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DimPrawn
9th July 2010, 18:07
Two bits of news out yesterday. First, The Bank of England held rates at 0.5%. Second, Halifax says house prices dropped 0.6%.

Oh, we’re a fickle lot… there was a time, not so long ago, that interest rates at 0.5% would have had house prices thundering ahead at 50% a year. After all, most houses are bought with debt and cheap debt makes for expensive houses.

Just look at what happened in Ireland. They partied like crazy when they joined the euro back in 1999. ECB rates fell to 3% and caused an explosion in property prices. Prices in Dublin were literally doublin’ and became as ludicrously priced as prime London real estate.

Just imagine if rates had been at 0.5%! If this was 3 years ago, banks would have lent until every homeowner became a millionaire.

But today, despite record low rates, house prices are sinking across the world… we’re in a typical credit-cycle bust.

The banking cycle turned South two years ago and debt built up during the great expansion has to get paid back or go bad. That’s why we’re still in the middle of this recession. Here’s 6 confirmation signs…

6 reasons for double-dip trouble.

1. Because the bond market says so.

The bond markets are an early warning signal. When financial markets are worried, money heads into government bonds… the so-called flight to safety. And when things are really scary, money heads straight for US government bonds.

The US dollar is the world’s reserve currency after all. And because of its safe haven status, yields on their treasuries have been driven down to a paltry 0.6%.

Investors want to be sure of the return of their money. The return on their money is neither here nor there.

2. Because the stock markets say so

Stock markets are a lead indicator. That is they’ll tell us which way the economy is likely to be heading. That’s because the financial markets react quickly (and sometimes violently) to news and views… the real economy takes a little while to catch up.

Even with this weeks rally, the FTSE is still down some 12% since mid April. China’s Shanghai index is 55pc below its peak.

3. Because the Baltic Dry Index says so

The Baltic Dry Index measures international freight rates and has fallen by 40% over the past month. Again, this is a lead indicator. It tells us that international trade is stagnating.

Think about it like this: on New Years Eve everyone wants a cab… so you’ll have to pay double. In terms of international trade, it’s like we’re at New Years Eve and nobody wants a cab. China’s factories are slowing down, they don’t need those cargo ships anymore… something’s not right!

4. Because the CDS markets say so

Credit default swaps (CDSs) are a kind of insurance policy on company, or government debt. If you’re holding Greek bonds and you’re worried they won’t pay out, then you can buy a CDS (insurance policy). Obviously, when markets are worried about repayment, it’ll cost more for this insurance.

Right now premiums are sky high. Here’s why…

The Bank of New York *Mellon reports that the smart money is dumping Greek and Italian debt. Italy’s public debt is the third largest in the world after the US and Japan.

Now, if Italy’s debt becomes a Grecian-like no-go area, we’ll be straight back into another banking crisis.

5. Because the Central banks are withdrawing liquidity

World-wide, the central banks came together in early 2009 and leant the banking industry cash as the financial system stared into the abyss.

But these special funding deals had a time limit. And time’s up.

The FT reports that Spanish banks have been begging the ECB to extend their scheme. Fears are growing that interbank markets could shut down again.

6. Because the Governments are finally accepting the inevitable

Like the rest of humanity, politicians are subject to herd behaviour too. Austerity for one beckons austerity for another… just look at Germany. Having got a pang of guilt over Greece’s austerity woes, the Germans took the idea to heart too.

They announced their own austerity measures. So now, everyone’s at it.

Chancellor Osborne isn’t alone in his fight to balance the government’s books. How quickly this game changes! One minute Gordon Brown summons world leaders and organises a spending party… the next, they’re all cutting budgets and upping taxes.

Why? Because nobody wants to be the next Greece… shut out from markets and bailed out by its peers.

Safeguard your assets

Evidence for a double-dip lies strewn all around us. Yet most economists refuse to see it. I guess nobody wants to be accused of ‘talking us into a recession’. Well, I don’t mind…

The fact is we never really finished our recession. Credit cycles simply don’t end in the benign way (and yes, I do mean benign) of the last eighteen months.

No doubt the Government will take the blame for leading us back into recession. But the fact is that it was inevitable. When banks go crazy and lend too much money, you’re at the top of the credit cycle.

Brown seemed to think he could stop boom and bust (credit cycles)… but Flash Gordon was wrong. Neither he, nor his buddies could hold back the financial tide.

I’m expecting the stock market to find it difficult to move forwards in this environment. I’m advocating a generous proportion of assets in cash… as there’ll be opportunities for bargain hunters coming up. We need to keep some powder dry.

I know that interest rates are negligible… especially on stockbroker’s accounts.

But I’m not worried about losing out on some interest. I reckon a downward lurch back into recession will be a deflationary affair. This means your cash will be more highly prized than ever. Keep hold of it!


The crash cometh. Cash is king.

suityou01
9th July 2010, 18:23
Typical drivel from the 15Watt Crustacion

Couple of points. The US dollar is being ditched by other Countries and is considered on the brink of collapse. China has removed the dollar peg, and all the market indicators show America sliding back into recession quicker than a fat lad on a steep water slide.

Cash is not king. You yourself said treasury bonds were safer than cash. At the minute, gold is king, although it's tricky to buy a loaf of bread with it.

HTH BIDI :tongue

MarillionFan
9th July 2010, 18:51
blah blah some bollocks blah blah

Stick to cleaning pools Dim.:eyes

NickFitz
9th July 2010, 19:02
<cut and paste>

You should at least link to the original source.

MarillionFan
9th July 2010, 19:05
You should at least link to the original source.

:eek:

The very accusation it's not his own work. :rolleyes:

Drewster
9th July 2010, 19:09
You should at least link to the original source.


:eek:

The very accusation it's not his own work. :rolleyes:

Shocking slander - he should sue!!!:eek :eek :eek

OwlHoot
9th July 2010, 19:21
You should at least link to the original source.

I did a web search and couldn't find anything.

Not accusing anyone of anything, but if DP did copy it without attribution that's a new low for CUK :eyes

If he didn't, then the idea he did is quite flattering and he should be pleased we're even discussing it.

DimPrawn
9th July 2010, 19:41
You should at least link to the original source.

How do you link to an email I received from a trusted source?

It ain't online.

:rolleyes:

suityou01
9th July 2010, 19:51
How do you link to an email I received from a trusted source?

It ain't online.

:rolleyes:

Your trusted source has a few crossed wires I suspect ;)

MarillionFan
9th July 2010, 20:10
How do you link to an email I received from a trusted source?

It ain't online.

:rolleyes:

Its only a mail shot. It will still be on David Ickes site. Just link it.:eyes

MarillionFan
9th July 2010, 20:29
Exclusive!

Photograph of DimPrawn's trusted source......

http://farm1.static.flickr.com/61/168646014_214cdc5ac4.jpg

Bloody Hell!! It's EternalOptimist!!!!!!!

DimPrawn
9th July 2010, 20:37
Ignore my sage advice at your peril.

The crash cometh.

scooterscot
9th July 2010, 20:43
I don't see a crash coming myself just years of stagnate growth.

I reckon Israeli and the US will be pounding Iran within the next 12 months.

suityou01
9th July 2010, 20:44
Ignore my sage advice at your peril.

The crash cometh.

:spel Your trusted sources

date and time? :rolleyes:

doodab
9th July 2010, 20:44
How bad will it be? Will my tinned food be safe in the shed or should I consider a proper bunker?

scooterscot
9th July 2010, 20:50
And another thing...


All those 1st time buyers being told to hold off the crash is coming...

Does that mean the houses they want to buy are going to start growing out of the ground?

Our little island is bursting to capacity, the supply of cash and property is simply not there.

All I care about is putting less of my cash into those financial institutions, I don't trust them. I'd rather put my cash into bricks and mortar and keep my castle growing.

administrator
9th July 2010, 20:54
I salute you Prawn. I feel another leg down coming.

Housing market seems the biggest bubble of all to me. For the UK to function correctly either house prices have to come down or wages have to rise to meet housing costs. I think the path of falls is clearly in place no, wage inflation has looked very unlikely for a while. For prices to have dropped (albeit small amounts) is suggesting more falls to come as it is not seasonal for prices to dip now. Transaction volumes still very small. More housing stock coming on to market in my area, yet few are actually selling.

All we need do now is follow the lead of South Korea and whack those interest rates up. This should cause a few who bought at peak to go under.

Harsh times ahead IMO.

AtW
9th July 2010, 21:01
I salute you Prawn. I feel another leg down coming.

All prawns and shrimps are crustaceans, which are mostly aquatic animals with a hard skin (an exoskeleton) over a segmented body. Crustaceans belong to the subphylum Crustacea. They are like insects, which also have an exoskeleton, but differ in usually having many pairs of legs, instead of three pairs. The Decapoda, the group of Crustacea to which all prawns and shrimps (and lobsters and crabs) belong, have five pairs of legs on the main part of the body, plus five pairs of swimmerets on the abdomen or tail. It is the muscular tail that is edible. The classification of the Decapoda is very complex, even to a carcinologist (a scientist who studies Crustacea).

Source: How many legs does a prawn have? - Yahoo! Answers (http://answers.yahoo.com/question/index?qid=20080616011916AAMHyix)


Just how many pairs of legs our prawn has got? There is only one way to be sure :eyes

AtW
9th July 2010, 21:02
Does that mean the houses they want to buy are going to start growing out of the ground?

No - it would be those second houses gotten on overextended debt that would become first houses for prudent buyers who did not engage in spekulative activities :mad

Going to move to another rented house next month for next 12-18 months - it's been like over 10 years since I started renting :eyes

MarillionFan
9th July 2010, 21:20
Ignore my sage advice at your peril.

The crash cometh.

Dave? Dave? Is that you?

How was China? How's your mum? How are those dancing girls?

Moscow Mule
9th July 2010, 21:20
More housing stock coming on to market in my area, yet few are actually selling.



Properly priced houses round our way are still being snapped up quickly, but being on the edge of all that BOE cash does have an effect...

MarillionFan
9th July 2010, 21:24
I salute you Prawn. I feel another leg down coming.

Housing market seems the biggest bubble of all to me. For the UK to function correctly either house prices have to come down or wages have to rise to meet housing costs. I think the path of falls is clearly in place no, wage inflation has looked very unlikely for a while. For prices to have dropped (albeit small amounts) is suggesting more falls to come as it is not seasonal for prices to dip now. Transaction volumes still very small. More housing stock coming on to market in my area, yet few are actually selling.

All we need do now is follow the lead of South Korea and whack those interest rates up. This should cause a few who bought at peak to go under.

Harsh times ahead IMO.

Do you still live in Rothbury Admin?

administrator
9th July 2010, 21:28
Do you still live in Rothbury Admin?

Nope. What has the location of a mentallist currently in the news got to do with houses coming on the market?

MarillionFan
9th July 2010, 21:30
Nope. What has the location of a mentallist currently in the news got to do with houses coming on the market?

Read it again....:eyes

You can't get the Administrators these days.:tongue

AtW
9th July 2010, 21:32
You can't get the Administrators these days.:tongue

But the Administrators can get you any time of the day or night, don't you ever forget it ...

administrator
9th July 2010, 21:44
Read it again....:eyes

You can't get the Administrators these days.:tongue

Missed the still. Sorry. I sort of get it now. I need booze to elevate me, been a hard week.


But the Administrators can get you any time of the day or night, don't you ever forget it ...

Nice to see you AtW - hope all is well :D

AtW
9th July 2010, 21:48
Nice to see you AtW - hope all is well :D

All is good in the UK :wink

TimberWolf
9th July 2010, 23:11
There will be more quantitative easing. The government must is in a flap about the pound rising and the printing presses will soon be up and running again.

SuperZ
10th July 2010, 09:24
Sorry, the only indicator I would trust is the oracle Paul........the octopus. If any of you believe these hocus-pocus indicators the Prawn talks about you're fools.

One thing I personally definately agree with is the housing market being the biggest bubble :).TO me the recovery isn't justified and has been fuelled by continuation of cheap money. Current prices are based on low traded volumes(or have the volumes been improving I don;t know?), and first time buyer properties simply aren't selling

I wait an indication from Paul where things will be going.

I think the stockmarket may just bounce around for the rest of the year (around current levels), or could stage a rise to new highs if a close is registered above 5350. However, shoudl the market fall back to it's recent low we could be heading down further (my guess 4100 or so)

scooterscot
10th July 2010, 09:57
One thing I personally definately agree with is the housing market being the biggest bubble :).

I agree. There are some parts of the UK where housing relative to income is many multiples beyond unattainable for Mr & Mrs Smith. But that fact alone is not going to change there accessibility. There are other links in the chain that must be broken first, job losses (wait until George is finished hacking back the 3rd largest employer of the world, the British public sector) that'll make a difference. Newcastle will be up for sale soon.

But then they're other parts of the country that are doing quite well, especially at the higher end. Those parts that did not run away with themselves on speculative reasoning.

Boris
10th July 2010, 10:09
Links:

How Big A Worry is the Baltic Dry Index? - MarketBeat - WSJ (http://blogs.wsj.com/marketbeat/2010/07/09/how-big-a-worry-is-the-baltic-dry-index/)

FTSE All Share - Charts and technical analysis (http://www.euroinvestor.co.uk/stock/chart.aspx?id=29726)

https://gm.bankofny.com/Research/MorningUpdate/Article.aspx?Type=0&ContentManagerID=24722

And caution to all those that think the AUD is safe...

https://gm.bankofny.com/Research/MorningUpdate/Article.aspx?Type=0&ContentManagerID=24768

To conclude:

Sell sell sell!

But WTF should I buy instead? :-)

DimPrawn
10th July 2010, 10:42
Links:

How Big A Worry is the Baltic Dry Index? - MarketBeat - WSJ (http://blogs.wsj.com/marketbeat/2010/07/09/how-big-a-worry-is-the-baltic-dry-index/)

FTSE All Share - Charts and technical analysis (http://www.euroinvestor.co.uk/stock/chart.aspx?id=29726)

https://gm.bankofny.com/Research/MorningUpdate/Article.aspx?Type=0&ContentManagerID=24722

And caution to all those that think the AUD is safe...

https://gm.bankofny.com/Research/MorningUpdate/Article.aspx?Type=0&ContentManagerID=24768

To conclude:

Sell sell sell!

But WTF should I buy instead? :-)

Houses!

Express.co.uk - Home of the Daily and Sunday Express | UK News :: House sales soar 20% in June (http://www.express.co.uk/posts/view/185901/House-sales-soar-20-in-June)

HOUSE sales soared 20 per cent last month as buyers took advantage of more homes on the market to barter down asking prices.


The number of properties sold leapt from 53,000 in May to 63,500 in June, said analysts Acadametrics.

David Brown, commercial director of LSL Property Services, which sponsors the Acadametrics price index, says June’s figures are the highest this year.


Boomed!


Buy buy buy!

Get a cheap house whilst stocks last!

Fred Bloggs
10th July 2010, 10:45
I agree. There are some parts of the UK where housing relative to income is many multiples beyond unattainable for Mr & Mrs Smith. But that fact alone is not going to change there accessibility. There are other links in the chain that must be broken first, job losses (wait until George is finished hacking back the 3rd largest employer of the world, the British public sector) that'll make a difference. Newcastle will be up for sale soon.

But then they're other parts of the country that are doing quite well, especially at the higher end. Those parts that did not run away with themselves on speculative reasoning.I quite agree with you about affordability. Here even in the grim North West first time buyer properties are between 4 and 5 times the average first time buyer incomes. And that's if you're lucky enough to have a job at all now that all the well paid industry has been replaced by branches or Currys, Tesco Express etc.... Noticeable is the number of men doing a traditional young family woman's part time jobs in Sainsburys etc... I find it truly worrying.