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Share Boom Sparks Fears Of Soaring Debt

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http://www.telegraph.co.uk/money/main.jhtm.../cmnshare11.xml

IFAs warn novice investors against taking out personal loans or piling on credit card debt to gamble on the FTSE bull run
Soaring share prices are tempting people to remortgage or use credit cards to invest in the stock market - prompting fears of a return to the days of the technology boom when thousands of investors had their fingers burnt.
Colin Rothery, the regional manager of Throgmorton Financial Services, the financial adviser, said in one case he had
dissuaded an investor from borrowing £100,000 on his house to invest in shares.

Perhaps this explains the sudden surge in mortgage applications? With returns on house investment dead for years to come (even the VIs admit no more than 3-4% for the next 5 years) the stockmarket may get all that spare cash. FTSE has returned 70% over the last three years whereas houses have performed very poorly by comparison. Who is going to invest in BTL when the stockmarket is this good?

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It is just incredible isn't it - the populations of the Western World are being scammed big time re shares, houses et al. I feel like an onlooker watching some bizarre going on in a goldfish bowl from without. It almost makes you begin to wonder if you are mad and everyone else is right.

I am getting to the point now where I think only a massive war will stop the likes of the US, UK and others entering a big economic depression.

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http://www.telegraph.co.uk/money/main.jhtm.../cmnshare11.xml

IFAs warn novice investors against taking out personal loans or piling on credit card debt to gamble on the FTSE bull run
Soaring share prices are tempting people to remortgage or use credit cards to invest in the stock market - prompting fears of a return to the days of the technology boom when thousands of investors had their fingers burnt.
Colin Rothery, the regional manager of Throgmorton Financial Services, the financial adviser, said in one case he had
dissuaded an investor from borrowing £100,000 on his house to invest in shares.

Perhaps this explains the sudden surge in mortgage applications? With returns on house investment dead for years to come (even the VIs admit no more than 3-4% for the next 5 years) the stockmarket may get all that spare cash. FTSE has returned 70% over the last three years whereas houses have performed very poorly by comparison. Who is going to invest in BTL when the stockmarket is this good?

Is there no end to people's stupidity? <_<

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Haha,

The financial system is out of control, speculation rules and the central banks have done nothing but reward specualtion - misallocation of caital on a grand scale that is now seeping out all over the place.

Maybe they are going to the big kahoona and want to see a synchronised meltdown of the housing/stock and commodities all the the same time after having pushed every one to historic highs. Would make the tech rout look like a picnic.

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Is there no end to people's stupidity? <_<

Seemingly not, though perhaps the question should be "is there no end to people's greed"

Personally I'm making decent money out of my investments and it's all from what I've earned the hard way. Last year holdings realised +35% so moved about 30% out into cash to reduce risk - I'm a coward when it comes to money!

People who MEW and stick it into shares need their heads looking at...

Edited by FreeFall

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Is there no end to people's stupidity? <_<

Quite right!!!

But when is one of you bears going to recognise that MANY people on this forum, having sold their properties and now using the proceeds in these risky investments, have done EXACTLY the same thing and effectively MEW'd their way to becoming a stock market investor?

Think about that, each of you who are risking your sale proceeds, or deposit money in the markets, are doing exactly what is advised not to do.

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Is there no end to people's stupidity? <_<

1929 style leveraging is not good, but in a way though this is any worse than MEW'ing to go on holiday or buying a boxster? Once consumed the money is virtually irretrievable, so unless the shares become virtually worthless it's actually no worse than a set of used airline tickets, straw donkeys and empty bottles of taquilla.

Are the banks actually saying that MEW'ing in general a bad thing now we're facing a crash? They've long stopped caring about what the borrowed money was spent on but one assumes they had no problems if that resulted in conspicuous consumption and help prop the economy up, it seems leveraged investments are something else altogether.

Maybe they could start a spread betting exchanged backed by property, by gosh, that would be fun to watch.

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Quite right!!!

But when is one of you bears going to recognise that MANY people on this forum, having sold their properties and now using the proceeds in these risky investments, have done EXACTLY the same thing and effectively MEW'd their way to becoming a stock market investor?

Think about that, each of you who are risking your sale proceeds, or deposit money in the markets, are doing exactly what is advised not to do.

With the housing market looking flat for the next few years (unless the crash occurs) investors are natuarlly going to look elsewhere for healthy returns. BTL is simply no longer in favour as a vehicle for wealth. Question is how many people will dump their BTLs believing, right or wrong, that the stockmarkets will bring greater riches? Japan is coming out of its 15 year slump--how tempting is that fact for a BTLer looking at 3% return this year and maybe 1% or 2% in 2007? The herd may be dumb but it influences prices.

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With the housing market looking flat for the next few years (unless the crash occurs) investors are natuarlly going to look elsewhere for healthy returns. BTL is simply no longer in favour as a vehicle for wealth.

I think we've hit the nail on the head, they don't want to sell up because of capital gains tax and because they "believe in property", as SP crowd says. So why not have your cake and eat it, MEW your BTL portfolio to death and drop the money into equities instead, to them it's no different than leveraging for deposits on further properties, in a way it's an easy sell and they fool themselves into thinking they're "diversifying".

Of course this would make a crash a self-fulfilling prophecy, MEW'ing for stocks sucks money out of the housing market into other asset classes, money that would have gone into innercity BTL rabbit hutches now goes elsewhere. Wth the virtual absense of FTB'ers the only thing that has kept the market propped up for so long hs been recycled money and extreme leverage.

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I was out in San Jose the fortnight that Cisco shares, if I recall correctly, went from mid-40s through the 30s to late 20s. Numerous people I know out there took out loans, and a few remortgaged their homes, once the shares went below 40 as they felt they were on a sure-fire win.

I found it increidble but the confidence, some might say arrogance, was such that you could almost feel it as virtually everyone just talked non-stop about the killing they were about to make. After all, many convinced themselves, the shares had earlier been up over a 100 bucks so... what could go wrong... and so they MEWed, took out loans to buy at mid 30s and watch the shares go right down to 10 bucks.

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T2RTR is right, there is only one rule of investment that matters, never invest what you can't afford to loose.

That's why I'm not buying a house - because I can't afford to lose the money :D.

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What is wrong with MEWing to buy shares? Isn't this a good way of diversifying one's portfolio? The stock market, in my opinion, is a long way from its peak, and using the value of one's house gives you a nice piece of leverage, provided you can afford to keep up with the mortgage payments. Of course it would be potentially dangerous to use MEW proceeds for small and microcaps, but I think it would be reasonable if one wants to buy low-PE, high-yield mid-large caps with minimal debt.

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What is wrong with MEWing to buy shares? Isn't this a good way of diversifying one's portfolio? The stock market, in my opinion, is a long way from its peak, and using the value of one's house gives you a nice piece of leverage, provided you can afford to keep up with the mortgage payments. Of course it would be potentially dangerous to use MEW proceeds for small and microcaps, but I think it would be reasonable if one wants to buy low-PE, high-yield mid-large caps with minimal debt.

It is a dangerous gamble because house prices are looking fragile and borrowing against an insecure asset is not wise. If both markets go down together the banks lose.

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What is wrong with MEWing to buy shares? Isn't this a good way of diversifying one's portfolio? The stock market, in my opinion, is a long way from its peak, and using the value of one's house gives you a nice piece of leverage, provided you can afford to keep up with the mortgage payments. Of course it would be potentially dangerous to use MEW proceeds for small and microcaps, but I think it would be reasonable if one wants to buy low-PE, high-yield mid-large caps with minimal debt.

Look at what happened to endowment mortgages, infact the MEWing to buy shares isn't much different.

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Quite right!!!

But when is one of you bears going to recognise that MANY people on this forum, having sold their properties and now using the proceeds in these risky investments, have done EXACTLY the same thing and effectively MEW'd their way to becoming a stock market investor?

Think about that, each of you who are risking your sale proceeds, or deposit money in the markets, are doing exactly what is advised not to do.

TTRTR, you are right in a way, but home owners asset (a house) can drop below their equity, this isn't a problem for a STRer. Imagine a home owners house dropping and their shares disappearing - up sh** creek!!

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IF THEY MEWed and bought Gold when it was out of favour- it would have worked

Too late now. Or wait for the correction

Are you sure Bubb?

My understanding is that to MEW you are borrowing money, not paying anything back and letting intrest accrue daily. Do you really thing that GOLD has outperformed the scandalous interest that large sums accrue?

TB

Nonetheless - very risky gamble!!!

Edited by teddyboy

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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