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Realistbear

D O W Sinking Ahead Of Ben's I R Hike On Thursday

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http://uk.finance.yahoo.com/q?s=^DJI

DJ INDUSTR AVERAGE (DJI:^DJI)

Index Value: 10,943.55

Trade Time: 7:41PM

Change: 101.73 (0.92%)

Prev Close: 11,045.28

Open: 11,048.24

Day's Range: 10,935.38 - 11,064.09

52wk Range: 10,098.20 - 11,709.10

Volume: 185,477,376

IMO, we still have a way to go before this recent correction is over.

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http://uk.finance.yahoo.com/q?s=^DJI

DJ INDUSTR AVERAGE (DJI:^DJI)

Index Value: 10,943.55

Trade Time: 7:41PM

Change: 101.73 (0.92%)

Prev Close: 11,045.28

Open: 11,048.24

Day's Range: 10,935.38 - 11,064.09

52wk Range: 10,098.20 - 11,709.10

Volume: 185,477,376

IMO, we still have a way to go before this recent correction is over.

Agreed, this might possibly be the start of a "real" bear market. Having lost 12% since may it seems that 20-30% peak to trough is very likely, what with Ir heading up faster than people 1st realised. See my thread that made FT front page

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UGLY at the finish:

DOW JONES INDUSTRIAL AVERAGE IN (DJI:^DJI) Delayed quote data

Index Value: 10,924.74

Trade Time: 4:03PM ET

Change: 120.54 (1.09%)

Prev Close: 11,045.28

Open: 11,048.24

Day's Range: 10,920.73 - 11,064.09

52wk Range: 10,098.20 - 11,709.10

NASDAQ COMPOSITE (NasdaqSC:^IXIC) Delayed quote data

Index Value: 2,100.25

Trade Time: 4:32PM ET

Change: 33.42 (1.57%)

Prev Close: 2,133.67

Open: 2,134.58

Day's Range: 2,098.76 - 2,139.43

52wk Range: 2,025.58 - 2,375.54

http://wireservice.wired.com/wired/story.a...storyId=1541307

NEW YORK (AP) -- Wall Street slumped Tuesday as investors looked past another round of acquisitions and grew increasingly anxious about the Federal Reserve's upcoming decision on interest rates. The Dow Jones industrials tumbled more than 120 points.
With the Fed meeting on Wednesday and Thursday to discuss its rate policy,
Tuesday's stronger-than-expected economic data raised fears that the central bank would signal that more hikes are coming.
It's nearly a foregone conclusion that the Fed will nudge rates a quarter percentage point higher; investors are worried about rate hikes in August and beyond.

.50% on Thursday? Unlikely, IMO, but 6% this year.

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A nasty drop on Wall Street today and this time around the support level of 10,700 for the Dow Jones will be breached dragging FTSE down with it.

At the risk of sounding like a stuck record I repeat my motto

"What goes up will come down"

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Yeah, go ahead, cheer another market fall: bound to lead to property falls right?

17 August 2003

"It’s hardly surprising, to be fair, that with the FTSE 100 index continuing to wallow obstinately around the 4000 mark investors are nervous about committing large amounts of cash to equities and are looking for viable alternatives. Property is the order of the day and we’re buying it up by the bucketload, often remortgaging the homes we live in to raise the cash for a deposit. "

http://www.sundayherald.com/35968

date unknown

Contractors have increasingly woken up to the profit potential and ongoing income opportunities afforded by the buy to let market, as a result of-

1. Falling stock market investments with the potential for further volatility and low growth in the years to come.

http://www.contractoruk.com/money/buy_to_let_mortgages.html

21 February 2006

"More than half say they are investing in buy-to-let primarily to provide for their pension."

http://uk.biz.yahoo.com/mortgage/sarahmodl...confidence.html

23/09/05

Ian Stinton is one of thousands of Britons who is obsessed by property and considerably less excited by pensions.

https://registration.ft.com/registration/ba...000e2511c8.html

29 Nov 2005

The UK's continuing pensions crisis is bolstering the buy-to-let market ... [according to]

the Royal Institution of Chartered Surveyors

http://www.dolphinmarketing.co.uk/news/rem.../79/article.php

Need I go on?

Add all that to the data I presented showing, if anything, an anticyclical relationship between stocks and property and what have you got?

Just ask yourself why TTRTR laughs his head off every time the ftse tanks.

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Yeah, go ahead, cheer another market fall: bound to lead to property falls right?

17 August 2003

"It’s hardly surprising, to be fair, that with the FTSE 100 index continuing to wallow obstinately around the 4000 mark investors are nervous about committing large amounts of cash to equities and are looking for viable alternatives. Property is the order of the day and we’re buying it up by the bucketload, often remortgaging the homes we live in to raise the cash for a deposit. "

http://www.sundayherald.com/35968

date unknown

Contractors have increasingly woken up to the profit potential and ongoing income opportunities afforded by the buy to let market, as a result of-

1. Falling stock market investments with the potential for further volatility and low growth in the years to come.

http://www.contractoruk.com/money/buy_to_let_mortgages.html

21 February 2006

"More than half say they are investing in buy-to-let primarily to provide for their pension."

http://uk.biz.yahoo.com/mortgage/sarahmodl...confidence.html

23/09/05

Ian Stinton is one of thousands of Britons who is obsessed by property and considerably less excited by pensions.

https://registration.ft.com/registration/ba...000e2511c8.html

29 Nov 2005

The UK's continuing pensions crisis is bolstering the buy-to-let market ... [according to]

the Royal Institution of Chartered Surveyors

http://www.dolphinmarketing.co.uk/news/rem.../79/article.php

Need I go on?

Add all that to the data I presented showing, if anything, an anticyclical relationship between stocks and property and what have you got?

Just ask yourself why TTRTR laughs his head off every time the ftse tanks.

I agree, from your point of view there is a very bullish history for house prices in realtion to stock market falls. The SM crash of 1987 was, after all, followed by the Great Crash in houses after 17 months of HPI. But there are equally as many bearish connections. The overwhelming consensus of opinion out there is that the markets are tanking because of the worldwide rises in interest rates. Gordon aside, all nations have hiked and are in the process of hiking more.

Now, we all know that IR impact the housing market. As SM's crash around the world IR hikes are a leading cause. The higher the rates the more likely the crash in house prices will go deeper. Below are some bearish posts to counter your bullish examples where you will see the correlation between IR the SM and slowing house sales. All interact together to produce what some bears are calling the "perfect storm" for a worldwide correction in all IR sensitive assets, not just stocks.

http://uk.biz.yahoo.com//28062006/94/europ...ing-losses.html

Wednesday June 28, 07:59 AM
European equities poised for opening losses
European stocks were expected to open lower on Wednesday as the US Federal Reserve begins its two-day monetary policy meeting against the backdrop of growing hawkishness from central bank policymakers.
Spread betters were expecting the three main European indices - London’s FTSE 100 (news) , Frankfurt’s Xetra Dax and the CAC 40 (Paris: news) in Paris - to open between 20 and 40 points lower.
Overnight in the US the main
stock indicators fell sharply as investors became concerned that the Fed may continue raising interest rates to stem inflation.

http://money.cnn.com/2006/06/27/news/econo...dex.htm?cnn=yes

Home sales: Weakest in 4 months
Slowest pace since January points to a cooling, but not collapsing, market.
June 27 2006: 3:53 PM EDT
WASHINGTON (Reuters) -- Existing homes fell 1.2 percent in May to the slowest pace in four months as
higher interest rates damped buying activity,
a trade group reported Tuesday.

The bottom line is that there is a correlation between stock prices and the housing market. Arguably, it is an indirect relationship but neverthless connected. When a SM crashes it relfects a downturn in economic activity which eventually affects employmewnt and the ability of a housing market to sustain itself. The effect is, however, normally delayed as in the 1987 crash. As you may recall, it took about 17 months to work itself through to house prices which began to slip in early 1989. This time, the stock market has moved sideways for a number of years and has only recently regained the place it held before the dot.com crash.

Here is an old artcile which may help you see the interplay between the broader economic activity and the housing market. Written at the beginning of the housing boom it offers some interesting insights. The reason for the long delay in a house price correction following the dot.com bust is, of course, the unique situation brought about by Al Greenspan's accomodative IR policy to keep the economies going after the SM crash and 9/11. That policy has long since changed as IR rise as a reaction to the inflationary policies of the past several years:

http://news.bbc.co.uk/1/hi/business/1235297.stm

So, what does influence house prices?

The amount of disposable income people have is a key factor, and this is governed by
interest rates
, average earnings and unemployment.
"The main driver of housing markets is interest rates and changes to the real economy, not the financial sector but general economic activity," South Bank University's Michael Ball said.
"In so far as financial markets are correlated with the real economy,
there is a correlation, but it is not a direct correlation
."
The influence of the financial sector may vary regionally.
In the City of London, some people may rely on city bonuses to buy a house.
Falling share prices may deter buyers in the City of London
In other parts of the UK, where the local economy centres on manufacturing, the strength of sterling may be a more important factor.
And in the UK there is another factor - the limited supply of houses, due to tight planning control on a small island, which means that house prices have risen more strongly during booms than in most other countries.

The HPI of recent years has been IR driven. We all know that wages have not kept pace with HPI. As the economic cycle turns and a sense of the "good times" being over as indicated by employment and rises in IR the SM will correct. As the article suggests, loss of wealth will impact buying decisions and the City is a good example where fewer bonuses means fewer homes. The long reign of accomodative IR has come to an end and with it the ability of people to borrow cheaply. The main driver of HPI is therefore being eliminated. As HPI is a powerful stimulus for the economy (MEW etc.) there is bound to be a further period of correction coming to stocks. As people spend less share prices will drop correspondingly. You cannot separate a SM crash from a corresponding downturn in the housing market. The last few years of HPI have, you must remember, been IR driven. THe housing market is highly sensitive to IR as is the SM which is precisely why it is correcting.

Chicken and the egg? As the article above suggests, both and neither. They are part of the same phenomena as one will not adjust without impacting the other.

Here is an OECD study on the relationship between house prices and stock market activity:

http://www.vwl.uni-mannheim.de/brownbag/lu...e%20prices'

Edited by Realistbear

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Oddly enough, here is an article just in off the wires directly on point:

http://orange.advfn.com/news_Morgan-Stanle...s_15931223.html

Morgan Stanley predicts global property slump amid rising interest rates
SINGAPORE (XFN-ASIA) - Rising global inflation and interest rates will
likely trigger a global property slump following the boom in recent years,
Morgan Stanley said.
The recent property boom was triggered by a prolonged period of low interest
rates globally, but this trend is reversing, with rates on the uptrend, it said.
"As inflation picks up simultaneously around the world, interest rates are
rising everywhere, and the property boom is turning into a bust," Morgan Stanley
economist Andy Xie said in a note.
"As the global economy is likely to experience rising inflation and cooling
demand, all assets are likely to depreciate," he said.
"Bonds began to decline first. Property, equity and commodities are
following.

"ALL assets are likely to depreciate" according to Morgan Stanley. Thus SM crashes and property carshes will go hand in hand this time. Perhaps a short delay at best.

Do you see the correlation between a SM correctioon and a HPC now?

Edited by Realistbear

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Just ask yourself why TTRTR laughs his head off every time the ftse tanks.

he seems to be belonging to the school which teaches

SM fall = IR cut,

which is not always the case.

If econimics was that simple we all would have been millionaires by now. ( or may be not)

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Realistbear : "D O W Sinking Ahead Of Ben's I R Hike On Thursday, 101 points down -- FTSE may suffer Tomorrow"

FTSE ends +0.47%

Realistbear yet to break his duck, and yet he still keeps up these commentaries. ...

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Realistbear : "D O W Sinking Ahead Of Ben's I R Hike On Thursday, 101 points down -- FTSE may suffer Tomorrow"

FTSE ends +0.47%

Realistbear yet to break his duck, and yet he still keeps up these commentaries. ...

Glad you quoted the "may" in the commentary! Yup--looks like the DOW-FTSE monkey see monkey do pattern has finally been broken after quite a few weeks of the London (and just about everyone else) market following NY down.

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FTSE holding it's own today and put on nearly 50pts since 6am. Still in no-man's land at the moment, though a meaningful rally could come very soon. Sentiment is unsustainably low.

http://www.investorsintelligence.com/x/cha...w=600&h=400

Thanks for the link Van. I'm in the process of changing data providers and am keen to source

any interesting charts like the one you posted. There's a present for you here

PS: remember when folks used to get slung out of the main house price discusion area for talking about stocks - even though they got it right all the time! Times sure have changed. Oh, by the way, did you know (according to RB) that I'm a bull ? :lol::lol:

Edited by Sledgehead

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  • 302 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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