Waiting For The Great Pumpkin

[JimDiGritz]

This article touched a nerve with me.

Waiting for the Great Pumpkin

If you have no interest in energy, or are unconcerned or skeptical of peak oil I would urge that you still read it anyway. Frankly you can replace high oil prices with high house prices and still get his point. It deals with the reality of our collective Cassandra like predictions of crashes, which despite being right, may come far more gradually than we think and never really feel like crashes.

I’d like to suggest that when we take a backwards look in the early days of 2013, we will most likely see that that’s what happened in 2012, too: a slow worsening across a wide range of trends, punctuated by localized crises and regional disasters.

The reason I am posting this is because I, like several other posters on here, am getting tired of waiting for the BIG ONE, a catalyst event which resets the market to match what we perceive to be the sustainable norm (house prices at local 3x income).

By way of background I spent years posting on the LATOC (Life After The Oil Crash) board, before, during and after the events of 2007. On there, as here, we could all see the direction of travel that oil and the global economy was headed in.

I watched live as NR drowned, and Lehmans and Bear Stearns failed. I watched Gold prices swing by $100/day, oil rocket to $150bl, the Senate and congress voting TARP in at the 11th hour, Iceland defaulting, nations engaging in near infinite bank bailouts, and Greece avoiding default by a whisker...

The result... no major oil price shock, yet another middle east conflict brewing and house prices hovering around the same price. My STR fund seems to be a constant reminder that I drank the kool aid.

"You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes. However the rabbit hole eventually pops back up in a very similar Wonderland and you just wonder whether you have just wasted a chunk of your life and taken a unidentified pill from a strange black dude."

Sorry for the long ramble... thanks for the therapy session. I'll expect the bill in the post!

Edited March 20, 2012 by JimDiGritz

[Son of Fred]

Keep the faith brother...

[Noginthenog]

Been posted before, but the same message....

http://www.youtube.com/watch?v=QovBLFZhQME

[pyewackitt]

It would be nice to have the price resets we all know have to happen eventually but frankly i'm less concerned with a 'crash' now than i used to be, not because i care any less and not because the Uk's position with regards housing is any better... if anything it's worse, but rather because i've better understood what's going on and protected myself further.

With regards housing the constant 0.5% rate environment will one day be looked upon as a period of unimaginable folly which essentially meant, not a cushion for those with potential repayment issues (loan or mortgage) as intended, but rather meant eventually everyone took on huge capital debts at low repayment cost. That's no awful as a short term action by the BoE/government but as we enter the 4years of near ZIRP (Zero Interest Rate Policy) the number of people stretched to borrow as much as they can afford is ever growing.

The UK housing market isn't improving regardless of the number fudging. FTB's are almost non-existant, volumes have dropped off a cliff for most part, the UK av pricing is to some extent being held up by a very small number of international investors buying overpriced London housing partly as a protection from a Eurozone crisis destroying their local currency. Fact is that for more and more UK mainland residents the cost of borrowing is as cheap as it has ever been, however the prices and deposits needed are out of reach. This isn't going to change overnight, this probably won't change for years to come - but when the rates do move upwards very small 1-2% changes to the base rate will have enormous impact on the sums borrowed by many in terms of monthly repayment.

To some extent the ZIRP policy becomes self-enforcing when it's held for too long - we are entering that time now. What i mean is that the longer it's held at 0.5% the more and more upside risks are created because there is nowhere else to go with it. Originally it was intended to lesson the repayment burdon and promote spending - now its the norm for many the idea of going back to a historical normative IR of between 5-9% is unthinkable.

The thing is that for borrowers this is feeding the addiction... for savers who still haven't cottened onto the fact that the UK is sacrificing them to the masses and taken their assets out of the UK and anything related to the UK economy well... they really need to vote with their financial feet as it were. The safest place to be from a currency dead set on inflation that offers savers no return and is on a policy path to armaggedon is far away, in other currencies, in commodities and in other countries stock markets - if you have money in the UK move it away, the pound will almost certainly not be getting stronger anytime soon - and if it does it will be through crisis in other currencies i.e. Euro, not strong industrial performance.

Basically as a country we are digging ourselves an ever deeper hole and like pigs in s**t rolling around in it telling ourselves via the MSM how lucky we are - frankly when the time of reckoning does come, and it will - it always does - there is no new paradigm here, we won't be able to get out of our hole.

This would all sound very depressing but i've been on HPC for 7 years now and learnt that governments will only make the situation worse - there are at least 4 or 5 things that the ConLibs can do to make things even more precarious in the next few years and i guarentee you that they will do almost all of them in their desperate desire to be seen to be trying to save something that by all rights and logic should be dead.

I think of our situation as something like a scene out of green wing where a patient is braindead and the overeager incompetent doctors is performing a heart bypass surgery for no reason other than knowing that the patient has a problem and he feels he needs to be seen to be trying to fix it. Similarly the governments NewBuy scheme won't make a blind bit of difference because they haven't understood the problem, selling council housing will again make things worse at discounts which cost the public even more - it's best to think of it as a comedy show but of course it will end up like a greek tragedy...

[chris25]

This article touched a nerve with me.

Waiting for the Great Pumpkin

If you have no interest in energy, or are unconcerned or skeptical of peak oil I would urge that you still read it anyway. Frankly you can replace high oil prices with high house prices and still get his point. It deals with the reality of our collective Cassandra like predictions of crashes, which despite being right, may come far more gradually than we think and never really feel like crashes.

The reason I am posting this is because I, like several other posters on here, am getting tired of waiting for the BIG ONE, a catalyst event which resets the market to match what we perceive to be the sustainable norm (house prices at local 3x income).

By way of background I spent years posting on the LATOC (Life After The Oil Crash) board, before, during and after the events of 2007. On there, as here, we could all see the direction of travel that oil and the global economy was headed in.

I watched live as NR drowned, and Lehmans and Bear Stearns failed. I watched Gold prices swing by $100/day, oil rocket to $150bl, the Senate and congress voting TARP in at the 11th hour, Iceland defaulting, nations engaging in near infinite bank bailouts, and Greece avoiding default by a whisker...

The result... no major oil price shock, yet another middle east conflict brewing and house prices hovering around the same price. My STR fund seems to be a constant reminder that I drank the kool aid.

"You take the blue pill, the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland, and I show you how deep the rabbit hole goes. However the rabbit hole eventually pops back up in a very similar Wonderland and you just wonder whether you have just wasted a chunk of your life and taken a unidentified pill from a strange black dude."

Sorry for the long ramble... thanks for the therapy session. I'll expect the bill in the post!

I posted the other day on how I believe there will be no doomsday scenario, just year after year of decline until life becomes unbearable.

Because it happens slowly you won't notice it.

Unless of course you are thrown into the firing line, probably through joblessness, regional anarchy/crime or individual business collapse. As this guy has stipulated.

I, along with many others on this forum have predicted a massive 1984-style decline combined with large scale unemployment, due to machines and software almost eradicating the need for human labour. Chuck in peak oil; and you have an economy where people are only paying for the necessities and nothing else.

Deterioration into a 1984 surveillance state is well on the way, but it will get a lot worse over the next few years what with improved technologies in facial recognition equipment and intelligent software and databases. Unlike the days of Nazisim, you will see no storm troopers and tanks, as TBTB will watch and control your movements by computer. This will be even worse, as the sheeple will not resist against it.

[JohnLennon]

Thank you Jim et all for your input I had thought I was the only one who could see this coming

Talk about peak oil and ALL people look at you like you are a complete retard. Even when you reason that basically oil is just another finite resource so even it it doesn't run out in ten years it will be fifty and they will just inform you the government won't let that happen

Either we are fvcked or our kids are, that's the new reality and no one wants to believe it

All i know for sure is that governments will make things better for themselves and much worse for us

Don't get me started on the EU either!

[24gray24]

I disagree completely with the sentiments.

Governments worldwide have bought some time by printing money. Effectively, time stopped in November 2008, while money is being poured into a black hole.

That's the only reason why nothing much has changed.

Directly the printing stops, time will start again. Banks will collapse, asset prices, pension funds will collapse, all over night. The world suddenly changes a lot. One day you will wake up, and the cashpoints don't work. That will be sudden, dramatic and brutal.

(The only alternative I can see, is currency flight. One day you wake up, and the pound is worth zilch. It's £20 for a loaf of bread.)

Reason: the banks are in so much debt, they can only be saved if the currency is turned into monopoly money.

[tinker]

Good thread, top post pyewackitt, politicians are both spineless and corrupted. They do not serve the majority, hence the measures that defy common sense, that this thing that 'nobody saw coming' (except the 'terrorists' who lurk on HPC) actually happened and the prescribed medicine seems to be to try to reanimate the Frankenstein monster, whilst ignoring the principal cause - the debt bubble.

We are a nation drifting an a boat without oars, with the officer class quietly passing round the message save yourselves.

It's all quite surreal, sometimes I wonder if it would be better to be uninformed.

[JohnLennon]

BUMP!

FFS the UK has terminal cancer and people are comparing Car Insurance on the main board

Wake up you cvcksuckers!

[scottbeard]

I, along with many others on this forum have predicted a massive 1984-style decline combined with large scale unemployment, due to machines and software almost eradicating the need for human labour. Chuck in peak oil; and you have an economy where people are only paying for the necessities and nothing else.

So - will there be no need for human labour due to machines?

Or will there be no oil to power the machines?

I can't see how you both statements can be true.

Edited March 23, 2012 by scottbeard

['Bart']

It deals with the reality of our collective Cassandra like predictions of crashes, which despite being right, may come far more gradually than we think and never really feel like crashes.

Things were moving fast in 2008.

[Guest_FaFa!_*]

I see no crash, but house prices will continue to decline until they reach the 100k - 120k average price mark. Those cheering on the government austerity should not be doing so because it will reduce the national debt, it won't, but because it guarantees a sluggish economy with sufficient job losses and insecurity leading to weak mortgage lending levels.

As we are not members of the Euro or tied to any exchange rate mechanism, the government is in total control of interest rates and will continue to do so as long as those two cavaets hold.

The UK will have trouble in the future but is not "screwed" (ie facing Mad Max or developing country standards of living) given it faces much the same problems as the rest of the developed world. The only countries currently doing well are resource based economies such as Australia, Canada and Germany who are doing well by screwing over the rest of Europe.

Ultimately the issue for the UK is one of capacity - ie can the population of the UK produce goods and services of sufficient quality that they can maintain the living standards to which they are used to and improve living standards to the level to which they aspire? I think this is the key issue, and the signs as far as I am concerned are not good. Whilst the UK currently has world beating science and manufacturing, with grade inflation, a culture of something for nothing and a lack of investment in our youth it is hard to see this being maintained. UK infrastructure is also poor as compared to other developed countries, but given the powers would rather raise public sector pay levels than invest in necessary infrastructure I don't see that improving either.

Regarding the peak oil points, I agree that this is a concern. Nevertheless there is a great deal of room for greater efficiency (for example the US consumes double the energy per capita of the EU or Japan), though this would involve a level of government interference in terms of setting efficiency levels and town planning that many on here would doubtless baulk at. I don't think we are facing doomsday yet. Whatever happens there will not be a crash, just a slow downward trajectory.

[scottbeard]

I don't think we are facing doomsday yet. Whatever happens there will not be a crash, just a slow downward trajectory.

Indeed - we can't expect the Chinese to do our dirty work for us for all eternity.

However, I think that many aspects of the "downward trajectory" will be really rather good, such as the return of manufacturing jobs from China to the UK and increasing sense of community.

Real GDP per capita and happiness do not always go hand in hand.

[chris25]

Indeed - we can't expect the Chinese to do our dirty work for us for all eternity.

However, I think that many aspects of the "downward trajectory" will be really rather good, such as the return of manufacturing jobs from China to the UK and increasing sense of community.

Real GDP per capita and happiness do not always go hand in hand.

Hmm, I would love to say the same thing, but unfortunately there must be a collective will to make society better i.e a mass encouragement of British manufacturing and community values.

Everywhere I go I see people that don't care, whether it be the benefit-scrounging single mum, the middle class private-school-and-bmw brigade, or the rich asset-stripping money junkies at the top, no one cares about society.

Everyone seems to care about 3 things:

-Sport/celebrities

-Their material wealth

-Their pampered brat children

Society, the future of this country, even the future of humanity is of no importance to them.

I discovered that many years ago, and that is why I came to the inevitable conclusion that our society will face collapse. I don't think many things in the downward trajectory will become good, due to the vulture-like behaviour of modern humans; who being detached from their communities, families, environment and traditions have become desensitized.

[silver surfer]

The UK housing market isn't improving regardless of the number fudging. FTB's are almost non-existant, volumes have dropped off a cliff for most part, the UK av pricing is to some extent being held up by a very small number of international investors buying overpriced London housing partly as a protection from a Eurozone crisis destroying their local currency. Fact is that for more and more UK mainland residents the cost of borrowing is as cheap as it has ever been, however the prices and deposits needed are out of reach. This isn't going to change overnight, this probably won't change for years to come - but when the rates do move upwards very small 1-2% changes to the base rate will have enormous impact on the sums borrowed by many in terms of monthly repayment.

It's not just overseas buyers, the main prop to the housing market is the growing numbers of BTL landlords. BTL is now over 40% of all house purchases and has effectively replaced first time buyers in the property eco system.

I suspect the main driver for this is that millions of Britons now regard BTL as their best bet for retirement saving. I'm a trustee of our company's pension scheme, so I talk to lots of people about pensions. It's dispiriting to hear just how many of them now regard BTL as a normal component of a middle class or self employed life style. It's got so that you're the odd one out if you haven't a few BTL properties; and moaning about tennants as now replaced gloating about new kitchens and house price rises as the number one topic of dinner party conversation.

I always make the obvious points, The Economist says British housing is 28% overvalued measured against rents, and 20% overvalued measured against incomes. Plus the short term tennancy legislation that underpins BTL is relatively recent, and will surely be reversed once owner occupancy rates slip much below 60%. But this has absolutely zero effect...it's as if millions of people in relatively well paid jobs with good credit ratings (in other words exactly the same people who have access to ultra low mortgages) have come to the collective conclusion that BTL is the only way they'll ever have the prospect of a decent retirement, and thereafter they simply stop their ears to any objections and get one with building a BTL portfolio.

[pyewackitt]

It's not just overseas buyers, the main prop to the housing market is the growing numbers of BTL landlords. BTL is now over 40% of all house purchases and has effectively replaced first time buyers in the property eco system.

I suspect the main driver for this is that millions of Britons now regard BTL as their best bet for retirement saving. I'm a trustee of our company's pension scheme, so I talk to lots of people about pensions. It's dispiriting to hear just how many of them now regard BTL as a normal component of a middle class or self employed life style. It's got so that you're the odd one out if you haven't a few BTL properties; and moaning about tennants as now replaced gloating about new kitchens and house price rises as the number one topic of dinner party conversation.

I always make the obvious points, The Economist says British housing is 28% overvalued measured against rents, and 20% overvalued measured against incomes. Plus the short term tennancy legislation that underpins BTL is relatively recent, and will surely be reversed once owner occupancy rates slip much below 60%. But this has absolutely zero effect...it's as if millions of people in relatively well paid jobs with good credit ratings (in other words exactly the same people who have access to ultra low mortgages) have come to the collective conclusion that BTL is the only way they'll ever have the prospect of a decent retirement, and thereafter they simply stop their ears to any objections and get one with building a BTL portfolio.

BTL portfolio's built on overleveraging and small equity will be wiped out by minor changes to the base rate - those looking to hold for long term (10+ years) with a good equity holding in their properties (50% or more) have nothing to worry about.

Typically a downtrend in housing will go in waves. Different reasons for things to move downhill, the budget and clamp down at the 2mil+ top end was great start in changing sentiment, even if the actually treasury gains will be relatively minor overall. What we desperately need is an end to the era of crazy cheap money and the more inflation stays above 2% the more it will have to happen eventually. I'd love to know where all the bond vigilantes have got to because ultimately a stance by the industry against government bonds is the right starting point for the higher baserate - a lower rating from AAA would also give the same desired effect as the risk balance would neccessitate an increase in returns on bonds.

Frankly i'm very much looking forward to seeing the base rates go up from 0.5% as Buffet said 'it's only when the tide goes out you see who has been swimming naked' and right now there are a lot of naked people, especially BTL owners.

[scottbeard]

Hmm, I would love to say the same thing, but unfortunately there must be a collective will to make society better i.e a mass encouragement of British manufacturing and community values.

Everywhere I go I see people that don't care, whether it be the benefit-scrounging single mum, the middle class private-school-and-bmw brigade, or the rich asset-stripping money junkies at the top, no one cares about society.

Society will flourish again not due to altruism but due to necessity and self interest.

People didn't pull together in the war just due to some notion of "society", they pulled together in local communities because it was the best way to win the war and thereby help themselves.