Thursday, Feb 08, 2007
Several thousand financial advisers will read this.
Investment Week: The art of getting out on time
"The news last week that a 12-foot by 6-foot cupboard in Chelsea has been placed on the market as a studio flat for £170,000 may be significant"... You think?!!!
Posted by financial planner @ 01:42 PM (150 views) Add Comment
15 Comments
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1. Rep013 said...
I have read this and would like to know who on this forum wrote it?
Others on here have eluded to the same thing and pointed to the £170k box in Chelsea as a possible precursor to the C**** and as per the quote below from this article.
"The skill comes in judging the end of the bubble. One good guide is to look for the mega deal that encapsulates all that has gone before it. The AOL-Time Warner merger of 2001 is a good example, neatly demonstrating how far dotcom valuations had been stretched over the preceding few years. Viewed in this light, the news last week that a 12-foot by six-foot cupboard in Chelsea has been placed on the market as a studio flat for £170,000 may be significant. Key points"
Enjoy the read and for those who get hit hardest don't say you haven't been warned!
2. Davros said...
This article is spot on.
We saw this the last time, exotic mortgages, people buying cupboards for stupid sums. If ever there was a sign that the party is over, these are it.
3. Surfgatinho said...
Spot on! Wish I knew a few recent BTL investors to email this to!
4. denzil said...
I like the bit about BTL being a party that is over. Those arriving now will no doubt have to pick their way through a mixture of used condoms crashed-out drunks on the front lawn and vomit left by those who are leaving the party. What I find really funny is those jumping on the BTL bandwaggon now think they are some kind of pioneer and they are stamping new ground, completely oblivious to the fact that they are twats.
5. dohousescrashinthewoods said...
Glorious Sunshine might be interested if a listening ear can be found.
I still don't understand the unshakeable confidence on the face of your posts - is it bravado, teasing or a genuinely deaf ear to market conditions?
Perhaps you are anaesthetised to the asset phrase "you may not get back what you invested" by decade or so of bull run that bucks the long term average.
An average which tracks the real growth in the economy (and hence salaries) and is therefore sustainable.
It has been skewed by a boom in phantom money (credit) being shovelled at consumers.
There is no fundamental change - I repeat, nothing is sufficiently different to justify this. Not supply, not salaries, not demographics.
The difference is a massive swell of demand created by easy credit.
Any fool could borrow more than they could ever repay. All this money supply causes inflation, HPI.
When the phantom money reverts to thin air, (credit tightening, defaults) so too will house prices.
Without credit, there is no demand. Take away mortgage approvals and who could put an offer in?
The market will fail as surely, inexorably and spectacularly as the sun rise. Even as the sky gets light, there will be people dismissing the inevitable because they don't see anything on the horizon.
GS, if the global liquidity bubble bursts and housing is still going strong 12 months later, I will readily admit you were right. For now, I'd say you are walking on thin platitudes. If you believe what you say, feel free to state your case.
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7. inflation is eating my savings said...
The tone of the article is mature- one point to make is that AOL Time Warner happened 1 year after the dotcom bubble burst, not before.
Recessions are often reflected in general cultural parameters. A souring, turgid and non-original backdrop. Reflecting the quantity of cheats in the system. These things usually signify the beginning of the end. Think back to Kylie and Jason in the late eighties. This was the zenith of popular culture. Sad. Then the re-release of tension as the nineties began, and the gradual enrichment of our lives again. Then the Millenium Dome at the end of the nineties, our Tony and the queen doing Auld Lang Syne together. Then another bust. I don't know what was happening in 1974, but I have heard that the Bay City Rollers were about. Just an opinion- may be a load of tosh.
8. Cwelsh said...
I wished I knew when the bubble was going to burst......................................
9. cyril said...
Interesting theory about the pop culture. Of course fashions and economics do go hand in hand to some extent but I'm not sure how that translates into music. The 70's was all flares, glitter and glam until the Sex Pistols came along, which in some ways was a reaction to the tediousness of it all. Then we had gloomier (but better) bands like the Specials and the Smiths in the 1980s.
Pop music nowadays is just manufactured drivel consumed like cornflakes. Maybe we have come to the end of an era - let's hope so.
10. nearly30 said...
Loving the pop culture references!!
Lest not forget bands that were big during ressions (paradigm-changing or zeitgiest?) , like:
Nirvana - Bleach (1989) then zenith with Nevermind (1991) - soundtrack for the disaffected.
Nine Inch Nails - Pretty Hate Machine (1989), Boken (1992) then The Downward Spiral (1994) - talk about angst!!!!
Just look at the number 1s for UK in 1991 = Iron Maiden, the KLF and the Clash.
In addition - US Rock N Roll really kicked off in the early 1950s - Post Korean War Recession
My favourite is The Specials - Ghost Town - really captures the late 70s / early 80s atmosphere for me!!!
11. Nohpc said...
And I don't understand why you guys don't understand that there is a strong chance the housing market will not collapse.
12. paul said...
The 1980s was the decade that taste forgot.
Late 70s early 80s were fine, but no-one, and I mean no-one, not even George Michael trying hard not to look gay, looks good in white jeans with a bad suntan. Manufactured pop? Stock, Aitken and Waterman invented the concept in the 1980s!
Glorious Sunshine is lurking but you won't find him on this thread.
13. Question said...
Hahaha - investment magazine??!!
"Psychology aside, the numbers no longer stack up. The average £800,000 house, assuming full occupancy, should provide about £3,000 a month, an annual yield of 4.5%. With the base rate, let alone mortgage rates, now at 5.25% – up from 4.5% in August – this no longer looks as attractive. Assuming a mortgage rate of 5.5% and a 20% deposit, then a rental income of £36,000 stacks up against interest costs of £33,000 – completely leaving aside any of the costs incurred. Not the most attractive of deals."
Ever heard of inflation? No, not house price inflation of the bubble form, but economy-wide price increases driven by a steady increase in the total money supply, ie a steady decrease in the value of money, ie a steady decrease in the value of your debt to the bank.
How can a guy write in a magazine without even knowing the basic fundamentals of calculating returns. plus, why did he subtract the cost of the deposit, surely it has an alternative cost? Maybe first-year economics would have been to some help here...
Good luck guys!
14. dohousescrashinthewoods said...
I agree, inflation is eating my savings, mature, steady and touches on the key issues.
Remarkable for a subject so emotively and fuzzily portrayed by most sources.
15. Davros said...
> And I don't understand why you guys don't understand that there is a strong chance the housing market will not collapse.
When you give compelling reasons we'll believe you. This article gives compelling reasons why it will.