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House Price Crash Forum


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Everything posted by i_godzuki

  1. Alas, the bubble years predate my time here, but the comment above is spot on regarding lending rates and base rates. Today, the base rate is 0.5% but a five-year fix with Mizuho is 1.9%. That doesn't sound too bad, but banks' lending criteria are far more strict than in the west and used to be far stricter than they are today. Slashing rates was pretty ineffective given the banking system was crippled. One thing I do often hear here is that it wasn't so much the authorities were too slow to cut rates, rather they were too slow to raise them during the boom. One could easily argue the same thing in the UK in recent years, particularly with the CPI-based inflation measures used as the main guide for interest rates rather than a more accurate measure.
  2. Maybe it's me but what I get from this article is that the Big Three Japanese banks have very little exposure to subprime and, compared to the size of its economy, 5.3bn is no great shakes. What the article also fails to mention is that most of the falling profits are down to domestic lending to poor people in Japan at extortionate rates by subsidaries of big banks. This year. the goverment capped what interest they could charge, spurrinig smaller profits which are now showing up. It's subprime related, but not as we know it. Of course, none of which helps the terminaly unsexy Japanese stock market which is down 18% this year despite limited subprime concerns and booming exports. That's a bugger for me as I've got some Nikkei tracker trusts.
  3. So even the Times now disagrees with David Smith's stats on earnings-house price ratio.
  4. I think the real problem here was that most corporate lending was secured on property. Then, when property prices fell up to 80%, companies were massively indebted and began using free cashflow to pay off huge debts rather than invest and grow. Banks, meanwhile, with 100s of insolvent lenders, were weighed down with trillions of yen of bad loans and were unable/unwilling to lend. The BOJ kept slashing interest rates and the government poured pumped up spending but it still took years to turn it around. An economist he here I was chatting with said the problem was that most actors were reacting rationally in line with traditional economic theories but the problem was that the situation didn't fiit the theory.
  5. That David Smith piece again Interesting to see that some readers have pulled David Smith up on his arithmetic. In his piece he suggests that the house price to average salary ratio is half of the 11x reported in BusinessWeek. Readers then point out, using a range of stats, that he is wrong to write that as the figrue is easily 9x or 10x. David then responds with some interesting sums (for instance, using last year's house price data or the average male earnings) to come up with a 7x figure, which while underestimating reality is still significantly more than the 5x-6x he suggests in his piece. Sometimes when you're in a hole it's best to stop digging.
  6. Housing stalls but don’t expect a crash Views?
  7. Yeah, the chaos continues. The Nikkei closed down a massive 0.5% on the news. The government hasn't collapsed either--there won't even be a general election.
  8. Re Japan, what a load of codswallop in the Telegraph.Japan is currently in it's longest uninterrupted post war economic expansion. However, it's possible that on Monday the revised GDP figure will be negative for the three months ended June. -0.2% is expected by economists but many say it's basically a statistical glitch and growth will have returned by the time the July-Sept quarter is meeasured. Growth of about 2.7% is expected for the full year--hardly recession. Japanese banks, meanwhile, have next to no subprime exposure and Toyota, which apparently will be hit according to the story, is the most profitable major automaker in the world. It's true that there are some problems, notoably the slight deflation, but the tone of the article was so far off the reality it's untrue.
  9. Er.no. The withdrawals (1.5 triillion) were by the BOJ, taking back the money it put in on Friday and Monday. Ithink the BOJ targets the interest rate and injects or withdraws money accordingly. Japan's banks are in good shape with hardly any exposure to subprime. The biggest, MUFG, said yesterday it had $42 million of exposure. It's profits for the quarter were well over a billion dollars.
  10. I had an interesting conversation with a Tokyo based economist today. He said that the the value of trades shorting the yen on the Chicago Mercantile Exchange has fallen 80% since the end of June, during which time the $-yen exchange rate has only moved about 5%. In other words, if his analysis is right, much of the carry trade has already unwound without a dramatic impact on the exchange rate. Potentially, a rare bit of good news among the sub-prime chaos. A possible to reason to by yen could be that Japan could emerge as a safe haven. It's growth recovery hasn't been accompanies by a huge credit boom (despite the ultra low rates). Also, while it's bank stocks have taken a hammering this year (down 20%) they have hardly any exposure to subprime. Once investors figure that out, there could be some updside.
  11. I've not be following too closely, but isn't this the BOJ just taking out the funds that it put in late last week and on Monday?
  12. No, that's my point. Someone further up was suggesting intervention is happening no but it's over three years ago--i.e. when the economy was floundering. Since things got back on track, there have been no signs of intervention (other than the low interest rates, of course). Even with those, many argue the low rates are stil fair given that Japan's inflation has been negative (just) for the last four months. The reason the yen has sunk is due to the differential between Japanese and global interest rates, but it's hardly Japan's fault that countries like the UK and US have allowed inflation to get out of control and, therefore, have raised rates faster than the BOJ.
  13. Sorry, what are yuo getting at? The Nikkei closed up 5 points today after opening down following the Upper House election result. This, presumably, can be explained by an initial over reaction and then investors bargain hunting. Nothing to do with intervention. The yen, meanwhile, has appreciated about 4 yen in the last week or two. The Ministry of Finance has't intervened for several years in the currency markets.
  14. I heard that it costs Honda almost the same amount to build a car in China as it does in Japan. Cheap labour is offset by poor infrastructure. Also, as someone said above much of the production in China is by foreign firms. Chinese carmakers will probably get there in the end but right now there are concerns about how long it will take. At the moment, they can build cars okay but the quality is poor. Hyundai is a good comparison. Arguably, they were Chinese car brands are now 20 years ago. Today, they're a pretty successful car company but it's not been them which has squeezed Ford and GM. It's the Europeans to an extent and especially the Japanese.
  15. They can pay by spending their cash reserves or by selling assets, such as Aston Martin or Jaguar in Ford's case. It's not dodgy. Ford seems to be in a worse position than GM right now. Interestingly, one of the few bits that's doing well is Mazda, which Ford has a 33% stake in.
  16. More telling than unit sales is profits. Last year, Toyota made $13.4 billion. GM lost $2 billion. Meanwhile, Toyota's market cap is $223 billion and GM's is $20.4 billion. So which is number one?
  17. As someone with a 20 year fixed loan (at 3%) I think this is a good idea. Of course, all the lenders etc will come out and say how it won't work etc. or say people don't want them because they make such a huge wedge through people changing to new mortgages. Also, if structured properly there should be no reason why you can't move with only minimum fees. Here in Japan (hence my low rate) I can pay off my loan in full with relatively small fees. Clearly, a 25-year fixed at a reasonable rate makes a lot of sense not least because you know exactly what you will have to pay and it will go down in real terms with inflation. When I got my loan last year, the mortgage lender was trying to persuade to take short term deals at 2% but I preferred the security of knowing exactly what I'll need to pay. It also, I guess, will take the boom and bust from the market to an extent, because people will be less affected by rate swings.
  18. How bad is it in Spain? I saw a friend last week who has lived overseas for a few years so not earning in pounds. He started off by telling me that he was thinking of getting a btl in the UK. I said "are you mad?" He replied that "property has gone up so much in the last five years..". Anyway, as the conversation progressd he mentioned he'd already put money down on a place in Spain, which is just about to be completed. His brother has another two, which according to the estate agent could be expected to earn 7% yields (not that great when you consider the currency risk). Anyway, all that was before the current downturn. Is the downturn affecting take-up of new build appartments by holidauing brits or is it just capital losses that's the problem?
  19. They are (very slowly) doing something about it by gradually raising rates. They've rised twice since August and a third 0.25% is expected this summer. At the moment, though, it's tricky to raise rates quickly because the cpi is still around zero. That should slowly change as consumer spending picks up. At long last,there are signs that wages are picking up, although this might not be reflected in the figures straightaway because many high paid boomers are dropping out of the labor market and being replaced by less well paid, younger folks. On the other hand, graduates this year are getting over two job offers each on average and unemployment is down to 4.0% and the wages for casual work are creeping up. As for the economy and the impact of the carry trade, it's pretty much good news. The yen has weakened because of the carry trade which is good news for Japanese exporters which make up a big part of the economy (Toyota, Honda, electronics companies etc) . the problem has been that those profits have been slow to filter through to wages, detering consumer spending. As for underinvestment, that's not a problem. On the contrary, there have been concerns that the low interest rates may lead to overinvestment and a misallocation of resources. From what I've read, the BOJ's worry would be what happens if the carry trade unwinds too quickly, sparking a rapid yen appreciation.
  20. I saw this today in the Japanese press. Quite interesting, I thought, given the Japanese no a thing or two about property bubbles, if that's the UK is having. Nikkei online (may need subscription so please see below)
  21. The Crash is Coming and it Could be Soon This is very interesting, don' t you think?
  22. The GBP837 figure is completely meaningless unless put into some kind of context. In other words, what would be the costs of not being in it? Also, I wonder how much the UK spends per head each year on defence?
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