3 Reasons This Rally Is Doomed

This is an old story since when the markets have taken a step back and wallowed around. The market was way over sold so to quote the FTSE 100 as soaring by 47% is rather misleading. The equity market is still relatively low and there does not seem to be any reason for it to sink further with so many economies gradually coming out of recession. The only reason it will go down again is if investors react to the manipulative scaremongering of those who make money out of market volatility. Invest for the long term and do not buy into the bears.

I am looking to invest and Pendragon is a company that will do well both in the short and long term. At Stratstone Jaguar the main thing stopping them selling even more cars is that the Jaguar XF is not being built fast enough. This means there is a good long term demand for these Jaguars which will increase when the XJ gets to the market in 2010.

Pendragon have also moved into the second hand market in a big way and I am expecting their interim results to show a better than expected performance, which will enable them to pay back more of their bank loans.

Definitely a stock to watch.

Neptel, its great wearing rose tinted glasses isn't it! So I guess all the leverage that was the cause of the mess last year has just disapeared.

BTW, remark on the article now, you have to note that the interest rates the writer is talking about are only central banks rates. Whilst the central bank may directly set rates on money held at the BoE overnight etc, many of our "real" interest rates are set by the market. This is generally set by supply and demand fundamentals for debt. Without recent QE, current market interest rates, for gilts and other debt would likely be much higher than they are now. The QE has "manipulated" rates a lot lower (mainly through buying gilts and corporate bonds). Now, the BoE will probably continue this approach, which not only has the effect of reducing rates but also makes more cash available to investors to use on the market (which has to find some sort of home), which in turn supports asset prices and reduces yield (e.g. again pushes down interest rates).

At some point QE WILL stop. Whatever happens to headline BoE rates (even if they stay near zero), the yield on gilts will be pushed up. This will affect all kinds of other borrowing rates from coporate bonds through to all types of mortgage rates.

Luckily the banks are going to be forced to buy gilts to sure up their capital bases. So atleast there will be another big buyer for a time.

But as soon as these dynamics start to break down, there will be a big spike in interest rates (regardless of BoE overnight rates).

AND ... the longer the debt charade goes on the more painful will be the outcome when things break down again.

US housing (e.g. debt & equity withdrawal converted into consumption) was used to cushion the dot com bubble burst (an irony of this is that a lot of that spending went on chinese goods, the proceeds of which were recycled into the US debt markets, enabling further easier borrowing). Goverment debt is now being used to cushion the fallout from the credit crisis. Where will the next cushion come from. Answers are gratefully received from any long term buy and hold propenents.

Eventually the current economic props are going to have to be taken away. That may take some time, but when they do go beware!

Oh and I do expect markets to at least stay where they are if not improve over the next 6 months maybe longer, but westen goverments largesse will have stop at some point.

I agree that the quality of articles is going down a LOT and I am thinking of canning these emails.
You are now at risk of losing (even more) credibility if things don't improve.

By the way some folk (include myself in that) find it irritating to have Nouriel Roubini et all referred to as if they know what is going to happen. You need to remember that at any time almost everything is predicted by someone or other. The fact that obviously someone is going to hit the mark does not mean anything other than luck is at work.

LARFIELD , consumer cofidence tickking upwards, where will their funding come from? Saving levels are at historic lows, debt at hostoric highs (oops there has been a little rudction in debt).

Expect more debt to be paid down rather than built up over the coming years.

So I think your positive will actually be a negative for consumer spending.

The UK goverment keeps conplaining about banks not lending, I suspect this is as much down to borrowers not borrowing (which is hypocritcal of teh gov anyway, since they know banks will be need to build up their core capital ratois levels which which constrains their ability to lend in itself).

Remember the masses have been living on the never never for along time now and there's only so much borrowing they can do without risking later insolvency.

Also I haven't been receiving any of those credit card teasers for some time and don't expect to see many more and my financial sitution is better than it was pre bubble burst.

If 75% of the FTSE 250 revenues are derived from outside the UK, surely the above article and subsequent comments are far too parochial.
The UK will undoubtedly take a while to sort itself out even if things go well, but with a world to operate in a lot of companies are going to do well even if the the UK is in prolonged difficulty. There are some similarities to Japan where exporting companies have been almost decoupled from the extended domestic spending decline.

The big crash was unforseen by the complacent masses. The difference is that now everyone is tuned in and focused and the bots have been recalibrated to react on a hair trigger. And that's what's necessary now. Dust off your slide rule and be an informed gambler, because at best that's what you're going to be.

Anyone who uses language such as 'doom monger' is bound to be disappointed by the reality of the market sooner or later. A lot of morons got lucky thanks to the trillions of government money shovelled into this farce of a market. Most pro traders have lost bundles.
We all know that every nation in the west is skint- due diligence will show what a mess we are in, so don't get angry at people who have a different perspective, a more worldly view, and an understanding of market drivers.
Once the easy money is gone what then?
The only chance of a new boom is a technological breakthrough but as most of these are owned buy greedy corporations already, that may take a while.

Neptel is playing the man not the ball. The author presents decent arguments to justify gloomy expectations. Neptel's argument boils down to saying"don't be so miserable". Hmmm, great counter-argument! What was the point of writing it?