Interesting Links for 20-10-2016

[andrewducker]

Depression could be treated with anti-inflammatory drugs (tags: depression inflammation ) This is what eight weeks of mindfulness training does to your brain (tags: brain mindfulness meditation ) Don’t believe what you’ve read: the plummeting pound sterling is good news for Britain And vitally necessary if we're ever going to manage to be a

Comments

Don’t believe what you’ve read: the plummeting pound

[drdoug]

It's hard to take seriously an article about the fall in the value of the pound that claims that the FTSE100 doing well is a positive sign, but makes no mention whatsoever of the fact that most FTSE100 companies have significant (or the majority of their) earnings in other currencies. To spell it out, if a multinational makes US$1bn profit a year, and the pound falls 10% against the dollar, that profit will be worth 10% more in sterling terms, so the company's share price ought to rise accordingly to reflect the increasing earnings as denominated in pounds. The earnings haven't gone up, just the number representing those earnings in GBP.

Judging a currency as an indicator of national economic success, or - even worse - it's value as an entity - is a great mistake. A falling currency is a sign of value reducing, just as a rising currency is a sign of value increasing; nothing more, nothing less. If the value is reducing then you do indeed want your currency to fall or you will have an overvalued currency (which is indeed bad) - which is why, since the 1970s, most countries have allowed their exchange rates to float over time, to reflect the balance of supply and demand.

If the author was right and the main driver of reducing value was an outflow of "speculative funds invested in the property sector", causing the "finance-property bubble to deflate", I think many people would be rejoicing. The actual data, though, suggest that "House prices continued to rise strongly following the Brexit vote - driven by increases in eastern and southern England" (source: http://www.bbc.co.uk/news/business-37689595).

So overall I'm pretty unconvinced by that article.

RE: Don’t believe what you’ve read: the plummeting pound

[andrewducker]

"but makes no mention whatsoever of the fact that most FTSE100 companies have significant (or the majority of their) earnings in other currencies."

It does. That's what it means by:
FTSE 100 index, comprising large multinationals...
The FTSE 250 - based on mid-caps deriving half their revenues from the British domestic market...
Even the FTSE “Local” index, whose companies derive 70 per cent or more of their revenues by selling their goods and services within Britain...
Which is clearly pointing out that there are three different indices, each of which has different levels of exposure to the pound.

I agree with you about the housing though.

Re: Don’t believe what you’ve read: the plummeting pound

[naath]

hahaha housing deflation lol no. 13% this year here.

Re: Don’t believe what you’ve read: the plummeting pound

[ckd]

I'd be interested in seeing those FTSE graphs scaled by the exchange rate between the GBP and a basket of major currencies (USD, EUR, JPY maybe - maybe trade-weighted by UK trade?). I bet it looks a lot less rosy then.

"The pound is down, but stocks priced in pounds have gone up! Woo!" is not as reassuring as it might seem.

Re: Don’t believe what you’ve read: the plummeting pound

[andrewducker]

Sadly, I think you'd have to make them yourself.

[danieldwilliam]

About level in dollar terms.