State of the Market

[squarepeg]

My problem with this new Labour administration is that they seem to view commercial activity as a dirty thing, to be eliminated. How dare people be so crude as to want to earn and keep money, to build wealth. Reves might be an economist, but a political one, and one that believes in some pretty marxist bs. Harris too. Chirst, its just about enough to make me think that Trump might be a good idea, though I believe he will not do anything remotely effective, and will just do more bailing out to win political favour.

She is very much in favour of Securonomics, which is one of those economic belief systems that turn good intentions into tears.

[willendure]

She is very much in favour of Securonomics, which is one of those economic belief systems that turn good intentions into tears.

https://dwfgroup.com/it-it/news-and-...-actually-mean

"The Labour Manifesto sets out that, if elected, they will create a £7.3bn National Wealth Fund investing in projects that contribute to their growth and clean energy objectives, including:

• £1.8bn to upgrade ports and build supply chains across the UK;
• £1.5bn in new gigafactories;
• £2.5 billion to rebuild our steel industry;
• £1 billion to accelerate the deployment of carbon capture; and
• £500 million to support the manufacturing of green hydrogen."

Well, that doesn't sound all bad - if you are a big player, or work in the right sectors and so on. At least the debt incurred will be spent on capital assets for the nation, rather than handed out to PPE companies belonging to dodgy Tory party donors.

The difficulty comes in the opportunity cost, if govt borrows to fund specific sectors, will push up interest rates and make capital harder to access for other sectors. Its obvious to me that we do need strategic investment in infrastructure, but we also need grass roots innovation. I'd like to see ultra-low tax incubator zones or rules, to help new small businesses get going.

None of the above will have any effect whatsoever on the immediate future, and likely recession. Labours plans are a bit like, if you owned a house but were out of work and skint, but its time to get the boiler replaced and fix the roof.

https://www.bbc.co.uk/news/articles/cw4rx2zxy7wo

There was this BritishVolt attempt to build a giga factory in Northumberland, but all fell through. If it wasn't a viable idea then, hard to see how it will magically become one now.

[Fraidycat]

Japan taking down the world financial markets.

If this gets worse ie. stock markets crash this year, we might have to write off 2025 as the year the contract market finally recovers.

[jamesbrown]

Japan taking down the world financial markets.

If this gets worse ie. stock markets crash this year, we might have to write off 2025 as the year the contract market finally recovers.

You're obsessed with the financial markets as driving contracting markets, but the link is quite loose and conditional. In fact, crashes and depressions often lead to change and change leads to lucrative opportunities, such as messes that need to be cleared up. I've had some of my best gigs during financial market meltdowns, coincidentally or otherwise. My particular engineering niche is currently booming, hey ho. Regardless, the link is weak and having such a pessimistic attitude certainly won't help your mental state and may even hurt you commercially/contractually. Be more Ferengi

[willendure]

You're obsessed with the financial markets as driving contracting markets, but the link is quite loose and conditional. In fact, crashes and depressions often lead to change and change leads to lucrative opportunities, such as messes that need to be cleared up. I've had some of my best gigs during financial market meltdowns, coincidentally or otherwise. My particular engineering niche is currently booming, hey ho. Regardless, the link is weak and having such a pessimistic attitude certainly won't help your mental state and may even hurt you commercially/contractually. Be more Ferengi

Would disagree, at least on the timing part. I would say contracting market is very strongly corelated to financial markets, though they do not necessarily move in synch. A financial contraction leaves less money available to spend on projects, and projects mean contractors, so a contraction in one certainly drives the other.

I've had some of my best gigs *just after* financial market meltdowns. In 2009 for example, I got an amazing gig working in high frequency trading.

On the other hand during meltdowns, I have been fired. Was let go by a pensions company in January 2009, because it was tanking badly in the 2008 crisis. First out the door are the contractors, since they are expendable by intent. It could happen to me again soon, because I know my current client doesn't exactly have customers queuing out the door! We'll see. I have 1 years living expenses in cash, stashed away because I learned.

[jamesbrown]

Would disagree, at least on the timing part. I would say contracting market is very strongly corelated to financial markets, though they do not necessarily move in synch. A financial contraction leaves less money available to spend on projects, and projects mean contractors, so a contraction in one certainly drives the other.

I've had some of my best gigs *just after* financial market meltdowns. In 2009 for example, I got an amazing gig working in high frequency trading.

On the other hand during meltdowns, I have been fired. Was let go by a pensions company in January 2009, because it was tanking badly in the 2008 crisis. First out the door are the contractors, since they are expendable by intent. It could happen to me again soon, because I know my current client doesn't exactly have customers queuing out the door! We'll see. I have 1 years living expenses in cash, stashed away because I learned.

Your contracting market, perhaps. Mine, definitely not. Of course, this is largely why the anecdotes posted in this thread have limited value. Anyway, you're agreeing with my point that cleaning up messes from meltdowns is part of the lucrative aftermath of a meltdown in the financial services and other areas that are directly exposed to meltdowns. Obviously, many markets are completely insensitive to financial market meltdowns or even boom in those circumstances as money is shifted around.

I do wonder about some of the negativity around here, though, particularly from posters with usernames that scream negativity . To some extent, you make your own opportunities. There are limits when your whole operating model has been undermined by the commoditisation of IT services, but definitely at the margins, and recognising and accepting the big shifts before your competition is part of the skillset of contracting.

[GigiBronz]

I'll take the contrarian view and say that markets crashing is a positive. They'll start with helicopter money once again, companies just getting free money to pump into the economy QE or other more hidden means.
The economy is a scam, financial markets are a scam, it's a all a loosely connected domino, if panic sets in it will either be martial law or hyperinflation.

They'll take the second. Contracting market will be the first to recover. Rates will go up in a month or two.
Bills will double also too...

[Fraidycat]

You're obsessed with the financial markets as driving contracting markets, but the link is quite loose and conditional. In fact, crashes and depressions often lead to change and change leads to lucrative opportunities, such as messes that need to be cleared up. I've had some of my best gigs during financial market meltdowns, coincidentally or otherwise. My particular engineering niche is currently booming, hey ho. Regardless, the link is weak and having such a pessimistic attitude certainly won't help your mental state and may even hurt you commercially/contractually. Be more Ferengi

The last four contractor downturns all coincided with stock market downturns.

2001, 2008, 2020, 2022.

The correlation is 100%.

Im not saying one causes the other, just that if something bad enough happens to cause a stock market downturn that thing has always resulted in the contractor market slumping as well.

In 2009 and 2020 they cut interest to almost zero + QE and they did it fast and it was boom times again within a few months.

It would amazing if they could do that again and not cause inflation. I'm all for it. But inflation was on no ones radar back in 2009 and 2020, but this time they might be a bit more slower and cautious..

Having written that, another major crash and bear market in stocks isn't a certainty, just more likely given recent stock market action.

[willendure]

In 2009 and 2020 they cut interest to almost zero + QE and they did it fast and it was boom times again within a few months.

It would amazing if they could do that again and not cause inflation. I'm all for it. But inflation was on no ones radar back in 2009 and 2020, but this time they might be a bit more slower and cautious..

I think it will likely happen quickly, if for no other reason than central banks are now better practiced at it. It took some figuring out prior to 2009, because cutting interest rates to near zero was not enough, and they had to invent ways to take assets onto their balance sheets - government bonds at first, then mortgages, commercial bonds. These were things not done since the great depression in the 1930s. In the 2020 crash they even started taking on ETF funds invested in equities.

It is interesting that QE did not cause inflation, at least not in the CPI. But it certainly did cause asset inflation didn't it? House prices and stocks and shares did very well since 2009. I think what triggered the big jump in CPI was Trump giving stimie checks direct to households, with his signature on them, to make it seem like he personally was handing out the money. Of course people just went out and spent it, especially as many of them had excess savings because they had to sit at home in lockdown.

The difficulty is that inflation causes longer term interest rates to rise - since no one will lend in an inflating currency unless they get a very good interest rate to compensate for the loss in real value of the principal. With US debt to GDP at 123% and interest rates at 5% and $30 trillion in debt, the US is close to being able to just cover its mandatory spending (interest, pensions and benfits, military spending) from tax receipts - its in the 90+% range at the moment. In a recession the debt will baloon, and tax receipts will fall, and the US will certainly be in fiscal dominance. Hence my expectation of a panic cut to short term rates and QE in the next year or two, and then stagflation and higher longer term rates overall.

The point is, that rates went to 5% to fend off inflation but killed the economy. But now we are going to get more debt and more inflation, but will no longer even be able to afford 5% to defend the currency. The max interest rates that the US and UK are going to be able to afford going forward will fall. There is simply too much debt and it can only be inflated away. Worse, this is an accelerating process. "interesting" times ahead...

[willendure]

Your contracting market, perhaps. Mine, definitely not. Of course, this is largely why the anecdotes posted in this thread have limited value. Anyway, you're agreeing with my point that cleaning up messes from meltdowns is part of the lucrative aftermath of a meltdown in the financial services and other areas that are directly exposed to meltdowns. Obviously, many markets are completely insensitive to financial market meltdowns or even boom in those circumstances as money is shifted around.

I don't know what sector you work in? Maybe HMRC or something like that?

But what is more likely - that most contractors are like you and work in sectors that are not at all affected by economic downturns, or that more work in sectors that are affected? Even public sector can end up cutting costs in a downturn.

Money is not simply "shifted around" in a deleveraging event. When debt is repaid, if new loans are not issued with the proceeds, then money is actually destroyed. This is why during such an event prices accross all asset classes fall in unison because there is deflation of the money supply and the demand for cash to repay debts makes cash itself more valuable.