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Realistbear

Merrill Lynch Issue Recession Warning

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http://investing.reuters.co.uk/news/newsAr...OMY-HOUSING.xml

Chances rise for U.S. recession

Wed Jun 28, 2006 10:50 AM BST

By David Lawder

WASHINGTON (Reuters) -
The U.S. housing market is now tracing a clearly downward trajectory that economists say will steepen as interest rates rise, raising chances of a recession by early 2007.

The key will be the extent to which the slowdown in sales activity translates to a decline in selling prices, eating away the cushion of home wealth and spending power that U.S. consumers have accumulated in recent years.

Merrill Lynch economists say there is now about a 40 percent chance of a recession in the first half of 2007 -- even without a widely anticipated 25 basis-point Federal Reserve rate hike this week.

As much as half of U.S. economic growth is now directly or indirectly related to housing sales, construction and consumer spending fuelled by home equity extraction, said Sheryl King, senior economist at Merrill Lynch
.

60% + of our economy is housing-MEW related?

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Bear

You provide a lot of useful stuff, but we're not terribly interested in the US property market. Or have I missed something?

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Bear

You provide a lot of useful stuff, but we're not terribly interested in the US property market. Or have I missed something?

If US go into recession, you can bet your bottom dollar we will not be far behind!!

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The USA has created so many jobs on the back of this property boom. If that wasn't bad enough they've been removing equity to buy shares in the crashing stockmarket.

According to the 'experts' on Bloomberg the Fed will have to overshoot with IR hikes!!!! This is recession territory.

Of course the UK nor Europe is reliant on the USA whatsoever and Cherie Blair is a looker!!! :lol:

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Bear

You provide a lot of useful stuff, but we're not terribly interested in the US property market. Or have I missed something?

As already stated, the US and UK are quite closely tied with a similar HPC history. With America standing as our 2nd largest trading partner, after the EU, a recession there will have a significant impact on us. We enjoyed the same HPC in 1989-96 with very similar drops to the Californian market which has, once again, mirrored our irrational exhuberance with a 120% increase in prices over a very short 5-6 years period.

Further, the IMF have suggested, quite accurately as it is turning out, that the world froth markets in house prices are closely tied and will crash more or less together and to about the same degree.

To me, it is blindingly obvious that we are going to see a HPC. No one can really afford our ridiculous prices without stretching the limits of rational thought in relation to what is a prudent amount to borrow. The economic cycle is turning, as it always does, and the days of unlimited cheap credit are coming to a rapid close. Worldwide IR are going up up and away. Gordon may be able to resist the worldwide surge for a few more months but the longer he stalls the inevitable the worse it will be for the economy.

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Of course the UK nor Europe is reliant on the USA whatsoever and Cherie Blair is a looker!!! :lol:

Cherieblair1.jpg

Phwaar!

wonder if she wears the wig for Tony? ;)

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Worldwide IR are going up up and away. Gordon may be able to resist the worldwide surge for a few more months but the longer he stalls the inevitable the worse it will be for the economy.

Trouble is there is nothing to stop the inevitable. Gordon has taxed us all and beaten the entrepreneur to death. The economy is now left wide open: he cannot tax further; there is literally nothing left worth taxing. Worse still he cannot reduce the spend on the public-sector because these things tend to have a bit of inertia to them.

In short, it's completely ****ed.

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Trouble is there is nothing to stop the inevitable. Gordon has taxed us all and beaten the entrepreneur to death. The economy is now left wide open: he cannot tax further; there is literally nothing left worth taxing. Worse still he cannot reduce the spend on the public-sector because these things tend to have a bit of inertia to them.

In short, it's completely ****ed.

IMO Gordon Broon has a couple more tricks up his sleeve to keep the miracle going that little bit longer - enough time [he hopes] to get into no 10:

Raise the BoE Infaltion Target - to bring UK in line with new 'global inflation environment' - BoE would then have to cut IRs to stimulate economy and inflate CPI to new target

Allow a run on Sterling - to 'boost a recovery on the back of UK exports'

Both of which will add to the economic pile-up were heading towards, but hey, who cares when you're PM?

Edited by jp1

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Allow a run on Sterling - to 'boost a recovery on the back of UK exports'

Both of which will add to the economic pile-up were heading towards, but hey, who cares when you're PM?

Err question though, WTF do we export these days?

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IMO Gordon Broon has a couple more tricks up his sleeve to keep the miracle going that little bit longer - enough time [he hopes] to get into no 10:

Raise the BoE Infaltion Target - to bring UK in line with new 'global inflation environment' - BoE would then have to cut IRs to stimulate economy and inflate CPI to new target

Allow a run on Sterling - to 'boost a recovery on the back of UK exports'

Both of which will add to the economic pile-up were heading towards, but hey, who cares when you're PM?

OR......get a couple of quick IR hikes in NOW to deliberately f*** up the housing market,knowing full well this will trigger a much weaker consumer,and cut when the drop is in full-flow to trigger the run on sterling(would suit the stockmarket quite nicely)

10yr is currently pricing in 100% chance of 25bp rise and about a 40% chance of 50bps.

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Bear

You provide a lot of useful stuff, but we're not terribly interested in the US property market. Or have I missed something?

This is a global problem - once the two biggest economies go into reverse ie USA/China then everybody follows

Do you honestly think the UK is immune to macro economic events?

GB fiddling the inflation figures and messing with .25 IR movements is nothing - just short term measures to keep IR low and borrowing high in the local economy (copied throught the world recently though)

It's going to be sudden and global when the crash happens...

Edited by dnd

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GB fiddling the inflation figures and messing with .25 IR movements is nothing - just short term measures to keep IR low and borrowing high in the local economy (copied throught the world recently though)

They can hide inflation from the general public, but they can't hide inflation from the currency markets.

We're heading for very interesting times.

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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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