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SarahBell

I Know Why House Sales Continue

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Guest DissipatedYouthIsValuable
It's savings rates.

They are sickening low for business still.

What else can you do with the money?

Well, you can avoid throwing it at a depreciating asset to start with.

What the hell sort of minimising loss strategy is buying a house these days?

People are morons.

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Where do you do that then?

Sorry, didnt mean that to sound sarcastic.

All I mean is that in this "phoney bounce", the cheap credit has made it easy to create a bubble in commodities and financial assets that is driven by margin trading rather than "real money" buying.

The cost of financing, say, a long equity futures position is much cheaper than current mortgage rates offered to consumers.

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Sorry, didnt mean that to sound sarcastic.

All I mean is that in this "phoney bounce", the cheap credit has made it easy to create a bubble in commodities and financial assets that is driven by margin trading rather than "real money" buying.

The cost of financing, say, a long equity futures position is much cheaper than current mortgage rates offered to consumers.

See that just goes straight over my head.

Where's that kitten logo?

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Well, you can avoid throwing it at a depreciating asset to start with.

What the hell sort of minimising loss strategy is buying a house these days?

People are morons.

Aren't there any pills you can prescribe?

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It's savings rates.

They are sickening low for business still.

What else can you do with the money?

Keep it in the bank? Rate may be low, but they are not negative. BTL is likely to provide a negative yield at the moment, even if teh house were not depreciating, as all the new mortgage offers have high rates.

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See that just goes straight over my head.

Where's that kitten logo?

Margin trading is not really that different to taking out a 100% interest only loan to take a punt on a property.

Say you wanted to gamble on the stock market. You could buy a FTSE tracker fund. The cost would be the same as the exposure you wanted to gain. Or, you could buy some FTSE futures. You end up with a similar exposure (not exactly the same) without putting up much money upfront. This is margin trading. When you buy futures, someone else (probably an investment bank) has sold futures to you and they, in turn will need to hedge themselves- either by

1) buying some futures themselves, or 2) borrowing money at libor, and buying the consitutent stocks that make up the ftse index.

The cost of borrowing for (2) is built into the price you pay to go long futures for a given period of time. And it's currently a tiny cost (with 3-month libor well under 1%). This is as good a reason as any to split inv banking / capital markets businesses from retail banking -and let the market determine the correct cost of borrowing for investment banks.

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Where do you do that then?

for an everyday person with a day job (does not contitute advice bla)

buy one of the main commodities funds within a fund ISA - the main ones are BlackRock Gold&General; First State Global Resources; JPM Natural Resources; that's how I'd do it anyway...

other people do ETFs but this seems tricky to judge which one

Edited by Si1

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SarahBell, needless to say, treat any claims about commodities, funds and future performance as having a severe health warning. There is a lot of speculative interest and hence bouts of incredible volatility.

I am not making a point for or against commodities, simply saying that with with access to speculative finance so cheap and easy at the moment, if one has a bullish view on a given commodity, the financing is not an obstacle to gaining exposure. Unlike UK residential property at this time.

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SarahBell, needless to say, treat any claims about commodities, funds and future performance as having a severe health warning. There is a lot of speculative interest and hence bouts of incredible volatility.

+1

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Keep it in the bank? Rate may be low, but they are not negative. BTL is likely to provide a negative yield at the moment, even if teh house were not depreciating, as all the new mortgage offers have high rates.

If I said I got 14 quid interest in a month, guess how much money they have of mine sat there...

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It's savings rates.

They are sickening low for business still.

What else can you do with the money?

Depends how much you have, what risks you want to take with it and how quickly you need to get your hands on it. ;)

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A few reasons

1. The bank of mum & dad that benefited from decade long prosperity is still strong

2. The government opened up their homebuy loans to the wider market, lots of these have been taken out

3. The mentality of get on the ladder now is still deeply ingrained in people

Apart from this, yes, bears deciding putting their money into an illiquid deprecating asset is a sound investment has contributed.

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If I said I got 14 quid interest in a month, guess how much money they have of mine sat there...

A heck of a lot more than UK PLC has thanks to Gordon Brown.

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It's savings rates.

They are sickening low for business still.

What else can you do with the money?

Hardly likely! Yes, people do like to get interest on their savings, but that's not the main reason they save money. People save to accumulate capital. Interest is just the icing on the cake. Edited by blankster

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