BigDipper
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Posts posted by BigDipper
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A P/E ratio of 21 for the South East doesn't sound too bad. The US average is 17.1 (the highest level in the past 20 years), with San Francisco almost double at 34.1.
The economist magazine has had several articles on the global housing boom and I can remember an article in the past year that had figures on rental yields. Unfortunately I don't have a reference but you can search the archives at www.economist.com.
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While visiting the parents yesterday I got an interesting story from them about a young (20-something) estate agent in our area.
My parents know his parents, and apparently the chap accepts that the market is very difficult and there are too few buyers, and that no-one can afford to buy. So with that said, the bloke has now borrowed a huge deposit from his parents, who have remortgaged their own house to raise it for him, and has used it to buy a flat for which the mortgage repayments come to almost exactly 100% of his take-home income. He will now live off credit cards, etc, to cover the costs of living, and apparently is quite relieved that he has made it onto the ladder (presumably felt it was a risk worth taking to avoid "missing the boat" ? ).
I must admit I was pretty shocked to hear this. It's one thing for an estate agent to try to trick buyers with this sort of thing, but to actually practice the insanity that you're preaching is another matter. I can assume that he was probably pressurised to "get on the ladder" by his parents, but even so..... you'd have to be quite stupid.
Well at least he can claim to talk the talk and walk the walk
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http://www.londonstockexchange.com/LSECWS/...3931&source=RNS
At the time of our preliminary announcement we pointed out that very weak
trading conditions during the final quarter of 2004 had substantially depleted
work in progress pipelines in our house agency, financial services and
conveyancing businesses. As a consequence of that situation, which was
exacerbated by our simultaneous efforts to incorporate the previously
substantially underperforming businesses acquired from the Bradford & Bingley
Group plc in October 2004, the Group will register a loss during the first
quarter of 2005.
During the first quarter of 2005, we are pleased to have seen a gentle seasonal
recovery in house sales activity. Although it is difficult to make comparison
with prior years because of the effect of the acquired offices on the
comparatives, we believe that transaction levels are between 25 and 30% below
those experienced in the buoyant first quarter of 2004 and considerably less
than one would normally expect. The market remains fragile, and volatile, and
slowed in the second half of March, which included the Easter week-end. Since
the beginning of the year, pipelines of work in progress have all improved but
are still substantially below previous years and this has materially reduced
our expectations for the second quarter.
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Sales for Jan '05 in my postcode are 33% of what they were in Jan '05.
(South East - Essex)
I did some comparisons of oct 2003 with oct 2004 for IG11. All sales should be reported by now for these dates and found a fall of about 50%.
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Remember that housebuilders are reporting figures based upon sales largely from the previous year. As a result they will lag the actual market considerably.
Agree there. You can see this from what happened to house builders share prices in the last crash: the peak was in 89 but the housebuilder share prices only plunged in 90-91.
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Japan may well end up selling some of its treasuries but IMO there is no way they are going to be the first big holders of T bonds to start the selling, they have no reason to be: they have a deflationary economy teetering above recession. Selling those T bonds would definitely result in recession and higher deflation. Of all the big holders of T bonds Japan is the most likely to keep on buying. The economies with pegs to the dollar and high inflation are more likely to be the first to dump the dollar.
That currency monitor is more likely to be used to detect sharp rises in the yen so that Japan can rapidly intervene and buy more dollars to weaken the yen!
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In a normal situation (low inflation) this would lead to massive inflation in Japan. This is has happened several times in the past in European countries. But Japan has DEFLATION. They want inflation so it costs them nothing to have an ultra loose monetary policy. In fact, they WANT more inflation.
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I don't know what China is up to, but what I do know is that the day they decide to revalue/float they are not going to give anyone advance warning. We will all wake up one morning and they will have revalued.
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As far as I understand the economics of this, Japan is effectively paying monkey money for the T bonds they have bought. The yen they use for buying T bonds is equivalent to yen that they can print through virtue of being the central bank. So it only cost them the price of the paper the yen are printed on, to acquire the T bonds they hold.
Of course, in any normal situation a central bank can't do this because inflation would go through the roof. But Japan has deflation so they just go on printing = ultra loose monetary policy!
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Of course China keeps saying that, we are in a run on the bank situation here i.e. for everybody except Japan, America being the bank. If you think your bank is going bust and you have massive deposits at that bank what do you do? You withdraw your money, but the one thing you don't do is give all other bank customers advance warning of the fact that you will be withdrawing. Because if you do that, by the time you turn up at the bank your deposits will be gone.
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There is no way that japan will be the first to move when it comes to dumping dollar assets. Japan is suffering from deflation so they don't care a dot about printing yen and using it to buy dollar denominated treasuries thus keeping the yen weak against the dollar. The japanese are desperate for a bit of inflation.
China on the other hand has a runaway economy with rising inflation partly due to their peg on the dollar which means that they essentially have the US's monetary policy. They can't afford for inflation to rise much further from its current levels, so at some point they will have to change their exchange rate policy. I believe this will begin with a revaluation, followed within a short time by a float within a larger band and against a basket of currencies.
There are also lots of other reasonably sized economies outside the south east asia with central banks that have large dollar reserves (e.g. most of eastern europe). If enough of these banks start selling dollars (most likely to be countries that don't trade much with the US), then that will start the ball rolling, possibly triggering some of the bigger fish to start selling (China, Taiwan, Singapore).
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All the evidence, RICS, mortgage approvals, personal observations, etc, etc, points to a massive slowdown in turnover in the housing market even if house prices are not yet crashing but merely sliding. But could someone explain to me why Countrywide's share price remains so high. Countrywide (biggest estate agents in the country) has made three profit warnings, the price dips after each warning but within a week it is back where is was before the profit warning. Strange. Any theories.
http://www.sharecast.com/cgi-bin/sharecast....cgi?csi=103971
Note: three profit warnings in the period covered by this graph.
Countrywide has a PE ration of 13 so it is not because bad news is already factored into the share price. In fact the share price is about what it was at in June when the housing market still "appeared" red hot.
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Well that would be an explanation if Countrywide actually had a low PE, like the builders with PEs of 5-6. But Countrywide has a PE ratio of 12.5 i.e. not that different from the average for the whole market.
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Yeah, those graphs are strange and even stranger if you look at the detail of what has happened since june. Look at the movement of the share price immediately after each of the profit warnings and you will see how strong the rebound is.
12 August
23 September
19 November
In the last profit warning, the statement is something like:
"profits for the full year will be SIGNIFICANTLY BELOW market forecasts", I translate this to "we believe our stock to be SIGNIFICANTLY overvalued".
And when you issue such a warning three times when the share price keeps on rebounding, what they are saying to the market is "Don't you get it, our stock is overvalued".
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This thread seems to be mixing up Countryside Properties and Countrywide plc, the estate agents, who have just provided us with its third profit warning.
I have noticed an interesting development in Countrywide's share price.
In June when it was first quoted, share price was about 300. Remember that those were the days when life was beautiful for estate agents. It then rose to a max of 340, and then the profit warnings started coming thick and fast. After each warning the share price took a dive but then rapidly recovered. So we have now had the third warning but the share price is only a few percent below what it was in the "halycon" days of june. What is happening? Is there something I don't know. Who could be buying? You would have to be insane given that the company itself has announced that its turnover is down by 30% and that it has relatively fixed costs.
My own personal theory is that there are some estate agents out there that bought some kind of derivative to take advantage of what they thought was going to be a buoyant Countrywide share price. Now that the price is falling they are trying to prop it up by buying any dips. They must think that the stock market is an illiquid market like the housing market. I smell a free lunch.
How To Make Money By Shorting Property
in Investment in general
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if you want people to discuss CWD with you can take a look on the free bulletin boards over on www.advfn.com. Long standing thread there with loads of CWD shorters that have been following the stock for months / years. Me included. Don't think many have made money on it yet as it invariably rises after any fall. Don't ask why.