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The Masked Tulip

It's So Much Worse Than You Think

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Not going to even cut and paste a short excerpt - it is all doom and gloom but orgasm reading for HPCers. In fact, it is probably lock up your womenfolk and buy a big gun reading so gloomy is it for house prices.

http://www.fool.com/investing/value/2008/0...-you-think.aspx

Very bearish and well set out but the financial advice on offer at the end of the article is laughable given the contents of the previous paragraphs.

The suggestion that investors only put their money in 'fair value' stocks must rank alongside the truism of 'not wearing plimsolls in the snow' as a singularly useless tip. If the Stock Markets go into a major slide later this year as I expect then all stocks are likely to take a beating and investors would most certainly be best advised to keep most of their assets in cash. BTW this logic even holds true should the worst predictions of the inflationistas comes to pass as any study of the behaviour of the major market indexes in the very inflationary year 1974 would show

Edited by up2nogood

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Very bearish and well set out but the financial advice on offer at the end of the article is laughable given the contents of the previous paragraphs.

The suggestion that investors only put their money in 'fair value' stocks must rank alongside the truism of 'not wearing plimsolls in the snow' as a singularly useless tip. If the Stock Markets go into a major slide later this year as I expect then all stocks are likely to take a beating and investors would most certainly be best advised to keep most of their assets in cash. BTW this logic even holds true should the worst predictions of the inflationistas comes to pass as any study of the behaviour of the major market indexes in the very inflationary year 1974 would show

I think he means buy undervalued companies when they are cheap. Cheap because general sentiment has hammered the share price. Just because stocks take a beating does not mean stocks will not recover in the future, but the skills needed to pick the winners are probably possesed by only a tiny percentage of investors. I suppose in a finite world we could run out of things to trade, therfore no world markets? In this case buying into a declining market would just lose you all your money, but by that time you would have other concerns. This is not going to happen in our lifetime, so I think there will be companies worth buying if you can work out their future value, although markets of the future (20, 30 years from now) may deal more in sustainable resources?

Edited by dances with sheeple

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What the Fools say is all true. But those guys are quite late to the game as regards seeing how bad a situation the USA is in. :o Propbably the very best of them all is "Mish's Global Economic Trend Analysis" blog here in the USA. I'll not post a link, but it can be googled and gotten to. Mish called the present state of disaster in the USA markets over two years ago and he continues to be spot on for each new shoe that drops over here. He seems to "Know where the bodies are buried" as they like to say on US Stock analysis shows and blogs.

The US Federal reserve and Federal government bodies are simply out to sea as to waht to do. The collapse of the US Dollar is one problem for them, rise in oil prices, grain prices and commodities, cost of the Iraq war, federal debt levels and local government debt levels, consumer debt levels. I simply could write all day. The present situation on this side of the pond is really close to collapse. The next 12 months will tell the tale, because only when all the losses become know can anyone even guess at the scale of collapse.

The UK has become quite tightly coupled to the US. Blair followed much of Bush style economics. I'de say we live in dangerous times. War and economic problems at the same time. Could be a storm brewing for us all. :o

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Bearfood indeed, seasoned with fear and served with sauteed bull testes.

The investment advice is something i have been considering too...there must be some good oppurtunities arising as this crisis works its way through...there will one day be a bottom in builders, financials etc....but when....

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What the Fools say is all true. But those guys are quite late to the game as regards seeing how bad a situation the USA is in. :o Propbably the very best of them all is "Mish's Global Economic Trend Analysis" blog here in the USA. I'll not post a link, but it can be googled and gotten to. Mish called the present state of disaster in the USA markets over two years ago and he continues to be spot on for each new shoe that drops over here. He seems to "Know where the bodies are buried" as they like to say on US Stock analysis shows and blogs.

The US Federal reserve and Federal government bodies are simply out to sea as to waht to do. The collapse of the US Dollar is one problem for them, rise in oil prices, grain prices and commodities, cost of the Iraq war, federal debt levels and local government debt levels, consumer debt levels. I simply could write all day. The present situation on this side of the pond is really close to collapse. The next 12 months will tell the tale, because only when all the losses become know can anyone even guess at the scale of collapse.

The UK has become quite tightly coupled to the US. Blair followed much of Bush style economics. I'de say we live in dangerous times. War and economic problems at the same time. Could be a storm brewing for us all. :o

Very true. So how are you protecting yourself (and priming for the next bull)?

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Bearfood indeed, seasoned with fear and served with sauteed bull testes.

The investment advice is something i have been considering too...there must be some good oppurtunities arising as this crisis works its way through...there will one day be a bottom in builders, financials etc....but when....

I have, in my time, seen too many builder's bottoms to want to see any more.

In fact I didn't want to see them in the first place but, sometimes, you turn a corner on site and find yourself asking 'How's the crack?'

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What the Fools say is all true. But those guys are quite late to the game as regards seeing how bad a situation the USA is in. :o Propbably the very best of them all is "Mish's Global Economic Trend Analysis" blog here in the USA. I'll not post a link, but it can be googled and gotten to. Mish called the present state of disaster in the USA markets over two years ago and he continues to be spot on for each new shoe that drops over here. He seems to "Know where the bodies are buried" as they like to say on US Stock analysis shows and blogs.

The US Federal reserve and Federal government bodies are simply out to sea as to waht to do. The collapse of the US Dollar is one problem for them, rise in oil prices, grain prices and commodities, cost of the Iraq war, federal debt levels and local government debt levels, consumer debt levels. I simply could write all day. The present situation on this side of the pond is really close to collapse. The next 12 months will tell the tale, because only when all the losses become know can anyone even guess at the scale of collapse.

The UK has become quite tightly coupled to the US. Blair followed much of Bush style economics. I'de say we live in dangerous times. War and economic problems at the same time. Could be a storm brewing for us all. :o

I agree, Mish always has his finger on the pulse. He is however firmly in the deflationista camp. As opposed to say Peter Schiff who has also made similar good calls, but diverges on the consequences further down the line. My bills, groceries and fuel are going up, but I am still not sure if recession will mean deflation ultimately. The fence is getting very uncomfortable though.

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bleakhouse,

I do agree with you. I really follow Mish to get his analysis of economic news. I am not firmly in the deflationist camp. I tend to skip over the debates on his blog that deal with inflation vs deflation. He does seem to have a talent for deconstruction of the day's economic press.

Bob M.

My survival plan is lots of cash, treasury inflation protected bonds, a small brand new home with 80% equity and a fixed 4.86% 15 year mortgage. I built it with help from a master carpenter so was able to avoid any middleman or RE outfit getting their cut or inflating the real cost of the house. Right now inflation is my biggest worry. I can incease my workload to balance that for now.

My last visit to the UK was before any of this blew up. So I am glad I found this site which seems full of the latest news and very well reasoned comments. :P

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bleakhouse,

I do agree with you. I really follow Mish to get his analysis of economic news. I am not firmly in the deflationist camp. I tend to skip over the debates on his blog that deal with inflation vs deflation. He does seem to have a talent for deconstruction of the day's economic press.

Bob M.

My survival plan is lots of cash, treasury inflation protected bonds, a small brand new home with 80% equity and a fixed 4.86% 15 year mortgage. I built it with help from a master carpenter so was able to avoid any middleman or RE outfit getting their cut or inflating the real cost of the house. Right now inflation is my biggest worry. I can incease my workload to balance that for now.

My last visit to the UK was before any of this blew up. So I am glad I found this site which seems full of the latest news and very well reasoned comments. :P

Mish is ok, and worth reading, but his deflationary ideas, and the loose explanations that he gives for them make me nervous about some of his other predictions.

why hold "lots of cash" at this point in time? wouldn't it be better to at least get some short term bonds or CD's?

if we do end up deflationary, the bonds would benefit just as much as the cash would, so I dont think it hurts to get those extra bits now while you can.

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Mish is ok, and worth reading, but his deflationary ideas, and the loose explanations that he gives for them make me nervous about some of his other predictions.

why hold "lots of cash" at this point in time? wouldn't it be better to at least get some short term bonds or CD's?

if we do end up deflationary, the bonds would benefit just as much as the cash would, so I dont think it hurts to get those extra bits now while you can.

Yes, you are right, I should not have said Cash. My break down is 1/3 in Bank CDs paying 5.25% with federal insurance of the principal. 1/3 Federal inflation adjusted bonds. 1/3 in low interst cash savings accounts/or low yielding liquid US federal savings bonds.

I admit I have been a big inflation believer for a long time. Mish's deflation ideas have not won me over yet. To inflate America out of it's debts is one road they can use over here. I enjoy Mish's analysis, but I join you in being a bit nervous by his deflationary talk. We have assest deflation in the USA, but massive inflation in food, fuel and medical care [medical is the number one worry of every American :angry: ]

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Yes, you are right, I should not have said Cash. My break down is 1/3 in Bank CDs paying 5.25% with federal insurance of the principal. 1/3 Federal inflation adjusted bonds. 1/3 in low interst cash savings accounts/or low yielding liquid US federal savings bonds.

I admit I have been a big inflation believer for a long time. Mish's deflation ideas have not won me over yet. To inflate America out of it's debts is one road they can use over here. I enjoy Mish's analysis, but I join you in being a bit nervous by his deflationary talk. We have assest deflation in the USA, but massive inflation in food, fuel and medical care [medical is the number one worry of every American :angry: ]

Problem is, there is currently no sign of IRs rising in the US in 2008. Ben's policy appears to be solely one of lowering IRs and ignoring inflation. You are right that inflation exists in commodities but if they simply decide to ignore inflation then you are going to see IRs go down and down and not up.

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Problem is, there is currently no sign of IRs rising in the US in 2008. Ben's policy appears to be solely one of lowering IRs and ignoring inflation. You are right that inflation exists in commodities but if they simply decide to ignore inflation then you are going to see IRs go down and down and not up.

the lower the rates go, the higher inflation will go.

eventually they will have to raise rates, it just won't be for a while.

in fact, the little crash in the markets today will probably give them more deflationary fuel to cut rates even more.

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I can't see IRs going up for 12 months, perhaps longer... and then only slowly... These boys are doing what Japan did even though they mocked the Japanese. Shame there are no UK or US Fook Mis and Fook Yus!

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Guest grumpy-old-man
That table is incredible: :unsure:

hey Durch, that is shocking but not surprising.

that's why this bubble is taking so long to pop properly, because when she blows, it's gonna be huuuuuuuge. :ph34r:

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Just thought I'd bump this mind-boggling piece of information for the morning crowd.

Don't really want to downplay the significance of the table, but crashing the housing market to 'create' a high percentage of people in negative equity makes no substantive difference at all to peoples ability to pay or be 'in trouble' with their mortgage. A coincident large increase in IR, unemployment or inflationary pressures on other outgoings might, but the simple act of being in negative equity - no.

Headlines of 40% of mortgages being under water are therefore alarmist, though if buyers in NE are psychologically affected by their status and start deliberately defaulting and going bankrupt to escape their situation (e.g. like the classic nineties family in a 1-bed NE trap) then the existence of NE could in itself fuel further defaults.

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Don't really want to downplay the significance of the table, but crashing the housing market to 'create' a high percentage of people in negative equity makes no substantive difference at all to peoples ability to pay or be 'in trouble' with their mortgage. A coincident large increase in IR, unemployment or inflationary pressures on other outgoings might, but the simple act of being in negative equity - no.

I disagree - if there is no equity to withdraw from, a lot of people will stop spending. If people stop spending, then shops (and their suppliers etc) make less money. If shops make less money, they may have to lay people off or, worse, go under. Then these people have no jobs, negative equity etc... I think the unwinding of people using their houses for cheap credit will cause the problems you describe above, without the need for any coincidences.

Edited by Traktion

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  • 298 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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