Crash Warning From Heavyweight American Express

[Realistbear]

http://uk.biz.yahoo.com/24032006/17/calver...-time-high.html

Calverley hints at bubble and squeak as housing market hits all-time high

AFTER Bill Jamieson reported on Tuesday how the Edinburgh property market is still merrily booming, and

Gordon Brown gave a boost to property investment on Wednesday

, along came a man with a big bucket of cold water to throw on Bill, Gordon, and all you

homeowners.

John Calverley, chief economist and strategist at American Express Bank, gave the RBS (LSE: RBS.L - news) annual economics lecture. He is an expert on "bubbles" - when the price of something inflates way above realistic levels and then bursts, leaving people who bought in at the wrong time a lot poorer.

His book - Bubbles and How to Survive Them (Nicholas Brealey Publishing, Boston) - is much discussed. And as his lecture topic - Bubbles and Busts: will the world housing boom end in tears? - zooms in on a matter of great personal interest to every householder, there was a big turnout.

What he had to say can be summed up in two questions and their answers. Is there a house price bubble? His answer - yes. Is it going to burst? His answer again - yes. At this point, people began to concentrate very hard, especially when he posed the obvious follow-up question: when is it going to burst? Rather disappointingly, he confessed that he did not know. Nonetheless,

he is 90 per cent certain that the bust is coming.

So what's his argument? He points out that house prices have inflated across most of the developed world. Since 1997, British prices have gone up by 167 per cent, topped only by California with a 191 per cent increase. The only places where prices have fallen are Germany (down 1 per cent) Japan (-30 per cent) and Hong Kong (-45 per cent). He also notes that prices have risen much faster than incomes and rents, so much so that

buying in Britain (including all taxes and maintenance costs) is now 36 per cent more expensive than renting.

IMHO, it is stating the obvious. The crash is coming despite Gordon's desparate attempts to keep HPI going--his future DEPENDS on it.

Edited March 24, 2006 by Realistbear

[Badger]

Dammit, didn't he give us a date? Calls himself an economist Good find.

[Realistbear]

Dammit, didn't he give us a date? Calls himself an economist Good find.

Great Avatar. That woman deserves a big thank youy and a bunch of flowers. And guest of honour when HPC decided to have a dinner to celebrate the crash. Whip round to send her on a holiday?

[BillyShears]

Dammit, didn't he give us a date? Calls himself an economist Good find.

Part of "true expertise" is knowing your limitations, i.e. knowing what you do not know, cannot do, cannot predict. Have a look at any book on "Knowledge Engineering".

Yes, I know that you're not serious, but I've been waiting to make that point.

Billy Shears

[Badger]

I know, brave lass did a great job.

[Warwickshire Lad]

All respect to John Calverley - he is still a believer in what's coming.

It's definitely the case that a downturn in other property markets is going to cause huge knock on effects in the UK.

Remember - this is a "world boom", although it's more an "Anglo Saxon" one really.

Once America and Ireland turn decisively then we will definitely follow.

It's an economic certainty.

Hopefully, the world's central bankers will just let prices fall rather than do anything irresponsible like allow hyperinflation.

[smiley]

Once America and Ireland turn decisively then we will definitely follow.

It's an economic certainty.

Yes - but when, when, when?

I feel like a kid in the back seat - 'Are we there yet?'

[Scooter]

All respect to John Calverley - he is still a believer in what's coming.

It's definitely the case that a downturn in other property markets is going to cause huge knock on effects in the UK.

Remember - this is a "world boom", although it's more an "Anglo Saxon" one really.

Once America and Ireland turn decisively then we will definitely follow.

It's an economic certainty.

Hopefully, the world's central bankers will just let prices fall rather than do anything irresponsible like allow hyperinflation.

Spotting a bubble is not that hard, by observing when asset prices have become totally unrelated to earnings stream (rental income) or notional earnings stream (equivalent cost of renting the property you own) and when assets are bought simply on the expectation that they will rise. Unfortunately tying your colours to the mast and suggesting at least a timeframe for the bust is what counts.

[mustrum_ridcully]

So where are GoldenTroll, dumbscumreader, notlookingafterthekids then? Ah wait a minute they can they actually cope with having a discussion where experts disagree with them.

If it looks as I have a problem with these guys, well this morning I do, I am a bear with a sore head :angry:

[Londoner]

Of course we should all ignore the sentence in the article

His book - Bubbles and How to Survive Them

which of course is totally irrelevant and it would be ridiculous to suggest that this commentator has an interest in talking up the threat of bubbles as I'm sure he in no way wants people to buy his book, hire him to write articles or otherwise add to his fame etc.

[Guest The_Oldie]

Interesting article.

Pretty much everything discussed on these forums is covered.

[brownthing]

Of course we should all ignore the sentence in the article

which of course is totally irrelevant and it would be ridiculous to suggest that this commentator has an interest in talking up the threat of bubbles as I'm sure he in no way wants people to buy his book, hire him to write articles or otherwise add to his fame etc.

You cycnic you.

[Guest The_Oldie]

Of course we should all ignore the sentence in the article

which of course is totally irrelevant and it would be ridiculous to suggest that this commentator has an interest in talking up the threat of bubbles as I'm sure he in no way wants people to buy his book, hire him to write articles or otherwise add to his fame etc.

The RBS considered him worthy of delivering their annual economics lecture though!

[lowrentyieldmakessense(honest!)]

So where are GoldenTroll, dumbscumreader, notlookingafterthekids then? Ah wait a minute they can they actually cope with having a discussion where experts disagree with them.

If it looks as I have a problem with these guys, well this morning I do, I am a bear with a sore head :angry:

have a read to make you feel better - or not

For wavering bears

[LivingTheDream-JustLikeLeedsUtd]

STOP PRESS!!!!!!

Man who writes books on Bubbles bursting predicts there's a bubble about to burst!!!!!

Must buy his book. Sounds brilliant.

[Guest The_Oldie]

STOP PRESS!!!!!!

Man who writes books on Bubbles bursting predicts there's a bubble about to burst!!!!!

Must buy his book. Sounds brilliant.

I repeat, the Royal Bank of Scotland considered him worthy of delivering their annual economics lecture. Presumably they were aware of his book, but still invited him to deliver the lecture on their behalf.

Speaks volumes for me.

Edit: Did you notice that John Calverley is the chief economist and strategist at American Express Bank?

[mustrum_ridcully]

STOP PRESS!!!!!!

Man who writes books on Bubbles bursting predicts there's a bubble about to burst!!!!!

Must buy his book. Sounds brilliant.

Awoooga

[Guest wrongmove]

I repeat, the Royal Bank of Scotland considered him worthy of delivering their annual economics lecture. Presumably they were aware of his book, but still invited him to deliver the lecture on their behalf.

Speaks volumes for me.

But I thought that lenders were ramping VIs who couldn't be trusted with a used Kleenex !

Now they are used to give credibility to a bear !

Speaks volumes to me. When they invite a bull to their next meeting, will you rush out and buy ?

[OzzMosiz]

STOP PRESS!!!!!!

Man who writes books on Bubbles bursting predicts there's a bubble about to burst!!!!!

Must buy his book. Sounds brilliant.

STOP PRESS!!!!!!

Man who knows about economics, writes books about economics!

[The Masked Tulip]

IMHO, it is stating the obvious. The crash is coming despite Gordon's desparate attempts to keep HPI going--his future DEPENDS on it.

Credit where credit is due (Oops, a pun about the guy at American Express. ) but John - we can call him 'John' as he is one of us - has been stating this for a while. He is the man who called it 'the mother of all bubbles' when referring to the housing market.

Do you think he would be prepared to look after my PEP?

[Harry Sacks]

STOP PRESS!!!!!!

Man who writes books on Bubbles bursting predicts there's a bubble about to burst!!!!!

Must buy his book. Sounds brilliant.

Self appointed property 'expert' f**kwit toff writes book on how to spend cheap debt when interest rate @3.5%.

F**king genius!!!!!

[BillyShears]

Spotting a bubble is not that hard, by observing when asset prices have become totally unrelated to earnings stream (rental income) or notional earnings stream (equivalent cost of renting the property you own) and when assets are bought simply on the expectation that they will rise. Unfortunately tying your colours to the mast and suggesting at least a timeframe for the bust is what counts.

Does anyone really know? Anyone at all? Which day betwen the 28th of October and the 29th of October this year is going to have the lowest peak temperature in central Manchester this year?

If we go back in time to the last bust, then we know there are people that predicted it correctly. But then given the steady stream of bust predictions, we should see some turning up "accurate" just from coincidence. I think it's oversimplifying things to expect that someone should be able to tell us when the crash will occur. It just leads to disappointment and "there has been no crash yet despite predictions therefore there will never be a crash."

Billy Shears

[Harry Sacks]

Great Avatar. That woman deserves a big thank youy and a bunch of flowers. And guest of honour when HPC decided to have a dinner to celebrate the crash. Whip round to send her on a holiday?

Has the attitude here changed toward the BBC now?

[bears all]

The article also says that what really matters is the cost of borrowing. Yes, borrowing is astronomical, but rates are low. The housing market will remain exposed as long as it takes wage inflation to catch up, but there'll only be a crash if and when there are greater affordability problems. OK, we have increasing unemployment and falling consumer spending, but the BoE will cut rates as and when it feels these are becoming a problem. Seems to me the nub of the issue will be when the state of the economy calls for lower rates but inflation and/or a falling pound call for higher.

[LivingTheDream-JustLikeLeedsUtd]

I repeat, the Royal Bank of Scotland considered him worthy of delivering their annual economics lecture. Presumably they were aware of his book, but still invited him to deliver the lecture on their behalf.

Speaks volumes for me.

Edit: Did you notice that John Calverley is the chief economist and strategist at American Express Bank?

Yes, I did notice who wrote it. It was in the title of the tread.

It's interesting but not that surprising is it??

When someone who's written books about property being a safe investment for life start saying there's a bubble about to burst, that's when it becomes interesting.

If you say the same thing for long enough, you going to be proved right eventually.