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Everything posted by VedantaTrader

  1. Hmm, I would not be that arrogant...There is much better alternative info from US citizens now than for UK citizens. Mike Shedlock, Peter Schiff, David Rosenberg, Doug Casey, Calculated Risk, Jim Puplava etc etc and the list goes on...much more difficult to find this info on the British economy, GlenBack, Judge Napalotano on Fox.. Also, the US have Ron Paul who has a huge following of young Americans who are concerned with freedom and their own personal liberty...Ron Paul has been vociferous in his appeal against the actions of the FED and the US government, the fact that he is the most searched name on Youtube shows he has a lot of support.. The "closest" we have is that Keynesian muppet Vince Cable who is not even close. Strikes: What have they achieved so far? Poll Tax Riots: Now we just have it in another name, called council tax, where have the protests been against the sky high council taxes we now pay? Anti War March: What has it achieved in real terms? The war still happened, and we continue to support and expand on previous foreign policy...These were pussy Marches controlled by the state... Housepricecrash: We are not that important, the market will do whatever it wants anyway. I m not American, I m British, but this is how I see it.
  2. I would say at the moment it is more relevant with the high correlation with house prices. I m actually using the FTSE as a more liquid leading indicator for future house price falls. It is just moving up to where it was before, the test is will it move from these previous highs. Like a rally in house prices we have seen and stocks, they seemed destined to suck in as many people as possible before reversing course. The optimism is extreme at the moment for the economic conditions.
  3. Hi PP, I have been watching this chart also for the last 2 weeks as you have put it in my head. I ll post later a couple of charts of it and my thoughts.
  4. Absolutely Maltus, all rational thought just goes out the window. It was the same with the dotgone bust in 2000, when the frontpage of Playboy magazine was featuring hot dotcom stocks, then you know all reason has left. The gambling analogy is a good one in society. When you say a certain percentage I would say that percentage is quite high.
  5. I do feel for the fellow, it is tough to take a hit like that, and it is made worse by the "trappedness" of it. However, I have thought about this, and it seems that someone will have to take a loss here. There is nothing these people can probably do about it, it all depends on who will take the loss. As someone has pointed out, this will have been financed by a bank, and as we know they are not charities, they will not take the loss, the developer will not take the loss. The bank will be asking for the £20,000 deposit I would imagine, and then Harcourt can then sell it at whatever price the market will decide, whether that be £135,000 or less. It seems that in this chain, and in this order it will be the bank who will be last to take the loss, then the developer and first in line is the buyer...As I say not nice for the people, but they might just have to accept it that before buying something of such high value a little bit more research should be done. Then again I guess no bubble has ever ended in a rational manner. I remember a news story on the 6.30 NI news, BBC about how a house in Belfast had been bid up something ridiculous in one day by 10 bidders. I don't know the exact figures, but it was something crazy like this...I remember thinking to myself, the end is nigh. I think this was spring 2007 a few months before it all went t*ts up. Surely, any contemplation over handing out £200,000 for a 2 bedroom apartment would have led to some questioning, some further enquiry. It is too late now to think about this, but it is hard to fathom how people got so crazy and deluded.
  6. And is at what price you buy it at not going to effect your profit? I know if I buy something cheap, and sell it at the same price as someone else is, but they paid more for it than I did, then my profit will be larger. Would knowing what price the "market" was prepared to pay not be a guiding factor in how much you are prepared to pay at an auction? By saying not knowing what price something is selling doesn't matter is basically discounting a market pricing mechanism, to make pricing more efficient.. It is fundamentally this transparency which allows a market to discover price. You are right in saying that it will not prevent a bubble as that was excessive credit, however what it might do is allow more efficient pricing and it will allow people oricing power, as they will be able to say now, "Well a very similar property last week sold for x amount?" It means the buyer can then make a more informed decision. It is also a point of reference which can be used to cross reference with what the estate agent is telling you...all in all, it seems like a useful tool to measure the "temperature" of the market right now. You mention about it being 6 months down the line, however, what if you were buying that same week? Why 6 months? Perhaps, with more of this type of information you could have actually of bought items for less than you did...? More efficient pricing allows more decimilisation with bid and ask prices. One only has to look to stocks, or a high developed futures market to see now that you can buy a stock such as Birtish Airways at fractions of a penny...Is it not price transparency, ie, seeing the bid and ask at each price that allows investors to buy at incremental prices. Perhaps good data will allow you to bargain at smaller increments. Also would trends not be something useful to know also? Gathering this data overtime will also enable one to develop a price trend to see if the market is moving up or down over a 3, 6, 9, 12 month moving average.
  7. I thought it was quite obvious why it would be useful to have transparency in this data, and it seems that the work that is being done on this (by Paul65) will go some way to giving that much needed transparency. It doesn't effect me as a non-participant in the NI housing market, but I m sure the people on here and in the wider community will find it useful. As PPam says, it will show the power of the bid, how much true demand there is at certain price brackets. The example of saying a house could have been a shed before is more and outlier event, however at least knowing this data provides a base to work from and investigate more. Most people want a house that needs little work, and only needs furnishing.
  8. Absolute classic...What a bunch of morons...I have to admit that I do enjoy fish and chips myself, but only occasionally. Yeah, as deep fried battered fish with chips is so healthy anyway, with or without salt. So now we will postpone their heart attacks from age 55 to 58...This is my observation, the people who eat in chippys often don't generally give two hoots about their health anyway, I see the same people drinking a can of redbull everyday, buying their 20 Mayfairs, and having a can of coke for lunch...and generally don't look too exercise prone. Their idea of a balanced diet is can of coke in one hand and a Mars bar in the other hand.
  9. Ironically growth has been happening since time began. It might shift geographically over long periods of time, but growth does continue to take place... I would say a more accurate summation of this would be that growth cannot continue uninterrupted forever under a particular system, but that growth does continue. I think we are talking about a quasi-capitalist system, one that is not actually a capitalist system. Fractional reserve banking needs constant growth to exist, however fractional reserve banking need not be part of a capitalist system. Central banks one of the biggest causes of the last three lost decades of the 20th century, 1930's, 1970's and this decade is not a free market institution. Infact the very word central pertains to something which is diametrically the opposite of what a free market is, a capitalist system. Money is the medium of exhange in society, and it is a centrally controlled organisation consisting of a few people who control the price of money for the rest. How can a few people sitting in leather chairs in a government building know what the aggregate demand for money is, the time preferences for money are of such a heterogeneous mixture of people are in a society. So the very macro level of exchange which is money does not exist with in a freemarket framework. If we cannot get the quantities of money right, the right price of money within what the natural supply and demand for money is then how we cannot expect to move in the direction of what a capitalist system is, if it fails at its very origins. Contrary to belief, a capitalist system does not need growth to survive. Periods of contraction, recessions are necessary to allow liquidation of bad debt , to allow people to increase savings at a higher rate of interest, for new capital formation to take place, as the pool of savings increases in the banks, then the supply of money increases overtime, which effectively reduces the cost of the money, bringing in the interest rate down naturally, then business entrepreneur can again borrow money from a real savings base, banks are not tied by bad loans, the government should not becoming out of a recession deep in debt as they shouldnt socialise the losses. A recession is there to detox the system, then a period of growth can be entered into again...As that growth continues eventually prices start to rise, the interest rate should rise naturally, which will help put the breaks on bubbles getting blown out of all proportion. So it healthy to have periods of contraction for everyone to get their house in order. This is a period of non-growth, yet from this a base is formed to go on the path of more growth. So a capitilists system does not need continous growth to survive, if anything the need for continous growth is what destroys market mechanisms from working. However, the politicians are trying to resist all of this, by not allowing purging of bad debt. They have totally distorted the cost of money. We are now "coming out of the recession" with record debt levels, and record government debt, a unstable currency, and a totally imbalanced economy. This vdo from a couple of days ago explains one of the problems with the system we have had... When you have governments running up huge deficits,by taking money from taxpayers, or creating inflation, by issuing new debt that requires future growth to repay then what the government intervention is doing is interferring in a free market mechanism to purge the system of wasted capital and to free up new capital.
  10. Yet peak oilers have not been proved wrong yet. The fact is that the supply curve has been flat for 5 years, this is what the hard data shows. I expect oil to be much higher in the next 5-10 years, and there is a chance it could be north of 300 USD. There was joy yesterday on the announcement that BP had made a deep discovery in the Gulf of Mexico, it will be up to ten years before that is in production. By that time many of the present large fields will have been depleted, so I am very sceptical that daily production can be increased to meet daily demand. The decline rate is around 6-8% per year at the moment, that is huge. You see the peak oilists Matthew Simmons was called a wacko back in the year 2000 he said oil would reach 100 USD. Jim Rogers received hate mail for saying oil would reach 150 USD this decade. The peak oilists have been right in price prediction, yet the economists have been chasing oil down all the way up. I think it is a case of the pessimists (realists in many cases) have to be right only once where as the optimists have to be right everyday. Peak oil is not peak energy by the way, but the transition I feel will be very painful. If one looks at the best data we have available it all points in the direction that we have peaked in production. Also don't confuse peaking with running out, we have no where near run out, it is just the fact that daily production will not meet daily demand due to geological issues rather than economic ones.
  11. Haha, well I actually did write more than I expected in the end... FTSE 10 year chart Here is the FTSE since 2000 with each candle bar being a 3 week period... I have drew in the chart calculator which has us at 29.30% below the 2000 price... Even in 2007 the FTSE never made a new high, it tested the 2000 high, but inflation adjusted it is well below its real high, and now nominally it is 30% below where it was...Remember that in 2000 oil was about 10 USD, now at 70 USD, and as the FTSE peaked out oil was 147 USD, in 2000 I think silver was 4 USD, went up to 24 USD, now at 14 USD, gold was 250 USD, now near a thousand, so yeah the FTSE has not been a good place to be. No one knows the future, and even when I think something will happen, I only still assign a 50/50 of it happening, most times, sometimes though you can just know something will happen. However, by assigning a 50/50 it means that if you position yourself to in that if you are right the payout is much larger than what you lose, then it doesn't matter if we are wrong so much. So I m on the side that the FTSE will fall this autumn with a chance we could reach or test the lows made in March, and possibly go past them. I have an option type bet on this which will pay out about 10 times my risk, so even if there is only a 1 in 4 chance the FTSE will fall I feel that this is still a could bet. Like I said before, if you told someone who has money in a pension that there was a 1 in 5 chance that it could lose 30% of its value they would be uneasy, yet the odds are probably much higher than this, as i think it is a real possibility. As A hedge in case I m wrong, I own gold and silver, and could take a bet on the USD falling eventhough I think it will rise in the coming months, as no one really knows, but at the same time I think things will be quite bad this summer, thats what the indicators I m looking at are telling me. However, as related to house prices I have said at the start of the year for the next few years we will get single digit falls, and I think prices will end the year down, and the next few months could see house prices falling again.
  12. Thanks for the chart, very nice chart. My mind is a bit fatigued so I don't have the focus to write too much...YOu raise good questions about why house prices have started to act like a stock, and why this correlation breaks down at certain points. In the piece I wrote on Sunday, further down this board I offer some reasons why this might have been the case from a cyclical point of view. I believe the correlation will breakdown at turning points in the relevant cycle of each asset. Yes the FTSE index fell heavily in 2000-2003...I would say this was related to a bubble in a specific sector of the economy, namely technology. This brought the index down, yet the stock Barrett Dev did move up, even though 80-90% of stocks fell. This stock I guess was a proxy for housing. I guess the fundamentals were in place for the single digit growth in houses 2000-2003, however as the BOE slashed rates as the FTSE fell to 3.75% this was like throwing petrol on the fire and led to the easy credit creation we saw which blew the housing bubble and actually the credit bubble as a whole. So 2000-2003 was a sector specific contraction and not a broad based one. The easy credit and feel good factors of rising prices after 2003 was in my opinion what led to the broadbased rally in the stock market between 2003-2007. Every sector boomed, the whole economy boomed, people spent like crazy, which of course fed into earnings in stocks and then people would buy the stocks on the improved earnings landscape. I believe it was housing which led the stock market from its 3 year slump 2000-2003. This time the slump is across all sectors of the economy ( and rooted in a structural banking problem), and not sector specific...and this time I think stocks are much further ahead in their cycle 10 years, but still somewhat away from their real bottom, however, in my opinion I posit that it will be stocks which will lead housing this time in any recovery, and then the correlation will breakdown again. I mean stocks did rally between 2003-2007, however, in real terms, ie inflation adjusted they are well down. The FTSE even in nominal terms is 30% below where it was 10 years ago. I have a macro-economic inkling to why houses and stocks have become so tighly correlated in recent years and months, and I will explain this in another post as I think it is important to understand. It is basically related to sterling as being used or perceived as a risk based currency, ie, a rally in risk or an appetite for risk will mean money flows will move from risk averse currencys and assets and into sterling to fund the purchase of more speculative assets. It basically boils down or at least has been down to positive interest rate carry between low yielding to high yielding money. It is crazy to think, yet it is true and the reasons are logical if you look into it more and look at the money flows that the japanese yen is negatively correlated to Northern Ireland house prices (well the UK anyway) as well as the USD. USD or JPY down, NI house prices up, USD or JPY up, NI house prices down, and almost in the same percentage proportions also...GBP/JPY fell over 50%, NI house prices fell 40% in the same time according to the figures...also 2003-2007 as the housing prices really took off, the GBP/JPY broke out of a multiyear trading range and really started to move in tandem with house prices as the GBP strengthened as the positive carry in overnight interest rates between the Bank of Japan and the B of England increased. So I would say the bigger macro theme at work here is international in nature, which is why I think even if the fundamentals were internally favourable for Northern Ireland house prices they effectively will be drowned out and in the end of no significance by the bigger picture at work here It is quite bizarre world we live in and an interesting one that the Japanese government bond yield has been moving inversely to NI house prices. The same goes for US T-Bonds. Something has occurred today that I have been keeping an eye for a while now, and I have been waiting for this breakout to occur, time will tell if it is lasting or not...but if I m right in this, it is signalling liquidity problems could be brewing and credit markets could start to tighten which of course is not asset friendly... US T-BondThe bond has broke out of a resistance on high volume,meaning that the demand for safer assets is moving up. BOJ Gov Bond The Japanese are pushing up thier bond prices also as demand for risk averse assets increases, it is making new weekly highs... I don't know if this is going to be a fully blown correction or not, but I do have a feeling that the next few months could turn very nasty for assets, sterling etc etc...Perhaps we ll get a 20% correction before the excessive government stimulus artificially keeps up asset prices, however if return of capital rather than return on capital is the name of the game, then I would be very wary in the next few months as I believe there is a chance that stocks could hit new lows, which will force prices on houses down also in tandem.
  13. I m not debating or disagreeing with your post in general, however, I do believe from a personal point of view that the more popular the music the worse it is. As far as music goes new songs not being popular is a positive musically. Some of the best music is never heard or promoted, infact really fantastic music that has got that near "celestial" element to it might not even be appreciated in the time sphere it exists, sometimes it is decades later that the music can become more popular than it was in its day...I guess the same goes for most truly great art. Sometimes, certain people, rare artists if you like are so misuderstood and ahead of their time that they are not appreciated at the time. Of course I define popular as being played on the radio often and the general populace love it and they achieve short bursts of success at the top of the charts..and then fades away and is written to target a specific group, ie, marketed. I think you are right in what you say regards this type of music as it is probably more like a fashion accessory as in it is cool to "wear" at the time and to be seen to be listening to it. This in my opinion is not in the spirit of real music and will not have any lasting effect on the listener...I m not saying there is not popular great music, however it is rarely in the mainstream...Radiohead I guess you could our popular but in the way that they are played onn the radio often, an album might only get into the top ten for a week or two before falling back.
  14. I have said this on here before and observed multiple times before...That people will put more thought into buying a second hand car at two grand, or buying a flat screen TV than how they ll invest 100 grand of their life savings... Case in point is that I heard of a couple who work to a bank that is related to Royal Bank of Scotland, owned by them in other words...They had a £100,000 of their retirement money in RBS shares which is now worth little more than £2000!!!! Surely anyone who had this sum of money in anything would have at least hired someone to read the balance sheet of this company for them...but no...I wonder how many times they looked at the brewing problems in the banking system...People say it is too much work and they don't have time to invest so just want some type of tracker/ISA type fund...yet they don't realise that years of work and savings can be lost or taken away from then in a few months when we have these high sigma events. A little work now, is much better than the work it will take people at the midlife stage to gain back £100,000 of their savings...if they ever do...Very sad. Its all with how we view risk...Lets say the odds of RBS going bust were only 1 in 30, or even 1 in 50(even though it was much higher than this, and effectively they did fail), I bet if that if you told someone with 100 grand in a company that there was a 1 in 50 chance that they could lose that then they would not be able to sleep at night. That would still seem too high a risk, yet people gamble all the time like this without any hedging, spreading or insurance for sigma events that do happen with greater occurence than people realise. EDIT to add, I have been looking at the correlation between the FTSE and house prices lately, I wrote a piece a few days ago on this forum...An example of a simple way I would protect myself, if I had just bought a house or was thinking of buying a house I would be buying a deep out of the money put for the FTSE to go down...as house prices and the FTSE are correlated in a positvie way...so if the FTSE goes down, most likely house prices will go down...so buying a "put" from these guys for example dated out to the end of next year would shield you against falling prices. Some of these options are leveraged at over 7 to 1 meaning that for every £1000 change in the underlaying is a £7000 change in your option/warrant...a £7000 grand return would offset being in negative equity somewhat and help with the montly mortgage payments.
  15. I would certainly not buy a Thai property listed on propertynews...I reckon this could be got alot cheaper, or something similar. MY mate bought 3/4 rai, for £20,000 in 2006. He can build a fantastic place for about £25,000-£30,000, and still have space to out a few bungalows on to rent out. This goes for any country, better to go and do some direct dealing with the local estate agents. It also helps if you can read Thai or have someone with you who can as you will most certainly be able to get a better deal.
  16. Thanks Spline. I would say that 2003 until today has been pretty correlated. Did you make those?
  17. According to this nationwide prices the price was £186,000 in the fourth quarter 2007, ie, December 2007/ January 2008. Also I said stocks are more liquid and for that reason you will have more "noise" in a stocks price around the mean. However, my friend the trend between the two exists. In the last few months, each day house prices rises were reported we had the FTSE moving higher on that day and the following days to new highs. Stocks are priced daily, house prices are not, so it will not be an exact fit, however the two have been following each other at the major turning points, and as one made a new high or low, the other did follow. House prices peaked November 2007-FTSE peaked November 2007, House prices bottomed (temporarily) March 2009 as did the FTSE, each rise in house prices in the last few months has been accompanied with the FTSE making new highs.
  18. Yeah sure Doccyboy, give me 30 minutes to fix the huge amounts of typos. Cheers.
  19. In the last few months we have had one of the biggest bear market rally's in the history of bear market rally's in stocks. I m sure many will say so what? How has this anything to do with house prices? Using the analysis software I use I have done an overlay of house prices on the FTSE 100 chart...Many of the housing bulls have likened the stock market to nothing more than gambling, and houses as a much better investment than stocks. Well, I hope to show that in the last 6 years, buying stocks and being a buy to let investor or building houses has been no different. The only difference being that buying the stockmarket index would have been much easier and less time consuming than building houses. With that you also have the fact that the stocks within the stock index would have also payed a dividend which is really the equivalent of rental income. Also having been in stocks would have offered much more diversity than houses with the added liquidity. Therefor one could have sold stocks very easily, within a day, and perhaps escaped with much less financial damage than being stuck with a house falling in value with no potential buyers in line for many months, perhaps even years... Here is the chart I have done this morning...House Price Overlayed on FTSE 100 I have used the quarterly house prices, I have not added every quarter until the last 18 months, as it was not necessary to show the very tight correlation between the two assets, and also to avoid unnecessary clutter on the chart. I would say the stock market leads the house price index for the reason that it is much more liquid. The FTSE peaked in July 2007 with a test of this level in November, before the two Bear Stearn hedge funds blew up, and the credit markets began their long freeze, and then the Northern Rock debacle began in August/September. Stocks Breakdown before Houses It can be clearly seen that with every new high in the FTSE was accompanied with house prices...and the same can also be said for every new low in the FTSE was also a new low in house prices between November 2007 until March 2009... The stockmarket made in March what is in my opinion a temporary bottom be it nominal or in real terms. As can be seen in this chart this bottom correlated very nicely with again in my opinion what is a temporory bottom in house prices. The chart shows that as the FTSE has made new quarterly highs so has the housing index right up to the Nationwide release last week. Now this pattern or correlation began in 2003. Between 2000-2003 there was a disconnect. These correlations and intermarket relationships don't last forever, but they can last for many years. If anyone wants to keep a tighter check on this relationship I suggest that you could put in excel montly house prices in one column and FTSE monthly closes in another and use the correlation function in excel to look for signs that this pattern may be weakening. Right now the correlation is there and is very strong. Perhaps if the correlation declines to below 70% then the pattern may have been broken, anyhow, this is a way to keep check if you are interested. Here is a chart of the FTSE 2000-2003 where house prices and the market were negatively correlated. As the FTSE crashed house prices rose. The fall in the FTSE between 2000-2003 was a sector based crash, that sector being the technology sector. One only has to look at a chart of the NASDAQ to see how bubbles don't return for years. The BOE cutting of interest rates which between 2000-2004 down to at what the time were historic lows was in my opinion what gave rise to the dramatic 4 year housing bubble. It was at this time in 2003 in my view that the correlation between house prices and the cyclical stock market bull began between 2003-2007 began. I m also of the opinion that it was low interest rates and the housing market boom which was the catalyst for the stock market bull between 2003-2007. As credit grew in all sectors of the economy the consumer was there in the form of spending (credit) to bolster earnings of companies in the FTSE. As consumption increased so did earnings. This pushed up the stock market earnings to the 2007 valuations, hence why we had companies like Persimmon, Wimpy going up many multiples. As people liquored themselves up on easy credit in the form of home equity extraction, cheap personal loans and credit cards many stocks across the whole economy went up many multiples on earnings induced from credit. Also as the outsourcing of labour to Asia increased so did global wage arbitrage. This led to an influx of cheap goods from Asia which we binged on using excessive credit growth. The errors of our policy makers were that they focused on prices and therefor the CPI as a measure of inflation and completely ignored credit growth. However, there was dowward pressure on the CPI due to the above mentioned wage arbitrage and outsourcing of labour, not to mention that a stealth commodity bullmarket was also underway, so this did not feed into prices on the CPI until post 2005. So the BOE and government made the grave error of treating inflation as a price phenomenon rather than a monetary one: Inflation is the growth of money and credit,not whether or not your imported dishwasher is going up in price or not. Yet at the recent BOE testimony they have not learned a sinle thing. They are still focusing on the CPI as a measure of inflation. in 2003-2007, instead credit growth continued to grow to epic proportions until we reached the point where for every £ of real GDP growth we had over £3.50 of debt to achieve this. Even as interest rates started to rise they still did not slow down credit growth, if anything it only increased. However, as debt levels continued to grow, and interest rates edged up we reached saturation point where interest rates anywhere above 5% were far too high for an overleveraged consumer. To summarise this point, historic low interest rates of 3.75% were low in 2003 as the economy was not as overleveraged as today. Today interest rates of 3.75% are much too high for the debt leverage that exists. It even seems that interest rates of 0.50% are too HIGH for the debt levels that exist now, hence why we have these pointless QE policies being undertaken. Here is my point. It was housing which led to the boom across all sectors in 2003-2007 as a result of low interest rates. We had house prices rising and stocks falling 2000-2003 before the correlation began 2003 until the present day. This raises a few questions and different possible scenarios. Will housing lead the stock market this time as in 2003? Will the stock market lead housing this time in a recovery unlike 2003? Will both asset classes fall together and neither will lead a recovery akin to the Japanese experience? Or will both lead a recovery and rise in sync akin to 2003? You can assign your own probabilities to each of the above... My view if I m forced to take one, is that stocks will lead the recovery before house prices this time, unlike the period 2000-2003 where house prices led. I think it is possible that stocks could bottom out in the next few years maybe sooner or later, and as stocks begin to rise in real terms house prices will be flat for quite afew years. I think it could be a nearly a decade before house prices make real increases in value. I don't think it will be before stocks, and stocks are still someway off a bottom in my view. Why are stocks still not near a bottom? My cyclical view on this is that we are at different stages of the cycle in stocks and real estate. The secular longterm bear in stocks began in 2000, the bear in housing began in 2007. We are ten years into a stockmarket secular bear. However, remember these secular bears usually last more than 15 years as a minimum, and it takes 25 years usually for a sector to reach its former peak in real terms not nominal terms from the bust if it ever does. So what for the forseable future. As of now the correlation between the FTSE and house prices is there and I think it is one to watch for hints on where things are going in the coming months. The above is a longterm secular chart of the S+P 500 going back to 1870. It shows the Price Earnings values at longterm secular tops and bottoms. For an explanation of the PE see here It tells a story. I will use the S+P as a proxy for the FTSE as the two are about 99% correlated. So in other words what happens to the S+P happens to the FTSE. The quintiles on the chart show where fair value has been. It is interesting that all market bottoms in the last 110 years have coincided with the PE at an average of 6, with the maximum being 9.1 and the minimum 4.8. The last top was a whopping PE of 44 in 2000 making this stock market bubble one of the biggest ever. As the old saying goes, the bigger the boom, the bigger the bust. So as of August today that PE ratio is at over 19...The lows in MArch were when it reached 13.4. So to call this a stock market bottom when the PE is still two times higher than any other stock market bottom is a little premature, especially if one considers the fact that this was the largest boom, so will we have a much smaller bust than previous busts? I don't see it. So lets lead this analyse of where we see house prices going from the point of view that stocks are over valued still from a very reliable PE standpoint. It is worth noting that we also can use longterm dividend valuation covering the same period which also corroberates with the findings of the PE study. 1) Stocks have not reached a bottom... 2) Stocks and house prices have a strong correlation today. As of today, to say one has reached a bottom is like saying they both have reached a bottom. 3) As can be seen from the PE and the way it is calculated, to get that PE down to around the 6 level again one of two things has to happen. We either need to get falling stock prices or we have to get rising earnings. I will side that we will get falling stock prices rather than rising earnings per share growth. It was the housing market and credit growth which led to higher earnings on stocks 2003-2007, will the housing market lead again to produce higher earnings? I doubt it, so it will probably have to be falling stock prices. I can't see any other new growth area in the economy which will lead us like the housing boom did 2003-2007. Unemployment is also higher now than rising than it was when it peaked 2003, so where will the jobs growth come from. I think the unemployment rate could remain high for years which leads me to believe we cannot reply on an earnings led recovery. 4) If we follow from point 3 then that means that we will get falling house prices if the correlation stays in place which I think it will for a while yet. The correlation seems to breakdown at turning points...as in 2000-2003 So to sum up my perspective on where house prices are going from this cyclical analysis... In 2000-2003 stocks fell hard and house prices increased. It was the rising house prices and consumer spending which lead to higher stock earnings which drove up stock prices 2003-2007... House prices were the leading factor 2003-2007... For that to happen again today we are relying on house prices leading the stock market again. Understanding that no bubble in history has never been reflated straight after it has burst suggests this will not be the case. This time the correlation will breakdown when stock markets bottoms, and it will be stocks that lead the recovery unlike 2003-2007 when it was houses prices rising which led to the stock market recovery. So if stocks are to fall in price, then unless we expect house prices to disconnect and start a new bullmarket then house prices will follow the stock market... I know some will say and think mistakenly that this correlation doesn't have to remain. That is true. But they can last for many years and it is very strong right now. It will not change overnight... As Doccyboy is predicting from next month we could see a return to falling prices, I concur with this point of view, as historically it has been the autumn period where stock markets have met their misfortune. Again I don't know if this will be 1930's style, ie a complete collapse or a 1970s style stock market bear where prices increased in nominal terms but fell in real terms due to high inflation. If we do get rising house prices, then they will lag prices rises in other sections of the economy and assets. Another alternative is that we are in a much larger credit cycle of 40-70 years which has ended so applying the logic of previous house prices crashed in the 1970's and 1990's may not hold any water this time. Credit is being destroyed at an alarming rate. Attitudes to debt may have peaked and changed. It remains to be seen, but there is nothing to rule out a Japanese style deleveraging where stocks are still 80% below there 1989 highs and house prices fell 65% from there 1989 highs. The previous crashes have occurred within a business cycle within a larger credit cycle. It look like we have reached a longterm term peak credit bubble, so this might play out like no one expects, and not for the better I might add. The only thing I can see holding stable value in real terms is gold. Gold does not have to go higher it could stay at these prices and increase in value as for example stocks fall 30%, gold drops 5%, house prices drop 25%. This is a net increase in wealth as it falls much less than other assets. I m using stockmarket valuations to confirm that house prices have quite abit further to fall for the reasons I have alluded to above. Two more confirming pieces of information I use in this is dividend valuations in stocks and the DOW/Gold ratio... At every market bottom this ratio has been between 1 to 2...today we can see it is still well above that, infact at 9 times that. So either the gold rises to 9000USD or the DOW drops to 900, or somewhere in between. To conclude, stocks and real estate are near perfectly correlated at least for the 6 years and it will not change overnight. So from an alternative view point, watching the stock market will give the clues to where house prices are going. Stocks have not bottomed which means house prices have further to fall, Simple as that.
  20. Good Luck Colin, making mistakes is a great teacher, I have made plenty of mistakes in many areas of life ( still in my twenties) but I feel a more able person for it, and if you analyse it you should it learn from past mistakes. Before I go all "chicken soup for the soul rubbish haha, there is nothing wrong with having supportive parents. I have been helped by my parents before but I vowed to pay them back and I think I have done that. In my opinion this is the way it should be. Family should look after each other and we should form close relationships with the people around us, friends etc, that you can cooperate with in a way that is beneficial to all. I have had the middle class thing thrown at me when helped by my parents by some people and that born with silver spoon in your mouth attitude etc etc. The same people think it much more acceptable to sponge money from the state in the form of benefits, and are not the most productive ,motivated, or positive people you are likely to meet. Good Luck.
  21. I agree. This is a bear market trap. House prices are going to fall, it is simple as that. Whether that is in real terms or nominal I don't know. However, I have really getting my head down over the last week and doing as much study as possible...It seems quite amusing I would say to alot of people, but the GBP/JPY has a near perfect correlation with house prices. GBP/JPY has been rising since March, as have house prices,I have noticed some changes in this pair. I think the JPY is a great barometer of changes in global sentiment, and risk aversion/risk tolerance. It has flatlined for over a month now in a range, and in the last few days the GBP/JPY has broken down through key support levels. If it gets below 147, then I think that will be a sign that credit markets will deteriorate or already are. Also Japanese Gov bonds are moving higher as well as US Gov bonds....These have been good indicators of things to come as in falling assets. The GBP is a currency that has become associated with being correlated with risky assets, so it is not coincidence that it has strengthened as stocks and real estate has increased. I think next month will be interesting and I think Doccyboy could be spot in his prediction that next month will be negative. The signs to watch for are when markets show weakness in the face of good news. I have seen that in the last few days. Everymonth when house prices have been released in the past the markets and the GBP have rallied on the news. Today the GBP is heavily down, markets are flat. This is a key sign if a turning point. Yesterday the US announced homesales surged most in 17 months, the markets were flat. Alo German manufacturing improved yesterday the markets went down. There are certain disconnects starting to appear, this autumn is going to be very interesting in my opinion.
  22. No problem man, I m on here most days, I also do one to one sessions on mindet adjustment. Glad to be of service... Excuse me if I grouped you in the estate agent, Belfast Tele group, general public...It is just that your previous post that we all are trying to push house prices down sounds like one of the statements many estate agents agents vested interest groups that have came out of the wood work and posted on here before.. Miss Jones for example...I don't own here, or plan to buy here. I want prices to fall and if I can influence people not to buy and that helps drive prices down (which I doubt, although collectively we do play a part perhaps, and if we do, so what?) so that my friends can buy a house, and the general populace can buy a house and have enough money left over to do the things they enjoy...then so be it, infact fantastic. Falling prices are a good thing. I can only speak for myself, but I m sure many of the longer term posters on here Doccyboy, BB, Shipbuilder, Sophia, Headmelter Joe D, Paul, Subby, PP, Traction, R+R and Talksalot and many others etc etc have saved many of their friends and families hundreds of thousands by telling them not to buy now...probably if each one of these forementioned people have influenced one person not to buy in 2007 it would be in the millions of pound. Thats incredible and a positive if you ask me.As I say I can only speak for myself, but I know I have saved people a hell of a lot of money by advising them not to buy and explaining why...So anyone reading this who is thinking of buying..Dont do it, encourage anyone you know who might be buying not to buy for another year...not for my benefit, but your own... And your right the graphs are not applicable to our wee country as the bubble here is off the scale, check out Joe Davolas signature, the price increases didnt fit on the Financial Times graph... Edit to add Talksalot to that list, no offence Talksalot...There are so many good posters to remember.
  23. So going on that graph BelfastVI, then the logic would be that this ratio fell below where the previous boom started...1982 until 1989, 2.8 to 3.9... the crash took this ratio below where it had started...down to 2.2 by 1995...So are you expecting this ratio to fall below where it was at the beginning of the boom around 2000...that would be below 3...if we take that markets shoot down below where they have came from perhaps we ll get down to 2.5? Markets are like elastic bands, or large coiled springs...YOu push a spring in until it becomes very narrow, then the bigger the move...as periods of very low volatility or standard deviation lead to periods of very high deviation or volatility... The move up to 2007 was when the spring was pulled hard at both ends, to an extreme, ready to snap back...now that spring has been let go at both ends and will snap back in proportion to how much it was suppressed at the start of the boom... I can't prove to you on this timescale that it will mostly likely be like this again...but I watch this phenomenon everyday occur at a fractal level in markets...some examples... Here is a recent one intraday chart of GBP/JPY...Return to mean/overshoot The bands are 2 standard deviations from a 13 period mean... The green arrows show the times when price shoots outside 2 standard deviations, usually followed by a violent snap back to over 2 standard deviations away from the mean in the opposite direction... The blue arrows show periods of calm, when the spring is coiled and not extended, and a move to a band usually presents a soft move back to the mean...however the longer the animal sleeps and stays inside the band the more hungry he is when he wakes up, then we get these violent moves...I d like to see this chart with a standard deviation line drawn in... The bigger the move to one side the larger the recoil back in the other direction...that was one hell of a move to the upside, so i d expect a large shoot to the downside, if the train wreck in the credit markets is allowed to play out,,,ie, minus inflating.
  24. Good reply. I have mentioned this peculiarity before, and have commented on it. I m afraid it is something in our society and the prevailing attitude to house prices, which I think estate agents, banks and the government have been a major cog in...and this is that: Rising House prices is GOOD Falling House prices are EVIL... Yet rising petrol, rising food costs are bad, and when they fall it is good. I pose the question to anyone in Spaders mindset which is a heft percentage of the population ...what is intrinsically better about a rising house price ,meaning you have to work more to buy one, than rising heating oil and petrol prices? If either rise it takes more of someones salary, savings to buy them...Stable prices are what would benefit everyone.
  25. Looking at past quotes he does seem like someone who will be deeply hurt by these comments We need a recession. We have had 10 years of growth. A recession gets rid of crappy loss-making airlines and it means we can buy aircraft more cheaply. Michael O'Leary Saying a recession could kill off all but four of Europe's airlines, November 3, 2008. We would welcome a good, deep, bloody recession for 12 to 18 months. We need one if we are going to see off some of this environmental nonsense that has become so popular among the chattering classes. Michael O'Leary His hope that a recession will dissuade governments from introducing green taxes, February 2008. In economy no frills; in business class it'll all be free - including the blowjobs. Michael O'Leary The Ryanair chief's plans for a transatlantic service, 2008. You don't see the government confiscating lipsticks and gel-filled bras on the London Underground. Most of them couldn't identify a gel-filled bra if it jumped up and bit them. Michael O'Leary On increased airport security checks, 2006. We fight constantly with governments and idiot Brussels bureaucrats who want to put up the cost of air travel, or half-witted environmentalists who can't add two and two. Michael O'Leary June 2006. I'm probably just an obnoxious little ********. Who cares? Michael O'Leary On himself, 2006. Making the world a better place ... by taking a vow of silence. Michael O'Leary On his plans after Ryanair, 2006. I'm taking the Ryanair approach to it: subcontracting everything. Michael O'Leary On being a father and raising children, The Times, London, June 2006. I changed the first nappy in the hospital and, called upon in emergency, I will do another. I'm not one of these people who will be there doing the full-time father lark. Michael O'Leary On being a father, The Times, London, June 2006. We want to annoy the ******* whenever we can. The best thing we can do with environmentalists is shoot them. These headbangers want to make air travel the preserve of the rich. They are Luddites marching us back to the 18th century. Michael O'Leary Lashing out at those who criticized Ryanair's flight give-aways for fuelling the rise in aircraft carbon emissions, November 2005. I don't see how onboard gambling can make the image of airlines worse. Michael O'Leary Announcing hopes to introduce in-flight gambling service on Ryanair, November 2005. At the moment the ice is free, but if we could find a way of targeting a price on it, we would. Michael O'Leary Suggesting that if his airline Ryanair could charge for it, it would, October 2005. Every idiot who gets fired in the industry shows up as a consultant somewhere. Shoot consultants and advertising agency specialists. Michael O'Leary As guest speaker at Anglo-Irish Bank Corp business breakfast, October 2005. We have a Government of lemmings, led by the biggest lemming of all, who is incapable of making a long-term decision. Michael O'Leary On the Bertie Ahern-led Irish government, as guest speaker at Anglo-Irish Bank Corp business breakfast, October 2005. The European consumer would crawl naked over broken glass to get low fares. Michael O'Leary I don't give a shite if nobody likes me. I am not a cloud bunny, I am not an aerosexual. I don't like aeroplanes. I never wanted to be a pilot like those other platoons of goons who populate the air industry. Michael O'Leary 2005. We bow down to nobody. We'll stuff every one of them in Europe, we won't be second or third and saying: "didn't we do well?" Michael O'Leary After crashing on a practice run for Monaco Grand Prix, May 2007. I'm disrespectful towards authority. Like I think the prime minister of Ireland is a gobshite. Michael O'Leary Screw the share price, this is a fare war. Michael O'Leary The problem with the airline business is it is mostly run by a bunch of spinless nincompoops who acually don't want to stand up to the environmentalists and call them the lying *****ers that they are. Michael O'Leary For years flying has been the preserve of rich *******. Now everyone can afford to fly. Michael O'Leary On Ryanair success as a low-cost airline. Screw the travel agent. Take the ******* out and shoot them. What have they done for passengers over the years? Michael O'Leary 2003. We don't fall all over ourselves if they... say my granny fell ill. What part of no refund don't you understand? You are not getting a refund so ****** off. Michael O'Leary On Ryanair's strict no-refund policy, the source of most complaints. Weber says Germans don't like low fares. How the ****** does he know? He's never offered them any. The Germans will crawl bollock-naked over broken glass to get them. Michael O'Leary On Jurgen Weber, Lufthansa's chief executive. There is too much: "we really admire our competitors". All ********. Everyone wants to kick the shit out of everyone else. We want to beat the crap out of BA. They mean to kick the crap out of us. Michael O'Leary On co-existence with British Airways. They don't call us the fighting Irish for nothing. We have been the travel innovators of Europe! We built the roads and laid the rails. Now it's the airlines! Michael O'Leary Our strategy is like Wal-Mart: We pile it high and sell it cheap. Michael O'Leary On Ryanair's strategy. I'm Irish and we don't have to prove anything. We are God's own children. Michael O'Leary Free tickets. In a decade or so, airlines will pay travellers to distribute people around Europe. The airline industry is Tesco, is Ikea, is network TV in the way viewers watch for free and advertisers pay for access to them, is the internet in the same way that websites earn money for delivering click-through traffic to other sites. Michael O'Leary On the ultimate goal of Ryanair. Air transport is just a glorified bus operation. Michael O'Leary Quoted in BusinessWeek Online, September 2002.
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