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That's It- Sheeple Herded Into Speculation


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HOLA441

Better to be in cash than houses..

Yes, I believe this is right. If your savings are destined for a house purchase, then it's not CPI or RPI that is relevant, it's HPI. What people want is for their money to buy more houses, not sausages/fuel/iPods. However, I can understand why people get a bit nervous about their savings when they read headlines like that. With a few quid in the bank, I'm tempted to buy now, especially as it's now a buyer's market. What a shame that Merv won't control inflation (despite the BoE's remit). Time and time again he's stated that this is only a temporary rise and that CPI will fall to its target shortly but it's just not happening. All the time, people's savings loosing value against certain commodities. However, it's not all Merv's fault. How can the banks justify such a huge gap between savings and loan rates I'll never know.

Dave

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HOLA442

Leaving aside whether property is a better place for your cash at the moment, this is classic Daily Express propaganda bordering on desperation. It's a clear message to people with large savings to get into property. Richard Desmond has a property portfolio worth hundreds of millions. But we all know this.

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HOLA443

If nominal prices remain stable/rise due to inflation then the marginal yield is irrelevant assuming the inflation rate is higher.

illogical nonsense

Warren Buffet is, presumably, positioning himself for inflation - I mean, sh*t, he boyught a whole railroad!

that's fine, so am I, but on a tiny comarative scale!

but he isn't buying UK residential real estate AFAIKl, probably because in real terms it looks awful

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HOLA444

I've been saying more times than I care to recall that this HPC and recession isn't like 73-75 or 90-92. All comparisons with then are meaningless as we now have a bankrupt financial system and zombie banks. We're all going Japanese and no amount of QE will stave off deflation and consumer deleveraging.

That twit Branson may have agitated for the bailing out of banks but it just ensured a decade long depression. There's only one way out of this mess to 'reset' the economy........War.

Before this century is out the US and China will go to war. If you google recent activity in the South Chian Sea you can see what is already starting... and has been building up for some years now..

Chinese ships allegedly harassing Japanese and US vessels, Chinese sub surfacing amongst a US carrier battlegroup... (although the sub may have been forced to surface by US subs the reality is that it managed to get slap bang next to a carrier which, allegedly, did not know it was there.)

I think Iran will be the next one though... North Korea will bring China in... but then some in the Pentagon might rationlise that taking on China sooner than later will be preferable... People forget that, prior to 911, there was increasing hostility between China and the US with spy planes forced to land and Bush's Whitehouse basically lining China up as the next Soviet Union... there was even talk of US companies operating in China being traitorous...

Then 911 happened, the world went into melt-down and suddenly cheap stuff from China was all important.

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HOLA445

http://www.theenergy...com/pub/na/7005

TER: We no longer really have the option of expanding the debt and it's doubtful that even short-term stimulus will have much impact. Looking at this next leg down against that backdrop, what projections would you make about unemployment, housing prices, GDP as we look through the end of 2010 and into '11?

JW: Unemployment will be a lot worse than most people expect. Housing will continue to suffer in terms of weak demand. But in this crazy, almost perverse circumstance, the renewed weakness to a large extent will help push us into higher inflation. Real estate tends to do better with higher inflation, but it's not going to be a happy circumstance for anyone.

...talking about USA real estate which has already fallen much further than UK

you need to try harder

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HOLA446

How does gold perform when there's deflation!!?

I'm staggered at how many HPCers see inflation lurking around every 0.nothing rise in the CPI or whatever. The FED have pumped trillions into the system and they're seeing deflation; doesn't this tell you something?

I'm thinking of starting a deflation crash website - seriously.

Interesting idea. Contrary to some claims on here everyone is betting on inflation - that's why 5 year TIPS in the US yield 0%. I posted previously about the trend in CPIY, which excludes the effects of indirect taxation, here in the UK. It has fallen from over 5% year on year in 2008 to 1.6% now and half of that gain is due to the increase in the price of petrol. This is despite a massive devaluation of sterling over that period. With a large output gap eliminating any chance of wage inflation and public sector austerity on the way I won't be surprised to see CPIY at 0% in the near future.

By the way, gold and gold mining stocks did very well in the 1930s but I assume that was due to FDR's decision to devalue the dollar in 1933. All the gold bug sites go on about how Homestake Mining increased 7 fold during the depression while the Industrials lost 90%. We'll see this time around, but it is always prudent to have some gold and mining stocks in the portfolio.

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HOLA447
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HOLA448

If we are being herded into speculation then we might as well do it in style. I'm considering shifting a large chunk of my cash into my spread betting accounts and having some big punts on oil and silver (reasonably tight spreads and tax free returns too). Considering a silver ETF with the rest - hoping for a decent dip in silver before getting in. What is everyone else doing with their cash?

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HOLA449
Guest notrealhoudini

Houses will fall as EVERYTHING else rocketts in price, wages will not follow up @ anthing like as fast. Factor in unemployment + oil shock prices & houses are the one thing that WILL fall BIG time.

I agree!

Incomes will not rise to keep pace with "inflation", so people will need to find savings somewhere.

Reducing housing expenses, and downsizing rents will be everyone's priority.

What is happening in Japan, will spread to the UK.

http://www.slate.com/id/2263805/

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HOLA4410

If we are being herded into speculation then we might as well do it in style. I'm considering shifting a large chunk of my cash into my spread betting accounts and having some big punts on oil and silver (reasonably tight spreads and tax free returns too). Considering a silver ETF with the rest - hoping for a decent dip in silver before getting in. What is everyone else doing with their cash?

You'll likely loose everything like 90% of spread betters. I suggest you start of with a small pot that you can afford to loose and when it is gone be strict with yourself, if you find you are in the winning 10% after a few months of many trades top up the account and go for it. Calling the broad direction of things is the easy part but with tight spreads you will be amazed how many times the market will walk you to just past your limit stopping you out before resuming in the direction you originality bet.

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HOLA4411
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HOLA4412

Yes, I believe this is right. If your savings are destined for a house purchase, then it's not CPI or RPI that is relevant, it's HPI. What people want is for their money to buy more houses, not sausages/fuel/iPods. However, I can understand why people get a bit nervous about their savings when they read headlines like that. With a few quid in the bank, I'm tempted to buy now, especially as it's now a buyer's market. What a shame that Merv won't control inflation (despite the BoE's remit). Time and time again he's stated that this is only a temporary rise and that CPI will fall to its target shortly but it's just not happening. All the time, people's savings loosing value against certain commodities. However, it's not all Merv's fault. How can the banks justify such a huge gap between savings and loan rates I'll never know.

Dave

I've tried to explain this to family but all I get is a vacant expression :lol:

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HOLA4413

Before this century is out the US and China will go to war. If you google recent activity in the South Chian Sea you can see what is already starting... and has been building up for some years now..

Chinese ships allegedly harassing Japanese and US vessels, Chinese sub surfacing amongst a US carrier battlegroup... (although the sub may have been forced to surface by US subs the reality is that it managed to get slap bang next to a carrier which, allegedly, did not know it was there.)

I think Iran will be the next one though... North Korea will bring China in... but then some in the Pentagon might rationlise that taking on China sooner than later will be preferable... People forget that, prior to 911, there was increasing hostility between China and the US with spy planes forced to land and Bush's Whitehouse basically lining China up as the next Soviet Union... there was even talk of US companies operating in China being traitorous...

Then 911 happened, the world went into melt-down and suddenly cheap stuff from China was all important.

TMT, blimey you can see a dark future.  Anyone on this board under 45 should probably work on making themselves medically unfit for combat - get off to the cake shop and buy a mobility scooter.

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HOLA4414

You'll likely loose everything like 90% of spread betters. I suggest you start of with a small pot that you can afford to loose and when it is gone be strict with yourself, if you find you are in the winning 10% after a few months of many trades top up the account and go for it. Calling the broad direction of things is the easy part but with tight spreads you will be amazed how many times the market will walk you to just past your limit stopping you out before resuming in the direction you originality bet.

Thanks for the advice, but I've been spread betting for years and am fully aware of the risks. Spread betting on equities is a mugs game, but it's a reasonable instrument for trading certain things.

Anyone who trades, or is thinking of doing so, should read Mark Douglas' Trading in the Zone. Don't be put off by the rubbish title, it's a great book.

Example from Chapter 7 – The Trader’s Edge: Thinking In Probabilities

"Because they [the casino and the professional gambler] don’t have to know what’s going to happen next, they don’t place any special significance, emotional or otherwise, on each individual hand, spin of the wheel, or roll of the dice. In other words, they’re not encumbered by unrealistic expectations about what is going to happen, nor are their egos involved in a way that makes them have to be right. As a result, it’s easier to stay focussed on keeping the odds in their favour and executing flawlessly, which in turn makes them less susceptible to making costly mistakes. They stay relaxed because they are committed and willing to let the probabilities (their edges) play themselves out, all the while knowing that if their edges are good enough and the sample sizes are big enough, they will come out net winners.

The bottom line is that there is some degree of sophistication to thinking in probabilities, which can take some people a considerable amount of effort to integrate into their mental systems as a functional thinking strategy. Most traders don’t fully understand this; as a result, they mistakenly assume they are thinking in probabilities, because they have some degree of understanding of the concepts.

Traders who have learned to think in probabilities are confident of their overall success, because they commit themselves to taking every trade that conforms to their definition of an edge. …They have learned, usually quite painfully, that they don’t know in advance which edges are going to work and which ones aren’t. They have stopped trying to predict outcomes. The have found that by taking every edge, they correspondingly increase their sample size of trades, which in turn gives whatever edge they use ample opportunity to play itself out in their favour, just like casinos.

In light of the fact that anything can happen, wouldn’t it make perfect sense to decide before executing a trade what the market would have to look, sound, or feel like to tell you your edge isn’t working? So why doesn’t the typical trader decide to do it or do it every single time?

Any of the best traders (the probability thinkers) could have just as much negative energy surrounding what it means to be wrong as the typical trader. But as long as they legitimately define trading as a probability game, their emotional responses to the outcome of any particular trade are equivalent to how the typical trader would feel about flipping a coin, calling for heads, and seeing the coin come up tails.

As traders, we can’t afford to let our pain-avoidance mechanisms cut us off from what the market is communicating to us about what is available in the way of the next opportunity to get in, get out, add to, or, subtract from a position, just because it’s doing something that we don’t want or expect".

btw, it's lose, not loose!

Edited by Constable
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HOLA4415

Houses will fall as EVERYTHING else rocketts in price, wages will not follow up @ anthing like as fast. Factor in unemployment + oil shock prices & houses are the one thing that WILL fall BIG time.

We see it by Xmas.

Mike

I see house prices are getting KILLED today.

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HOLA4416

TMT, blimey you can see a dark future.  Anyone on this board under 45 should probably work on making themselves medically unfit for combat - get off to the cake shop and buy a mobility scooter.

You might be OK. It's your kids you should worry about. Pray for a girl!

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HOLA4417

http://www.dailyexpress.co.uk/posts/view/193097

express cover.jpg

This front page has made my mind up, and anyone wanting a crash (me included)is going to be very disappointed.

The sheeple will over the next few months realise that their money is shrinking in value in real terms ,due to negative real interest rates,and any return above inflation is to be grabbed. Therefore any house offering 4% net will be bought if finance can be arranged.

Houses won't go up but not down either :(

Stocks and commodities will go ballistic if more QE is announced.

The CRACK UP BOOM is here!

I am already seeing 3 bed terraced houses down to £70k (from ~£95k) in my target area. I'm ready to jump in again this winter (hopefully 3 houses @ £60k each for cash). For similar houses I am getting £450/month long term rent with low unrented peroids.

The plan is for the property to give me my pension of +£40k/year.

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HOLA4418

http://www.dailyexpress.co.uk/posts/view/193097

express cover.jpg

This front page has made my mind up, and anyone wanting a crash (me included)is going to be very disappointed.

The sheeple will over the next few months realise that their money is shrinking in value in real terms ,due to negative real interest rates,and any return above inflation is to be grabbed. Therefore any house offering 4% net will be bought if finance can be arranged.

Just one problem with your theory...the sheeple dont have money....they have bought into the idea of debt.

P.S. An no one will lend to them anymore.

Edited by TheCountOfNowhere
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HOLA4419

I am already seeing 3 bed terraced houses down to £70k (from ~£95k) in my target area. I'm ready to jump in again this winter (hopefully 3 houses @ £60k each for cash). For similar houses I am getting £450/month long term rent with low unrented peroids.

The plan is for the property to give me my pension of +£40k/year.

Great plan, but you shouldn't assume rents will remain as high as £450 p/m. In many respects the rental market is as disfunctional as the housing market.

Can't quite understand why landlords assume that rents are "fixed" unless in an upwards direction.:lol:

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HOLA4420

I am already seeing 3 bed terraced houses down to £70k (from ~£95k) in my target area. I'm ready to jump in again this winter (hopefully 3 houses @ £60k each for cash). For similar houses I am getting £450/month long term rent with low unrented peroids.

The plan is for the property to give me my pension of +£40k/year.

That must be some crappy area if 3 bed houses are 70k now. I assume that it's housing benefit that will be paying the rent.

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HOLA4421

That must be some crappy area if 3 bed houses are 70k now. I assume that it's housing benefit that will be paying the rent.

Nice attitude.

It's a working class town I grew up in and my family still live. Gives me the advantage I know exactly the type of house/area to buy for the least hassle market I am targetting. I have 1 HB the rest are private.

For me the maths do not work for the cities/southeast when I do not want the risk of buying 1 expensive property for large purchase price and being hit by voids.

RE: Sir John Steed,

Correct, rents are not fixed, in the last couple of years, one of my houses has dropped from £525 to £460/month - but thanks to Gordon/BOE, I am now making more profit on the property because my mortgage is now on the SVR than when I was was on the original 2 year deal with the higher rent income. The trick is to have no voids and keep the same tenants (no need to redecorate) - buy near schools is my target, and I have had some families in for +4 years.

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HOLA4422

Houses bought with BORROWED money...............not bought with savings!

QE = RATES....Even that Commie MERV can stop rates going up

The Sheep can only afford what they are allowed to be lent....

Mike

The whole point of QE is to suppress rates by keeping yields on treasuries low. i.e. By the BoE buying treasuries back at a guaranteed price, the market for new treasuries is supported and yields don't have to go up. Low treasury yields mean one less thing providing upward pressure on interest rates.

As long as the govt/BoE is prepared to tolerate inflation then they probably can keep rates low in the near term using this tactic.

Longer term of course - well, long term thinking went out of fashion years ago in the circles of global finance.

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HOLA4423

It's a working class town I grew up in and my family still live. Gives me the advantage I know exactly the type of house/area to buy for the least hassle market I am targetting. I have 1 HB the rest are private.

So its your friends and family you are pricing out then - nice.

Correct, rents are not fixed, in the last couple of years, one of my houses has dropped from £525 to £460/month - but thanks to Gordon/BOE, I am now making more profit on the property because my mortgage is now on the SVR than when I was was on the original 2 year deal with the higher rent income. The trick is to have no voids and keep the same tenants (no need to redecorate) - buy near schools is my target, and I have had some families in for +4 years.

So as long as your lender doesn't decide to increase your SVR on a whim AND the BofE doesn't raise base rates AND rentals don't fall, you're quids in - sounds foolproof to me.

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HOLA4424

To keep it easy let's say you get £500 month gross yield per month. i.e £6k pa.

Let's assume (wildly) that there NO COSTS so your net yield is also £6k pa per house.

Let's assume your average tax (including everything) will be 30% giving you a net income per house of say £4k pa (just to keep things simple)

Using these very rough and optimistic numbers, just one pensioner would need to rent out 10 houses for a pension of £40k pa.

There's something that doesn't stack up here and I don't know what it is. Can you help?

Your back-of-the-fag-packet calculation is the same as mine. I aim to have 12 houses paid off by the time I'm 50 to 52 years old. The thing that you are missing is that I am a well paid contractor in the oil industry - but have to work in some pretty shitty countries to make the money.

I would get worried if my day job work started to dry up, but as a contractor I have worked 5 years solidly and cannot see it ending any time soon.

The HPC stance that BTL prices out locals is not the case for everyone. There are people with no savings, who earn low salaries that need rental properties. I rent to several single mums with part time jobs, a couple of divorced fathers, a retired lady and a Nepalese bus driver and family - probably one or two of them would be in a position to buy if properties were around £50k.

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HOLA4425

Thanks for coming back on that.

My point is that one pensioner needs so many properties to fund one pension. 6 properties for half of what you want.

To me it shows just how expensive pensions are and that if I did the same sort of calculation with the stock market where earnings were suppose to fund us all or the tax system etc., it will just not stack up.

You may have to build in a bigger allowance for higher taxes in your projections.

There are a few 'expenses' to reduce the tax payable, plus holding properties in both husband/wifes names helps as well.

Why houses and not a traditional money purchase or stocks based retirement fund? I guess I like the fact that I have something physical to leave to the family when I am gone.

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