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Are soaring markets and house prices an 'epic bubble' about to pop?


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Are soaring markets and house prices an 'epic bubble' about to pop?

https://www.theguardian.com/business/2021/jan/10/are-soaring-markets-and-house-prices-an-epic-bubble-about-to-pop

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There are some specific reasons why house prices are going up. Rishi Sunak’s temporary stamp duty holiday is one. The desire for houses with a bit more space and a garden is another. The fact that many people can afford to buy a more expensive home because they have saved money while working from home is a third.

But what links rising share prices in the US and rising house prices in the UK is money creation by central banks. Both the Federal Reserve in Washington and the Bank of England have ramped up their quantitative easing (QE) programmes, under which the central banks buy financial assets, usually government bonds, in exchange for cash.

In theory, the newly created money could fund new productive investment for companies eager to expand; in reality much of it has been lent for speculative activity of one form or another. There is no real mystery about this: it happened after the financial crisis of 2008 and it is happening again.......

...“The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behaviour, I believe this event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.”...

....

 

Edited by Saving For a Space Ship
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18 minutes ago, Saving For a Space Ship said:

No, the are a reflection of QE and money printing of a likes never seen before. You wait until Biden gets another $7T stimulus pushed through Congress after Feb 2021. 
 

Prices now will look like at least a 20% discount. All this money flows into assets worldwide. And they can’t stop, they must force inflation. ALL cash And bond holders to be wiped out. 

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3 minutes ago, goldbug9999 said:

Then how can it claim that this is a "bubble" ? given that the money printing is now likely to go into overdrive.

There's the trillion dollar rhetorical question at the end of the article:

 

"Fresh dollops of stimulus might not actually be needed at a time when demand is going to be picking up anyway. Inflationary pressure is currently weak but were that to change, the mood in the markets could quickly change. The yield – or interest rate – on government bonds would start to rise and share prices would fall. Wall Street would be begging the Fed to come to its rescue, but with inflation rising it might feel uneasy about doing so.

 

Will this happen? Who knows? But the financial markets are placing a lot of trust in the Fed and the other central banks. It had better not be misplaced."

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8 minutes ago, markyh said:

No, the are a reflection of QE and money printing of a likes never seen before. You wait until Biden gets another $7T stimulus pushed through Congress after Feb 2021. 
 

Prices now will look like at least a 20% discount. All this money flows into assets worldwide. And they can’t stop, they must force inflation. ALL cash And bond holders to be wiped out. 

$7tn is a trivial sum set against the $1000+ tn of credit derivatives currently sloshing around the shadow banking system.

I've been in cash + gold for the last 3 1/2 years but feel no compunction to get back into the market. There's very little consumer price inflation in the UK except that caused temporarily by Brexit.

The UK housing market is a gigantic ponzi scheme held upright by £100bn of govt spending every year. Economic insanity in the short term, economic suicide in the long term.

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27 minutes ago, zugzwang said:

$7tn is a trivial sum set against the $1000+ tn of credit derivatives currently sloshing around the shadow banking system.

I've been in cash + gold for the last 3 1/2 years but feel no compunction to get back into the market. There's very little consumer price inflation in the UK except that caused temporarily by Brexit.

The UK housing market is a gigantic ponzi scheme held upright by £100bn of govt spending every year. Economic insanity in the short term, economic suicide in the long term.

But look what the money printing of 2020 alone has done to asset prices, especially those that are stores of value. 

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33 minutes ago, zugzwang said:

The UK housing market is a gigantic ponzi scheme held upright by £100bn of govt spending every year. Economic insanity in the short term, economic suicide in the long term.

That may be the case but by not buying (presumably renting?) aren’t you simply assisting someone else (your landlord) to participate in the same scheme?

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2 minutes ago, markyh said:

But look what the money printing of 2020 alone has done to asset prices, especially those that are stores of value. 

The FTSE's had it's best start to the year ever but it's still down on 2018.

I'm in no hurry to get back in.

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Just now, PeanutButter said:

That may be the case but by not buying (presumably renting?) aren’t you simply assisting someone else (your landlord) to participate in the same scheme?

That's the terrible thing about property inflation, it's all but impossible to get out of the game.

I certainly regret not buying in 2012 but intend to rectify that this year, hopefully with a bit of a discount on 2019 prices and before the HK Chinese arrive in number.

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4 minutes ago, zugzwang said:

That's the terrible thing about property inflation, it's all but impossible to get out of the game.

I certainly regret not buying in 2012 but intend to rectify that this year, hopefully with a bit of a discount on 2019 prices and before the HK Chinese arrive in number.

Property is certainly different from other assets. You can avoid Beanie Babies or vintage cars or Penfolds Grange quite easily, but no one can avoid seeing property. It surrounds us. 

If you’re not after a new build flat you shouldn’t have too much HK competition. 

 

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1 hour ago, zugzwang said:

The FTSE's had it's best start to the year ever but it's still down on 2018.

I'm in no hurry to get back in.

You have taken a time frame and index  ro suit your arguement.

You.ve losr a stack. Look at long term global fund returns.

Yes it's high but you'd have been far better off in than out.

I would agree right now isnt the best time to go all in.

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2 hours ago, markyh said:

No, the are a reflection of QE and money printing of a likes never seen before. You wait until Biden gets another $7T stimulus pushed through Congress after Feb 2021. 
 

Prices now will look like at least a 20% discount. All this money flows into assets worldwide. And they can’t stop, they must force inflation. ALL cash And bond holders to be wiped out. 

I suppose the question is what would make the current bubble pop?  There are a number of candidates, rising unemployment, end of Furlough, end of stamp duty holiday, Brexit, the fact that prices are too high etc.  However the only that seems to impact prices in a downward way is the banks lending capacity.  

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I wonder if there'll be a relief rally once Biden is finally in the White House, on the basis Trump might try to start a war or something to distract from his possible impending bankruptcy and prison time?

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The total lack of respect for the value of the tokens we all work for (GBP in my case) led me to Crypto recently.

I did not want to buy these strange items, but I am also in cash and PM's...so there was only really one way to go in the 2020's.

I'm up a few thousand already and although that is nice, I am really looking to diversify my wealth and get it away from these reckless criminals.

The more I make on Crypto, the more Crypto I buy on the basis that I am mitigating any down turn.

I currently have Bitcoin, Ether and now Ripple.

I am quite happy with the results so far...I didn't think I would be.

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2 hours ago, wighty said:

 

You.ve losr a stack. Look at long term global fund returns.

Yes it's high but you'd have been far better off in than out.

I would agree right now isnt the best time to go all in.

 

Timing the market is a mug's game if you're an amateur. Financial markets are typically Markov processes, full of noise and impossible to beat.

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It all depends on inflation, while inflation remains low there is no pressure to increase interest rates. We have managed this magic trick because outsourcing manufacturing to low costs countries like China has kept prices low.

The problem is when costs in Asia increase, ending the era of low inflation. Inflation caused by pumping money into the economy would force interest rates up and with the amount of debt we have, that could be a disaster.

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14 minutes ago, zugzwang said:

 

Timing the market is a mug's game if you're an amateur. Financial markets are typically Markov processes, full of noise and impossible to beat.

Then leave it to the professionals.

isnt timing the market what you say you are going to do with your house purchase?.

4 hours ago, zugzwang said:

 

I certainly regret not buying in 2012 but intend to rectify that this year, hopefully with a bit of a discount on 2019 prices and before the HK Chinese arrive in number.

 

Over the longer term (say 5 - 10 years) and  with diversication you would have made far, far more than HPI and wilth minimal risk.

 

 

Edited by wighty
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1 hour ago, Roman Roady said:

The total lack of respect for the value of the tokens we all work for (GBP in my case) led me to Crypto recently.

I did not want to buy these strange items, but I am also in cash and PM's...so there was only really one way to go in the 2020's.

I'm up a few thousand already and although that is nice, I am really looking to diversify my wealth and get it away from these reckless criminals.

The more I make on Crypto, the more Crypto I buy on the basis that I am mitigating any down turn.

I currently have Bitcoin, Ether and now Ripple.

I am quite happy with the results so far...I didn't think I would be.

I'm still gutted I didn't buy bitcoin when I saw it, I saw it very early. Was going to buy quite a few and the reason I didn't buyy wasn't because I didn't want them.

Back in those days there was a website called The Bitcoin Faucet that would occasionally give out free bitcoins throughout the day. 

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15 minutes ago, zugzwang said:

 

Timing the market is a mug's game if you're an amateur. Financial markets are typically Markov processes, full of noise and impossible to beat.

Market or inflection?

You can hedge against the both.

Timing the inflection is hard.

 

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10 minutes ago, wighty said:

Then leave it to the professionals.

isnt timing the market what you say you are going to do with your house purchase?.

I hope to take advantage of a black swan event (Covid-19) but I intend to buy this year come what may.

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1 minute ago, spyguy said:

Market or inflection?

You can hedge against the both.

Timing the inflection is hard.

 

Hedging both ways is what the professionals do but you need deep pockets, quick reflexes and a lot of smarts to make it pay off consistently.

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43 minutes ago, spacedin said:

I'm still gutted I didn't buy bitcoin when I saw it, I saw it very early. Was going to buy quite a few and the reason I didn't buyy wasn't because I didn't want them.

Back in those days there was a website called The Bitcoin Faucet that would occasionally give out free bitcoins throughout the day. 

Oh tell me about it...my finger hovered in 2015. I bookmarked PREEV.com back then and as it does, the browser saved it at that price...so I am for ever reminded that I almost bought at $719 per bitcoin!

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