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D'artagnan

Why The Long Faces?

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Today's MPC decision is not that momentous. They have a difficult task at the moment, steering the economy through the narrow channel that is required for anything resembling a soft landing. It is of course, an impossible task, but they have to try. News has been mixed over the last month or so with many indicators that suggest that the recent rate rises have started to take affect. Back to back raises would shock many people.

With the above in mind, they were never going to raise IR today if the CPI figure has fallen slightly or remained the same. We will see when the figures are released. The best we can hope for in the short term is the raising of IR's in alternative months.

Even if they are starting to lose their grip on inflation, it'll just mean rates will be going much higher and we'll arguably get a more severe crash with the added bonus that when we do buy, inflation will quickly erode the debt as it did with our parents.

In any case, I feel that external factors (i.e. the money markets, credit contraction) will have much more of a bearing on the outcome of the coming economic shitstorm.

Keep the Faith! All roads lead to Rome...

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The markets voted today, Custer's last stand stuff potenitally.

The bond market may not be fooled again for a long time.

If that trend line breaks convingly all bets are off.

In all the carnage elsewhere commodities were rock solid, last place of safe-haven for years of irresponsible money printing.

http://www.ft.com/cms/s/1baa406e-1525-11dc...0b5df10621.html

“A lot of people are scared of that 20-year trend line and rightfully so,” said Gerald Lucas, senior investment adviser at Deutsche Bank. “A close above that level at the end of this week would likely target a further rise to 5.25 per cent.”

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i think A LOT OF PATIENCE(sp?) is required

these small changes that are occuring wont bring affordability

can you really see affordable housing in the next year or so?

i would think if nothing drastic happens then we are stuck with HPI- with only people who have property being able to buy/sell

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Today's MPC decision is not that momentous. They have a difficult task at the moment, steering the economy through the narrow channel that is required for anything resembling a soft landing. It is of course, an impossible task, but they have to try. News has been mixed over the last month or so with many indicators that suggest that the recent rate rises have started to take affect. Back to back raises would shock many people.

With the above in mind, they were never going to raise IR today if the CPI figure has fallen slightly or remained the same. We will see when the figures are released. The best we can hope for in the short term is the raising of IR's in alternative months.

Even if they are starting to lose their grip on inflation, it'll just mean rates will be going much higher and we'll arguably get a more severe crash with the added bonus that when we do buy, inflation will quickly erode the debt as it did with our parents.

In any case, I feel that external factors (i.e. the money markets, credit contraction) will have much more of a bearing on the outcome of the coming economic shitstorm.

Keep the Faith! All roads lead to Rome...

Shouldn't we be looking further afield than concentrating solely on the BOE? Until the BOJ and other low interest economies start hiking their rates significantly, then surely increases in our own rates aren't going to make much difference anyway - in fact, it may have the opposite effect of increasing asset prices as the tide of cheap money flowing into the country increases even further. IMO in this current climate, a .25% increase in Japanese rates could be more significant than one here - ie the closing of the gap between our rates and theirs.

I'm no economist so I'm not claiming I'm right... it just seems to make sense to borrow cheap and invest in something with higher returns.

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I'm no economist so I'm not claiming I'm right... it just seems to make sense to borrow cheap and invest in something with higher returns.

Neither am I, and I have a question.

Carry trade. Hedge funds or whatever borrow yen at close to free, and seek to invest it for a handsome return elsewhere. This I understand.

But do they really get involved in direct investment in the UK residential property market? I thought they just bought bundles of debt that had been created by small time investers and homebuyers?

So my question is; Does the carry trade inflate HPI, or simply profit from it?

Please make me less ignorant!

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Guest Bart of Darkness
Today's MPC decision is not that momentous.

I think a lot of people didn't expect them to hike IRs twice in a row. July/August will be the real test.

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i think A LOT OF PATIENCE(sp?) is required

these small changes that are occuring wont bring affordability

can you really see affordable housing in the next year or so?

i would think if nothing drastic happens then we are stuck with HPI- with only people who have property being able to buy/sell

Coudn't agree more. Its a long drawn out game this.

The people that already have a house / mortgage will remain in the game.

Others are going to be frozen out for a long long time.

People on this site like RB and PG who constantly try to tell people that great crash 2 is here have their timescale seriously skewed.

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With the above in mind, they were never going to raise IR today if the CPI figure has fallen slightly or remained the same.

Surely the MPC is attempting to control inflation months ahead. There's nothing, whatsoever, they can do now to affect today's inflation figures or, indeed, for the next month or two, at least. I think the tone of the recent minutes ephasises this.

p

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Surely the MPC is attempting to control inflation months ahead. There's nothing, whatsoever, they can do now to affect today's inflation figures or, indeed, for the next month or two, at least. I think the tone of the recent minutes ephasises this.

p

Money supply growth now provides the pool of money for inflation in the future as it spreads out across the economy.

They are not tackling future inflation if they are allowing current money supply to grow in double digits with a 2% target two years out.

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The comment that the MPC will leave interest rates unchanged if CPI does not rise seems a common theme on this site* .We had the same said last month ...if CPI falls below 3% no raise,when in fact it was a formality even though CPI came in at 2.8%.It still isn't sinking in amongst some members that CPI ,with one off favourable deflationary factors to hide behind like domestic fuel deflation,has to fall off a cliff to well below 2% to achieve the target in the medium term.

I know that the MPC are a bunch of cretins and I predicted a hold.In the back of my mind though I was hoping for a Damascan conversion.Remember the uber-Dove Bootle had one at the weekend voting for a 0.5% rise on the Shadow MPC.He has certainly realised the medium term inflationary s**t we are in.

*point made by the starter of this thread(Ed Norton).

Edited by crashmonitor

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Absolute rubbish. It's clear now that this ridiculous credit fueled boom is running out of gas and fast.

Inflation is a huuuuge problem and holding rates is only going to enhance the issue in the long run. Coupled with that property booms in Spain France Ireland the US Poland are all starting to feel the horrific effects of unamanaged cheap credit and we are about to enter a similar scenario.

No way the MPC can manage their way out of this mess they can stall it but a bloodbath awaits.

Coudn't agree more. Its a long drawn out game this.

The people that already have a house / mortgage will remain in the game.

Others are going to be frozen out for a long long time.

People on this site like RB and PG who constantly try to tell people that great crash 2 is here have their timescale seriously skewed.

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the good news is bonds they are crashing at last inflation is being priced in yield going higher.

Punctuation, please. This makes no sense! :blink:

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i would think if nothing drastic happens then we are stuck with HPI- with only people who have property being able to buy/sell

I can't see how that would work. You need new entrants at the bottom of each chain - or you need an investor.

In most areas the only properties suitable for investment are the stuff at the bottom of the market. Anything more expensive than these have no chance of delivering a rent that will go anywhere near covering the mortgage.

There are people thick enough (lots of them unfortunately) to think prices will rise forever until a 3 bed semi is a million - but these people don't have a brain cell between them as they seem unable to realise that in a global economy with little wage inflation no-one would be able to afford to buy one.

As more and more realise that BTL is no longer a one way bet - investment will drop and the market will fall. I do not believe investors will borrow money to buy into a falling market - so prices will fall until FTBs can afford them.

I'm holding on to that theory in the hopes my children have a future in this country.

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Coudn't agree more. Its a long drawn out game this.

I'm not so sure - in 2004/2005 we had stagnation and falling asking prices in London and the South East. People seem to have forgotten it already as prices recovered in 2006.

I know of new flats that were on the market at 230k that sold at 185k - 4 bed detacheds on the market at 570k - sat for a year and sold for 470k - all during 2004 and 2005. They never showed up in Land Registry figures because some of them were new and others still sold for more than they sold for a few years ago. So, it looked like no crash, but in fact prices of detached houses fell up to 20%.

I think we are now at the same stage as we were during the first half of 2004. IRs had been going up and the penny was beginning to drop that 'hello, interest rates blooody well go up as well as down!' Unless they do the stupid trick they did in August 2005 and drop rates again - we are in for a year of falling asking prices and a very quiet market. If during that year IRs go up again - sentiment will completely change and relatively rapid price falls (6 months to a year) will occur.

That's my theory and I'm sticking to it.

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Guest Charlie The Tramp

I think Crispin Odey hit the nail on the head with his statement last November that CBs are terrified what they are now seeing.

Here in London, Crispin Odey the leading investment fund manager says global interest rates should now be around 8%. The threat of inflation posed by the oversupply of money needs to be challenged. Higher interest rates would slow the growth in lending and debt that has fuelled so much of the bubble in money. Central bankers are starting to get frightened at what they see, and want to raise interest rates, says Odey. [but] the fears of over-indebted Western economies being skittled over by rising interest rates will only ensure that monetary policy remains accommodating

The MPC now fit into this category, The NZ Central Bank have got it right with their 8% rates and to hell with the consequences.

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Absolute rubbish. It's clear now that this ridiculous credit fueled boom is running out of gas and fast.

Inflation is a huuuuge problem and holding rates is only going to enhance the issue in the long run. Coupled with that property booms in Spain France Ireland the US Poland are all starting to feel the horrific effects of unamanaged cheap credit and we are about to enter a similar scenario.

No way the MPC can manage their way out of this mess they can stall it but a bloodbath awaits.

Come come now. huuuuge?

Fiddled yes but huuuuge?

Its probably somewhere between what 3 and 8% depending on who you believe. huuuuge really?

I bet the girls are disappointed with you. :lol:

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i think A LOT OF PATIENCE(sp?) is required

these small changes that are occuring wont bring affordability

can you really see affordable housing in the next year or so?

i would think if nothing drastic happens then we are stuck with HPI- with only people who have property being able to buy/sell

This is perhaps true. People will sell their house to (generally) move into a better one i.e. bigger, detached etc. That means their old house becomes a 'better' one for it's new owner. That new owner probably falls into one of these categories :

(1) Someone buying the property as a second or third for whatever purpose e.g. BTL, a house for their kids etc. i.e. someone who doesn't need it to live in. Unless that person is uber-rich, then it's bought 'on credit' or another mortgage as well at the one they need to service their own home. This can continue provided that credit is cheap and they don't loose their job etc.

(2) Someone simply moving along that housing ladder.

(3) First time buyer.

Provided cheap credit remains then category (1) buyers will remain. Remove the cheap credit and perhaps category (1) buyers will reduce in number, leaving category (2) and (3) buyers.

If we imagine that category (1) buyers have been removed from the equation, say interest rates have become high, house prices remain high and wages have not increased making it impossible to service a second or third mortgage, then there has to be link in that 'chain of house sales' where the house is considered a 'started home/first time buyers house'. That means any potential buyer falls into category (2) and (3). That is to say, somewhere in that chain there's a house which is going to have to be sold to a first time buyer (assuming no category 1 buyers are available). And if that first time buyer CANNOT afford to buy it, then the whole chain upwards will not work.

The housing 'ladder' relies on people coming in at the bottom end, and at present this is probably due to category (1) buyers being in the majority.

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