Monday, March 26, 2007

Watch the Stock Markets Drop around the Globe!

Drop in New [US] Home Sales Sparks Selloff in Stocks

Another US housing figure falls very far short of expectations. The stock markets, which have been bouyed up by a lot of stupid money which thinks it is buying in the dips, re-evaluate downwards. I reckon if we can breach the lows touched in previous weeks, we could get a stock market crash.

Posted by royston @ 03:15 PM (587 views)
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16 thoughts on “Watch the Stock Markets Drop around the Globe!

  • dohousescrashinthewoods says:

    Bam! Everything drops. So the UK isn’t affected by the US? Or the housing market either?

    Suggests the US has been putting spin on its bad news. Psychology only hides the elephant, it can’t alter reality. Either that or they don’t know either, but are prepared to be disingenuous by forecasting something they can’t predict.

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  • george monsoon says:

    check out the FTSE… oh my god! its in free fall.. is this it?

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  • George, calm down dear, you don’t want to do yourself a mischief; it’s only 0.8% so far*

    *am sure there are worse days ahead.

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  • Watch out for oil effects.

    Connected Economy folks.

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  • i wonder whether the market has figured out yet that the FED can;t help them.

    Probably not. We will probably see some dumb commentary from somebody shortly.

    The FED may come under ridiculous political pressure to reduce rates, however if it does so the USD will be come under significant pressure from people tired of owning toilet paper.

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  • Guys, the markets have a habit of bungee-jumping at the moment.

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  • dohousescrashinthewoods says:

    Hmm seems to be holding at .6 to .8 down

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  • Don’t forget, we don’t get to see the Chinese and Japanese reaction until tonight. Tomorrow we get Europe’s reaction to Asia’s reaction. Alternatively, more stupid could flood in now and put the fire out. With the Iran situation, oil prices rising, I think we are in for a choppy week. As I said before, if we manage to breach the lows of recent weeks – look out!

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  • The banks control the country and until they see a reduction in their inflated profits, HPI will increase unabated. Probable reduced bonuses this year will mean a 10% cull of the “lowest performing” coke heads in the major banks. Less bonuses means more house sales to release capital, HPI stagnates, the home owners assess start to pucker up and the most important factors, negative sentiment and psychology kick in…..result, worst case, 30-40% correction within 1 year, best case, static HPI for 2-3 years and a whole lot of mortgagees clinging on for dear life praying that the credit boom can re-ignite.

    From a political point of view, the best is yet to come. TB will never allow GB into office. The bum chum brigade of TB, Mandelson and Milliband together with Clarke and Milburn will create havoc and the New Labour Project will implode, similarly to the Tory’s under Major. The markets like nothing better than political instability!!!

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  • Hang on before you all celebrate a stock market crash. I’m not so sure a stock market crash is what we need. The reaction to a major stock market down turn would be for the BOE to keep interest rates on hold, at the very least. Thats not what we need. We need interest rates to rise. Also many property investors are NOT in the stock market, so will not feel the effects of any crash. If anything, stock market turmoil is even more reason to invest money elsewhere, which is exactly why so much money had been poured into bricks and morters during the last market downturn.

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  • What we do however need to celebrate is the rising oil prices as a result of the Iran crises. Nice and inflationary. Lovely Jubbly

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  • tyrellcorporation says:

    Trouble is that this sort of thing has a habit of spooking the MPC into glorious inaction – again. Every idicator is pointing to an April 0.25% rise but with these scares they usually bottle it.

    The drip-drip of bad news from the US could well turn into a prolonged plunge if more sub-prime lenders go to the wall and/or an investigation uncovers something illegal.

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  • The way the MPC have responded over the last few years, Even though IR need to rise it would not surprise me for them to drop IR 0.25% – One member voted that way this month I believe. The stock market seems to be enjoying the ride, and again I reckon over the next six months it will bounce a lot. Maybe they will need Peter Snow, with his swingometer to explain the huge movements….

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  • dohousescrashinthewoods – you’re missing the point on US vs UK. There is no magic thread connecting the NYSE/Nasdaq to the FTSE nor, as others have claimed, is there any correlation between Fed interest rates changes and ours. There are many similarities between the two economies of course – we, like them have an overpriced housing market as the result of cheap, easy credit resulting from the Yen carry trade and are due for a correction. We too have a fiat currency and a government that prints too much money. But to blindly transpose every single little item of US news onto our market is just patently stupid.

    Jim – you are witnessing the rather perverse logic used by some on this news blog that goes something like this;

    “I want to buy a house but won’t because I believe in HPC. There is no HPC because there is too much cheap and easy credit so the BoE needs to trigger a crash by raising interest rates. Even if they do raise interest rates, folk are still not stretched enough so we really need a recession with enough layoffs to trigger an HPC.”

    Any bad news is therefore treated as good news. I still wonder at how some have managed to secure themselves a recession proof form of income in order to back up this thinking.

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  • Monty, despite the fact that I am one of the people you are referring to, I have to admit you’re right – we do cheer recessionary talk becuase it should help House Prices to Crash, but of course it may cause our jobs to go too. However, not everyone losses their job in a recession, so I guess we’re all hoping we’ll be the lucky ones. Would we be any worse off anyway? – if unemployed I could claim Housing Benefit; whilst I wouldn’t have a house of my own, I haven’t got one now anyway, so the situation in that regard is no worse. And if I do keep my job, my chances of getting a house are that much improved by a recession. So, you see, the reasoning is maybe not that daft after all, even if it is a little unchariatable to the people of this country as a whole (because the poorest will probably suffer most, as usual, in a recession). Additionally, further in our defense, I don’t think that our hoping for a recession is going to make it happen, I think it’s going to happen anyway, so why not try to look for silver linings to that cloud, I ask you?

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  • the latest round of excessive HPI started to occur mid 2006 when IR were 4.5%. One question, why haven”t prices been rising at 10-20% per year since 2002 when IR were about 3.5% ? Excluding the high end London market, it is nothing to do with supply and demand, it is simply because in the last 2 years there have been record bonuses for City workers coupled with a changing landscape with respect to credit availability. The bun fight for properties is due to irrational exuberance, a feeling that easy money is here to stay, jobs are secure and the good times and salries/bonuses will never end. Where i live in Sussex, HPI is running at 20% per year and there are no East Europeans around here queuing up to buy houses! Houses are being spun around within 3 months at 10-20% higher prices. People believe it is a financial dead cert. Until, sentiment changes and I still believe this will be driven by the banks i.e. reduced profits and bonuses, nothing is going to stop HPI. Higher IR may hurt the FTB’s but lets face it, 0.25% increases equate to ~25 quid a month on a average mortgage. No-one will lose their home for 25 quid a month. When sentiment changes, the high end of the housing market will wobble because the same people who invested in property with high bonuses will want to liquidate their money ASAP. This sentiment will trickle down the food chain and prices will stabilise, if other market/economic factors also kick in, prices may correct severely but I am afraid that waiting for IR alone to kill the market will be a futile process. ps: I look forward to a crash- I have a substantial (6 figure deposit having sold last year prior to relocating) but still cannot afford anything decent in Horsham, West Sussex (3 bed house is 300-350%). Good luck to all.

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