The Bear Market
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Trading Features / Strategies from Simon Denham of Capital Spreads.
Markets look to be coming in on the weak side this morning which is disappointing after late activity on Friday gave hope that a base had been reached. The problem has not so much been any particular new piece of information on the UK economy but from the almost universally gloomy statements from the meeting of the ‘great and the good’ at the G7 Finance ministers get together. Forgive me for being a little dense but didn’t they all have time for a chat at the Davos beano a couple of weeks ago?
Whilst the rest of the world fears a serious slow down, Capt’n Darling can be heard propounding the almost ludicrous theory that the UK is safe from any global influence. Err...yes this is the same country that has the huge, and growing, public sector and trade deficits, a manufacturing base of just 13% of total output and a financial sector (on which the rest of the economy clings like limpets) that is being dealt a series of hefty blows from Credit Crunch to Non Dom tax hikes.
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As has been mentioned many times in the press and analysts’ publications one of the main problems is the huge parasitic organism that the public sector has become. Whilst a robust state sector is a desirable asset of any nation, the UK model has become a monster of ridiculous proportions. Private sector productivity has gone up year after year in an unbroken chain for many decades but the Public sector has actually fallen over the last ten years, not just last year or the year before BUT for ten whole years. This must make the change in output of the average public sector worker (on a cumulative basis) over 50% lower than his counterpart in the private sector. Unfortunately, whereas in the private sector a situation like this would call for cuts to survive, the one thing we can be sure of is that “ the axeman will never cometh” as far as this government is concerned. Any problems? Throw another few billion at it!
Watching the public sector hand out massively paid ‘non jobs’ on an almost continual basis has been a frustrating experience for those running tightly controlled businesses only to see 30% of the profits swiped in a sort of legalised highway robbery called corporation tax and then, if they want to pay a dividend with what is left, watching the same government tax that same profit once again (making the cumulative tax on distributed profits over 50%).
The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
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'The Bear Market' edited by SD, updated 12-Feb-08
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