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The 'myth' Of Property As A Leveraged Investment

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The bulls on this site often like to spout ill-informed opinions about house prices being sacrosanct because 'its the only leveraged investment available to the general public'.

I may be no expert in investments other than property, but I do know this:-

the more leveraged an investment, the higher the risk

The 2 are usually inversely related. That's why the coming property collapse will be STUPENDOUS in its size. Leverage working AGAINST the punter

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Quite, but in an inflationary environment you're best to be as leveraged as possible provided you have reserves to weather high interest rates.

Good job we live in a 'low inflation world' then, isn't it BB?

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I've said this many times before, but you are quite right PG.

The coming property crash will be like nothing ever seen before, not only will the vast

majority of people lose all their money, they will lose more than all of their money and

be in a huge amount of debt.

Borrowing money to buy something which isn't guaranteed to maintain

its nominal value, increases your risk exposure.

I think we will see housing wealth wiped out with consistent interest-rate rises,

through 2007-2009, and then probably around 2010 there will be a global

forex / inflationary crisis like nothing ever seen before.

This will nicely take care of destroying the real value of practically everybodys'

savings and pensions. As an added bonus, it will make people really pissed off,

the media will tell you China is to blame for this, and you will quite happily sign

up to go and fight them in Central Asia. Millions will die.

:wacko:

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I think we will see housing wealth wiped out with consistent interest-rate rises,

through 2007-2009, and then probably around 2010 there will be a global

forex / inflationary crisis like nothing ever seen before.

:wacko:

I'm sure that it would have been seen before... history goes back a long time....

History shows property has been a solid investment over the long term, and is a fundamental asset that underlines 1st world civilisations.

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I've said this many times before, but you are quite right PG.

The coming property crash will be like nothing ever seen before, not only will the vast

majority of people lose all their money, they will lose more than all of their money and

be in a huge amount of debt.

Borrowing money to buy something which isn't guaranteed to maintain

its nominal value, increases your risk exposure.

I think we will see housing wealth wiped out with consistent interest-rate rises,

through 2007-2009, and then probably around 2010 there will be a global

forex / inflationary crisis like nothing ever seen before.

This will nicely take care of destroying the real value of practically everybodys'

savings and pensions. As an added bonus, it will make people really pissed off,

the media will tell you China is to blame for this, and you will quite happily sign

up to go and fight them in Central Asia. Millions will die.

:wacko:

I totally agree with you in your assertion but not necessarily your reason. I think we will have a housing crash like nothing we have ever seen before with prices lowering and then gaining momentum and plummeting. The trigger point for me though and it has already started will be the US where prices are already in free fall. Once this gains momentum the US banks will panic and will call in delinquent loans BUT the US Banks are not the major underwriter for US property. They are not that stupid; they have offloaded in huge quantities overseas and when when these parties lose confirdence the US economy will collapse and everyone over here who is currently invested in property will be affected. GET OUT NOW WHILST YOU STILL CAN !!!

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Surely the relevant inflation rate here is the one for houses, currently around 8%?

Quite, you can plot M4 against raw land registry data and the trend is quite clear, M4 leads the way and it recently hit a new record of >14% year-on-year growth along with mortgage lending growing at 19% annualised. There is no tightening out there, the taps are flowing and credit is as easy as ever thanks to all the central banks, on a superficial basis there have been minor adjustments to the repo rate in the UK but this is simply to soothe the public's inflation expectations, akin to the open fraud that is the CPI, it's smply about managing 'expectations' whilst the monetary base is inflating away as ever. You cannot win against such a system, they have the ability to create money and credit out of thin air at will.

Now is a good time to be holding debt, real interest rates are barely positive and all the world's currencies are depreciating against each other at an unprecedented rate, the debasement even exceeds that of the 1970's. Cheap goods from china and wholesale voluntary wage constraints in the form of unlimited migration simply add to the mirage, in reality the average working man's standard of living and accumulated savings are eroding at a pace, if you hold no hard assets but only trust paper wealth then you're essentially swimming naked. The flow of liquidity out there can only go in one direction, once it starts reversing the whole system crumbles, and the powers that be are more interested in preserving our system than housing inequality, especially as the latter basically causes no wider civil or political consequences, the vast majority of the public actually welcome being ripped off in such a manner. Even if there are civil consequences they can be easily dealt with, especially with the introduction of internal passports in the 2009-10 timeframe as previously mentioned.

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[ ... ] then probably around 2010 there will be a global forex / inflationary crisis like nothing ever seen before. [ ... ]

... which will disproportionately impact individuals nearer distribution than accumulation; this is what a generation's worth of speculation buys.

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This will nicely take care of destroying the real value of practically everybodys'

savings and pensions. As an added bonus, it will make people really pissed off,

the media will tell you China is to blame for this, and you will quite happily sign

up to go and fight them in Central Asia. Millions will die.

:wacko:

Seriously, there is no way we can fight China. It is too big and too powerful - and has nuclear weapons.

However, I can foresee the rise of populism and protectionism in the West and world in general. Will we see a "new" New World Order?

I have never understood why the US has whipped up so much popular frenzy over the war on terror when the real threats are the emerging economic rivals in Asia.

The war on terror must simply be a smoke screen for securing oil reserves - nobody ever goes to war unless there is profit in it or someting advantageous to be plundered.

Edited by Caledonian-Emigre

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[ ... ] if you hold no hard assets but only trust paper wealth [ ... ]

... if you want a detached third party to recognise and agree ownership of a given hard asset - you'll need to trust paper wealth to some degree in the process; both promises are underwritten by the same guarantor.

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Now is a good time to be holding debt, real interest rates are barely positive and all the world's currencies are depreciating against each other at an unprecedented rate, the debasement even exceeds that of the 1970's. Cheap goods from china and wholesale voluntary wage constraints in the form of unlimited migration simply add to the mirage, in reality the average working man's standard of living and accumulated savings are eroding at a pace, if you hold no hard assets but only trust paper wealth then you're essentially swimming naked.

Since when has it been good idea to hold debt? - is this a new mantra of the miracle economy? Debt is like an ever-replenishing money tree then?

The flow of liquidity out there can only go in one direction, once it starts reversing the whole system crumbles, and the powers that be are more interested in preserving our system than housing inequality, especially as the latter basically causes no wider civil or political consequences, the vast majority of the public actually welcome being ripped off in such a manner. Even if there are civil consequences they can be easily dealt with, especially with the introduction of internal passports in the 2009-10 timeframe as previously mentioned.

I have not heard anything about this. Is it true?

Bye bye civil liberties.

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Guest muttley

Since when has it been good idea to hold debt? - is this a new mantra of the miracle economy? Debt is like an ever-replenishing money tree then?

If interest rates are 4% and an asset you own is increasing at 20%, then it would make sense to borrow money to buy this asset.So, yes, holding debt can be a good thing. (Think getting as big a mortgage as possible in 1999)

Also, currencies can effectively fall against each other. It just means their purchasing power has decreased.

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History shows property has been a solid investment over the long term, and is a fundamental asset that underlines 1st world civilisations.

Property is, of course, a sound investment over the VERY long term. Even if you bought a house now you'd see a profit eventually... But the problem is that if you buy when prices are very high and interest rates are low you leave yourself with a massive loan that you may not be able to cover if rates go up. That's why so many are at risk now. Granted their houses will eventually be worth more than they paid for them, but if their incomes aren't high enough to cope with the repayments over the next few years they're never going to experience the benefit as they'll have to have cut their losses long before the next bull run. Unless you're rich enough to cope with any eventuality you're better waiting until property prices are at a relative low before buying into the market. As you say, history shows that property is a solid investment, but history also shows that property repeatedly becomes overpriced and is subject to a correction before forging ahead again. Buying during the right part of the cycle ensures that you have the best chance of keeping a roof over your head.

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go away and have a little think about what you just said.

The whole world is on a fiat system, no country wants its currency to appreciate substantially against the dollar, especially exporting nations, as such they have to keep pace with the growth of the money supply in the US, which is growing like mad as it always does in times of war, the UK is no different. One common way to subdue appreciation is to recycle dollar reserves into US Treasury Bills then print local currency to match this supporting 'asset'. The stock of money in the world could double or triple in no time at all, as it has done over the last 25 years, there are no constraints but a limited number of assets for it to chase.

It's an uncomfortable truth that is decimating your savings, I suggest you bury your head in the sand, make it go away.

... if you want a detached third party to recognise and agree ownership of a given hard asset - you'll need to trust paper wealth to some degree in the process; both promises are underwritten by the same guarantor.

The guarantor of those little £££'s in your savings account is Gordon Brown, Mervin King, Ben Bernanke and ultimately George Bush (or whomever decides his polices). How does that compare to the Land Registry?

I have not heard anything about this. Is it true?

Bye bye civil liberties.

Identity Cards Bill

As for debt, ask yourself, do you seriously think anyone ever intends to repay the national debt? In fact we cannot, our modern monetary system is little different from a pyramid scheme but somebody is able to print endless amounts of new money to keep it propped up, until people gradually realise said paper is no longer worth anything.

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The bulls on this site often like to spout ill-informed opinions about house prices being sacrosanct because 'its the only leveraged investment available to the general public'. That's not an ill-informed opinion. It is clumsily expressed but it is basically a fact. Anyone can easily leverage the equity in their house and become a property investor. Dead easy. Learning how to trade options (as an example of another leveraged investment) requires a lot more in the grey matter department.

I may be no expert in investments other than property, but I do know this:-

the more leveraged an investment, the higher the risk Not true. You can have 100% leverage on a BTL investment by increasing the mortgage on your own house to provide the deposit for a BTL and borrowing the difference. It is relatively low risk compared to trading options. Or you can simply get a 100% mortgage to buy a property for yourself. High leverage but low risk - particularly if you have the resources to weather storms.

The 2 are usually inversely related. That's why the coming property collapse will be STUPENDOUS in its size. Leverage working AGAINST the punter

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good news my friends, not only is marina a 'born again bull' but she has just invalidated the principles of investment that drive the entire world economy. That's fantastic news. According to her, risk and reward are no longer inversely related.

So the next time some scammer emails you an 'opportunity' to 'invest' in a 'little known' stock 'over the counter', you must all jump at the chance :-) - you can thank Marina for this excellent piece of well thought out and lucid thinking.

Merengo also seems to believe 'house prices being sacrosanct because 'its the only leveraged investment available to the general public' - a sentiment I would personally regard as ill-informed. I'm willing to be disabused of the notion of course, but not by someone who a/ can't read a clear 30 word sentence amd b/ thinks replying within the body of a quote in bright red is a 'clever' thing to do.

As for BuyingBear, like I said, go away and have a think about what you just wrote. Here's a clue - I was commenting on the bit I quoted - that's why I quoted it

Doh.

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As for BuyingBear, like I said, go away and have a think about what you just wrote. Here's a clue - I was commenting on the bit I quoted - that's why I quoted it

Doh.

All the world's currencies have been depreciating against each other since the collapse of Bretton Woods, real purchasing powering of all currencies has declined, this is non-controversial and obvious. How do you suggest I "go away and think" about this?

edit: oh, it seems you're holding £3.75m in paper money, clearly I've touched a nerve! :lol: Not a good position if they're watering down the whiskey bottle.

Edited by BuyingBear

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Quite, you can plot M4 against raw land registry data and the trend is quite clear, M4 leads the way and it recently hit a new record of >14% year-on-year growth along with mortgage lending growing at 19% annualised. There is no tightening out there, the taps are flowing and credit is as easy as ever thanks to all the central banks, on a superficial basis there have been minor adjustments to the repo rate in the UK but this is simply to soothe the public's inflation expectations, akin to the open fraud that is the CPI, it's smply about managing 'expectations' whilst the monetary base is inflating away as ever. You cannot win against such a system, they have the ability to create money and credit out of thin air at will.

Now is a good time to be holding debt, real interest rates are barely positive and all the world's currencies are depreciating against each other at an unprecedented rate, the debasement even exceeds that of the 1970's. Cheap goods from china and wholesale voluntary wage constraints in the form of unlimited migration simply add to the mirage, in reality the average working man's standard of living and accumulated savings are eroding at a pace, if you hold no hard assets but only trust paper wealth then you're essentially swimming naked. The flow of liquidity out there can only go in one direction, once it starts reversing the whole system crumbles, and the powers that be are more interested in preserving our system than housing inequality, especially as the latter basically causes no wider civil or political consequences, the vast majority of the public actually welcome being ripped off in such a manner. Even if there are civil consequences they can be easily dealt with, especially with the introduction of internal passports in the 2009-10 timeframe as previously mentioned.

Wow ..did you write this ? Very eloquent , I agree entirely and to respond to some of your critics

Now is a good time to be holding debt

Absolutely... the purchasing power of the money that a debtor pays back is less than its purchasing power when borrowed.

Clearly its best to never be in debt but if you have to and can fix rates to low IR levels and then let high inflation erode it then your pain is lessened.

all the world's currencies are depreciating against each other at an unprecedented rate

I'm not sure about the rate but this is definitely happening, the fact that it is not YET reflected in the gold price is because of intervention. Rest assured it will with surges towards $700/oz by xmas my personal view.

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All the world's currencies have been depreciating against each other since the collapse of Bretton Woods, real purchasing powering of all currencies has declined, this is non-controversial and obvious. How do you suggest I "go away and think" about this?

edit: oh, it seems you're holding £3.75m in paper money, clearly I've touched a nerve! :lol: Not a good position if they're watering down the whiskey bottle.

I think his point was they depreciate together and not against each other.

If the dollar depreciates against the pound the pound is appreciating against the dollar...

They can't all depreciate against each other, they must all depreciate together. Pressumably againts assets.

By the way there are some weird and wonderful theories seeping form this thread.

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I think his point was they depreciate together and not against each other.

If the dollar depreciates against the pound the pound is appreciating against the dollar...

They can't all depreciate against each other, they must all depreciate together. Pressumably againts assets.

By the way there are some weird and wonderful theories seeping form this thread.

Quite, they all decline in terms of real purchasing power, however they decline at different rates, it's perfectly possible for the USD to decline against GBP but nevertheless both are simultaneously deprecating. Once the dollar declines others are basically compelled to follow suit.

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good news my friends, not only is marina a 'born again bull' but she has just invalidated the principles of investment that drive the entire world economy. That's fantastic news. According to her, risk and reward are no longer inversely related. You made a stupid sweeping statement. I merely pointed out that it was not true.

So the next time some scammer emails you an 'opportunity' to 'invest' in a 'little known' stock 'over the counter', you must all jump at the chance :-) - you can thank Marina for this excellent piece of well thought out and lucid thinking. You really are a saddo. I didn't suggest that at all. You seem incapable of proper debate.

Merengo also seems to believe 'house prices being sacrosanct because 'its the only leveraged investment available to the general public' - a sentiment I would personally regard as ill-informed. I'm willing to be disabused of the notion of course, but not by someone who a/ can't read a clear 30 word sentence amd b/ thinks replying within the body of a quote in bright red is a 'clever' thing to do. You manage to write so much drivel in your posts that they have to be responded to point by point. I can't be bothered to copy and paste your drivel and remove bits of it to make it clear which bit I am responding to - so I simply make my text a different colour. It seems logical to me. It might seem clever to you, but I am not that easily impressed. I didn't say house prices were sacrosanct - why have you put a quote mark around it to suggest I did? I didn't say housing is the only leveraged investment available to the general public. You said that that is what bulls say. I merely pointed out that you were, as always, talking drivel, that there are many leveraged investments available to the general public (I said nothing about email scams, you brought up that red herring) and that housing is a much lower risk investment than other leveraged investments. I am sorry you seem to be incapable of understanding much.

As for BuyingBear, like I said, go away and have a think about what you just wrote. Here's a clue - I was commenting on the bit I quoted - that's why I quoted it And what you asked him to go away and think about ... as someone else pointed out ... you, again, completely missed the point.

Doh.

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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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