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zamo

How Would You Predict The Next Crash

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No matter what anybody says, there are lots of people on this forum waiting patiently for the market to bottom whether it be for profits or the purchase of a family home

Wth all the knowledge input into this site, its such a useful resource for those in the property game of the future.

Where do you see the market in 5,10 or 20 years time?

Do you believe in harrison's 18 year cycle?

Are you familiar with drBubb's idea's?

Will we be the next japan?

Will the lending ever get so loose?

More importantly, what would you say were the 5 main elements that made the summer of 2007 the peak? Was it one pin or several all acting at once to pop that bubble. Don't say cheap money or stupid lending (we all know that) - be more specific and relate this to how you would see the next boom and bust emerging. Would it be the same situation as in a de ja vous scenario?

What were the red flags to look out for the next time around?

All the major posters would be more than welcome to give their two cents. I really value the contributions of profit prophet, belfast boy and doccy among many others

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I doubt you could predict better than a few years based on any existing data. The system is too dynamic. The trick, as already noted, is to watch for warning signs such as affordability. You then play the risk analysis game.

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i think affordability had gone out the window around 2002! so the 5 years after that were pretty much out the window for using affordability as the warning.

The american market are a good bit ahead of us and the R.O.I maybe 6 months + ahead of us. possibly a sound indicator

I remember being at an auction with my father in belfast in the summer of 2007. We were chatting to a guy from down our way who my dad had known for a long time. He was in the property business around the border regions and he was telling us then that he couldn't shift his stock then and that the next year would be rough for him.

We also chatted an estate agent from our parts who was also up at the auction. He was honest and told us things were slowing down and that we should sell the family business asap!

It seems that those who really know the market well knew before august that things were going tits up

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I first seriously considered buying in late 06. At that stage, with a partner, ASKING price were just about afforable. So I imagine that early summer 06 prices of a reasonable townhouse for a professional/non prof couple were ok. That would have cost us less than 30% joint income. In 2002, I cannot envisage how affordability could have been a genuine issue - the fact that prices continued upwards for 5 years indicates that affordability was indeed, not an issue in 2002.

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I first seriously considered buying in late 06. At that stage, with a partner, ASKING price were just about afforable. So I imagine that early summer 06 prices of a reasonable townhouse for a professional/non prof couple were ok. That would have cost us less than 30% joint income. In 2002, I cannot envisage how affordability could have been a genuine issue - the fact that prices continued upwards for 5 years indicates that affordability was indeed, not an issue in 2002.

It was not an affordability problem perhaps in the economic backdrop of 2002. However, this was the end of a shallow recession which should have been much deeper, however, rates were cut and a recession was to be averted at all costs. This was the beginning of the huge credit expansion we have seen, an outsourcing of labour and production to CHina, created a deflationary affect on consumer prices, bank credit became easy, and we went on a spending spree. More people joined in the party and pushed prices up further...The houses were affordable on these teaser rates, 100% mortgages, however, now that this world is gone, and mortgage resets are occuring on the cheap deals, they are no longer affordable. Infact they are way beyond most peoples means...The market always finds its equilibrium. If house prices were affordable then banks would be lending and would not be losing money which could turn out to be 1.6 Trillion USD.

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It was not an affordability problem perhaps in the economic backdrop of 2002. However, this was the end of a shallow recession which should have been much deeper, however, rates were cut and a recession was to be averted at all costs. This was the beginning of the huge credit expansion we have seen, an outsourcing of labour and production to CHina, created a deflationary affect on consumer prices, bank credit became easy, and we went on a spending spree. More people joined in the party and pushed prices up further...The houses were affordable on these teaser rates, 100% mortgages, however, now that this world is gone, and mortgage resets are occuring on the cheap deals, they are no longer affordable. Infact they are way beyond most peoples means...The market always finds its equilibrium. If house prices were affordable then banks would be lending and would not be losing money which could turn out to be 1.6 Trillion USD.

Quite.

May i also add that the market may only find equilibrium on the way up

And of the 1.6 trillion, 400 billion has been written off. That means we are a 1/4 way through

What do you think?

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It was not an affordability problem perhaps in the economic backdrop of 2002. However, this was the end of a shallow recession which should have been much deeper, however, rates were cut and a recession was to be averted at all costs. This was the beginning of the huge credit expansion we have seen, an outsourcing of labour and production to CHina, created a deflationary affect on consumer prices, bank credit became easy, and we went on a spending spree. More people joined in the party and pushed prices up further...The houses were affordable on these teaser rates, 100% mortgages, however, now that this world is gone, and mortgage resets are occuring on the cheap deals, they are no longer affordable. Infact they are way beyond most peoples means...The market always finds its equilibrium. If house prices were affordable then banks would be lending and would not be losing money which could turn out to be 1.6 Trillion USD.

I agree - of course affordability and availability of credit are strongly linked.

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Quite.

May i also add that the market may only find equilibrium on the way up

And of the 1.6 trillion, 400 billion has been written off. That means we are a 1/4 way through

What do you think?

I certainly agree, a quarter of the way through is a good estimate. Over the last 3 days while keeping an eye on Bloomberg and listening to the various fund managers that have been on I have noticed that most now are calling a bottom in the financials. Not all, but more often than not they are now reasoning that financials offer good value...I think in the longrun being a contrarian pays dividends. It is worth remembering that the markets, somewhat like income distribution in society follows a kind of Paretos law. Pareto had an 80-20 rule, that 80% of a countries wealth was distributed among 20% of the population. However,I guess it is even more extreme than that. I think it is something like 90% of the wealth of is controlled by 5-10% of the population. Income inequality has become more acute in recent years with the heady heights reached in asset inflation. Inflation by its own mechanisms is good for the rich, as they are the first people to come into contact with the "new money" and bad for lower income groups as by the time they come into contact with the money it has already lost its value...Deflation is more beneficial for the lower income groups and is not so beneficial for the rich, as they have most of their income in assets. There is a point to this rambling I think :lol:

My point is that the markets follow a similar type of "truth" to Paretos law, in that the sum total of the deep pool of money available in the markets eventually gravitates to the few...In trading and investing it is suppose to be around 1 in 10 is successful in the longrun. They are quite daunting statistics. It is well summed up by a top money manager who has compounded an average of 20% a year for 25 years, beating the market by a longway...One of my favourite quotes is...

"If a betting game among a certain number of participants is played long enough, eventually one player will have all the money. If there is any skill involved, it will accelerate the process of concentrating all the stakes in a few hands. Something like this happens in the market. There is a persistent overall tendency for equity to flow from the many to the few. In the long run, the majority loses. The implication for the trader is that to win you have to act like the minority. If you bring normal human habits and tendencies to trading, you'll gravitate toward the majority and inevitably lose." - William Eckhardt

So my main point is that, being in a minority relatively speaking and believing that we won't see a bottom in financials until 2012 is a good estimate. Any rally should be used as an opportunity to short...

No one quite believes that it really could go on that long. Although there certainly are very savvy people out there who believe this will be the case. But they are silent voices in the noise, and they are in the minority. I know in Northern Ireland people were calling a top to the housing market for about 3 years before the bubble actually burst. The age of this website is a clue.

Asia was in bubble territory by 1994, yet the bubble didnt burst until 1997. It is very difficult to predict, infact its pointless. Best to let price do the talking...As another legenday trader/investor of all time, Richard Dennis who turned 400 USD in 1970 into 200 million USD by the 1980's said the three best indicators to determine market direction are 1 Price

2 Price

3.Price

So I think it will be the case that the worse wont be over until 2012/13...It is interesting to look back at newspaper reports from the last year...Initially the losses were estimated to be 200 billion USD..then...

400Billion USD...then...

1.2 Trillion USD....and now last weel a report estimated the losses would come to 1.6 Trillion.

I think the markets are so vast, and there are so many different areas that are interconected that it is very hard to keep up with all areas, yet to make informed decisions you have to try to keep up. I think it is better to stick to one area and become well acquainted with that area and then find out who the best thinkers are in the other areas and "work with them",ie, use their work to come to our own conclusions and then try and combine and see where it fits in with our own thinking...Derivatives is an area that I dont know very much about...but then again, neither do the banks by the looks of things...lol...however, one person who is suppose to be the authoritive figure on is Satyajit Das...I think it is telling what he said in an interview this week...

Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.

One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years, he seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.

I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?"

Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.

It was actually a very good article and the rest can be found here...Das article

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Asia was in bubble territory by 1994, yet the bubble didnt burst until 1997. It is very difficult to predict, infact its pointless. Best to let price do the talking...

Agree. It would be easy enough to know when we are in a bubble in the future, but it's never going to be easy to predict when it will burst because it might be more or less severe than this time. Someone may easily have called the top in 2005 but missed two more years of madness. There are so many factors playing into it such as government action, financial markets, market psychology, millions of participants, that it creates a chaotic system where the butterfly's wings flapping are all that is needed to create a huge event.

For me what I take to be a useful observation is that you kind of feel something in the air, almost unconsciously, and if you are on the alert to your feelings and can recognise them, it might not be a bad guide, or at least help alongside any rational calculation you might make if you really want to take a stab at timing a top. George Soros's son says that all the stuff about his analytical brain misses the point because he only knows he needs to sell when his back starts playing up!

Anyway my point about the 'feel' is that it began to feel for me like the 1999/2000 dot com boom, which I also saw quite a lot of. Many of the things I noticed in common :

1. People making a lot of money but not contributing anything that I could see whatsoever to the economy.

2. People in jobs not concentrating on them and making more money 'on the side' at speculation.

3. People who had left their jobs to speculate being looked upon by 'ordinary' workers with some sort of envy/amazement.

4. Valuations that could not be justified using normal metrics but nonetheless were accepted by everyone.

5. People everywhere saying that prices would NEVER fall. You can't lose with .......

6. The press full of articles about ......

7. Friends and family of successful speculators jumping on bandwagon with 'me too' investments.

8. Rapid acceleration towards the end.

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  • 399 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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