Monday, Aug 13, 2007
Free Money In - Markets Up - Problem Over?
BBC: Global markets recover from falls
204 Billion Euro's Printed to Put In Equities? + 38 Billion $'s???
So the printer is working overtime and the markets are up. Problem solved. No HPC. & We can all get on with buying houses and HPI?
I am gob smacked by how much money has been printed and now worried what effect this has on my savings.
Posted by waitingfor hpc @ 02:28 PM (345 views) Add Comment
40 Comments
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1. Tickock said...
Waiting,
The same effect as it has been having for years and years ( i.e. destroying its value at a far faster rate than interest rates compensate for).
This is why nobody has savings in 'savings accounts' any more, and why Gold is still hugely undervalued.(IMHO)
2. Alan said...
Sticking my neck out, I'll forecast that this sudden rise in the FT indices will be short lived.
The next hedge fund or mortgage company to fail will put the market in retreat again, as panic sets in.
After 2 or 3 repeats of the above scenario, the Fed will drop IRs.
Meanwhile, the UK high streets continue to advertise 120% mortgages ....it's looney tunes!
3. mrmickey said...
I don't understand how printing more funny money can solve a problem caused by printing to much funny money, might this not create another speculative bubble and bust but even bigger.
4. tyrellcorporation said...
My sentiments exactly. The central banks have effectively condoned ultra-reckless lending behaviour and bailed everyone out. Just like IVAs this just makes me think that I'm not really up-to-speed with the new 'debt-based economy'. All these wild hedge funds are now laughing as they know that there may be a few early casualties but if it gets too hairy the Central Banks will step in to save them.
The odd thing is that the money pumped in to save their asses is still in the form of loans - when will this madness end?
Dark days for us lot I'm afraid to say.
5. dohousescrashinthewoods said...
Damn I want a job in the developing world. Anybody know of a good opportunity in Mexico I can take up before they close the airports or I can no longer afford the air fare?
6. auntie said...
Not my words.....
"This is not a bailout as it has to be paid back rather quickly, most of it will have to be paid back Monday. What it does do is it provides banks a chance to stabilize themselves, formalize a plan, and unwind investment positions in an orderly manner to free up funds. This is one of the main tasks of central banks, to keep the banking systems stable with added liquidity as needed. The same types of liquidity injections took place in the LTCM hedge fund crisis back in 1998, in 2000 and after 9/11. The size and how coordinated this action is by central banks indicates there is some fairly large disruptions going on underneath the surface, probably due to deteriorating value of mortgage backed securities."
Click
7. Alabamabob said...
When there is a shortage of money, the current interest rate is surely too low because people are willing to pay more to get hold of the money they need.
Because central banks have offered more money into the system at the artifically "low" rate, this is cheap money which will lead to inflation.
The short terms effect of this in the UK, is even higher house prices(because of the extra cheap money) then higher interest rates to try and keep inflation at bay
The medium term effect could be a "buy to let" mortgage crash in the UK as people finally get stretched too thin to afford repayments,
This could cause a second round of banking problems...
8. tyrellcorporation said...
Auntie, yep that all sounds very sensible but the fact remains that this action shores up ultra-risky behaviour and is anti market forces. It is often said that the financial markets represent a pure form of free market trading. The actions of the last few days say otherwise. When push comes to shove Central Banks and ultimately Governments will intervene, distort the market and probably make things worse in the long-term.
Like the .25% cut in IRs back in August 2005, the housing market speculators witnessed first hand that when things turn to rat-shit their asses will be saved!
9. auntie said...
Tyrellcorporation - I agree, don't think it's sensible, think it's all utter madness. Just clarifying that the fund injection is not permanent and yep, the Aug '05 cut made the market romp to ever new highs.
I'm tired of it all now, just wish everything would get on and crash big time. We need a big fat freeze on everything. Like a very frosty winter, it's good cus it clears out all the bugs.
And is our financial system ever infested with bugs!
10. david20040_0 said...
Oh and look, like I predicted the markets have recovered, ho hum!
11. david20040_0 said...
Oh and the BBC have reported house prices rose by 4k between May and June, I am right again, where is this supposed slowdown and crash?
There isn't going to be one.
I told you guys yesterday you were wrong and the markets would recover, and oh look, they did.
12. Einstein said...
This is only the equivalent of sticking a rather large plaster on a wound...
13. tyrellcorporation said...
David...not much to say to that - you were right.
BUT the subprime problem is still there, the credit problem is still there and despite the stocks rally, my guess is that canny investors realise they are now in the eye of the storm and using the lull to pull out of risky funds. That's what I'd be doing anyway.
Expect more funds to go down the tubes soon.
14. david20040_0 said...
There is not going to be a '1929 crash'
I am waiting for the comment of 'it must have a few more months to run' or 'the next year will be interesting now'.
In relation to the supposed slowdown, house prices rose according to the BBC by 4k between May and June, that is over £125 a day, where is this supposed slowdown. If they are rising that much and we a re in a slowdown I give up.
15. auntie said...
David20040O Ooo so very, very clever. We are not worthy. You forgot to mention, oil is still dropping. Just like you said it would.
16. david20040_0 said...
No oil went up $1.
I said oil would drop, like it does every year after the Driving season ends in the United States and Canada traditionally after Labour Day in the US and Canada.
I am not very clever, and patronising me isn't really fair 'auntie' I just have a more realistic outlook than you guys.
17. david20040_0 said...
From BBC
MARKET DATA - 17:31 UK
FTSE 100 6219.0 up 180.70
Dax 7474.3 up 131.07
Cac 40 5569.3 up 120.65
Dow Jones 13311.5 up 71.94
Nasdaq 2557.0 up 12.07
S&P 500 1461.4 up 7.80
BBC Global 30 5734.9 up 51.65
18. david20040_0 said...
Not a bad recovery, my guess it will recover most of the lost ground.
The Federal Reserve and the European Central Bank have put so much money in there is now no chance of any form of collapse.
19. denzil said...
David,
I hate to say this but you are coming across as being right up your own **se.
On Friday or Sat you said the markets would rally monday. That was a completely no brainer and most people AGREED with you, I know I did, so please don't try the "look at me I'm a maverick" because it was as sure as eggs is eggs that the market would rally monday.
So in your expert opinion is the sub-prime problems gone now then? Would you care to make a tough prediction?
I've always enjoyed your impartiality but today you are coming over as a complete condescending c**k.
What was it about the minimum wage again? ;-)
20. wiltshire said...
Actually David, if I remember correctly you hedged your bets and said the markets will recover by Wednesday. Care to predict where they'll be at Christmas???
I think what tyrellcorporation said best sums up the situation at the moment. No way has this business been played out yet, strap yourself in (real tight)...........
21. david20040_0 said...
The news doesn't go your way and you resort to insulting me and calling me names just because your predictions were incorrect.
I am not condescending anyone, I merely put my views forward and are usually shot down because my views are thought of as wrong. Then usually a few weeks later I am proved right.
My predictions recently have proved to be correct, that doesn't mean you have to resort to insulting me. I don't use vulgar language to anyone else.
22. sold 2 rent 1 said...
David,
This correction has only just started and for the record I think stocks will hit a bottom of 15-20% off their highs by Sept/Oct.
House prices will carry on rising until the end of the year.
LSR predicted 15% for 2007 and they are the best predictors.
Their availability index is well into the danger zone now and will reach crash levels in early 2008
I fully expect IRs in the US to be slashed from Sept through to next May and the crisis declared over by Smithy et al.
I expect stocks will recover at least half of the losses over that period too.
If you know your history, that is pretty much what happened in 1929 to mid 1930
I 100% expect you to still be saying there will be no HPC next spring too.
What we are seeing is people MEWing to maintain their living standards.
The debt levels remains higher than we have ever seen before.
The sub-prime issue will come and go but the new era of debt destruction and living well within our means will be here for 20 years.
Just look at Japan.
23. george monsoon said...
The way I see it, the markets are living in their overdraft.... I don't think the markets will recover for more than the next 7 days before a raft of bad data sends them panic selling...
24. david20040_0 said...
I bet they recover 75% of their losses.
25. stillthinking said...
I thought they would drop myself, and clearly the CDOs didn't jump in value and become sellable, the only difference is that the fund's lost cash whenever finally tallied comes out of the injected borrowed funds of taxpayers money. The injection prevented a panic, not the loss.
If you are looking at a sand salesman in the Sahara, giving him a bridging loan won't help. The funds are bust or they aren't.
The people who took out the home loans are -not- going to repay them. Out of everything on this site this is easy to understand.
One US debtor I read about was a 19 year old Mexican who worked at McDonalds, they lent him 200K. Is that 200K safe as well? Thinking about that seriously and knowing you could hound him for the cash and get money direct from his salary through the courts, how much is that worth?
Maybe some portions of the CDOs are OK. I personally think the americans have grabbed every penny (cent) commission they can from any old punter possible.
26. Chiilli said...
With that much money pumped into the system, you bet they will recover.
On the other hand they have to give the funds back soon, so recovery may be in order, but continued growth over the next 3 years?
27. david20040_0 said...
MARKET DATA - 18:19 UK
FTSE 100 6219.0 up 180.70
Dax 7474.3 up 131.07
Cac 40 5569.3 up 120.65
Dow Jones 13296.4 up 56.82
Nasdaq 2554.0 up 9.07
S&P 500 1459.1 up 5.41
BBC Global 30 5735.3 up 52.02
And the recovery continues.
28. Coolerking said...
David.........you are not alone in thinking markets would improve. It was self evident that after the ammounts injected into the markets they would go up today. But I'll make another prediction. This is a temporary improvement. It's not only the sub-prime problem, there are other concerns on the horizon. Chinese inflation for instance. Also I don't believe house prices have risen 4k between May and June. Certainly not where I Iive. Housing shortage is not the reason why first time buyers can't get a foot on the ladder, affordability is the reason, which is why we will have a HPC soon, maybe not tomorrow, but soon, and maybe up to 20%
29. Jonjo said...
This isn't rocket science - pump money in to create liquidity - pull out of risky funds to more quality and hey presto, market recovers. But what of the risky assets i.e. mortgage backed securities - sell sell sell - Banks will not be able to sell these off now FACT - credit crunch and crash by October
30. Jonjo said...
Dow will end down today - what does that mean?
31. Quiet Guy said...
@david20040_0
"I am waiting for the comment of 'it must have a few more months to run' or 'the next year will be interesting now'."
OK, I'll confirm your prediction for you.
I don't know what will happen to the markets and I don't know when house prices will drop to long-term averages again.
What I do know is that we are up to our necks in debt. Our personal debts and national debts are horrendous yet people still want to borrow more. I just don't see how we can keep borrowing the cash to keep the boom going.
At work, when I speak with people about house prices, they say everything will be OK! House prices won't drop ...
my best guess for house prices to start dropping is sometime in the next year or two. There I said it!
32. ck one said...
Looks like it's getting hot in HPC blog world... David don't open the champagne just yet mate...
For all your down hearted Bears, one day of over exuberant rising markets doesn't mean game over... it might be flat or mildly down tomorrow!
Anyway here's a thought for you... Interesting the talk of global co-operation from central banks but I didn't here any loving statements from the Chinese or Russians. Still think our friends in Asia have one sweet hand to play in this at some point, I would say they fancy picking up some cheap busted flush companies when the markets really tank!
33. Dandare500 said...
Well your markets have collapsed in US somewhat!
DJIA 13,236.53 -3.01 -0.02%
Nasdaq 2,542.24 -2.65 -0.10%
a minute ago at Nine 20pm BST.
Not going to be as easy as you thought!
34. ck one said...
DOW -3.01 13,236.53 -0.02%
NASDAQ -2.65 2,542.24 -0.10%
S & P 500 -0.72 1,452.92 -0.05%
Ummm me thinks the FTSE may give up some of those gains...
35. deepak said...
I think today in all blogs David is putting some life into them.
I think he should be awarded a gold star atleast for the effort and enthusiasm that we don't show.
Show of hands FTSE 100 to fall tomorrow against David's predictions. Show of hands please.
Fall to rise: 1 : 0
36. Pecker said...
Fall 2 - 0
37. david20040_0 said...
It's funny all the blogs I comment in go over 10 comments, weird.
I reckon the Dow Jones, Nikkei, FTSE will all pick up again
Fall to rise 1 : 1
38. wiltshire said...
I don't think it's that weird. You come on here calling people fools, telling them they're wrong, telling them prices are still going up, telling them they'll never stop.
What do you expect? Of course you're going to get responses.
39. Rimmer said...
David
What you are talking about and everyone here is a correction NOT a crash.
If a 1929 style crash occurs it doesnt matter how low house prices get you wont have a job to buy one regardless.
What determines house prices ???????????????????????????
Think about that one, it really is all about people needing to sell and move and what price they get based on market forces, no FTBs = no movement at he bottom end ( once BTL has finished as well ) .
No movement = no market.
Will volumes a lot lower as they now are i would expect to see the estate agent group moaning really soon.
40. planning4acrash said...
Guys, the banks can't afford to turn the situation around. They are paving the way for an orderly correction that doesn't undershoot a true pricing of risk. This is a short term way of managing a short term correction. It is the equivalent of an adrenalin shot to somebody who's just taken an overdose. We often forget the sheer size of the EU's economy, so the shot of liquidity is unlikely to be a massive cause of inflation, and is probably relatively insignificant in the context of the EU economy as a whole, because this intervention will not and cannot be sustained for more than a few days. Like has been said many times around, we don't yet know what the sub-prime or whatever losses are yet. This data will come through slowly, bit by bit, and, every now and then, mostly leading to orderly or isolated corrections, there will be a big jolt every now and then when banks will just try to stop the market from going into free fall.