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Realistbear

Manager Of 1.2 Billion Property Fund Calls Crash In U S

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http://online.wsj.com/public/article/SB115...1.html?mod=mktw

The Wall Street Journal

MUTUAL FUNDS QUARTERLY REVIEW

Surviving a Real-Estate Slowdown

A 'Loud Pop' Is Coming,

But Mr. Heebner Sees Harm

Limited to Inflated Regions

By GREGORY ZUCKERMAN

July 5, 2006; Page R1

The real-estate market shows signs of slowing. Is there deeper weakness ahead? Fewer questions are more important to mutual-fund investors. Many own funds with real-estate-related shares -- not to mention homes and vacation properties. And many economists believe a slowdown of the housing market could hurt the overall economy.
To get a lay of the land, we tracked down Kenneth Heebner,
who since 1994 has managed the $1.2 billion CGM Realty Fund
. It has the best 10-year record of all real-estate-focused mutual funds, according to fund tracker Lipper Inc., up an average of nearly 22% a year during the past decade, well more than double the broader market. The fund also has one of the best one-year records, up 32% through June 30.
....../
WSJ: How is the housing market?
Mr. Heebner: A significant decline in prices is coming. A huge buildup of inventories is taking place, and then we're going to see a major [retrenchment] in hot markets in California, Arizona, Florida and up the East Coast.
These markets could fall
50%
from their peaks.
WSJ: What has you so concerned?
Mr. Heebner: I'm worried that more people will default on their mortgages. Risky mortgages such as interest-only and pay-option adjustable-rate mortgages require no principal amortization and in some cases payment of only a fraction of the interest due, have been widely used in the last two years. Some people got 100% financing for their homes. It made the tech bubble look like a picnic. When housing is going up rapidly and you can buy far more than your income can support, some people are eager to make big profits by extending themselves financially.
As housing prices fall more people will be under water, and these people are just going to walk away from their homes. They are going to say, 'I'm outta here.' You're going to see increasing foreclosures over the next several years. As [home] prices come down, it will create a difficult environment for home builders.

IO mortages, non-fixed rate, 100% loans, growing negative equity.................sound a little familiar? The reason why Gordon dare not raise the rates until inflation forces him to act.

IMO, the UK market will, once again, mirror California as it did in the Great Crash and the 50% drop Heebner sees is highly likely. We could see 60% in some areas of the UK, especially the grossly inflated BTL properties in rough areas that had been selling for 150k plus.

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We could see 60% in some areas of the UK, especially the grossly inflated BTL properties in rough areas that had been selling for 150k plus.

I think we will see a crash in new builds, and a considerable correction generally - but even I don't think we'll see 2001 prices ever again. :(

Edited by Warwickshire Lad

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IO mortages, non-fixed rate, 100% loans, growing negative equity.................sound a little familiar? The reason why Gordon dare not raise the rates until inflation forces him to act.

Yet, again I feel I must try to put a stop to the idea that Gordon controls interest rates. HE DOES NOT :angry:

RB - you do your case no favours by this biased and inappropriate assertion that you repeat nearly daily.

fp

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Yet, again I feel I must try to put a stop to the idea that Gordon controls interest rates. HE DOES NOT :angry:

RB - you do your case no favours by this biased and inappropriate assertion that you repeat nearly daily.

Can we at least agree that GB was behind the assassination of the only MPC member who voted for an increase?

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Yet, again I feel I must try to put a stop to the idea that Gordon controls interest rates. HE DOES NOT :angry:

RB - you do your case no favours by this biased and inappropriate assertion that you repeat nearly daily.

fp

The BoE's independence is an illusion. Never underestimate the power of political patronage. Brown appoints the external members and the rest are appointed by the treasury (TB and GB). If the BoE were truly independent and not subject to Brown's appointments we may well have seen several IR hikes by now and honestly with regard to the rate of inflation.

http://www.bankofengland.co.uk/monetarypolicy/overview.htm

Monetary Policy Committee (MPC) The Monetary Policy Committee

Interest rates are set by the Bank’s Monetary Policy Committee. The MPC sets an interest rate it judges will enable the inflation target to be met. The Bank's Monetary Policy Committee (MPC) is made up of nine members –
the Governor, the two Deputy Governors, the Bank's Chief Economist, the Executive Director for Markets and four external members appointed directly by the Chancellor.
The appointment of external members is designed to ensure that the MPC benefits from thinking and expertise in addition to that gained inside the Bank of England.
Public accountability: explaining views and decisions
The MPC goes to great lengths to explain its thinking and decisions. The minutes of the MPC meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee.
The Committee has to explain its actions regularly to parliamentary committees, particularly the Treasury Committee.

When was the last time the BoE stepped out of line with Gordon's policies? Some may have tried............................ :ph34r:

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The BoE's independence is an illusion. Never underestimate the power of political patronage. Brown appoints the external members and the rest are appointed by the treasury (TB and GB).

Give the conspiracies a rest, please.

MPC members need to be appointed by the government and be accountable to parliament - that's the principle all important public appointments work on. It doesn't mean that the MPC can't be indpendent, just because they were appointed by the Treasury.

MPC members have a tendency to take their mandates quite seriously once they get into the Bank, and since most of them don't care about reappointment it's not like Gordon has any leverage over them. Do you think they spend two days sat in a meeting thinking "Ooh, what would Gordon want", or do they possibly take decisions on the basis of the large mound of statistics and analysis the Bank's staff prepares for them?

The truth of the matter is that even in the wider economic community, where you can't possibly believe Gordon has control, there has been mixed belief in the need for higher interest rates. Even though I do think higher rates are necessary, I think here at HPC we get a bit carried away about the strength of our case sometimes.

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Give the conspiracies a rest, please.

That's only half of it -- RB thinks Gordon had the hawk on the MPC poisoned in order to keep rates low!

The MPC is independent of Gordon Brown, these guys are all real-world economists and civil servants with distinguished careers, not anonymous yes men picked from a list of GB cronies. As a senior figure at the BoE, King has seen chancellors come and go, I don't see why he would want to show Gordon any favours.

However, the Committee does suffer from a Whitehall/City groupthink mentality -- currently on display as paralysis in the face of conflicting evidence.

A one man decides system like the US would better allow for pre-emptive rate moves. Like RB, I think the current MPC will wake up to today's inflationary danger too late to contain it, but I blame groupthink for this, not Gordon Brown.

Although I agree with RB's analysis 75% of the time, his hatred of the chancellor sometimes brands him as an armchair crank. He should realise that dispassionate analysis of the facts, unclouded by prejudice, is his best strength.

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Yet, again I feel I must try to put a stop to the idea that Gordon controls interest rates. HE DOES NOT

RB - you do your case no favours by this biased and inappropriate assertion that you repeat nearly daily.

Rubbish, he has a say in who becomes a member of the MPC and there is always the underlying threat that if they dont tow the line somewhat they wont stay in buisness, also it is the government that is the go between whoever compiles and manipulates the stats re the CPI that the BOE depends on to set its rate. How naive to think otherwise.

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.... his hatred of the chancellor sometimes brands him as an armchair crank.

:lol: well that logic brands the vast majority of the population as 'cranks' - Brown is widely disliked. He's almost as unpopular as Blair - are Blair-haters 'cranks' also??? - opinion polls suggest about 30% regard Brown in a good light

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That's only half of it -- RB thinks Gordon had the hawk on the MPC poisoned in order to keep rates low!

The MPC is independent of Gordon Brown, these guys are all real-world economists and civil servants with distinguished careers, not anonymous yes men picked from a list of GB cronies. As a senior figure at the BoE, King has seen chancellors come and go, I don't see why he would want to show Gordon any favours.

However, the Committee does suffer from a Whitehall/City groupthink mentality -- currently on display as paralysis in the face of conflicting evidence.

A one man decides system like the US would better allow for pre-emptive rate moves. Like RB, I think the current MPC will wake up to today's inflationary danger too late to contain it, but I blame groupthink for this, not Gordon Brown.

Although I agree with RB's analysis 75% of the time, his hatred of the chancellor sometimes brands him as an armchair crank. He should realise that dispassionate analysis of the facts, unclouded by prejudice, is his best strength.

We don't know how David Walton dies yet until the autopsy report is released--if there was one. I am not suggesting Brown may have had a hand in it but that the death was somehwat suspicious given the age, apprent good health and suddeness of the death. Given the strange deaths of the Vatican bankers awhile ago nothing is beyond belief these days.

For the record, I do not "hate" GB. He's a politician whose policies I abhor. As the creator of the Miracle Economy based on cheap credit and harrowing debt he has a lot to answer for.

I do think you are right though--their paralysis is political in the sense of having whitehallitis- Yes minister stuff I am afraid.

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I think we will see a crash in new builds, and a considerable correction generally - but even I don't think we'll see 2001 prices ever again. :(

We will see the prices lower than in 90-ties. World economy is very correlated now, and crash in the USA will mean crash in whole world (maybe far Asia and Russia only will have stagnation, not depression, due to massive reserves and savings rates). Moreover, housing bubble is spreaded worldwide - USA, UK, Ireland, Spain, Netherlands, Sweden, Hong Kong...

UK will experience pound crash (and inflation than) or skyrocketing of interests rates. Why? Simple, it is an outcome of runnning so huge trade deficit. To reduce 1% of trade deficit, a currency has to decline for 20% - and now UK is running trade deficit circa 5-6% of GDP.

Obviously, in such conditions nobody will buy a house, except people who will have money (in proper currencies, like Swiss one) on hands.

All house markets will crash - new houses, second hand houses.

Except house prices crash, an crash on stocks will occure (not only because stocks are very sensitive on housing).

Both crashes - on stocks and in housing - will cause massive unemloyment and together with fallind dollar and pound will cause bursting of next bubble - credit one.

In conditions of depression, the prices have to decline to much more lower levels than those from not only 2001, but those from 90-ties as well.

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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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