Sunday, January 17, 2010

Slightly nervous voice of a borrower

Interest rates: the lower the better

"There's nothing like buying a house to concentrate the mind on the future path of interest rates ... At one extreme, Goldman Sachs has pencilled in a two percentage point rise this year and the same again next year to leave UK interest rates at 4.5pc by the end of 2011. Ouch ... In the opposite corner sits my fellow Telegraph columnist and economist Roger Bootle, who predicts a Bank Rate of less than 1pc for the next five years. Wouldn't that be nice?"

Posted by quiet guy @ 02:49 AM (3361 views)
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25 thoughts on “Slightly nervous voice of a borrower

  • quite funny how they say they are petrified of making the same mistakes in 1930’s and japan 1990’s

    err,you are making the same mistakes if not worse!….in fact far worse

    unemployment peaked in 1931-1932 at 20% then just under 25%

    The real u-6 unemployment rate by the same criteria is actually according th us labor dept is 17.3%

    They took the pain and US went on to have a proper recovery based on saving,manufacturing and exports of useful goods

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  • “UK interest rates at 4.5pc by the end of 2011. Ouch …”

    4.5pc is not even high! People really do hope we have arrived at a new plateau of high house prices and low interest rates. During the 80’s boom and bust in the housing market interest rates were over 10pc. The lowering of rates and the following high inflation helped lesson the pain because high inflation erodes away the debt. This is probably why Bootle et al are hoping for a static IR over the coming years.

    Hopefully, GS is correct.

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  • @flashman – take note

    Closer to home, Andrew Sentance, a member of the Bank of England’s Monetary Policy Committee, gave sterling a fillip last week when he hinted that the policy of printing money through the quantitative easing programme had run its course and that UK rates may have to rise this year.

    Hmmm. Looks like someone else is agreeing that the MPC is playing currency traders! I know it’s never particularly gratifying to know that you’re being played like a puppet in someone else’s game, but the currency market seems very happy to play along …

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  • I think the case for rates staying lower for longer is stronger, and I’d like to think my analysis would be the same if I were more disinterested than I clearly am.

    What’s this? An honest journalist? One that’s actually disclosing his private interests as a caveat to his editorial?! This is unprecedented, and to be applauded.

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  • markj69 str05 says:

    Applauded but not necessarily respected.

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  • If you were to move savings in Sterling to a country that you intend to move to (Oz / NZ) would you wait or take a hit now?

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  • Paul – my god you’re right!!! The BoE is all knowing and omnipresent and all currency traders are at best impotent in their wake..

    Does that make you feel better?

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  • BTW i notice you didn’t comment on my Lamont posting. Yes the BoE obviously has an effect, but so does the FED, so does the ECB and so does the BoJ, and so do the big currency players (the paper).

    But its the market’s reaction that is the key. I believe Flash was saying that there is a multitude of factors that can influence the market. The central banks are of course one of them BUT at certain times the markets can, will and have taken on the central banks. In those times I’m afraid there is only one winner – and it isn’t the central banks.

    The best example was when Norman tried to buck the market. Was it a bad thing that he failed. No it probably wasnt – if he had carried on MLR would have zoomed up to 20 or 30% and we would have pissd all our currency reserves up the wall to try to defend (the indefensible at that point) exchange rate.

    I dont know why you must insist on badgering people about being right when everyone knows you aren’t. Yes at certain times it pays to follow the stance taken by the central banks (particularly when the market is stretched and they smoke out those weak buyers / sellers) but at others it doesn’t, in fact you should do the opposite.

    If my mechanic tells me that the exhaust needs replacing do i bang on about him being wrong? But you seem to want to tell someone (flash) that he is wrong when his livelihood depends on years of experience. I dont know what you do for a living (feel free to divulge) but i doubt you would be too enamoured by someone telling you you did your job poorly.

    Maybe it would be an idea if you could tell us where we should buy / sell a particular market and where the stop should be. If that works then that might give you some credibility. Just a thought!

    I suppose you could be excused of you are too young to remember black Wednesday, or if you are old enough you need to grow up a bit!

    http://www.housepricecrash.co.uk/newsblog/2010/01/blog-the-alcoholic-lady-of-threadneedle-street-cured-herself-with-a-big-bottle-of-whisky-27253.php – number 35.

    or just watch : http://www.youtube.com/watch?v=AHDsO7gvXHQ – see 1.26 if you cant be ar5ed to watch it all.

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  • I’d just point out with regards to experienced financial and economic experts is that they say a great many things and frequently turn out to be wrong, as so many here have observed in the past. Some may be consistently right, but it is not always clear which.

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  • I dont know why you must insist on badgering people about being right when everyone knows you aren’t.
    But you seem to want to tell someone (flash) that he is wrong when his livelihood depends on years of experience.
    I suppose you could be excused of you are too young to remember black Wednesday, or if you are old enough you need to grow up a bit!

    Oh techieman, I never like seeing people getting upset on others’ behalves. But you’ve gotten upset so I’ll try to diffuse this a little.

    Firstly, I don’t need to badger people – I’ve kind of got better things to do. There is a wide range of people on this forum, working in various professions. I work in IT – thanks for asking, but I’m not especially proud or precious about what I do. In fact in my precise line of work, big egos don’t go down well at all. Some people are very proud of what they do though, maybe by necessity, but most crucially they are not always good at analysing why they do things (as opposed to simply doing it). What has happened today is that a journalist who makes a living out of analysing the many facets of our economy has agreed with my assertion that the Bank of England is playing the currency market participants.

    In that last thread you highlighted, flashman started the thread by talking about how he has to decode the Bank of England’s messages. This is because his (and other currency speculators’) livelihood depends on it.

    I remember Black Wednesday too – a great example of when the government was waiting to be ridden by the market – it took a big player like Soros to bet against the Bank and the house of cards fell. However that was actually quite a long time ago and was pretty isolated by the unique circumstances that Lamont brought about.

    But the Bank of England is a lot savvier nowadays when it comes to playing both the media and the market.

    Flashman pointed out:

    The currency traders ARE the (currency) market so it could not possibly move without them. Btw, I have worked in the currency markets for more years than I care to count.

    But actually, the currency traders are participants in the market. No single player can influence the market completely nowadays. Just like any speculative market, it takes cues from somewhere. And the place where it takes its cues is the daddy in the relationship. This undoubteldy sits uncomfortably with the egos in currency trading. Finding out you’re the rat not the piper can be bruising to the ego.

    But let’s not dwell on it – I was just pointing out that flashman was wrong – you’re the one badgering (on his behalf!) now maybe …

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  • Maybe it would be an idea if you could tell us where we should buy / sell a particular market and where the stop should be.

    Oh yes, I DO have some advice!

    Don’t follow the piper.

    Unfortunately though, it won’t make you any money at all. You should be able to work out why.

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  • Actually its YOU that are following people that shouldnt be followed. You work in IT fair enough – so i wouldnt dream of telling you how to programme or analyse or whatever you do in IT – and yet you want to inform this blog that you KNOW you are right and yet people that actually make a living working in that environment are wrong?? I dont know why you think you are right but really i suppose its not relevant if you or nobody else acts on it.

    I am actually not supporting Flash at all, and not at all upset on his behalf. All i am saying is – plain and simple – you are wrong. Thats not opinion thats fact.

    And if you had ever traded markets at all you will find out pretty quickly that you are wrong. Sometimes the market will follow the central banks, sometimes they will fade them. Sometimes an initial move will be faded out too – after it meets support or resistance.

    I actually agree with you – Central banks are a little more sophisticated these days – their moves will co-incide with a market move because they will come in at the right time, when the market is overbought or oversold, i.e. when they wont be knocking their heads against a brick wall. And infact they participate a lot less than they used to because generally they were absolute crap at it before. In other words yes they have learnt their lesson. In other words the market is king. But they generally dont move the market as much as you would like to think -and yes it is generally the other way round. Its exactly the same with IRs .

    Im not saying that what the BoE says isnt something to be considered, if the market is devoid of other news it may move it the same way or the market may move it in the opposite direction.

    As for your advice its worth about as much as your comments. As some used to say on the floor its worth FA to a JT. Ego? Its really not that important what you think its just that others might actually believe you!

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  • I just wished we had 25 year fixed rates in the UK like the USA does (or did?). At least we could budget properly and not be at the whim of politicians and the business cycle.

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  • You err … work in currency trading too, don’t you techieman?

    Oh dear. I’ve think I’ve upset you both.

    I’m wrong. So’s the article. Let’s leave it at that.

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  • Will the market allow the BOE to carry on printing money, techie?

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  • Flashman = property developer = vi

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  • Low rates, purely for political gain once more, fuel for yet more boom and busts. Be ready to act accordingly.

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  • @16. smugdog.

    Yes, think 2004 all over again; until or unless currency collapse.

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  • “Low rates, purely for political gain once more, fuel for yet more boom and busts. Be ready to act accordingly.”
    It’s had no effect so far.

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  • Low rates and QE are temporarily keeping the ponzi scheme intact.

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  • There will either have to be a return to lax lending or a major economic collapse.

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  • tenyearstogetmymoneyback says:

    tom101 said…If you were to move savings in Sterling to a country that you intend to move to (Oz / NZ) would you wait or take a hit now?

    A colleague actually converted his lifes savings into Australian Dollars about a fortnight before Black Wednesday because he was about to emigrate there and he thought the £ looked a little shakey.
    It goes to show there is no time like the present.

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  • Cheers tenyearstogetmymoneyback, I’m thinking this week as well. Things just seem extraordinarily uncertain again!

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  • There will either have to be a return to lax lending or a major economic collapse.

    It will be both; lax lending will lead to the next collapse.

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  • it_is_going_with_a_bang says:

    All it does is leave the problem to someone else does it not?
    Unaffordability is not really changing, what we are talking about is the ability to pay the interest – not to actually pay it off.
    So what if it is not a problem this year or next – the point is that it will be a problem at some point and the increases however small in prices only make the problem worse.

    In the usual rush for easy money and good times the future is being forgotten and brushed under the carpet.

    This government is clinging onto power, it would be nice to think that a replacement would be bolder about what is actually needed to make this country work.

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