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BARCLAYS WARNING
Jul 1, 2008 | 4:18 PM
Category: News
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Barclays warns of disaster as Fed loses all credibility

By cpowell

Created 2008-06-27 02:02

By Ambrose Evans-Pritchard
The Telegraph, London
Friday, June 27, 2008

FULL ARTICLE AT: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/
2008/06/27/cnbarclays127.xml

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero."

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock under way. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.

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Member Comments Total Comments: 3
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RandyLoo read my blog view my photos
Jul 1, 2008 | 7:57 PM

They can raise interest all they want, people aren't going to be buying much. Middle income earners won't be saving anything either. Inflation? Well we have been experiencing that for months now with all life sustaining goods and fuels. They aren't discussing anything in those board meetings that we don't already feel. Of course, those guys wouldn't know what the inside of a grocery store even looked like let alone the price of anything.
DEOP, I am just venting not at you or your blog...just because these guys have no idea what the Real Americans are feeling right now.
DEOP read my blog view my photos
Jul 2, 2008 | 5:25 AM

RandyLoo - I agree with you.

If people haven't been paying attention to their investments, thinking their advisor is watching out for them, they better wake up real soon and do what's best for themselves. Too many advisors do what's good for them, not their clients. That's why there is such a problem with annuities - these investments have many drawbacks and certainly are terrible for seniors, but the high commissions (much higher than standard mutual funds)entice salesmen to push them.
People who now have investments in mutual funds don't realize that their salesmen advisor continues to make income (12b-1 fees) as long as their money remains in a normal mutual fund. If you move your money for safety into a money market fund, the advisor loses that income. If we are headed for another period such as 2000-2002 or worse (and the charts are so similar it's errie), we could see the market lose another 30% or so.
Granted, if the investor is young, usually the market rebounds to where it was in 4 years or less. But the great depression took 30 years for the market to get back to where it was. No one has a crystal ball and can say for sure what will happen, but my investments moved into money markets weeks ago. If I'm wrong, I'll miss a bounce back and maybe 10% growth. If I'm right, I'll be able to retire before I'm 85.
As for inflation, obviously it's higher than what the government is saying. And with the oil price, it's going to get much worse. This is one time the old trickle down theory is really going to work. What won't be affected? I've tried my best to hold the
DEOP read my blog view my photos
Jul 2, 2008 | 5:27 AM

cont
I've tried my best to hold the line in my business, but I can't any longer. Inflation will just be another nail in the coffin for the stock market.
Nobody needs to panic and start stuffing their money under the mattress, YET! But everyone needs to pay attention.
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DEOP

How sad it is when people hide behind the delete button. If someone is rude, obnoxious, or obscene, why not let the world see this? The truth is the delete button is used by some when they disagree or want to hide the facts that shoot down their beliefs. But worse is the chickens that don't allow any comments on their threads.

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