Friday, Jan 23, 2015

The great rotation becomes exponential

Uk.investing: US Dollar Index spikes to 95. 120 next? Dow 25,000 here we come

The Swiss set it off. Now EU QE has set the tone for the next move. It is however clear that €1tn will not solve Europe's dissipative forces, demonstrating that further easing is on the way, and Euro weakness has a way to go. Some say it needs €3tn, but is that figure not exponential without Eurozone wide debt pooling that Germany will never agree to? And so this spike in the US Dollar index, soaring Sterling, Krona, Swissie & stocks have a way to go, with Eurozone bond holders continuing to position themselves for Eurozone collapse by investing in the bonds of stronger EU economies. London property, from Euroland, looks a great investment for wealthy Europeans who require an EU base & relatively low taxes, with values rising a few percent a day now for them as the Euro plummets.

Posted by libertas @ 01:23 PM (17537 views)
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27 Comments

1. libertas said...

Further investigations show, looking at global FOREX reserves, Euro was little much above Germany's overall reserve levels. This spiked in a rotation from USA to Europe. I think that this is all unwinding now, as relative US stability becomes clearer.

I am expecting the Euro's percentage of global reserves to fall back to Germany's level before the end of this. From 15% to 20% of total global reserves once the world realises that the EU is just Germany, plus, US percentage of global reserves will soar back to above 70% of global FOREX reserves as the world realises that USA is USA. Japanese Yen could also begin to recover.

I expect Sterling to rise above 5% of global FOREX reserves, with that lead lost during the 2008 crash, once the world becomes convinced that London is fixed.

Euro will fall way beneath a dollar, pound will rise above 1 Euro 50 cents.

http://en.wikipedia.org/wiki/Reserve_currency

Friday, January 23, 2015 01:36PM Report Comment
 

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5. reticent said...

Thirded!

That couldn't possibly be true Mr. Hards, because the headline writer for the Express has 10x more to say about house prices going to the moon than he/she has about bond market fluctuations and the reverse is true of Libby.

Friday, January 23, 2015 06:50PM Report Comment
 

6. libertas said...

I will pop back here in a while, you renter losers. To show you how wrong you are, when your beloved Carney fails to raise rates and is forced to cut them, with your cash frittered away to subsidise BTL landlords and house prices higher then than they are now.

Friday, January 23, 2015 07:26PM Report Comment
 

7. libertas said...

What you do not understand is that by not buying a house for yourself, you are buying a house for somebody else. Probably a landlord who's guts you hate, whilst you fail to buy one for your you and your lover and your children now or yet to be born.

Does that make you a complete looser? Maybe.

Friday, January 23, 2015 07:28PM Report Comment
 

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9. libertas said...

I really love being wrong when I'm right, and this straw poll almost confirms what I've stated, because if everybody is betting on rates going up, house prices flat-lining, I can be sure that this correction has reached a bottom.

Friday, January 23, 2015 09:01PM Report Comment
 

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11. quiet guy said...

@Libertas

The essence of this site is that lower house prices would be a good thing. I don't mind anybody arguing a case that prices are actually rising but the tone of the discussion you have created is pretty toxic. And let's be clear about this: your threads in which you talk to yourself, post whacko videos and gloat about how well you have played the market are pretty unappetising. How many of your threads have been pulled in recent times? I've lost count.

The reality is that there will be many people with precarious employment and modest wages for whom buying isn't realistic - we do not and cannot all have cushy jobs in the public sector. Do you give a f*** about those less fortunate than yourself?

Friday, January 23, 2015 11:44PM Report Comment
 

12. Mark said...

10 - whilst I am in total agreement with most of your post quiet guy, I am getting increasingly frustrated at public sector worker bashers on here. I can assure you that most public sector workers do not get a free lunch ticket. There are many, many jobs in the public sector which have absolutely rubbish conditions in comparison with similar professions in the private sector. The press have demonised public sector workers but would you deny an NHS nurse a reasonable wage, a fair pension and an unsociable hourly rate for what is an extremely rubbish job? After all, he or she will probably be wiping your backside one day.

Not all public sector workers are cushy, trust me.....it really annoys me to hear such sweeping statements.

Saturday, January 24, 2015 12:21AM Report Comment
 

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14. mister ed said...

@11
Quote: "If prices rise faster and that precipitates more jobs and higher wages through more economic activity, then higher prices can be more affordable prices."

And you say it is other people who do not "understand the complex dynamics of markets".

Libertas, higher house prices do not add a single penny of value to an economy. They simply result in a financial bubble.

And it isn't only "communists" (though where the idea that anyone on HPC is a communist came from I have no idea) who understand that high house prices are detrimental to an economy. Free market supporters (me being one of them) understand it as well.

Anyway, given that you work for the State, it's more likely that the "communist" label applies to you much more than anyone else on this site. Ditch your parasitic taxpayer-funded job and get out into the economy and start creating some real wealth.

Saturday, January 24, 2015 10:58AM Report Comment
 

15. debtserf said...

"I am King Canute".

Agreed - just remove the a and the e, mix 'em up a bit, and that would be a fair approximation, yes.

That was about the only part of your thesis that made any sense.

Everyone should go out and buy houses. Immediately. Thereby driving prices up to ever more affordable levels?

You dirty little troll.

Saturday, January 24, 2015 11:31AM Report Comment
 

16. libertas said...

debtsurf. Again, you show your ignorance. Are you renting? If so, you are buying a house for a prat that you hate, your landlord. Unless you live under a log, or in a tree, you are already buying a home. You simply have to recongise that reality and decide, shall I buy a house for my idiot landlord, or buy a place, regardless of how small it is and what side of town it is, for me and my lover and my children.

Will you beef up and be a man?

Saturday, January 24, 2015 11:38AM Report Comment
 

17. mister ed said...

@14

"regardless of how small it is and what side of town it is, for me and my lover and my children"

And regardless how bad the local sink comprehensive school is. Libertas, I'm guessing you don't have children yet. I can't wait until you have children and real "reality strikes home. Or will your taxpayer-funded job supply free private education for your kids as well as decent pay rises each year.

By the way, you haven't shown your reasoning as to how higher house prices create wealth. Or maybe you know some secret that Adam Smith failed to discover.

Ho ho ho ho ho ho

Saturday, January 24, 2015 12:05PM Report Comment
 

18. reticent said...

"people here misunderstand house prices because they do not recognise that since leverage is involved (one borrows easily 3.5x wages) that if wages are rising 2%, that a 7% house price rise is sustainable, since funding is always available to turn that 2% rise 3.5x higher towards 7%."

Can't be bothered to explain YET AGAIN why this marks you out as somebody who not only doesn't understand finance, but can't actually do basic arithmetic.

"I will split now"

...so you keep promising.

"you COMMUNISTS who do not want that free market activity to occur ARE the reason there is a house shortage."

And there I thought it was the planning laws, perverse incentives for building firms and the uncertain economic climate!

"If prices rise faster and that precipitates more jobs and higher wages through more economic activity, then higher prices can be more affordable prices."

So, "leverage", as you call it, means that wages going up 2% leads to house prices going up 7%, but house prices going up 7% leads to wages going up by more than that, so that affordability is improved overall, presumably because over 100% of GDP is dependent upon house prices?

But then, doesn't your grasp of leverage dictate that a 7+% increase in wages translates into a 25+% increase in house prices decreasing affordability? Or does the process just keep spiralling on so that wage growth and HPI just keep increasing 3.5x every year?

I despair.

And no, not being a Libertarian does not make you a communist. It just means that you don't spend your life thinking up completely nonsensical reasons why you shouldn't have to pay your taxes.

Wanting a planned economy where everyone owns everything in equal measure and works for the government makes you a communist. As a planner who works for the government and wants everyone to everyone to own their own home (but not anyone else's presumably, given your tirade against landlords), you're probably the only person on here who can lay claim to communist leanings.

Saturday, January 24, 2015 12:56PM Report Comment
 

19. Britishblue said...

Libertas I haven't read through this thread in detail, as you are posting a very similar argument and rationale on many of your posts. So this is a general comment to you. I speak from a position where I am both an owner of a relatively high value property with a small mortgage (which has just got bigger as it is in Swiss francs) and also a renter. In a number of your posts over the various weeks you base many of your arguments on continuing rising London house prices based on (fixed) low interest rates. You also argue you are paying far less in mortgage than renting. This position makes perfect sense to you and as a private decision, I have no argument against your personal choice. However, the UK is quite unusual in the fact that many people in recent years have based home buying based on interest rate repayments. But the larger elephant in the room is paying back the overall debt, which you largely ignore. Many people have borrowed sums which would have seemed frightening 15 years ago. . You also seem to indicate that the trend of upward house prices in London will continue indefinitely as London is a safe haven. I have recently seen properties sell in London that no self respecting student would have rented 20 years ago, that are now being purchased by young doctors and solicitors. If the trend were to continue in this way, it would mean in 20 years time a high flying mid 30 something lawyer would only be able to afford to buy a single room in a shared property to house his or her family. You obviously read a number of different blogs and posts from people like Martin Armstrong, Zero hedge etc. But the overall message coming out of these is that we are in one historic bubble that will eventually collapse with horrible consequences. But along the way people will gravitate to the least dirty shirt, which at the moment is the US dollar, London property, etc. The chances of currency wars, trade wars, physical wars and bubbles exploding have all increased substantially in the last few months. Therefore, buying a property in London at the moment might seem quite safe if you measure it purely on one metric, namely interest rates. But if you measure it on a broader scorecard and factor in the increased risk in the world, there is no guarantee that prices wont rapidly reverse the other way. I have changed my views over the years. I once thought we would see the cyclical house price crashes that were always there in history. I no longer believe it will happen in this way, I suspect something far larger is brewing and I wouldn't purchase a London property at the moment even if I had the rates fixed for 25 year mortgage term. I am no more a 'renter' loser than you are a 'purchaser gambler.' All the best with your purchase, but it would be nice if you treated this blog as a place for meaningful discussion and didn't clog up the boards quite as much.

Saturday, January 24, 2015 02:01PM Report Comment
 

20. britishblue said...

Libertas I haven't read through this thread in detail, as you are posting a very similar argument and rationale on many of your posts. So this is a general comment to you. I speak from a position where I am both an owner of a relatively high value property with a small mortgage (which has just got bigger as it is in Swiss francs) and also a renter. In a number of your posts over the various weeks you base many of your arguments on continuing rising London house prices based on (fixed) low interest rates. You also argue you are paying far less in mortgage than renting. This position makes perfect sense to you and as a private decision, I have no argument against your personal choice. However, the UK is quite unusual in the fact that many people in recent years have based home buying based on interest rate repayments. But the larger elephant in the room is paying back the overall debt, which you largely ignore. Many people have borrowed sums which would have seemed frightening 15 years ago. . You also seem to indicate that the trend of upward house prices in London will continue indefinitely as London is a safe haven. I have recently seen properties sell in London that no self respecting student would have rented 20 years ago, that are now being purchased by young doctors and solicitors. If the trend were to continue in this way, it would mean in 20 years time a high flying mid 30 something lawyer would only be able to afford to buy a single room in a shared property to house his or her family. You obviously read a number of different blogs and posts from people like Martin Armstrong, Zero hedge etc. But the overall message coming out of these is that we are in one historic bubble that will eventually collapse with horrible consequences. But along the way people will gravitate to the least dirty shirt, which at the moment is the US dollar, London property, etc. The chances of currency wars, trade wars, physical wars and bubbles exploding have all increased substantially in the last few months. Therefore, buying a property in London at the moment might seem quite safe if you measure it purely on one metric, namely interest rates. But if you measure it on a broader scorecard and factor in the increased risk in the world, there is no guarantee that prices wont rapidly reverse the other way. I have changed my views over the years. I once thought we would see the cyclical house price crashes that were always there in history. I no longer believe it will happen in this way, I suspect something far larger is brewing and I wouldn't purchase a London property at the moment even if I had the rates fixed for 25 year mortgage term. I am no more a 'renter' loser than you are a 'purchaser gambler.' All the best with your purchase, but it would be nice if you treated this blog as a place for meaningful discussion and didn't clog up the boards quite as much.

Saturday, January 24, 2015 02:02PM Report Comment
 

21. Janch said...

It's all about risk and who has the risk. If you're an owner occupier with a mortgage you must pay the mortgage come hell or high water. You might lose your job; house prices go down so you're in -ve equity; you have a mortgage in a different currency eg swissie as above etc etc. Otherwise you're out on the streets with your family. A house is not a liquid asset and may take years to sell if you think this would be a good way out in a time of trouble. But on the other hand if you're a renter the BTL landlord has all the risk. You can get out with a month's notice and move to somewhere cheaper without the millstone mortgage around your neck. When times are uncertain as they are at the moment and we may be in a huge London housing bubble then it really isn't a good time to be taking on a lot of risk with a whopping mortgage.

Saturday, January 24, 2015 02:54PM Report Comment
 

22. quiet guy said...

@Libertas

"Your egos may be so inflated that you believe you can choose to not engage in the housing market by renting"

No. I have commented in the past that the property market is different from, say, equities or precious metals in that you cannot decline to participate.

"If only you could go out and buy properties, driving prices higher, then developers would come forth and build the houses we need, resulting in more affordable rather than the lower prices you desire"

No. Just in case you haven't noticed, we have experienced a generational phenomenon of rising property prices at the same time as slumping construction i.e. the exact opposite of what you postulate. The reason, stated many times here before, is that the property market does not operate in the same way as that for typical manufactured goods.

Saturday, January 24, 2015 03:20PM Report Comment
 

23. libertas said...

House building has collapsed because developers are forced to pay for social housing and community infrastructure levy's that were previously funded through general taxation, which has not reduced but is no longer paying for infrastructure.

However, as rates turn negative, we get defacto default and tax cuts are on the way. Countries that use negative rates to raise taxes will be sucked into deflation and depression, whilst those who use this opportunity to reduce taxes and fund infrastructure projects that actually provide economy boosting capacity, like Crossrail, HS2, new runway (Why not Gatwick and Heathrow?) etc. will see major booms, because the real issue is that the burden of taxation has reached epidemic proportions. Debt levels right now are not the issue. Yet many folk here ask for a land value tax, etc. yet the principal problem is too much taxation like, why pay 20% VAT on household extensions? Why charge developers well over £20k local taxes to build a house, why tax capital gains on properties at 40%? How can we justify taxing already taxed income via death duties? Plus, how do we expect artisans and builders to build when we charge high labour taxes. It is crazy!

Failing to participate in the housing market, buying your own home, does nothing to change the above factors, it merely helps fund BTL investors, reducing voter participation and representation in the housing market.

Saturday, January 24, 2015 06:01PM Report Comment
 

24. iguana said...

Libby dear boy, your Saxon/Norse spelling is abysmal, it is not Canute it is 'C' followed by 'nut'. nuff said.

Saturday, January 24, 2015 06:17PM Report Comment
 

25. mister ed said...

You’re right, Libby.

High house prices create economic wealth because it means more people are rich, and high house prices mean house developers will see the profit potential and will build more houses therefore resulting in lower house prices, which means more people will be able to buy a house which will rise in value and then more people will be rich and developers will build even more houses resulting in lower house prices.

You’ve sold me. Now you just need to convince everybody else.

Saturday, January 24, 2015 06:27PM Report Comment
 

26. icarus said...

Well said bb @ 02.02PM

Saturday, January 24, 2015 07:30PM Report Comment
 

27. Schoolboy said...

"people here misunderstand house prices because they do not recognise that since leverage is involved (one borrows easily 3.5x wages) that if wages are rising 2%, that a 7% house price rise is sustainable, since funding is always available to turn that 2% rise 3.5x higher towards 7%."

How do you get 7%?

Perc increase = New_mortgage / old_mortgage = (3.5 * ( salary * 2%)) / (3.5 * salary) = 2%

Obviously, as you say I don't understand house prices so could you please enlighten me libby?

Sunday, January 25, 2015 07:16AM Report Comment
 

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