Wednesday, May 27, 2009
Says it all really
Market Oracle: UK Housing Market Will Not Bottom Before 2012
For you engineering types - i found this both entertaining and tragic at the same time.
Posted by techieman @ 01:58 PM (1766 views) Add Comment
16 Comments
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1. techieman said...
"Just as bankers apparently need to have it explained to them that lending money at 135% LTV (as assessed using International Valuation Standards), is dumb, and can ultimately damage the fabric of the economy, they also need it explained to them that lending at 50% LTV (as assessed by IVS), is equally dumb, and can be equally bad for the economy."
2. paul said...
By lending at 50% LTV, aren't the bankers simply pricing the risk inherent in lending against a falling asset correctly?
The Bank of England stopped pricing lending risk correctly some time ago when they were instructed to attempt to reflate the housing bubble.
3. techieman said...
paul the point is that this is a race to the bottom now. What they should have done was reduced LTVs on the way up. Now reducing it is an own goal for UK PLC and effectively for the banking system as a whole. Because the credit is the lifeline they are ensuring large falls.
4. techieman said...
so although it makes sense for an individual bank to protect itself - it will only protect itself if it becomes the lowest valuer AND then if someone else lends more
5. mark wadsworth said...
Techie #4, that's the prisoners' dilemma, and the banks are firmly in it - what's good for an individual bank is bad for banks as a whole (but excellent for falling house prices!)
6. uncle tom said...
There's an awful lot of gobbledegook in this article..
..and someone who knows the wicked ways of the world should quietly tell the author what 'the oldest profession' is.. ;)
7. doomwatch said...
It's aways dangerous to draw parallels with the reasonable exact and repeatable world of engineering mathematics with the more unrepeatable half-whit "quant" world of Excel quasi-maths or some dumb linear programming tool.
8. crunchy said...
6. uncle tom said.....and someone who knows the wicked ways of the world should quietly tell the author what 'the oldest profession' is
The only things I can think of are a Ring Master or a Kock Plucker?
9. mr g said...
"Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( hbutter@eim.ae ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai"
Obviously Mr Butter, the author of this article, has contributed to another property bubble.
Perhaps he has belatedly seen the light or is an out and out hypocrite. The latter is probably correct as he sounds a greasy individual with a name like his.
10. crunchy said...
Mr Butter is in a jam and doesen't know what to do.
He turned to the oldest profession for light relief and haggled for a sc...!
11. paul said...
Indeed Mark.
It's actually the Tragedy Of The Commons, isn't it? Shared resources subordinated by self interest resulting in destruction of the shared resource.
Either way it is a petard of their own making that their foisting themselves on. Perhaps they really have learned contrition like Japanese bank managers did in the 90s.
What a novel thought - bankers learning a lesson.
12. 51ck-6-51x said...
Even the actual oldest profession thinks about their own bottom line.
*groan*
13. happy mondays said...
I expect most bankers are Ring masters & need to keep making deposits!!!!
14. crunchy said...
How childish of you all, and such a serious article from Market Oral as well.
15. icarus said...
The whole discussion revolves around the long-run equilibrium, but that graph line includes a uniquely large bubble over the past 10 years which has pulled the line upwards. In other words, the 90-year line ending in 1998 won't be as steep as the 100-year line ending in 2008. So which is the "correct" line?
16. icarus said...
paul @11 - Tragedy of the commons - I agree. But it's the taxpayers who've been hoist by the bankers' petard.