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5 "Tells" that the Stock Markets Are About to Reverse

UK Economy Accelerating General Election Boom, Real Secret of Financial Success and Will Scotland Commit Suicide?

Politics / UK Economy May 01, 2014 - 04:18 AM GMT

By: Nadeem_Walayat


Academic economists have once more been caught on the hop as the UK economy led by the services sector accelerates to its best year on year growth rate in 6 years of 3.1% by adding preliminary GDP of 0.8% for 2014 Q1 that annualises to an near economic boom rate of 3.2%, with the economy now looking set to have recouped all of the last Labour governments catastrophic collapse of 2008-2009 by the end of June this year.

As expected George Osbourne was buoyant - "Today's figures show that Britain is coming back – but we can't take that for granted. We have to carry on working through our long term economic plan," said the chancellor. "The impact of the great recession is still being felt, but the foundations for a broad based recovery are now in place."

Whilst Ed Balls tried hard to fine a dark cloud in the silver lining - "Now that growth has finally returned, the question is whether ordinary working people will properly feel the benefit and we have a balanced recovery that’s built to last.

“David Cameron and George Osborne want to tell people the cost-of-living crisis is over, but millions of hardworking people are still feeling no recovery at all. "

My in-depth analysis of the UK housing market which included a UK GDP growth forecast concluded in the following expectation for 2014-

30 Dec 2013 - UK House Prices Forecast 2014 to 2018, The Debt Fuelled Election Boom

Economic Growth Forecast 2013-2015

Therefore in terms of my economic growth conclusion, I expect the UK economy to at least attain a growth rate of 3.6% for 2014 and target 3.8% for Q1 2015 with a strong possibility of achieving the holy grail for election victories of announcing during the election campaign of 2015 that the UK economy at that time was growing at 4% per annum. Furthermore post election I expect that an over heating UK economy to slow as it dips back towards 3% over subsequent quarters of 2015.

The Goldilocks Economy

Britain's economy has now entered the goldilocks zone of strong growth coupled with low official inflation that helps sedate the voting public into a mood of irrational exuberance. The economic data is inline with my forecast expectations for the UK economy to attain the holy grail of an 4% annual growth rate by the time of the next general election which with a year left to go literally sows the seeds for an outright conservative election victory.

Debt Fuelled Economic Recovery

The truth is that this is a debt fuelled election boom, both public debt to employ public sector workers to shuffle paper back and forth and private sector debt to inflate house prices as the brainwashed masses perceive rising house prices as rising wealth when the reality is one of becoming more indebted and thus more enslaved to the system. The asset backed debt based slavery system is highly effective and feeds on our inbred animal instincts for instant gratification as I recently covered at length in London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation.

The Real Secret to Financial Success

In my experience the real secret of financial success is the exact opposite to most peoples perceptions of how to succeed, for most people perceive financial success in terms of what they own, i.e. new car, big house, expensive clothes and jewellery, even bars of precious metals all of which is mostly attained by means of saddling themselves with debt that they will then have to work hard to service their whole lives.

Thus, it appears that humans are programmed to be entranced by sparkly, shiny objectives which perhaps is a result of evolutionary consequences for our species did spend most of our 200k+ years existence on the african savanna where humans would spend much of their time seeking out that glittering, sparkly thirst quenching image on the horizon, that of sunlight reflecting off of rippling fresh pools of water, so adaptation by means of natural selection has resulted in humans becoming most focused on such glittery shiny images that our brains remain fixated on obtaining even to this very day.

So what is the real secret of financial success in today's world ?

Well a start would be to think the opposite to that which most people are conditioned to think i.e. it is NOT to bury ourselves under a mountain of debt, it is not by filling garage's full of chinese junk that perhaps most of which we may never even use once! It is not by paying homage at today's shrines of consumerism - the shopping malls with shiny plastic cards in hand to buy bags full of shiny objects.

No, the real secret for success is to understand that which is most important is NOT what we OWN but rather what we EARN. MULTIPLE REVENUE STREAMS! Successful businesses understand this as they do not tend to put all of their eggs into one basket for if they did then they know that they would soon go bust, but are instead constantly on the look out for new revenue streams even if many of their acquisitions turn out to junk, i.e. such as Facebook recently buying Oculus Rift for $2 billion for technology that is probably not worth $2 million, Facebook understands that they have no choice to but to sow the seeds for future revenue streams or they will die. All large corporations do it, we constantly marvel at the billion dollar price tags that large corporations pay for tiny app's developers. They do this because that is how they survive by either innovating a new revenue stream or by buying an emerging revenue stream and that is what ordinary people should seek to emulate to maximise financial success.

App's are not complicated, they are usually relatively short (code) simple programs that are within the capacity of anyone to produce! So learn to make App's and you too could also sucker the likes of Facebook into throwing millions in your direction, let alone if you hit the nail on the head and start to reap tens of thousands in revenues per month. It is important for every adult to learn how to make basic app's for then they will know how to guide their children into a life time of programming that in my opinion is probably the ultimate multiple revenue streaming skill to have.

I hear you say what about a career, university education, that surely will deliver a good income. We'll, that is what most have been brainwashed to believe but all I see most of the time are graduates leaving university with approx £40,000 of debt and then going on too flip burgers or some other low paid job, or even worse become unemployable as they remain fixated on the perceived value of their scrap of paper that deludes them into thinking that nothing else will do other than that which they were promised when they started their degree. Worse still their heads are so full of academic theories of what should happen that they are unable recognise and capitalise upon the many opportunities that come their way.

I often state that I consider Universities for most students (80%) to be a scam because they saddle graduates with a mountain of debt so that they are already crippled as soon as they start at the bottom of the jobs ladder.

Instead the answer is to be focused on recognising and developing multiple revenue streams and it is this which underlies Britain's strong economic recovery that academic economists completely miss for they look at the traditional data of employment and earnings such as the bad slave labour zero hours contracts, whilst virtually completely missing the big picture of the explosion in the number of self employed small businesses of over 1/2 million since 2008 which by their very nature are in a constant state of seeking out multiple new revenue streams and are not fixated on pieces of scrap paper stuck in frames on the wall that reinforce the idea that the person should only be working in an particular type of 9-5 office job.

To become successful in businesses then every act of consumption must be viewed as a potential revenue stream. It is a matter of changing ones way of perception of consumption, everything is seen in terms of what opportunity it presents to generate revenue.

An example of how your child could be easily taught to think in an entrepreneurial manner is for instance by buying a small exotic plant such as fruiting edible banana plant, which say 6 months or so later will have grown to the point where it can be split into multiple plants, a task which literally even a child can do.

Thus 1 plant becomes 4, 3 of which could be easily sold on ebay and so the child has learned a valuable lesson that they are unlikely to ever be taught in state schools of how easy it can be to create multiple income streams that will continue to annually generate profits that are many times the initial cost, and that in this example the original plant can continue to both be enjoyed and eventually also be sold off for a huge profit given its large size.

Another example, whilst shopping at discount stores, we all have those moments when we think wow that is really, really cheap. But how many of us check to see how much it typically sells for on ebay? Smartphone's make it easy these days to find out stuff that you can quickly yield a 100% profit on.

The same should go for virtually all consumption decisions.

i.e. when buying a car factor in what potential revenue streams could it generate i.e. can all of the seats be folded down so that it can also be used as a van for transporting goods? Or if you do not use it every day then would there be a market for renting it out.

Similarly the computer age is a great leveler in terms of marketing ones skills so continue to acquire IT skills that you can eventually market. For instance learn to use the application packages that are actually in demand and not just make use of the easiest to use open source equivalents .

And most importantly when buying a house it is wise to factor in areas of the property that could be used for future revenue streams such as office space, workshop, green house, driveway with plenty of parking spaces (that could be rented out), transport links, storage, rent a room etc. Perhaps the properties layout could allow it to function as a B&B for at least the summer months (check local council rules and regs). Another option is that if you have a large room(s) or a nice garden that you could hire them out for social events.

Off course the next step down the property income generating route is to buy properties to let, which generates at least 2 income streams, 1) rental income, and 2) capital gains when the property is sold. Though this really should be treated as a business that requires investment of quality time with many lessons to be learned along the way.

UK General Election Forecast

My longstanding forecast for the outcome of the next general election is as excerpted below -

30 Dec 2013 - UK House Prices Forecast 2014 to 2018, Inflation, Trend Trajectory and General Election 2015

In conclusion a May 2015 general election at an average house price inflation rate of 8.5% would result in a Conservative overall majority of at least 30 seats. Therefore this is my minimum expectation as I expect UK house prices to start to average 10% per annum from early 2014 with my actual forecast converging towards average UK house prices breaking to a new all time high just prior to the May 2015 general election which would be a significant boost for housing market sentiment and thus the Conservative's election prospects.

At the time opinion polls put Labour 6 points ahead of the Conservatives that translated into a 74 seat majority (Independant on Sunday).

Today, some 4 months on the latest opinion polls only show a marginal narrowing to Labour now being 5 points ahead at 37% to the Conservatives at 32% (ICM 15th April 2014), which would translate into a Labour majority of about 55 seats. Therefore as things stand the Conservatives are below the linear trend trajectory, however I expect an laceration in the Conservatives share of the vote as the election date draws near due to the compounding effect of successive quarters of boom time GDP growth rates of 1% per quarter.


The mainstream press remains obsessed with UKIP party of protest, which I am sure the importance of will continue to be inflated in the mainstream media right up to the day of the general election as a strong showing in this months european elections will even further bolster mainstream press attention despite the fundamental fact that UKIP at the next general election are just as likely to take votes away from the Labour party than the are from Conservatives which in effect cancels out their impact.

Furthermore the mainstream media journalists continue to talk down to the British electorate as though they are children, when it will be clear to all voters that the chances of UKIP actually winning any seats is virtually zero in 99% of consistencies, so the voters will tend to vote tactically which by the time of the next general election will in most cases be to insure that the Labour party does not win the next general election given Labours catastrophic economic depression that the country has still yet to fully recover from.

So whilst the UKIP debate that will continue to rage all the way to polling day, however in my opinion it will be a complete red herring and only have a marginal impact on the outcome of the next general election

Scottish Independence and the Balkanisation of Britain

There are 2 elections ahead of the next general election (3 if you include local elections), whilst the european elections can be ignored however the Scottish Independence referendum has the potential to cause great disruption to what in effect is a 300 hundred year old entity of the united Island of Britain, which as I have often written that a YES vote would literally sow the seeds for the balkanisation of Britain as what remains of the UK literally starts to rip itself apart for the status quo of what was taken for granted would no longer exist.

Recent news illustrates that the approaching Scottish Independence vote has already galvanised agitants to blow on the embers for Cornish independence as they wave their aptly coloured Cornish black funeralesk flag that continued into this week with calls of autonomy literally at the other end of Britain from the Northern and Western Isles with calls for devolution from Edinburgh and even calls for their own parliament that sows the seeds not only for the balkanisation of Britain but also of an Independent Scotland that following a YES vote would soon start to fragment as for instance the bordering regions would reassert their separate identity that has far more in common with the of North England than Scotland, formerly known as the kingdom of Northumbria that stretches from Edinburgh in the north to Sheffield in the south. Whilst the Northern Isles see themselves as having more in common with Norway than Scotland.

So if Alex Salmond does succeed in his cunning plan for greater powers then he will likely go down in history as the first and last Prime Minister of Scotland as we know it today which effectively means a Yes vote on 18th September will be Scotland voting to commit suicide.

However my view remains that the people of Scotland will blink at the brink and not be seduced by SNP fanaticism which will not only save Scotland but the whole of the Island of Britain from the start of a series of sequence of events that would be far more catastrophic than anything experienced since World War 2.

Dow New All Time High

Within a week of my last brief stocks article (24 Apr 2014 - Stock Market Bears Wrong Again, Apple to Push Dow to New All time High) reiterating to ignore prevailing bearish chatter that drew heavily on the fact that the Dow had thus far failed to follow the S&P to new all time closing highs during April and thus signaled that THE top was in and that a bear market had begun, instead of collapsing into oblivion the Dow yesterday (30th April) posted a new all time high of 15,680.17.

Here's a quick google of recent perma bear market always imminent tripe -

My last analysis of the Dow which I wrote at the heights of the then imminent bear market about to begin mantra of early February 2014 concluded in the following trend expectation:

3rd Feb 2014 - Stocks Bull Market Over? Are the Bears About to Break...even?

The current stock market correction looks set to attempt to revisit 15,000. How close it gets to 15,000 I can't tell, perhaps half way, just that the correction is not done to the downside. Following which the price chart implies that the Dow will enter an upwardly sloping trading range that would target a NEW all time high. However given the nature of trading ranges it is difficult to say how many swings it would take for such an outcome to occur, i.e. the last such trading range comprised 7 swings before breaking higher. This one could be quite brief and just comprise 2 swings as indicated by the chart, which could imply a New Dow high by early April, though that does not mean that the Dow would be able to hold the high as it could remain in the upward sloping range for some time which implies Sell in May and Go away as probable.

So to answer the question - Is the stocks bull market over ?

NO ! No sign whatsoever that this (what people decades from now will look back on as being the greatest bull market in history) bull market is anywhere near being over!

The subsequent price action closely matched my trend expectations as the Dow bottomed at around 15,250, and then began its volatile climb to set a new all time intra-day high on 4th of April 2014 at 16,631, just failing to break its closing high of 16,577 of 31st December 2013 by 5 points (16,573) that had remained pending until the 30th of April.

Ensure you remained subscribed to my always free newsletter for my next in-depth stock market analysis which will follow the completion of my latest ebook in the Inflation Mega-trend series on the UK Housing Market (ETA 11th May 2014) which goes beyond housing market analysis and detailed trend forecasts by covering many home buying and selling topics such as -

  • Thorough step by step guides of how to buy and sell homes, from locating properties, to making offers to dealing with estate agents and much more.
  • What to do after you move into your new home.
  • Analysis of buying vs renting
  • 15 detailed guides on how to increase the value of your home
  • Costly home improvements to avoid.
  • Managing your mortgage debt
  • Maintenance that can save you a lot of money long-term
  • Regional house prices analysis
  • Surveying properties - what to look for
  • and even how to get on with your new neighbours.

Source and Comments:

Copyright © 2005-2014 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


01 May 14, 19:51
US economy

The economic numbers out of the US do not look good. A significant downturn in the U.S could have a big effect on everyone else. What are you anticipating to fuel the rise in stocks going forward, continued Q.E, capital flows of some sort? Regards.

01 May 14, 20:45
The elephant in the room?


02 May 14, 00:29
stock and housing market to boom


Once again congratulation on your prognostics since March 2009. you are my favourite blogger since 5 years and keep up the good work for all of us lay men.

I have also been a bull since 2009. My 401K stocks have done extremely well. I was also lucky to have avoided the 2008 dip because I moved to bonds(money market funds) in Feb 2007.

I think you are absolutely right, stocks and housing are going to bull run right up. I am going to close on my new rental home in Bay area California, where housing is too hot since Foreign buyers and local IT buyers are giving 1fifteen offers for one house. It was very tough sellers market and I have been trying for past 1 year. Houses priced correctly, sell in 4 days after one open house.

The only thing I differ from you is that I think this is the best period to load up on long term fixed interest debt. In US, we get 30 year fixed interest mortgage, which is fantastic. This is because Inflation is galloping fast and what better way to hedge than taken debt for 30 yr loan.

The housing and stock market is going to surprise everyone. This period is not like 2003 to 2005, but actually the hot inflation period of 1970's.

02 May 14, 07:30
Rip off Britain

Yeh, where mortgages are concerned its a case of a bankster controlled rip off Britain.

2 years is typically what gets people in the UK a decent rate.

Still I am anti-debt because debt is slavery, you cannot trust the banks.

Debt is primay means by which the elite steal all of the wealth.

It works like this -

banks print debt, ordinary people borrow it to buy a house. Printed money causes house prices to rise.

The small borrower thinks they have gotten richer because prices rise but instead the the elite own more of the wealth than they did before the house price inflation.


50% house price inflation means

a £100k house increases to £150k

whilst a £1mill house increases to £1.5mill

Now the gap between Joe average and the rich has increased from 900k to 1.35k.

So what about Joes next house ?

It will have INCREASED in price by 50%, far more than the amount his home has increased which means he will need to borrow even more money next time!



02 May 14, 11:37

Putin wants approx 50% of Ukraine.

I expect a blitzkrieg invasion before the end of May.



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