Where else will the cash go?

[Mr. Wapkaplett]

First time post.

I won't bother with the various stats that many have posted over the time I have been looking at this board, needless to say that it is fairly obvious to all fair minded souls that property in the UK is too expensive.

In accordance with this fact, it must, therefor suffer a correction. It is how this pans out which is of interest. Crash or stagnation, who knows.

Another thing that is of interest, and I have observed this in US mutual fund markets over the past 3-4 years which have not performed especially well, but have seen reasonable subscription is "there is nowhere else for the money to go".

It is a fundimental. Low interest rates rule out saving in banks etc, which may just beat inflation in real terms. Property and stock markets are the obvious choice for most investors, so when the tech boom crashed, cash went into BTL and speculation. It worked well and capital values made it a superb.

Now property is at the top of a cycle, where does the cash go? Global stock markets are risky as is foreign property (which is riding the back of the US/UK boom). Banks are dull. It seems to me, average Joe investor is at a loose end. Some may specialise in fine art/wine/antiques etc. but most will not.

If you had £100k cash, where would you put it?

[Big_Bad_Bear]

I put the proceeds from my STR (just under £150k) in a high interest saving account. Like you, I see no obvious investments out there. As you say, art, wine etc. may be worth a dabble but for me, at the mo, cash is king.

I do consider other stuff but the fact that my monthly interest almost pays my rent convinces me to stay where I am.

[Lou G]

Another STR here and again cash in a savings account. Offsetting the rent so no stress. Starting to doubt that I will ever buy a house again.!!

[zzg113]

cash is always king.

[Van]

Cash is king right now.

Where will the money go now now that property is dead? Debt repayment.

[zzg113]

good point van. debt repayment offers an excellent tax free return on your money.

[Sledgehead]

Mr. Wapkaplett : Global stock markets are risky

Big_Bad_Bear : cash is king

Lou G : cash in a savings account

zzg113 : cash is always king

Van : Cash is king

Anybody else call that a consensus?

Anybody else know what that implies?

[zzg113]

we're all wrong? high-yielding stocks are a good idea but they are defensive so everyone will already be in them and you will have to overpay for them. still, the income is worth having.

[chandellina]

yes - just about every nook and cranny in the financial markets is overvalued right now because there has been too much liquidity from all the cheap money our central banks have been giving us. but fear not, interest rate rises will take that soggy cash out of circulation and value will return to various investment instruments.

i don't see anything wrong with a nice 5% or more rate on a savings account - you get a better yield than on many government bonds. U.S. 10-yr Treasurys are yielding less than 4%.

[zzg113]

thats what happens when you have lots of monetary expansion-you get overinvestment where the yields on all asset classes fall until they reach a level where no-one is prepared to invest. I think we're there.

[Harry Sacks]

Mr. Wapkaplett : Global stock markets are risky

Big_Bad_Bear :  cash is king

Lou G : cash in a savings account

zzg113 : cash is always king

Van : Cash is king

Anybody else call that a consensus?

Anybody else know what that implies?

<{POST_SNAPBACK}>

Recession.

[Topher Bear]

Moonrights

Thats gonna be the next big thing

buy property and build houses on the moon, it the last pocket of affordability, commute to work everyday is a bit of a bind, but nice view!

In seriousness, how about gold and silver as a place to put your cash?

myself I'm in cash ISA's and when they are maxed out I'm gonna try Premium Bonds...you never know...could be the only way to afford my first house!

TB

[Harry Sacks]

but fear not, interest rate rises will take that soggy cash out of circulation and value will return to various investment instruments.

i don't see anything wrong with a nice 5% or more rate on a savings account - you get a better yield than on many government bonds. U.S. 10-yr Treasurys are yielding less than 4%.

? Do you mean the soggy cash will dry up when its borrowers have to pay it back?

I dont see how this will increase investment returns.

5% savings account ?

Inflation is 3%.

[zzg113]

with PB's, right, say the chance of winning is 1 in 30,000 and I put £30,000 in PB's; how is it possible not to win a prize every month? stats? Plus minimum 20% tax on the savings account dom. so your real return is 1%. whoop-dee-doo.

[statscat]

Mr. Wapkaplett : Global stock markets are risky

Big_Bad_Bear :  cash is king

Lou G : cash in a savings account

zzg113 : cash is always king

Van : Cash is king

Anybody else call that a consensus?

Anybody else know what that implies?

<{POST_SNAPBACK}>

I'm with Dom on this one, i think it implies that people are going to perhaps stop spending and investing and instead save all their cash, which could if taken to extremes cause recession and deflation (isn't think what happened in the US in the 30's and in Japan recently ?)

[Sledgehead]

Recession.

<{POST_SNAPBACK}>

No, that's what everybody thinks

Mr. Wapkaplett : Global stock markets are risky

And what is the relationship between risk and return?

[zzg113]

It would take a lot more than a recession to stop today's spendthrift generation.

[Harry Sacks]

No, that's what everybody thinks

Mr. Wapkaplett : Global stock markets are risky

And what is the relationship between risk and return?

<{POST_SNAPBACK}>

Do tell.

[Harry Sacks]

Do tell.

<{POST_SNAPBACK}>

You think the smart money made from property will pile into the stock market ???

[The Masked Tulip]

The money from property will simply go no-where.

People put 'real' money - their pensions, savings, etc - into shares and that bubble collapsed. So, a housing bubble was engineered partly by the city bigwigs and partly by Government, where, although some people put 'real' saved money into property as deposits, the majority borrowed 'unreal' money to buy houses.

When the housing bubble bursts it will be seen for what it is - a credit bubble with illusionary money. Of course, the debt will be real.

There will simply be no money, real or unreal, left to go elsewhere.

[zzg113]

property may well be shored up by the new SIPP rules coming in.

[Sledgehead]

All I'm saying is that people are scared shitless of the stockmarket,.

You ever box or play mortal combat / soul calibre. Tell me : when's the best time to strike?

[Topher Bear]

with PB's, right, say the chance of winning is 1 in 30,000 and I put £30,000 in PB's; how is it possible not to win a prize every month? stats? Plus minimum 20% tax on the savings account dom. so your real return is 1%. whoop-dee-doo.

<{POST_SNAPBACK}>

from the premium bonds brochure the current odds are 1 in 27500 of winning a prize for EACH £1 bond

Maybe that has now gone to 1 in 30,000.

heres the extract

"So, at current odds, someone who invested the maximum £30,000 and enjoyed average luck could expect to receive 13 tax-free prizes a year. And any one prize could be anything from £50 to the big £1 million jackpot"

so minimum return would be £650 which is a 2.2% return net. but using the stats average one of those prizes would be £100, therefore a return of £700, returning 2.3%. these aren't great returns but not much worse than you can get in high stree banks/bs instant access savings acounts (after tax) which are not ISA's plus you do have the chance of getting something greater. yeah its a bit of a gamble, but then so is stocks and everything else, but at least I can't lose my stake, and as I say if prices don't come down, it'll be that or the national lottery for my only hope of house ownership before my parents die!

TB

[zzg113]

the key words there were "enjoyed average luck".

[rockdoctor]

Premium bond prizes are tax-free, which is handy if you are a 40%er