Hold the presses - a financial regulator does its job!
Posted by jdavis on April 19, 2010
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Please remember, investments can fall as well as rise. And they will!
Please also remember, no trend goes in a straight line. Otherwise it would be called a straight line! The trend in houses and stocks is still very much down, in our view.
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This table was in The Economist last Friday. We said, just last Tuesday, that we see UK prices falling c 25-35% and this journal complies with our view with its estimate of 31% overvaluation in Q4 2009.
From that table, there is not a single country in which I would currently buy property, from a purely financial viewpoint. (I would sell, though, if I had any and there were any buyers.)
France and Spain are notable estimated overvaluations. A 6% fall in Spain over the year is nonsense. Were the Spanish government not colluding with the lenders, the statistic would be more like 30%. It will be soon enough. And more.
Otherwise, I concur entirely with the whole table. Irish prices have already come down some 40-50% yet The Economist still puts their prices at a quarter too high. As the Euro falls inexorably this puts property prices, in Euroland, still lower in Sterling terms.
On the stock markets, we have consistently stated that prices were again displaying bubble-like features and something would come and burst the bubble. Little did we expect on Friday, it to be the US regulator, the SEC, in its paradigm-shifting case against Goldman Sachs, the most successful global banking firm. How did they become so successful is the question many have asked for a long time? Maybe we’ll now find out. GS will not have been the only participants. It is never just one firm in such incestuous markets. This will weigh heavily on GS, banks and the market for a long time to come.
Currently, our forecast of prices back to Summer last year levels stands. That would be c 20-25% off the wider market from last week’s prices.
There are rumblings that we could break last year’s lows (March 2009 – more than 40% fall from last week) however we conclude that we cannot go that far yet in our convictions. However, it is certainly possible.
It may well be that markets go nowhere for years ie up then down then up then down etc. That would make lots of sense given the harsh realities of the world aligned with the huge money printing ie deflationary forces v inflationary forces.
I’ll be filming with BBC2 in Beaconsfield, Bucks., tomorrow afternoon about the ongoing recession/depression, for a programme going out after the election. Incidentally, we hear all the time about a possible ‘Double Dip’. Please know, this is merely a (yet another) euphemism for Depression as nothing, economically, goes in a straight line. Depression? Afraid so.