QE boost #investments #finance
Yesterday the Bank of England announced a QE boost with another 60 billion of quantitative easing and a cut in the base rate to 0.5%. There will be no prizes for guessing who will benefit from this boost. The stock market surged by 1.5% yesterday and the trend continues today. The base rate cut will see mortgages cheaper and so stoke the London housing bubble a little more while there is stifling of the supply side.
The QE boost will mean the bank will buy 60 billion in government bonds in the market with money it has effectively printed, swapping one form of ‘paper’ for another. It predicts 2% inflation. Of course, that doesn’t mean all prices will go up 2%. The goods and services that the poorest in society buy are likely to increase by much more than 2%.
The cut in the base rate is already being passed on to savers who get miserly interest on their savings. I’m still getting 4% from Zopa. It is good news for mortgage payers, who will hunt for even more expensive homes and increase London property prices even further. That cut was bad news for banks and will make it even harder for them to make a profit. If people just spend and don’t save where do companies get their financing from? I nearly forgot the bigger companies will get some of that QE boost, the Bank of England is also buying up corporate bonds.
Solo Oil soared yesterday giving long-term investors a lift. Half of those gains have been lost this morning but we are close to getting some good news from Tanzania and Solo has diverse investments, any one of which, could produce a steep rise in the share price at any time.
Computers are quite useful and great for analysing trends. One system for analysing stock market trends compares recent share price rises to the more long-term rises or falls and then recognises the trend and buys on the upward trend. Many of these buys are automatic buys, the computer does the buy when it recognises the ‘trend’. We now have an artificial upward trend created by the Bank of England QE boost. As computers over the coming days and weeks analyse the recent trend they are more likely to buy than sell. This computer generated bull market won’t apply to shares in banks and some others severely affected by the Brexit chaos, but it does present opportunities for private investors.
Finally, many private investors are pulling out of the alternative investment market (AIM) because of dodgy practices by market makers, like manipulating spreads. I’m thinking of joining them, I certainly won’t be putting more money into the market. While spreads have to take account of risk, increasing them to over 10% for no reason seems like profiteering and market manipulation.