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apom

Putting Aside The Bullish Opinions..

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How on gods green earth can people be surprised?

Its not like every market before hasn't gone pop..

They all have, everyone.. since the dawn of time..

And before the Bull's come back with this and that can I say...

Blah, blah, Blah...... Blah.. blah..

:)

Every market has gone crunch after a boom.. its the economic cycle..

and every time bulls would have had an argument to say why its different this time..

The bears have only the need for one argument..

Its never been different before, it's not different this time..

It's embarrassing to think that intelligent people get caught up every time.. Time and time again.. And again and again…

That the very backbone of the capitalist idiom is reliant on what is essentially the same trick.. That the economic cycle has to play out time and time again.. and so very few see this..

I have a quote that explains the housing bubble.. bears you need no more arguments..

Men in Black

Jay: Why the big secret? People are smart, they can handle it.

Kay: A person is smart. People are dumb, panicky, dangerous animals and you know it.

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Guest Bart of Darkness
How on gods green earth can people be surprised?

If the lessons of history were heeded (and people had a lot more common sense) it would be a very different world.

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Putting Aside The Bullish Opinions.., Can I ask a question..?

The subject tells it all, really. Don't like what you hear then dismiss it as VI, nonsense or whatever...don't even want to hear an opposing opiion these days.

:blink:

The worst thing anyone who is interested in their financial well being, is to stay tied to an opinion regardless of the facts. Pride comes before a fall.

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The subject tells it all, really. Don't like what you hear then dismiss it as VI, nonsense or whatever...don't even want to hear an opposing opiion these days.

:blink:

The worst thing anyone who is interested in their financial well being, is to stay tied to an opinion regardless of the facts. Pride comes before a fall.

I'd love to hear opposing opinions as to explain why this isn't like any other bubble?

Since when have bubbles stayed inflated? Even ones you blow up deflate over time!

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I'd love to hear opposing opinions as to explain why this isn't like any other bubble?

I'll give you 7 reasons why it might be different this time...

(1) We have had 4 major booms and 3 major busts in UK housing. Early and late 70s, late 80s and now.

Every bust has happened in a time of high nominal interest rates, I believe that there is a reasonable chance that in the medium to long (10 years) term high inflation / nominal interest rates is a thing of the past.

Times of low inflation and low nominal rates have never seen a UK house price crash. People WILL NOT sell at a loss (or perceived loss - if people's house goes up 100k and then down 20k that is a 20k loss to most muppets) unless they are forced sellers. Low nominal rates will help keep forced sellers to a minimum. Please note that I understand how low inflation means debt is not being eroded, and we might be better off if we did have a crash, but that doesn't mean it will happen.

(2) BTL. There are lots of reasonably savvy people who have made money out of buy to let and are becoming reasonably successful businessmen. (Note: businessmen not investors, I'm being picky but I think the difference is worth making). Yes, there are loads of BTL muppets who'll lose their new build flats, but equally there are loads of others who are not that highly leveraged waiting to step in in small falls happen (eg 10% in nominal terms over 2 or 3 years (ie real falls of maybe only 5%)).

(3) What is it about the crash will happen when the last bear turns bullish? With you lot on here there is no chance that this will happen! Seriously though, bubbles by definition are things few see, and I think most people do see high prices.

(4) UK house prices might be high, but 4-6% yield on UK residential property is not even vaguely close to being the bubble that we saw for example in tech stocks where companies that had never made a penny were worth tens of millions of pounds.

(5) Returns and prospective returns on all assets are low. Mmmmmm, houses are a poor investment now.... so I think I'll put my money into bonds yielding 4.2%, or overpriced equities (given the carnage most people on this site seem to predict for the UK economy then surely equities are overpriced?), or gold that's on the back of it's own boom. Sod it, I'll buy dollars, the US seems to be running it's economy well. No thanks!

(6) Linked to (2) and (5). There are about 3 people left in the country who believe that their company and/ or the government will provide for their retirement. DIY is the way forward.

(7) Linked to (5) and REITs (Real Estate Investment Trusts which look likely in some form). There is a chance that we are about to enter a period where UK insurance companies / pension funds / property companies begin to invest in residential property in earnest.

FF

ps... FYI. I am in no way bullish, BUT I am prepared to accept that "this time it MIGHT be different". I am soon to move house to something a little bigger, and could easily afford to keep the old one as a BTL but am not so bullish that I wish to go longer UK property at the minute.

Edited by Father Fred

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Just taking a few of your points, these are my thoughts.

(1) We have had 4 major booms and 3 major busts in UK housing. Early and late 70s, late 80s and now.

Every bust has happened in a time of high nominal interest rates, I believe that there is a reasonable chance that in the medium to long (10 years) term high inflation / nominal interest rates is a thing of the past.

Times of low inflation and low nominal rates have never seen a UK house price crash. People WILL NOT sell at a loss (or perceived loss - if people's house goes up 100k and then down 20k that is a 20k loss to most muppets) unless they are forced sellers. Low nominal rates will help keep forced sellers to a minimum. Please note that I understand how low inflation means debt is not being eroded, and we might be better off if we did have a crash, but that doesn't mean it will happen.

-Japan

-Inflation figure quoted is CPI. This is doctored. What we should really look at is the real cost of living. Do you feel this has risen at under 2%/year for the past 5 years? I don't. the value of the money in my pocket feels like it has plummeted over that time period.

(2) BTL. There are lots of reasonably savvy people who have made money out of buy to let and are becoming reasonably successful businessmen. (Note: businessmen not investors, I'm being picky but I think the difference is worth making). Yes, there are loads of BTL muppets who'll lose their new build flats, but equally there are loads of others who are not that highly leveraged waiting to step in in small falls happen (eg 10% in nominal terms over 2 or 3 years (ie real falls of maybe only 5%)).

Could you explain the difference between a businessman and an investor in your example. Even with a 10% fall I think you will find that the vast majority of BTL do not stand up as good business on a yield basis. Perhaps if capital gain is factored in(will that happen over the next 5 years?), however, isn't the essence of good business strong cashflow. A business model reliant on capital gain is not a good one.

(3) What is it about the crash will happen when the last bear turns bullish? With you lot on here there is no chance that this will happen! Seriously though, bubbles by definition are things few see, and I think most people do see high prices.

I have seen a lot of bears turn bullish on here of late. If people are seeing high prices will that not turn sentiment? Markets are driven by sentiment. I have a relatively secure job, but I am feeling nervous about this job security and my ability to earn at the level I am in the future. This is also something I am noting in people I talk to. Look at recent news, lots of redundancies, even 1000 to go at North Staffs hospital!! I've worked in the NHS for 14 years and never thought I would see that sort of headline. With this mood prevalent people will be less inclined to commit themselves to a large mortgage and also tighten their belts, so what effect will this have on the "ladder" and wider economy?

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Maybe, as has often been said on here before, there is a polarisation going on. More and more people will buy property as a long-term pension sort of investment and be quite happy to subsidise the rent by a few hundred a month - regarding this subsidy as a contribution to their mortgage. If this keeps happening (and someone is buying the 200k flats round here) then, as long as the BTLetter does not lose their job and can keep the subsidy going ...

Those BTLs may be prepared to hang on to the negative cash flow investments for a very long time

This will sustain the market

If the market stays level - more people will pile in

The market might even go up a bit

Some people will end up owning 10 properties

Your generation will never own property

As Father Fred pointed out - it might be a good idea to countenance that it might be different this time. It's all well and good spouting the 'market mantra' (and I have done it many times) but surely you need to take a look at how a market is functioning before making sweeping statements.

I will admit to being puzzled as to what is going on at the moment - the market where I live is pretty buoyant. I could just think 'it's the death throes of a bull market' but, what if it isn't?

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I will admit to being puzzled as to what is going on at the moment - the market where I live is pretty buoyant. I could just think 'it's the death throes of a bull market' but, what if it isn't?

Not having a go here, M, but this statement from you screams at me, yet another bear turning bullish.

I sold up a few months ago. It was a forced sale due to divorce. I am renting, you could call me STR but it wasn't really a calculated move. I am happy renting because I have never had a great urge to buy. I don't know why, but that desire has never been part of my personality. the only reason I bought a house back in 2000 was because I was getting married and my wife-to-be wanted to nest.

Given this, and the fact that I am not too fussed about buying, I am really just an interested observer on the sidelines, even I have been having doubts that the market will correct and fundamental value be restored. If I sit down and look at things rationally, though, these thoughts are easily dispelled. I think these sorts of sentiments just indicate that we are at a particular part of this current cycle. For people who have a burning desire to buy but can't I would say don't worry, just be patient, the signs are there.

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Can I say..

The arguments did follow...

Missing the point of the Economic cycle.

IR's are low, yes..

but that has allowed the boom to go higher..

which means that only a much smaller rise is needed..

oh never mind

It's a very obvious bubble.

I have researched every piece of evidence and every economical trend.

I can see quite clearly that the bubble is deflating rapidly..

sentiment may swing around as it does deflate..

but it is..

bless.. sorry...

the people who have made a great deal out of housing have done so, I know these people and they have sold their investments..

Those who still believe in the market are those who the true investors sold them to..

I had it described to me as an easy market to make money in as many investors are slow and have little understanding of market dynamics.. essentially dumb..

I was told that I was one of a very few who would have looked into it.

One guy was cruel, but he was old and had been investing for years..

In the end it's like taking candy from a baby..

He agreed with me when I discussed that there are more houses then ever.. that is obvious to all...

but he said that people's gread would allow then to believe that 200-300% inflation was sustainable.. and their gread convinced them to pay so very much more..

Anyway.. you know how it goes..

It's the economic cycle and it is the backbone of society..

Wealth cannot be created it can only be moved around.. It can be earn't, but only if goods or skills can be sold.. but then that is still transfer of wealth..

Now if you buy and asset only in the hope that someone will pay you more for it then you are transfering wealth, but it is speculation anf gathers no true wealth.. It is percieved to be free money, but it can't exist without the "Last Man Holding" theory

Capatilisim works that way, it is the engine and fuel by which it runs.

Boom and Bust, only the very challenged would believe that Boom and Bust would be fixed, and I do not choose to believe that anyone who understands the engine of western economies would ever even entertain the thought that Boom and Bust could be fixed at the peak of the highest peak ever recorded.

Anyway, the economy is nadgered by debt and gread..

I am not desperate and unable to buy..

I am perceptive enough to understand that what I buy today would be bigger and shinier if I waited..

It is different this time.. How?

Inflation has changed.. Look into that...

;)

if you still believe in the market there are some rich people who thank you every night in their prayers..

you made them rich..

They like you.

I know what you really are

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(2) BTL. There are lots of reasonably savvy people who have made money out of buy to let and are becoming reasonably successful businessmen. (Note: businessmen not investors, I'm being picky but I think the difference is worth making). Yes, there are loads of BTL muppets who'll lose their new build flats, but equally there are loads of others who are not that highly leveraged waiting to step in in small falls happen (eg 10% in nominal terms over 2 or 3 years (ie real falls of maybe only 5%)).

Exactly: people may be geared at higher than 3.5x their incomes (joint or otherwise), but the debt is spread over more than one property creating a different dynamic.

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I posted this before Greenspan left the Fed.

I think if you want to know where and why, we are where we are. It's worth contemplating the following.

Please clear your mind, take a deep breath… exhale. Read on.

The cut price, low rate lending was Greenspan leading the whole world on a merry dance. Stay with me…

America was on its knees after 9/11 people were unsure whether or not it was safe to go out. Remember?

Greenspan gave everyone some cheap cash and sent them down the shops.

Lower rates were set to cheer up the American people, the American people are now less scared/worried so we can return to more economically viable rates of 5-6%.The house price boom was a mere side effect of cheap lending.

Delaying the 9/11 recession was very, very important otherwise the terrorists could have claimed a much larger prize. Grinding the US economy to a halt.

Such a claim by Al Qaeda could have lead to mass Islamic fundamentalism gaining popularity across the Middle East, making oil retrieval a real nightmare.

Welcome back to reality.

So what have we learned??

If at some point in a future economic cycle the US people get scared to go outside, rates will dive, lending will boom, housing will boom, in that order. Once US sentiment returns to normal, rates will hike, lending will cease (well not cease but it will be expensive), housing will dive.

OK I know that’s not a guarantee but I think that was AG’s plan all along and it HAS worked, not sure if he foresaw the housing bubble though? In hindsight he must have.

Well done Alan.

Once again welcome back to reality

Remember 9/11? It was 18 months after the dot com pop, economies were down.

Greenspan’s conscience:

How big a recession would fear of terrorism in the US cause?

Greenspan:

I don’t know there is no historical data. A recession resulting from fear of terrorism may lead to our enemies supporting more terrorism/terrorist gaining support… where does it end?

Greenspan’s conscience:

How big a recession would be caused by delaying a standard/typical recession through debts/lending?

Greenspan:

A very big one, possibly the largest ever. Why would anyone ever do that?... At least it would not be as bad as the recession in the first question. Eureka!

This quote relates to events of late 2001 and early 2002.

The Fed prolonged the boom for reasons of war and terror. The global boom reached dizzy heights.

It even awoke the sleeping techno giant that is Japan. It pulled India and China out of the dark ages and created nearly 400 billionaires. It distributed a huge amount of wealth from the US people to those who offered them goods and services in their time of greatest need.

As far as economics go the Fed is the centre of the universe. They kept US sentiment high enough to support two wars (until IR hikes started in 2004) by spending the money of the US people (with their unwitting consent, through allowing cheap debt and discouraging saving), safe in the knowledge they can seize it back at a later date (but thats a different thread).

The Fed has made 14 consecutive interest rate hikes, since summer 2004. They want their money back. Their money is tied up in Western property and Chinese factories.

I'm happy as hell I am not on the clipboard of the god of bailiffs. For the bulls out there by all means, buy in, perpetuate the boom, test their patience. You will one day find you're not swimming against the tide as much as trying to swim up Niagra Falls.

I can't spell this out any more clearly and frankly if you don't follow, I don't care. All I can say is I tried my best.

I won't be buying any property for a while.

So... apom to answer you're question. People are ignorant and fail to understand the macro-economic/geo-political climate.

Edited by ?...!

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Care to expand on this? <_<

Mid 90s discharge from bankruptcy 2-3 years, now 12 months.

Mid 90s bankruptcy considered a social disaster, now, who cares?

Mid 90s...convert to an interest only mortgage? I wish, now! No problem.

Edited by watchinandwaiting

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Mid 90s discharge from bankruptcy 2-3 years, now 12 months.

Mid 90s bankruptcy considered a social disaster, now, who cares?

Mid 90s...convert to an interest only mortgage? I wish, now! No problem.

How will everyone going bankrupt propogate a boom?

Surely it will just eat up bank profits as they are forced to set more money aside for bad debts.

Meaning bank managers are instructed to ridicule and slap feckless muppets who ask for loans and mortgages.

"Prove you can pay it all back and still save £5,000 a year with our savings account" they will say.

"What's your NET (yes net) worth?" they will giggle.

"Oh no, I said NET" they will explain.

"How much do you owe? Because if it's some..." They will grr whilst shaking a fist at you.

"What will you give us if one month you are 50p short? Because if it's worth less than the loan you can forget it"

This would be a withdrawl of liquidity from the economy by the banks and the number of people with the ability to buy property dwindles. Demand is killed of by proxy and sellers are more common than dogga.

Just like all the other 28 asset inflationary bubbles documented by history.

.

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Mid 90s discharge from bankruptcy 2-3 years, now 12 months.

Mid 90s bankruptcy considered a social disaster, now, who cares?

Mid 90s...convert to an interest only mortgage? I wish, now! No problem.

can't convert your mortage when you are in negative equity

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How will everyone going bankrupt propogate a boom?

Surely it will just eat up bank profits as they are forced to set more money aside for bad debts.

Meaning bank managers are instructed to ridicule and slap feckless muppets who ask for loans and mortgages.

"Prove you can pay it all back and still save £5,000 a year with our savings account" they will say.

"What's your NET (yes net) worth?" they will giggle.

"Oh no, I said NET" they will explain.

"How much do you owe? Because if it's some..." They will grr whilst shaking a fist at you.

"What will you give us if one month you are 50p short? Because if it's worth less than the loan you can forget it"

This would be a withdrawl of liquidity from the economy by the banks and the number of people with the ability to buy property dwindles. Demand is killed of by proxy and sellers are more common than dogga.

Just like all the other 28 asset inflationary bubbles documented by history.

.

It would'nt, but it would slow a crash.

can't convert your mortage when you are in negative equity

Why?

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Why?

Because you owe x amount against a property.

Now you need to again borrow x, but this time as interest only, so you need a new mortgage.

for a mortage you need the property evaluated, if its valuation is less then you owe then you can't get the mortage..

When I looked toward buying I spoke to several who got stung last time..

You know the point where your low rate goes and you re-mortage...?

that can't be done either..

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It would'nt, but it would slow a crash.

Really, I think it is part of the reason for the huge rise in insolvencies and the fact that some lenders now have to put aside some 20% of their profits to cover bad debts.

This percentage is climbing, I thought insolvencies were up some 70%? Banks will have to be more picky about who they lend to in order to keep the figure in check.

They will not allow 40% or 50% of their profits to walk out the front door in the pockets of morons who can't repay loans.

They will simply say "no, we strongly believe you are a moron, sorry".

To be honest I think writing off 20% of profits shows weak financial acumen. God only knows what number some lenders are working to.

On another note I bet the recent rise in insolvencies are mostly credit card based and not mortgage based. But it should all filter through, people... Sorry, morons are just more reckless with plastic cards.

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Because you owe x amount against a property.

Now you need to again borrow x, but this time as interest only, so you need a new mortgage.

for a mortage you need the property evaluated, if its valuation is less then you owe then you can't get the mortage..

When I looked toward buying I spoke to several who got stung last time..

You know the point where your low rate goes and you re-mortage...?

that can't be done either..

Don't want to borrow more money, just convert to IO!

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Really, I think it is part of the reason for the huge rise in insolvencies and the fact that some lenders now have to put aside some 20% of their profits to cover bad debts.

This percentage is climbing, I thought insolvencies were up some 70%? Banks will have to be more picky about who they lend to in order to keep the figure in check.

They will not allow 40% or 50% of their profits to walk out the front door in the pockets of morons who can't repay loans.

They will simply say "no, we strongly believe you are a moron, sorry".

To be honest I think writing off 20% of profits shows weak financial acumen. God only knows what number some lenders are working to.

On another note I bet the recent rise in insolvencies are mostly credit card based and not mortgage based. But it should all filter through, people... Sorry, morons are just more reckless with plastic cards.

Early on in the 90s rescession, lenders repo,d and dumped. This had the effect of severly lowering house prices, thus exposing lenders to lower security in there mortgage stock. The government persuaded lenders to back off. Iwas taken to court and given a suspended order in 1995ish. The lenders solicitor told me before the hearing that as long as I offered some extra to cover the arrears, she would not press for possion. 6 months later the lender recapitalised the arrears.

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Don't want to borrow more money, just convert to IO!

Same money is needed, that money is leant against the value of your house.

you need a certain sum to pay of your current mortage to then take up the new mortgage.

You will only be leant to the value of your house.

that is now valued at less then you owe.

no new mortgage..

also people now on an IO mortage will find if they enter negative equity that they have a 25 year loan that now only has 20 years left, they can't remortage to extend the loan because of the negative equity..

so the capital that they couldn't pay of before in 25 years they now have to deal with in 20..

and all this with no wage push inflation..

(Merv promissed us all that)

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Same money is needed, that money is leant against the value of your house.

you need a certain sum to pay of your current mortage to then take up the new mortgage.

You will only be leant to the value of your house.

that is now valued at less then you owe.

no new mortgage..

also people now on an IO mortage will find if they enter negative equity that they have a 25 year loan that now only has 20 years left, they can't remortage to extend the loan because of the negative equity..

so the capital that they couldn't pay of before in 25 years they now have to deal with in 20..

and all this with no wage push inflation..

(Merv promissed us all that)

I'm not a mortgage expert but I have heard of 125% mortgages.

http://www.1stdirectmortgages.co.uk/mortga...5_mortgages.htm

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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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