Friday, May 29, 2009
In the interests of editorial balance
Bloomberg: UK House Prices Jump in May
Not significant in any sense as the HPC story will play put over years but still it is incredible how a picture of economic recovery is being painted and bought. Sterling which has swept everything before it this past month up again today and seeming unstoppable. Stocks rallying
Posted by bellwether @ 08:15 AM (2310 views) Add Comment
44 Comments
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1. hpwatcher said...
what was that about a drowning man and straws?
There are now two front page posts on HPC.co.uk about this, yet none of the posters has been able to face adding the +1.2% to the their headline.....
2. paul said...
Isn't it amazing that the mainstream media are able to temporarily block out everything they have been reporting for the last two years - rising unemployment, falling completions, rising supply in order to shout "RISING HOUSE PRICES" as loud as they can today?
3. happy mondays said...
Great let's get back to normality, i was starting to doubt the system!
"A long habit of not thinking a thing wrong gives it a superficial appearance of being right" - THOMAS PAINE
4. bellwether said...
It's weird a stronger £ and asset prices benefits me but there is something oddly depressing about it, I guess because it seems artificial until a picture emerges how we grow in a more sustainable way. I'm ever more convinced (which might be a bad thing I guess) that this can only happen after a further levelling which forces us to abandon the current system. Debt is still wildly excessive and the govertments have stepped in to try and keep the mispricing going. Temprarily they are suceeding in some measure.
Japan's exports boom most on record headlines today. Thinking that this will keep going through next round of earnigns in the US. The financials will look good and the stimulus will start showing unemployment rising, S and P 1100 by end of year, FT 5000?
5. bellwether said...
sorry meant employment rising
6. hpwatcher said...
I'm ever more convinced (which might be a bad thing I guess) that this can only happen after a further levelling which forces us to abandon the current system. Debt is still wildly excessive and the govertments have stepped in to try and keep the mispricing going
Yes, but how much longer can the smoke and mirrors last for? - that is the question.
Can't be that much longer now.
7. Mariner said...
@Paul
Slightly bizarre criticism. The media reports the house price change every month, it happens to have gone up this month. Virtually every report is taking the stance that this is a blip in a still downward trend. Hardly reinflating a bubble.
8. growler said...
Better newspaper comment would be to highlight the last crash. If you look at the numbers, there we "up blips" then as well. At the risk of repeating myself, it's may. Game, set and match with House Sales when Wimbledon starts.
9. crunchy said...
Rothchilds and associates have decided that they like Cable.
Just a rumour, ignore! Only a few trillion traded in the forex.
No problem!
10. peter_2008 said...
I am reading into this in conjunction with yesterday's news about the signs of 2nd credit crunch happening in the US. If the US government is paying over 5% IR to borrow money, how can they continue charging less for providing mortgage (unless they play some voodoo magic)? The same question goes for the UK.
The US market has experienced the some temporary effect of ultra low interest (backed by printed money) and improved liquidity (also backed by printed money) for about 6 months. The UK is lagging behind the US. Now this comedy is ending, it is interesting to see how it will unfold itself.
I will not touch the property market until next general election. I believe the Conservatives will have to do the unpopular but right things first, like cut public spending, cut debt, increase tax and increase base rate. That's when the economy MAY really start to recover.
11. flashman said...
Over the last few months, I have tried to point out that the UK economy is far more diverse and powerful than most posters seem to think. It is therefore bound to react to a massive stimulus. In a similar vein, many posters also obsess about the dollar and its 'inevitable' decline from reserve status. This is ridiculous. It's position is absolutely unassailable for the foreseeable future and betting against America is a quixotic game. It still has, by far, the most dynamic and diverse economy in the world
People should stop confusing themselves with the biblical style, economic armageddon language. They should also dispense with the Elliot Wave forecasts, Mayans and other such mentally negligible quackery. The Cynicus Economicus's of this world are either still in 'L' plates or are trying to make a name for themselves at your expense. Many other doomsters are cynically trying to cover their bets, again at your expense.
Both the economic stimulus and the overly negative clap trap are a diversion. Only when we have dispensed with both can we get down to reality. The reality is that there will be higher interest rates, higher unemployment, higher taxes and reduced government spending. House prices will therefore significantly fall. The problem we have now, is that the stimulus is holding things up and is being made necessary by the doom merchants. The excessive stimulus is wrong and the doomsters are wrong. We desperately need to get rid of both so we can get down to the boringly stable business of matching the economy to House prices.
12. crunchy said...
10. flashman said.. We desperately need to get rid of both so we can get down to the boringly stable business of matching the economy to House prices.
Or vise- versa. Thanks for your objective input flashman. I just can't get my head around why the Chinese want to buy up tonnes of gold.
They are big gold producers and that still isnt enough. Gold backed reserve currency ambitions, over speculation, or edgeing out of the
US dollar. What's your take, if you will?
13. mark wadsworth said...
Well said Flashman.
14. spencer234 said...
Even dead cats bounce...
There are people who have been waiting for a while for a house price fall, with good deposits, who have been desperate to get in on the property market for some time but couldn't afford it. Having seen a fall, and having waited for so long, they are paranoid about missing the boat, because they have been infected by the house price bubble bug. I know someone in this position.
But, like the last crash, this rise is small and is very likely to be a temporary blip. And the rise could simply be down to more expensive properties being sold, pushing up the average. The huge job losses we have experienced - and will continue to see - have not yet impacted on the property market. So far it's mostly been about loss of confidence. By the end of this year, that will be untenable.
You just have to look at what's happened in the US - and we are a year behind - to know that this is far from over.
15. techieman said...
Flash - 1.64/65 cable resistance, potential 8600-8700 Euro / GBP low [lets see if this support holds first though, am not brave enough to go long without some confirmations!], - have commented on both levels before.
FTSE - 50 / 50 probability breaks previous recent mid 4500s high [current potential bull pennant OR change of trend], then squeeze - if it breaks high, then sharp fall. If not then sharp fall from here - depends what S&P does - probably in next few hours or days.
There you go that fence was killing me - or maybe im still on it!!
As for Doom merchants entirely and absolutely agree, have always said we would have a bull trap / DCB in property and have always said we would have a move back up in the FTSE until folks were convinced the bear was dead - a 40% move off the lows superficially looks very convincing - but a 60% move looks more so!!
As for EW - one thing I would like you to look at if and when you have time and thats the following:
http://www.neowave.com/qow.asp [couple of minutes]
http://www.neowave.com/qow/qow-archive-406.asp [couple of mins]
and a couple of "proof is in the pudding":
http://www.neowave.com/company-oct2008interview.asp [ you need to print the charts]
http://www.neowave.com/company-nov2008interview.asp [same again].
Your views as always are appreciated.
16. Spencer234 said...
crunchy - as a percentage China has small reserves compared with the rest of the world. The UK's gold percentage is now one of the lowest of Western economies, thanks to Brown ditching gold at a ludicrously low price. It really does now seem that he set out to wreck the UK economy.
Very likely China will continue to buy up more gold to hedge against US defaulting and ensuing crisis in fiat currencies that would occur in the event of this happening.
17. little professor said...
18. flashman said...
crunch: the Chinese want to diversify their reserves. They had no choice but to take dollars for their output but they are an economic minnow compared to the US and are therefore vulnerable to any policy the US chooses to enact. They are trying to hedge a bit in case US trade policy gets more radical and leaves them out in the cold. They are acting out of fear rather than enacting some cunning plan
As an aside, I am always amazed by the cheek of the Chinese. They rant on about inappropriate Western economic policy while conveniently forgetting about their role in all this. They frantically manipulated their currency, which in turn caused giant trade imbalances. They also carried out a policy of unfair protectionism of their industries and unfair incentives to their exporters. Many of their policies caused the oil price boom, which arguably caused the house of cards to collapse in the first place. They are arguably more responsible for this mess than anyone else. 75% of their rivers are dead, they can't breathe in their cities and 90% of their population live below the breadline. Was it worth it? Another reason that they are in no position to take over, is that nothing moves in that country without a 'back-hander' and they struggle with telling the truth.
19. James said...
What if you're all wrong? Its fine to avoid the sheep mentality and avoid the rush to the top, but don't be the ones to miss the opportunities when the market reaches or approaches the bottom. Even your house price chart shows that house prices are reaching their long term mean. And will they really undershoot much during this cycle given where interest rates are, compared to the previous downturn in the 1990's.
20. p. doff said...
Nice to see some reasoned comment instead of the usual 'the end is nigh, we are all going to disappear into a consciousness singularity' claptrap.
21. icarus said...
flashman - there's a lot more to it than matching the economy to house prices. I agree that the decline and fall of the dollar is far from inevitable but there are serious long-term economic problems that won't be addressed because of the massive influence of the banks on government policy. The 'real' economy is under the sway of short-term financial engineering and, whichever way you see the direction of cause and effect, this has been associated with stagnation in many parts of the economy. Of what do these 'diverse' economies consist? In the US especially there's a huge. protected military/aerospace sector (paid for in large part by the Chinese etc. - they're funding more than just the US consumer), there's the stimulus of info/comms technology fostered by the state over the past 25 years (but its main applications have been in retail and finance), cars and pharmaceuticals. The rest of the economy has seen stagnation, little investment and stagnant or declining real incomes. It is dependent on the very consumer demand that is attenuated by lack of income growth, hence the borrowing binge that was facilitated by asset-price bubbles and dollar dominance.
The banksters who played a big part in bringing about this state of affairs are seeing to it that the syastem isn't purged of the bad investment involved in all this. They aren't being bailed out so that productive investment can re-start - that's not their game. Their game is to financialise the world so that debts accrue faster than the economy's ability to pay, not to invest to raise incomes and living standards. The polarisation of incomes - very rich and very poor - is one result of this. Another is government - more or less globally - by oligarchs, mafias and kleptocrats.
22. spencer234 said...
Crunch - China actually has very small reserves in gold. Most Western countries have significant reserves in gold. Thanks to G Brown selling off the UK's gold on the cheap, and lowering the price even more by alerting the market first, the UK's gold reserves as a percentage have gone down to 19% - one of the lowest.
Very likely china will continue to keep buying gold to increase their % to hedge against US default and ensuing crisis in confidence in fiat currencies this would entail.
23. crunchy said...
Thanks for your views flash. The 'back-hander' economy could go global.
Give us a pony and I'll tell you why!
24. crunchy said...
19. spencer234. Thanks also, and in advance to anyone else's possible input.
25. nomad said...
I think it important that the mood in the country has changed dramatically in the last two months. Swinging from desperately wanting to retain the status quo, eg. inflated house prices, to the firm realisation that our indebtedness has to be tackled head on - and soon.
This, plus the increasing difficulty in selling government bonds, is going to stifle GBs only policy which is spend, spend, spend.
26. flashman said...
Icarus: I wasn't making a comment on the dollars' value, just its reserve currency status. I won't bore you with pie charts and statistics but the US economy is dominant in so many areas. It goes without saying that they own most of the worlds oil majors but many people don't realise how much of the worlds mineral wealth is US owned or controlled. You mentioned pharmaceuticals and military technology but maybe didn't provide enough emphasis on their importance. We live in an aging world, that is as intent on war as ever. Having the best pharmaceutical and military technology is therefore very beneficial. The American technological lead in is also staggering in many other areas. You can Google the stats, but just imagine a world without Microsoft, Intel, IBM, Boeing, Google, Ebay etc. Incidentally, my father-in-law is over from the States at the moment. He works at the cutting edge of laser (nuclear lasers) technology in California. The mind boggles at the progress they and others are making (it seems we are not that far from str1's abundantly cheap energy). Don't worry about the banks and the kleptocrats. They are a sideshow. There is a very real world of technology and industrial industry going on. I don't think its missed a beat in this downturn.
27. mander said...
Engineered recovery. The real problems will occur after election when the new Gov will have to deal with reality and not with green shots.
What has China to do with house prices? Should the Western world have invested all their money into houses and have ingnored other type of businesses because everything is made cheaper in China? No. The banks have created way too much money considering that everyting is manufacutered in China nowdays and people have been fooled into the property ladder type of thing in order to create economic activity. Now these problems will not go away even if an egineered recovery may succeed, in 10 years from now we will live same collapse.
Right now it is time time for the next Gov to change.To allow house prices to get in line with people's incomes and make sure they stay there and go onto doing diferent business because the shortage mit in the housing will dissapper in 3 years time and the problems that US have now can be avoided.
28. flashman said...
techie: I am sorry for being so hard on EW. I respect your experience and perhaps I think you are easily capable of shrugging off my withering criticism (you probably notice I lay off some other 'forecasters'). I come from an economics and mathematics background and these crafts do not sit well with the rather unscientific nature of EW. It is quite possible that modern mathematics and economics are not up to the job of analysing EW but its all I know. I did read a couple of the links you provided. It all seems convincing but then I remembered that nearly all EW forecasts are doom laden. Some of the forecasts were made in 2008 when things were already underway. Countless millions made the same forecasts based on common sense. In any case no proof of calculation or 'work sheet' is provided. It never is.
Incidentally, when I wrote my last rant about Elliot Wave, someone posted it on a site frequented by a half-wit called Doctor Bubb. He irately responded with words to the effect that some mate of his was going on an expensive holiday paid for by trading Elliot Wave signals ... so there. A more cerebral poster contacted me with a link to another article repudiating Elliot Wave. This well crafted article was written by someone with a background in mathematics. The contrast between the mathematician and the 'my mate went on holiday' poster says it all really. It is quite possible that this Dr Bubb character once had some worthwhile knowledge but the pathology of someone who once traded and now sells quack books for a living needs careful examination. Traders who lose their shirts often spend years praying for an economic melt down. This may or may not be the case with the Bubb fellow.
29. icarus said...
flashman @23 - I too meant the reserve status.
There is the problem of turning all this clever technology into higher living standards and I know there's a mindset that says the current crisis is an opportunity for new industries and technologies etc. but there's still the problem of incomes, aggregate demand, debt overhead etc. and I don't think new technology is the answer - it operates on a different plane. Fortunately many of the companies you identify have the kind of access to investment capital that weakens the "we have to support the banks to get credit flowing again" argument (the proportion of the economy that is dying for lack of unavailable/expensive credit for PRODUCTIVE purposes is actually quite small).
Regarding China - you could talk also about the cheek of the Americans (e.g. China can't buy anything worthwhile of US assets/industries with all the dollars they have, while the US buys privatised utilities etc around the world - look at how they bought up Korea etc. during the SE Asian crisis 12 years ago). Why do the Chinese want a strong currency? Partly to avoid going the way of SE Asia in 1997.
30. techieman said...
Flash no need to apologise! I posted the links because of some of the segments which support what you say:
some quotes:
"in its orthodox form, Elliott Wave never allows for such dogmatic forecasts. To the contrary, Elliott Wave typically allows for multiple, completely contradictory scenarios. If you have simultaneously bullish and bearish counts, it is of little value for trading."
As for doom laden
"For example, in 1988 (for those who remember), I was one of the only bullish analysts in the world. Among orthodox Elliott Wave practitioners, who were extremely bearish (and remained that way for most of the last 20 years!), I stood alone and was heavily ridiculed for my extremely bullish, long-term forecast. It was the LOGIC of NEoWave that allowed me to remain so adamantly and confidently bullish on the U.S. stock market (despite massive public condemnation) and even in the face of negative national and international news.
It was NEoWave that allowed me to turn adamantly bearish on the U.S. stock market near the highs of 2000 and then, two years later, turn bullish again just six months after the 2002 low. Finally, in January of 2008 - once again, despite strong opposition - I turn adamantly bearish on the U.S. stock market. It was NEoWave that gave me the courage to announce to the world, in mid January 2008, that a new bear market began and that there was virtually nothing that could be done to stop the downward spiral of the U.S. stock market for the next 4-6 years!"
BUT as of now well i think you might be able to guess where he thinks the S&Ps end up !!!!
I actually got the book in 1990 and ive tried to get my head round it ever since! :-).
Actually i think the guy you are talking about also had a go on that thread - about a day later. He was a bit rude to you but then again Im sure he had a nice holiday ;-).
31. techieman said...
Sorry to go on - but i know you will love this! In the book he looks forward to 2060 [yep thats not a typo] and he says that the Dow will be around 100,000 then.
So much for Doom laden! I suppose you pays your money and takes your chances!!! Now where are those March 2060 S&P calls???
32. flashman said...
icarus: the Americans are indeed very cheeky and self serving. I singled out the Chinese because it is kind of a default position to knock the American future and claim the Chinese will take over. As you say (I think?), technological progress will almost certainly not cause income to be distributed equally amongst the population. Sadly it may do the opposite but there is no escaping its steam-roller progress or its effects. The unlikely alternative is to wind back the clock and start up manufacturing again. Of course for this to happen, the working classes would have to accept an 80% pay cut. The sad truth is that the West has, out of perceived necessity, chosen the technology path. In this scenario,many of the uneducated classes could end up redundant or in service to the rich. The UK/West will still have the revenue, but it wont be distributed as evenly as it was. No more plumbers playing golf on the Costas
33. flashman said...
techie: I think this Neely chap will rise or fall on his gold and deflation forecasts. He forecast, last year, that we would enter into a 4-6 year deflationary spiral and that gold would fall in value for roughly the same period. If he's right, he might get shot by a furious goldbug
34. icarus said...
flashman - China's not as strong as many think - agreed.
Most of the problems I talk about aren't (in my view) the result of technological progress but the strategy of banks. The solution is to break the hold that banksters have on the macro-management of investment. Banking as a public utility if you like (this happens in many countries, but not the dominant ones) that steers investment into productive uses that enhance living standards, rather than the Anglo-American model which is predatory and extractive and sets out to enrich only itself - by making loans on, or financing, existing assets or income streams, creating and living on debt overhead, requiring govt policy to let land prices rise so they can be capitalised and paid out as interest to the banks, causing bubbles etc. - to say nothing of exploitative international lending, IMF policy and so on.
35. icarus said...
clarification @ 31 - first line 2nd para - make that 'OF the strategy of the banks'
36. flashman said...
icarus: maybe familiarity causes me to underestimate the importance of the finance sector, but I don't think its as significant to the world as you might believe. Like I said earlier, it's a sideshow to the work that goes on in a ceaselessly active real economy
37. icarus said...
flashman - I'm away from a computer for the next few hours so we'll have to agree to differ on that one.
38. crunchy said...
flash, That's funny... It's like saying petrol is a sideshow to the car. Excluding shiny show cars, squeekweak!
39. flashman said...
crunchy: joking aside, petrol actually is a sideshow to the car. You can run a car on steam, hydrogen, diesel, batteries, LPG, nuclear cells, petrol etc. You could even pedal it, but the car, (like the economy) is the main act. The fuel (like the financial industry) can be messed around with and substituted. It's not that important.
On a more serious note, I have a feeling that by next summer the banking scandal will be a fading memory and people who still harp on about it will be a bit like teddy boys when the hippies took over. Life moves on, and on, and on. Who's the next target for public rage??? I long for those simpler days, when all we had to hate were traffic wardens and the mother in law
40. crunchy said...
The next things to hate, Cameron, Obama, taxes, low wages, property, GM foods, Gardening, The latest old idea, Deadly Viruses, Traffic wardens and of course the mother in law if your wife is around long enough to become acquainted with her. That's the mother in law. lol
Yes the simple days when we only needed yellow sun glasses to make the tiny TV picture more exciting and had to get up off ones own ar4e to switch it off quickly before the National anthem, then quickly switch on the electric blanket for a warm winters sleep.
The morning cold snap of getting the milk bottle from the doorstep for that first cup of tea. Remember tea leafs. If only we had learnt to read them!
We would have known what they were all about.
41. shipbuilder said...
29. flashman said...
icarus: the Americans are indeed very cheeky and self serving. I singled out the Chinese because it is kind of a default position to knock the American future and claim the Chinese will take over. As you say (I think?), technological progress will almost certainly not cause income to be distributed equally amongst the population. Sadly it may do the opposite but there is no escaping its steam-roller progress or its effects. The unlikely alternative is to wind back the clock and start up manufacturing again. Of course for this to happen, the working classes would have to accept an 80% pay cut. The sad truth is that the West has, out of perceived necessity, chosen the technology path. In this scenario,many of the uneducated classes could end up redundant or in service to the rich. The UK/West will still have the revenue, but it wont be distributed as evenly as it was. No more plumbers playing golf on the Costas.
Those are interesting points, Flashman. However, I think that you make the mistake of assuming that manual skills are somehow of lesser value than white collar work - I assume this is a result of your education and work background - in Engineering, which forms my educational background, the practical has always been on a par with the intellectual. If you are talking about technology becoming the focus of our society rather than money moving - we can only hope. In this scenario, I would expect to see an increasing role for the practically minded (whom you refer to as 'uneducated') and a decreasing role for the financiers, lawyers and other associated service industries.
We can also only hope that the educational system can perform the required U-turn.
Of course, in any scenario, inequality of wealth (rather than lack of wealth), whether justified by intellect or not, leads to unhappy societies, whether the poorest live like kings or live in the gutter.
42. flashman said...
hello shipbuilder: No, I most certainly don't include engineers or the practically minded in the uneducated category. Quite the opposite. Engineers are pivotal to growth of technology. We categorically need more of them.
However, I do fear that inequality is, unavoidably, in our future. The irony is that many people who now moan about inequality, currently live in a society with perhaps the greatest distribution of wealth ever seen (hence my tongue in cheek comment re plumbers playing golf on the Costas).
Without wishing to sound like Blair, we need to exponentially increase the education of our population. The uneducated or unskilled will be left behind in any technology driven future. These are the people who will end up unemployed or in service to the rich. This type of society hasn't been seen since the 1920's.
43. shipbuilder said...
I wholeheartedly agree about education, my main point being that in technology/engineering, no matter how advanced, the set of skills that makes a good plumber are as relevant as academic qualifications. While technological breakthroughs may happen in the lab, putting them into practice in the real world requires a different mindset altogether. Unfortunately the academic bias of our education system and the relegation of practical skills to a second, lesser tier in the view of society will make this very very difficult.
On inequality, it doesn't matter if the poorest can play golf or are starving, it is the gap between the richest and poorest that causes tension in society and that gap is as big as ever. People do not stop feeling exploited even if they have a decent standard of living. In my view only when reward in terms of money and status genuinely reflects proportionate differences in talent will we see a more content society.
44. devo said...
@43 shipbuilder
If you decide to stand for election, you have my vote.