Friday, Aug 10, 2007
Markets Left Reeling...
Guardian: News Article
This is the latest on the FTSE. Down 3.7% , the biggest one day fall for 4 years.
Well I wonder what will happen on Monday?
Posted by orwell @ 06:57 PM (198 views) Add Comment
23 Comments
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1. david20040_0 said...
Unfortunately it will probably recover as the Federal Reserve and the European Central Bank have stepped.
These drops happen sporadically.
2. david20040_0 said...
There will be a recovery on Monday.
3. ck one said...
Mon - 50 point rebound, Tues - Flat Market... Bad news starts again... Weds - 75 point drop, Thurs - 150 point drop, Fri - 50 point drop and gradual ease down until we reach 5,400... Then we reach the start of the reporting season in Oct and then the real slaughter starts!
4. denzil said...
David,
there may be a recovery on monday as the DOW seems to have settled but I have a feeling this time next week the FTSE will be below 6000. There must be a limit to the number of fingers central bankers can shove in a leaking dyke, no pun intended.
3.7% today and 2% something yesterday can't be brushed under the carpet.
There a lot more teetering funds around!
5. uncle chris said...
Frankly nobody knows what will happen because no-one knows the true extent of the financial shenanigans that have taken place. There seems to be an assumption that the past weeks instability and company failures are due only to US sub-prime. The scary thing is that even more ridiculous lending practices have taken place in the UK, which means this will rumble on for years. Personally I think the FTSE will be down into the 4,000s by the end of the year.
6. harold said...
"Personally I think the FTSE will be down into the 4,000s by the end of the year."
I'll second that.
7. Sally said...
There is something really wrong with you lot. Why do you wish for financial apocalypse? It won't make the world fair all of sudden, the very rich will be fine and ordinary people will really suffer. Of course house prices are ridiculous and causing severe inequality, but if you think what is happening in global markets will improve the situation your are naive. Credit crunch means you can't borrow money and liquidity of all assets dries up.
Wishing misery on everyone just because you missed out on the boom is just plain stupid not to mention a recipe for disaster as it guarantees that you'll miss opportunities that do present themselves.
8. sirgoogle said...
"Personally I think the FTSE will be down into the 4,000s by the end of the year."
Bloody well hope not. I guess that you chaps either have:
a. not saving for a deposit or have savings or shares or bonds
b. no pension
c. are sitting nicely in a 100% paid for house that you brought in 1982.
Please do not wish for these things. The HPC will not happen if the other markets drop out as propery and gold are the last refuges - and nobody will sell unless forced to.
9. uncle tom said...
Well, here's my two penneth...
1) The market has been expecting a correction for some time - they happen in bull runs, and the market then recovers - but nothing has triggered one - until now.
2) The bullish outlook in point 1) will be compromised by serious, but still un-quantified problems in parts of the financial sector. Any business that carries substantial debt as part of it's operations will also be compromised, as the real cost of borrowing looks set to rise. Any business that is heavily dependant on US discretionary consumer spending also looks likely to suffer, as the secondary effects of the US housing crunch begin to bite
On Monday, (before Wall St opens) I would advise selling US treasuries, and buying international mining stock - like Billiton - which has fallen heavily without good reason today.
10. david20040_0 said...
People pile into property as the last refuge?
Really?
11. sirgoogle said...
david20040_0
Yes - if times are bad the Brits will pile into property, above all other investments.
Property is a strange investment - you can live in it.
It takes a lot of effort to sell it.
If you only have one, then any capital gains is not taxable.
It also has strong popular conviction behind it that is supported by facts (so long as you do not look back too far) that it never loses value.
It does not depreciate particularly, as land costs (the fact that it exisits) make up such a huge % of the "value".
A lick of magnolia paint, a prune of the garden and other cosmetic touches costing only 1K can add 10K to it!
The average Joe in the street knows the market and the processes involved really well
you know the rest.
12. lvmreader said...
@sirgoogle,
You don't seem to understand what securitisation is.
The mortgages underpinning the houses have been packages, rebranded and sold on to international investors, whose lawyers couldn't give a squirt of anything about what colour Dulux paint is applied.
The cheap money spigot has blown its last discharge and the tightening to come is going to be horrific. Firstly, you will see distressed selling and forced selling, with people trying to unload their asset base at any cost to get into bonds in other countries
If an investor who owns the mortgage to Jackie "Kirstie Allsop Lover" Public decides it's time to sell, 70 pence on the pound is a good deal and they will do it. they don't care about what Jackie MEWed. That's her problem.
We are into (1930's territory)2 here. This is really bad.
13. Sceptic said...
Come on people. Drops in stock markets are normal. Bull markets lurch upwards with lots of drops happening in the process. All normal. Don't freak yourselves out. FTSE in the 4000s. Well, it is impossible to predict stock market levels accurately but using the best method there is, that of valuation, that is as about as unlikely as the recent report estimating house price rises at 40% over the next 5 years. The reason this site exists is because we believe that house prices are overvalued. This is true. They are at record ratios to earnings. Stocks are dirt cheap. The average valuation in the FTSE 100 is about 12 times estimated forward earnings. This is very very cheap. Company earnings have been growing and the market has not kept pace.
The recent drops are due to two factors:
1) Fear
2) Speculation
3) Genuine concern over credit markets.
Everyone is terrified at the moment and wants to get out of the stock markets. Speculators are making a fortune through shorting. People are genuinely concerned about credit markets.
Now taking point 3 which is the only one that really matters to the long-term investor, there may be some drying up of private equity activity. Everyone is shouting about how there are premiums in company valuation due to the possibility of buyouts. Nonsense. Valuations are near to historic lows. Even if company profits drop across the board by 20%, at currrent levels valuations would be below average. Now is a good time to invest in shares. They are historically cheap. The market can get out of sync with average valuations as we've seen in the property market. This is not the case with shares. Buy now and come back in 5 years. The market will revert to average valuations eventually.
14. sirgoogle said...
lvmreader
I do understand.
But Joe public does not.
I now believe that there will be another property spike after this flurry on the markets - which Joe public will see as further evidence that property is "safe".
The fundamentals will eventually catch up with Joe Public and the banks will ensure that he is left holding the baby when the HPC comes.
Distressed selling will come from a combination of unemployment and interest rate rises.
Agree - this is potentially worse than the 30s. But then again we are now in a Global market with China and India playimg ball with the West so the dynamics are different.
15. voiceofreason said...
Just watched the 10 o clock news and lead item is "cheeky chappie" Evan Davies talking about how suddenly "sub-prime" is a new word that everyone is learning about.
Question is - how will it affect everyday life ?
A pal of mine is a mortgage broker. He says that it is very hard/impossible to get a mortgage on off-plan flats now.
Radio 4 at 6:00pm said that those with poor credit histories will find it harder to get mortgages.
In my view, the prime cause of the property price boom has been availability of credit. So less credit surely = lower house prices outside of central London where foreign cash (not credit) is used instead.
16. Orwell said...
"...whose lawyers couldn't give a squirt of anything about what colour Dulux paint is applied."
Being a Litigation Lawyer that amuses me...
But on the down side I think that IVM is right about Mortgagees. They will sell at any cost/s, if the mortgage is sufficiently in arrears with little hope of paying it back. Provided the District Judge allows it (or if not the High Court or Court of Appeal/House of Lords). And remember, by design, just as all the facists in the country wanted, there is no proper legal aid system anymore...
17. wiltshire said...
sirgoogle said...
"Yes - if times are bad the Brits will pile into property, above all other investments".
Sirgoogle, I think you're forgetting that this country is mortgaged to the hilt, no actually, it's mortgaged well beyond the hilt. Look at what is happening - credit is being tightened, interest rates are increasing drastically, the housing market is slowing down fast, even the experts don't know what the hell is going on in the world markets (and especially don't know how deep the financial abyss we are staring into is).
This is now mainstream (News At Ten etc) and probably just the tip of the iceberg. Apart from World War III I can't think of anything knocking sentiment more than the current state of affairs.
18. wiltshire said...
P.S. I saw an interesting comment on one of the early evening news bulletins saying that this is the biggest drop on the DOW since 2003 (I believe) when the Enron thing broke. I thought how interesting that that was about one company (essentially) and this is about a huge sector of the financial industry with implications for all the others.
19. david20040_0 said...
But if Brits pile into property if the stock market goes cahput are you seriously suggesting sigoogle that property will boom once again?
20. paul said...
sirgoogle that's hogwash.
Do you really really think there is any confidence left in property?
Think again buddy.
21. sirgoogle said...
Look chaps
As you know I am a long standing bear on property. BUT I am completely disullsioned with the way things are.
You earn a good wage
You save
You invest
Property prices increase faster than you can save or invest (how does that work when you rent very cheaply ?)
You do not want to borrow beyond your means (as you have a risk meter ticking away in your head unlike the rest of the poopulation)
You miss out and see spivs laugh at your sensible and low risk lifestyle
You read the Econonist and become a cassandra at work.
Your wife still wants a house....... The kids are getting too big....
Since I have been calling the top of the market I have seen stocks fall before. I have seen property HPI slow and almost stop. But both recover - to insane levels. I am depressed.
but turning to your point......
I see a spike in property followed by a freezeout. Caused by money from the stock market trying to find a home (rather than staying as cash). The well heeled Joe Public (the ones that don't need much of a mortgage or cash buyers) will emulate the clever city money - causing the spike. Once the cash buyer market is mopped up - the freeze.
The HPC will come if there are currency fluctuations that casue a run on the GBP. This will cause a rise in IRs, with mortgage hardship and unemployment. Only this will end the freeze and start the forced selling into a buyer's market - unfortunately for the sellers - the buyers will also be skint - causing a drop in prices, which once they start to go will tend to plummet and bottom well below the HPI trend line (50% drop).
22. ck one said...
Sirgoogle, the basic effects of what we see now are the following... Banks will still lend money but disregard the interest rates set by central banks, therefore rather than mortgages being kept affordable by the central banks fiddling with interest rates the commercial banks become so risk averse they actually start over risking debt. This will become especially relevant to fixed rate mortgages. Potentially if the situation comes as bad as suggested on this sane website, mortgage repayments (including interest only) could well ramp up dramatically over a very short period. Add to this the fact unemployment will rise quickly as companies will start going under and cutting costs (therefore heads) due to the higher debt service costs... There will be few buyers... house prices simple have only one way to go and that's down.
23. _woody said...
Gordon Brown has only been PM for barely over a month. Already he's faced terrorist incidents, foot and mouth, floods and now a stock market collapse. Has his luck finally run out?