legend of Zelda: Tears of the Kingdom, released in May 2023, sold more than 18.5 million copies in the first quarter and received universal acclaim. The game features an open-world adventure with stunning graphics and gameplay, and is considered one of the best titles on the Switch platform. Interestingly, the game is played offline.
Outstanding game
The outstanding performance of Zelda has helped Nintendo prop up flagging sales of its Switch console, which is now in its seventh year on the market and faces competition from rival console makers Sony Group Corp. and Microsoft Corp. Nintendo has not announced any major games for the rest of the fiscal year, nor has it revealed any plans for a successor to its flagship console.
Nintendo maintained its full-year forecast for the console of 15 million units, which would be an impressive feat at this stage of the console’s lifecycle. The company also has a strong pipeline of titles for the year-end shopping season, including Detective Pikachu Returns and Super Mario Bros. Wonder.
Super Mario Bros Movie Boost
Nintendo saw a boost from the ‘The Super Mario Bros. Movie‘, based on the company’s best-known characters, which has generated more than $1 billion at the box office since its April release. The film was produced by Universal Studios.
Fitch downgrades U.S. credit rating to AA+ over fiscal concerns
Must try harder
The U.S. has lost its top credit rating from Fitch Ratings, one of the three major credit rating agencies, due to its recent political gridlock over the debt ceiling and deteriorating fiscal situation. How much does this matter?
Fitch re-calculated the U.S.’s long-term foreign-currency issuer default rating (IDR) from AAA to AA+ early August 2023, reportedly saying it was because of a ‘steady deterioration in standards of governance‘ and a lack of confidence in fiscal management.
Downgrade
The downgrade comes despite the resolution of the U.S. debt ceiling crisis in June 2023, when Congress agreed to suspend the $31.4tn borrowing limit until January 2025. Fitch warned that the U.S. faces serious long-term fiscal challenges, such as rising debt levels, unfunded social security and Medicare obligations, and the real possibility of a recession.
Disagree
Janet Yellen, the U.S. Treasury Secretary and the White House strongly disagreed with Fitch’s decision, calling it ‘arbitrary’ and ‘bizarre‘. They stated that the U.S. economy is fundamentally strong and that Treasury securities remain the world’s safest and most liquid assets. They reportedly suggested that Fitch’s calculation model is flawed and outdated.
Downgrade rattles markets
The downgrade is unlikely to have a significant impact on the U.S.’s borrowing costs or reputation, as it still retains its triple ‘A’ rating from the other two major credit rating agencies, Standard & Poor’s and Moody’s.
However, it could increase market volatility and pressure the U.S. to address its fiscal imbalances. But according to Janet Yellen these do not exist and there is no problem…?
‘What the hell just happened?’
‘One minute I’m in work and the next…?’ ‘Is this AI again?’
The day the blue bird flew away – Twitter rebrands as X – Taking Stock
‘Didn’t expect to see you here again, thought you’d retired’. ‘Yeah, me too!’
UK to issue new oil and gas licences for energy independence
Green?
The UK government has announced a plan to issue over 100 new oil and gas licences in the North Sea, as part of its drive to make Britain more energy independent and reduce reliance on imports. The Prime Minister said that even when the UK reaches net zero by 2050, a quarter of its energy needs will still come from oil and gas.
Carbon Capture
The new licences will be subject to a climate compatibility test and will aim to unlock carbon capture and storage and hydrogen opportunities in the region. The government has also approved two new carbon capture projects in Scotland and the Humber, which are expected to be delivered by 2030.
Criticised
The move has been criticised by environmental groups, who argue that opening up new fossil fuel projects is incompatible with the UK’s climate goals and will undermine its leadership ahead of the COP26 summit in Glasgow.
They also question the claim that domestic production is cleaner than imports, as the UK’s oil and gas sector is still responsible for significant emissions.
The government has said that it will support the transition of the North Sea industry to low-carbon technologies and protect more than 200,000 jobs in the sector. The UK government has also pledged to invest in renewable energy sources, such as offshore wind, to diversify the UK’s energy mix.
‘In a time of universal deceit – telling the truth is a revolutionary act’
George Orwell 1903 – 1950
This quote is attributed to George Orwell, a British writer and journalist who is best known for his novels 1984 and Animal Farm, which are critical of totalitarian regimes and propaganda.
Buffet Indicator & U.S. Stock Market
The Buffet Indicator is a valuation multiple used to assess how expensive or cheap the aggregate stock market is at a given point in time. It was proposed by investor Warren Buffett in 2001, who called it ‘probably the best single measure of where valuations stand at any given moment‘ . It compares the total value of all publicly traded securities in the U.S. to the U.S. GDP .
The current value of the Buffet Indicator is 181%, (July 2023) – which suggests that the U.S. stock market is reportedly worth $48.37 trillion, while the U.S. GDP is $26.74 trillion.
This ratio is 50.50% above the historical trend line, suggesting that the stock market is overvalued relative to GDP. Buffett warned that if the ratio approaches 200%, ‘you are playing with fire‘.
Buffett Indicator: $48.85T ÷ $26.91T = 182%
Does it Matter?
The Buffett Indicator expresses the value of the U.S. stock market in terms of the size of the U.S. economy. If the stock market value is growing much faster than the actual economy, then it may be in a bubble.
Buffet Indicator Movement Above and Below Trend Line
Meta (Facebook) Posts Strong Wall Street Gain in 2023 – its year of efficiency
Meta Platforms, Inc. (Nasdaq: META), formerly known as Facebook, has seen its stock price soar in 2023, a straight nine month gain in a massive turnaround after a dismal performance in 2022.
Meta is the parent company of social media apps such as Facebook, Instagram, WhatsApp and Messenger, as well as the Oculus VR headset and other ventures.
Year of efficiency
Meta’s founder and CEO Mark Zuckerberg has declared 2023 as the ‘Year of Efficiency‘ for the company, as it tries to cut costs and streamline its operations. The company has also announced layoffs of about 10% of its workforce in 2022 and 2023, as part of its restructuring efforts.
Meta’s stock has almost doubled since January, making it among the top performers on the S&P 500. The company has also seen a boost in the number of daily active users on Facebook, reaching two billion as of the end of December 2022. Meta’s net worth is currently at $89.9 billion, making Zuckerberg the 12th wealthiest person on the planet, according to Bloomberg’s Billionaire Index.
Surge
Meta’s stock surge comes after a sharp decline in 2022, when the company faced regulatory scrutiny, public backlash and technical glitches over its plans to expand into the metaverse, a virtual reality world where people can interact with each other and through digital content.
Meta’s stock plummeted by over 60% last year, as Zuckerberg struggled to sell Wall Street on his vision for the future of social media.
Future
Meta is still betting on the metaverse as its long-term goal, and has been investing heavily in AI, VR and AR technologies. The company is reportedly working on a new social media app called ‘Instagram for your thoughts‘, which would allow users to share their thoughts and emotions using brain-computer interfaces.
The app could launch as soon as next month, according to latest reports.
The metaverse is coming!
‘Two things are infinite: the universe and human stupidity; and I’m not sure about the universe.’
Albert Einstein 1879 – 1955
UK house prices fall according to the Nationwide Building Society
UK house prices dropped at their fastest annual pace for 14 years in July 2023, according to Nationwide.
The building society said house prices dropped by 3.8%, which is the biggest decline since July 2009. Nationwide said mortgage interest rates remain high, making affordability a difficult for house-buyers. Mortgage costs hit the highest level for 15 years in July 2023 as lenders grappled with inflation and uncertainty over rates set by the (BoE) Bank of England. The BoE recently raised interest rates by 0.5% to 5% in a belated efforet to curb rampant inflation which is currently well above the 2% target.
Average UK house £260,828
The average price of a home in the UK is £260,828 – 4.5% below the August 2022 peak. Many first-time buyers would welcome a drop in house prices, which have climbed in recent years, including during the pandemic.
But despite July’s fall, higher mortgage rates mean housing affordability ‘remains stretched‘, Nationwide said.
Real average house price data from 1975 – 2022*
*Indicative guide only (prices adjusted for inflation).
Euro Zone GDP & Inflation Improves in July 2023
EU Inflation 5.3% July 2023
Euro zone inflation fell in July, and new growth figures showed economic activity picking up in the second quarter of this year, but economists still fear a recession.
Headline inflation in the EU was 5.3% in July, according to preliminary data released end of July 2023, lower than the 5.5% registered in June. However, it still remains substantially above the European Central Bank’s 2% target.
EU GDP
GDP growth accelerated in the second quarter, expanding by 0.3%, higher than the 0.2% expected by analysts.