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PotNoodle

Are We About To Hit The "fear" Part Of The Bubble

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The bubble graph, which we all know and love, shows a very interesting

area after the false recovery of the bull trap, labelled "return to normal".

bubble.jpg

If, indeed, we are seeing the "return to normal" stage now;

then, next we should see - July/August/September and following - the failure

of the "recovery" and the next stage developing.

Rising swap rates, rising mortgage costs, and then rising interest rates

will feed through as unemployment (we have breen promised) heads

towards three million.

If, indeed, the "return to normal" collapses, then, for those who are vulnerable,

will come a stage that will be very nerve-wracking indeed.

Buyers, particularly, will be completely scared off if the "recovery" proves false.

That's when we should see the really big drops in prices.

Any bulls care to comment ?

post-9120-1244532013_thumb.jpg

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Guest KingCharles1st

I'm not a Bull, and have been astonished at how long it has taken us to get to this point.

This is going to be horrible

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I'm more of a "Neither", but my comment would just be to point out that the graph is not necessarily to scale.

Yes there are likely to be more drops, but 20% off peak may just turn into 30% rather than 60%.

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This is going to be horrible

As long as you keep posting that avatar, KC1, we will see it through.

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Guest KingCharles1st
As long as you keep posting that avatar, KC1, we will see it through.

I wont let you down Pot.

However, being "in the know" and "ahead of the curve" as it were, does this mean that once the bottom is reached, we already know its coming 12-18 months in advance- once we talk about taking advantage, would this then turn us into Bulls...? :unsure:

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But no one can point to a similar "bull trap" in previous UK House price crashes. That's why you have to use this made up graph.

People need somewhere to live, they don't need Gold, equites or bonds; markets that the graph you know and love is based on.

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I'm more of a "Neither", but my comment would just be to point out that the graph is not necessarily to scale.

Yes there are likely to be more drops, but 20% off peak may just turn into 30% rather than 60%.

I think we will hit 40% off peak in nominal terms by 2012. If things get progressively worse then stock up on those beans!

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But no one can point to a similar "bull trap" in previous UK House price crashes. That's why you have to use this made up graph...

Yes they can.

Last time, the market died in 1988, but saw rising prices in spring 1991, followed by the big falls.

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But no one can point to a similar "bull trap" in previous UK House price crashes. That's why you have to use this made up graph.

People need somewhere to live, they don't need Gold, equites or bonds; markets that the graph you know and love is based on.

I don't have any gold or equities.

I do have a few short term government bonds, but most of my net worth is in cash, instant access.

I do have a very nice house to live in (rented).

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But no one can point to a similar "bull trap" in previous UK House price crashes.

I think it's great, Labour have lost the plot, don't even know what their own voters want, the Tories must

be loving it, we have Gordon unelected chucking billions of pounds of tax payers money at the re-inflating

the housing market when their own voters want cheap housing.

Go Grodon you will guarantee the Tories a landslide in the next election hard working Labour voters

want cheap housing, it's the middle class Tories that want high house prices, it gets better by the day

Gordon doesn't even know what his voters want maybe that's why they just had their worst election in

a 100 years.

Edited by time 2 raise interest rates

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But no one can point to a similar "bull trap" in previous UK House price crashes. That's why you have to use this made up graph.

People need somewhere to live, they don't need Gold, equites or bonds; markets that the graph you know and love is based on.

Bulltraps don't necessarily have to go up (the last crash was flat). It is the psychology behind, not necessarily the price action.

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But no one can point to a similar "bull trap" in previous UK House price crashes. That's why you have to use this made up graph.

People need somewhere to live, they don't need Gold, equites or bonds; markets that the graph you know and love is based on.

Yes, and now they are spoiled for choice because of overbuilding. There is no connection between high prices and needing soewhere to live. Not many years ago council housing was the norm for many people. People will always be housed, there wont always be high prices to pay for housing

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The frustrating thing is, in a way, this is a bull trap.

It is only a temporary rise, and it will revert to more (but much smaller) falls over next winter.

But what the bears fail to realise is that not all bull traps occur close to the top. Some occur close to the bottom. Not so much a bull trap, but rather a premature recovery.... It would be just as appropriate to call the coming falls over winter a bear trap.

The point being, that the stereotypical "lifecycle of a bubble" chart was designed more for highly liquid equities or commodities bubbles. It has no precedent in UK housing, even in previous bubbles.

Whilst it is illustrative in terms of phase, it is entirely innacurate in terms of timing and scale.

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Bulltraps don't necessarily have to go up (the last crash was flat). It is the psychology behind, not necessarily the price action.

Exactly. Bull traps are sentiment driven. What has engineered the current housing bull trap is that houses are 20% cheaper, interest rates are very low and the economy is recovering.

The reality is that property is stil way overpricec, interest rates can only go up and the economy has far from recovered.

Its the incoming decline in house prices that is going to crush any positive sentiment and push people into the fear/capitulation stage.

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But no one can point to a similar "bull trap" in previous UK House price crashes. That's why you have to use this made up graph.

People need somewhere to live, they don't need Gold, equites or bonds; markets that the graph you know and love is based on.

I beg to differ. Last time round there was a bull trap, it was just over half way to the bottom:

Picture_6.jpg

post-13003-1244535924_thumb.jpg

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Exactly. Bull traps are sentiment driven. What has engineered the current housing bull trap is that houses are 20% cheaper, interest rates are very low and the economy is recovering.

The reality is that property is stil way overpricec, interest rates can only go up and the economy has far from recovered.

Its the incoming decline in house prices that is going to crush any positive sentiment and push people into the fear/capitulation stage.

I agree in principle. However, the constant media ramping keeps people in denial about this. It's ridiculous how they want people to perceive that rising house prices is a good thing. It beggars belief.

I own a house outright in Italy and I coulnd't care less if it lost 70% of its perceived value as long as every other house falls by the same. All good to me.

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Exactly. Bull traps are sentiment driven. What has engineered the current housing bull trap is that houses are 20% cheaper, interest rates are very low and the economy is recovering.

A recovereh based on borrowing 16% of GDP.

Sustainable?

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Yes they can.

Last time, the market died in 1988, but saw rising prices in spring 1991, followed by the big falls.

Prices didn't fall much from spring 1991, 55,418 in 1991 Q2, to 50,128 in 1993 Q1 or 50,930 in 1995 Q4.

Inflation adjusted there was no spring rise in 1991.

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we have Gordon unelected chucking billion of pounds of tax payers money at the re-inflating

the housing market when their own voters want cheap housing.

The QE is to spark business lending and stop general deflation, it is having little direct effect on the housing market.

Even labour voters would rather have a growing economy than no jobs and cheap houses.

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A recovereh based on borrowing 16% of GDP.

Sustainable?

I wasn't saying the economy is recovering, you misunderstood me. What I meant was that the public, through the mad ramping of VIs and media, perceives an economic recovery.

I know this country is toast for many years to come.

Edited by Eiji

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Bulltraps don't necessarily have to go up (the last crash was flat). It is the psychology behind, not necessarily the price action.

Possibly true, so use a graph showing previous UK house price crashes and try and show where we are on that rather than use a graph that has not been appropriate for at least the last two crashes.

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Yes, and now they are spoiled for choice because of overbuilding. There is no connection between high prices and needing soewhere to live. Not many years ago council housing was the norm for many people. People will always be housed, there wont always be high prices to pay for housing

I don't think many people would recognise your "overbuilding".

One big problem is that nearly everyone wants to live in one small corner of the UK. Indeed, Birmingham in the bottom third of the UK is called the "Midlands" and Manchester, less than half way up, is called "The North".

There are plenty of people who are inadequately or vulnerably housed and plenty who are prepared to pay more to live nearer London.

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I don't have any gold or equities.

I do have a few short term government bonds, but most of my net worth is in cash, instant access.

I do have a very nice house to live in (rented).

Exactly, you are keeping the BTL market fuelled.

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I beg to differ. Last time round there was a bull trap, it was just over half way to the bottom:

Picture_6.jpg

Thanks. Sorry to be dense but how did you calculate the percentage figures, they seem very high to me.

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