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House Price Crash Forum


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Everything posted by aa3

  1. If the US government had let GM and Chrysler fail.. Ford would be looking at next year as the best year in its history. And America would soon have an incredible national champion of epic proportions. But the creative destruction of the market got so great that even America blinked.. and now the descent, where the good are torn down. I was more then ready to buy Ford shares as I saw GM and Chrysler's bankruptcy coming back in 2005 and was waiting. I would have been happy even if Ford issued a ton of shares to raise equity after their competitors disappeared. Instead my money(in Euros, Canadian dollars and Aussie dollars) will remain on the sidelines, instead of investing in companies.
  2. This sentence struck me as interesting. It is always considered here that the workers in the state, especially national government workers would be the best protected in a very bad economic crisis. But in this case the state workers actually were at a disadvantage since they couldn't adjust the prices they charge for their labour. Of course even so I'm assuming the ruling party in Zimbabwe must have found other ways to reward the police and army. In South American countries facing economic crisis the police can easily extract money by simply choosing(for a cut) when or when not to enforce the government legislation that inevitably comes like price controls. In western Europe our police don't have a culture of corruption to the same level though.
  3. As a futurist I've noticed for the last 10 years businesses have been avoiding automation compared to w hat they could do. Especially in the white colar area. But as they come under pressure in this severe downturn, the amount of money that can be saved by really automating things is endless. Back int he 70's big corps needed office towers full of workers in cubicles to manage the information. Now a server farm can handle what thousands of those office towers could. I've looked at businesses with say 6,000 employees. Where 20 years ago they had 6,000 employees.. 5,000 workers and 1,000 white colar. Now they have 2,000 workers and 4,000 white colar. This with computers and networks enabling management and other white colar to become far more efficient. If I was a buyout firm you could walk in and fire at minimum 3,000 of the white colar workers(which would merely take them back to 20 year ago levels). Who also make more money and cost a lot more as they are always flying around having meetings. If I got really savage I could cut 3,500 white colar workers, and still have a functional company, actually more functional as it wouldn't have so much bureaucracy paralyzing its ability to take action.
  4. Tough to say isn't it? I moved all my money out of the UK in mid 2007, into Canadian dollars, Aussie dollars and Euros. My gut feeling is transfer it all out, as the UK looks set for printing money to cover debts. The country is also still running a trade deficit, so imo that will have to close off by the currency falling in value. Especially as the opportunities for investment inside the UK don't look very attractive to foreigners. (although we might see some looking for bargains if things fall hard enough) Something to consider is if the currency fell a gigantic 40% in the next year it would only be 3.5% a month. Which would only be an average .2% a trading day. There could be multi-month long rallies and steep falls at other times.
  5. I'm trying to change things for the better.. by leading by example. Mainly lots of small things.. eg.. letting people know that I appreciate the work they do for me, from the dentist to the pizza maker. Or when driving going out of my way to let people in. Not treating people differently because they own more things.. Yet at the same time being a strong supporter of property rights.
  6. If there is a sustained 40% drop in car sales like is happening in the USA.. there is going to be a massive reduction in the number of car dealerships. And these dealers employ a lot of people, and occupy significant amounts of commercial real estate.
  7. If we had a real Labour government they would go for my proposal of a minimum wage of £15 an hour, and no part time stuff, unless the employee request part time. All supermarkets and high street shops would be on a level playing field, so the free market would still be operating with the best operated businesses coming out ahead.
  8. House prices will have to adjust to the new income level.. whats £5.50 an hour 20 hours a week.. at 3x income?
  9. I expect these kinds of properties to change hands 3 or 4 times before the bottom. Wiping out the capital of each buyer along the way.
  10. A big problem with the bullish forecasts of a shallow recession or credit troubles blowing over, was they never took into account, and still aren't taking into account the deleterious impact of massive job losses. We saw the meltdown of the financial companies BEFORE the job losses even started. If unemployment rises by like 700,000 in a month, one has to assume a large percentage of those will not be able to keep up with their mortgage and consumer debt(and if they are foreclosed its going to push house prices down where they live). And their consumption will fall significantly, causing trouble at the local retailers/commercial real estate. Also the newly unemployed are going to have far less access to new credit.
  11. Yes, I'm assuming that if a society has a 10% deflation that on average wages will decline 10% across the society. It may be an incredibly unequal process though, which presents risk management challenges.. some people goign to 0 income, and others remaining the same or getting minor pay increases. Japan had a managed income deflation over the last 20 years, but I don't know if western countries could do that.
  12. As screwed up as it may sound interest rates are getting very expensive right now in places. In the states they are having at least a 10% annual deflation in the monthly numbers lately, so even someone getting a 5% interest rate on their mortgage is paying a real 15% interest rate. Compare that to periods in the 70's when interest rates were 16% and inflation 12%.. that is a real interest rate of only 4%. In a powerful enough deflation the amount of money people owe in real terms is going to rise. For example imagine a 25 year mortgage, with 2% of the principle being paid back in the first year. If deflation is 4% it is crazily a neg-am mortgage in REAL terms. The principle owed is now 2% larger in real terms after the first year of repayment. What about a deflation of 10%? If principle paid back in the first year is 2% of the loan amount, the real amount owed will RISE 8% in the first year.
  13. Over the last 5 years Germany's power seems to be increasing exponentially. Along with its exports. Look at how Russia and Germany have become buddy-buds, which makes perfect sense as one is a great manufacturer, and the other a great resource producer. The last few months of crisis have also shown definatevly that the EU/Euro is a German/Franco project with the other countries along for the ride. And imo Germany taking the upperhand over France. Especially as the French/Dutch/Belgium group hit banking problems and need German help. No doubt in my mind that Germany will have a list of demands it wants for every 10 billion it gives to bail them out.
  14. I think 3x is far too high for modern Britain. Although it made sense back in the 60's and 70's. During the 1970's there was tons of union jobs available so take the example of a factory worker. He gets the job and is protected by the union. He has a guaruntee of keeping the same wage, and usually the union would already have negotiated future pay increases. So the bank woudl know his income would actualy be rising in the future. In the unlikely event that there was mass layoffs in that industry so deep that the union couldn't protect him, there were many other union jobs of about equal pay open in the economy. Marriages also were far more likely to stay together back then, so the bank wouldn't have to worry as much about divorce or seperation and the financial consequences of that. Nowadays most jobs aren't very secure. And haven't been for a decade. For older union workers with seniority - yes.. but I'm talking young people in the job market. Its not uncommon at all to lose their job every 3 or 4 years, and have to find another. The bank takes the risk that the person will not be able to find another job of equal or higher pay.. and the bank takes a risk in the intervening period, which may be like 6 months. And considering how poor job prospects are nowadays it means a much higher risk for the bank than in days gone by of the person being able to replace it. Secondly the union factory job is not the common job nowadays, especially for young workers who earn enough for a mortgage. Instead they are working in contractual jobs like realtors and construction workers. While a realtor may show to the bank incoem slips for the last 5 years showing a high income, its not a certainty that the income will continue into the future. As we've seen the virtual collapse of the industry over the last year. How many realtors will soon default on their expensive mortgages? I'd guess a large percentage will. Same for a building contractor, the income is not so consistent as a union factory worker in the past. Also as another poster mentioned, the taxation levels are so extreme that people do not have the flexibility in their income versus expenses that they can adapt to negative changes. Of course the income tax, but also council taxes, sales taxes, gas taxes that they need to get to work and so forth. Net income before taxes is not that meaningful because it is an apples to oranges comparison to different eras. Long story short I think in the new era with so much uncertainty in everything, .75 times net income would what I'd be comfortable lending a random person instead of the old 3 times. I'd be willing to lend more to someone like a prison guard or a council worker who had stable employment. But out of Britain's 30 million workers, 5.5 million work for the government. So this is under 25% of perspective borrowers.
  15. I guess they have to switch to something else now that the Obama story is winding down?
  16. I fear the private pension schemes through the insurers, that people are not going to get paid out. Maybe not anything back. It would depend what level of creditor a pension policy holder is considered, and I'm guessing they would be far back. I showed in my post on insurers why I thought all the European insurers are now bankrupt unless a miracle happens and asset prices bounce back to where they were. An example is ING bank with 1.4 trillion USD worth of Assets. And capital of 54 billion USD. If the value of those assets falls by half it is 700 billion in losses. 700 billion USD is a little larger than the GDP of the Netherlands. So it seems doubtful to me that the Netherlands would be able to bail out that scale of losses especially considering ING isn't the only large Dutch financial company.
  17. At one point when the Soviet Union was deteriorating they screwed up the production and distribution of Vodka and there was shortages in parts. Soon angry people were taking to the streets and protesting not just the vodka shortage. The Soviet leaders moved heaven and earth to quickly get the vodka flowing again.
  18. Before the internet we were atomized. They broadcast into our home with their views on things and only showing stories that advanced their agenda. It was a one way, centralized communication. Now we can talk to each other. I hope they have to reinvent themselves from telling us what to think, to simply telling us what is going on. An example of that imo is I use yahoo finance all the time. I go there everyday. Financial news was always pretty good because the consumers of it need real info to make decisions, and would switch to whoever helped them make better financial decisions.
  19. Who will be there to put an anti-freedom, anti-technology, anti-development slant on every story. Was just thinking about how when they do an economic story from Africa like a mine being built it is never about the good jobs being created or new money coming into the area but always about how the company is exploiting the workers and destroying the environment.
  20. Tourism monumentally sucks for generating wealth and jobs. What it creates are a moderate number of very low paid seasonal jobs. Look how pathetic it is 15 million tourists and only £800 million for the local economy. Compare that to typical industry. Say a modern car plant that produces 200,000 cars a year, with a value of £12,000 per car. Value from that one plant: £2.4 billion.
  21. Another problem.. a lot of the liabilities of the failed banks that the government is standing behind are priced in foreign currencies. They can't print their way out of those liabilities.
  22. Imo this is a pretty good idea. A few of us who believe that automation is replacing human labour across the board and is goign to fundamentally change the way the economy works over time, how money gets into the hands of the people... a shorter work week is one way to combat the problem. Instead of having 40% unemployment and people working a 5 day work week. Why not have near full employment and people working a 3 day work week? Agree with DaveSpart too, people then would have time to pursue entrepeneurial activity in their spare time, if they wanted.
  23. Dubai does some amazing things and I love the pro-development attitude of their leader... amazing things like the Palm Islands, the great desalination plants using the latest reverse osmosis technology, literally turning places they live into Oasis'.. and great power projects. But what never made sense to me was these massive condo towers. I always asked who is going to live there once the boom ends. The uber rich UAE citizens are going to live in palaces with estates. They will have guest houses on the property for the guest worker staff to live in. And there is only 800,000 citizens there, but they were building enough condos for millions of people. The Palm and World Islands made sense because the rich citizens could live in those homes and enjoy ocean front. With the Islands they actually increased the coastline by a factor of like 10 or more.. plus formed beautiful protected inlets and such so people could enjoy the ocean more. But the big part of the speculation was these endless condos and office towers.
  24. I have said fro over a year that I believe the UK will collapse financially as the housing/credit crisis blows up. The liabilities and leverage of the banks are just too massive, like Iceland. My list of countries that are going to go down: Ireland, Spain, the UK, probably the Netherlands and Belgium(after I looked at the assets and liabilites of their insurers recently which they appear to be standing behind). I think the USA might just make it. Their banks were only half as leveraged as the Euro banks.. and large sections of America had no property bubble. They also have more room to play being the main reserve currency of the world. There is the theory though that a toppling of the UK financial system might be the anvil thrown on top that brings down the US financial system.. That seems possible to me. The thing is a dying system, that is sapping the lifeblood out of its young and productive.. its not neccessarily a good thing to 'make it'. I don't think East Europe would be better off today if communism had made it through the bad financial crisis of the late 80's, and struggled on for a few more years. What needs to go is the incredible bureaucracy that is choking off real investment and production. Endless environmental rules and studies, commissions, countless bureaucrats with veto power over any project at any time, courts shutting down projects, affirmative action, heavy taxes, uncertainty in the political future with things like carbon taxes.
  25. With masses of construction guys being put out of work, with building materials piling up like the mass of bricks piling up I read about, with a real need by many human beings for a place to live.. with the price of building materials at lows not seen in many years.. The logical thing would be to go on a building spree of 4 story commie block style housing. If 1.77 million dwellings are needed(make it 3 million soon needed), and for arguments sake 60 dwellings per commie block, that would be 3 million / 60 = 48,000 commie blocks needed nation wide. Make it so >90% of the materials used are produced internally so it won't affect the balance of trade/value of the pound. Imagine the people we'd put to work if we built 48,000 new commie blocks. From building materials factory workers, construction guys on site, water and electrical work, roadwork, transportation companies, excavation (aka real actual jobs, where actual work gets done) Chance of our government taking action = none. Meetings will be had, studies will be done, paperwork will be shuffled, hefty bonuses will be given, dirt moved = 0.
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