Myth-Busting. Proving Bears Wrong, again.

Thrugelmir

Really2 wrote: »

What about the argument that the QE is only filling a hole left by asset deflation.

Basicaly going down a debt plug hole.

Inflation is by no means a given.

The money isn't being left on deposit. Its working its way around the system.

Possibly out of the country even. As the debt that the UK sits on was funded from abroad. NR raised £127 billion on wholesale international markets (between 2001-07). All the mortgage repayments and interest made are flowing back to source.

In simple terms. Employer raises finance. Business keeps going. Pays employee wages. Employee is able to pay mortgage. Money is repaid to bank in China.

With interest rates low. Its possible to invest for a higher return in say Corporate bonds than the underlying cost of the money.

My mortgage is .35% over base. I'm investing (rather than overpaying) in Corporate bonds via my ISA yielding 8.82% currently. I draw the income out quarterly and use that to reduce my mortgage.

The whole situation is madness. As possibly there is a huge transfer of wealth at the moment.

Really2

Thrugelmir wrote: »

The money isn't being left on deposit. Its working its way around the system.

I thought velosity was still decreasing.

Thrugelmir

Really2 wrote: »

I thought velosity was still decreasing.

Banks are international.

Lloyds is the only main listed UK based bank.

The Government created by QE initially by buying gilts from insurers and pension funds. This money was deposited into banks. What the banks do with it is another matter!

ad9898_3

julieq wrote: »

The long term trend is under 3% annual compounded HPI over 30 years. Why is that unsustainable?

That was a silly comment considering that it's the last boom thats caused the issue not the decades before.

julieq

Thrugelmir wrote: »

Between 1999 - 2004 the compound rate of HPI was 15%.

Creates a distortion on 30 year trend figures. So the longer term trend will actually fall back below 3%. Until the excesses of 1999-2008 are traded out through time. As the market conditions to generate such an increase will never be seen again.

That's 1/6th of the data set. 5/6ths of the data is therefore dominating the long term trend average and the proportional effect of the short term bubble is therefore very small indeed. That is the point of long term averaging in fact, to filter out short term fluctuations.

I'd argue that less than 3% compound house inflation over that period given everything that has happened is a sustainable rate even ignoring underlying supply and demand issues. The actual bubble has already been largely traded out on that basis, we've returned to either the long term trend if you take my view, or MARGINALLY above it if you take yours.

Anyway, we'll see, won't we? I have to say that I'm surprised to see rises in prices, I was expecting a couple of years falling then 5 years or so to get back to current levels.

HAMISH_MCTAVISH

julieq wrote: »

I have to say that I'm surprised to see rises in prices, I was expecting a couple of years falling then 5 years or so to get back to current levels.

Indeed.

I've been pretty consistent in predicting the real recovery to begin Q2 2010, and for it to take 3 years or more to recover to 2007 levels.

I still think we'll see some small falls over next winter, but I am pleasantly surprised by the strength and duration of this rebound.

Thrugelmir

julieq wrote: »

That's 1/6th of the data set. 5/6ths of the data is therefore dominating the long term trend average and the proportional effect of the short term bubble is therefore very small indeed. That is the point of long term averaging in fact, to filter out short term fluctuations.

I'd argue that less than 3% compound house inflation over that period given everything that has happened is a sustainable rate even ignoring underlying supply and demand issues. The actual bubble has already been largely traded out on that basis, we've returned to either the long term trend if you take my view, or MARGINALLY above it if you take yours.

Anyway, we'll see, won't we? I have to say that I'm surprised to see rises in prices, I was expecting a couple of years falling then 5 years or so to get back to current levels.

If we for arguments sake say that the market overall is now at 2004 levels.

The 100% increase between 1999 and 2004. Still equates to a rise over 10 years of just over 7% per annum compound.

This now 33% of the data set. So materially affects the trend.

What was the compound rate prior to 1999, for the 20 year period ? If that line is extended forwarded wouldn't it give a picture of where house prices should be? On the basis of your point.

Pete111

My thoughts...(such as they are)

Hamish is clearly a rabble rouser but I like to read his posts as I'm hoping for HPI in the next 4 years and it's a refreshing change from the comments posted by the doom and gloomers (plus he seemingly p*sses off the perma-bears like no one else can)

JulieQ writes beautifully and is clearly well informed. Whether she is correct or not I do not know but again, I rather hope she is.

Some bears back up their arguments well also and are sticking to their guns with admirable resolve....but others are starting to sound rather desperate.

Nearlynew seems to think calling Hamish, 'Mctittish' gives his comments extra weight. Sad really.

Which way are we actually going re housing? Happy up here on the fence for now!

P

mr_fishbulb

HAMISH_MCTAVISH wrote: »

And for 15 years of every 20, prices rise faster than most people can save.

Which is why they then crash, because people can't afford to enter or move up the ladder.

But it is also why they go up, because people have a short memory when it comes to the possibility of making some money.

Thrugelmir

Pete111 wrote: »

My thoughts...(such as they are)

Some bears back up their arguments well also and are sticking to their guns with admirable resolve....but others are starting to sound rather desperate.

Don't you detect the desperation of the bulls.......

There are some noticable absentees from this forum who had large BTL portfolios. Last we heard from one he was renegotiating finance on his 60 plus property empire.......:think:

Bears don't need to be desperate. We are cash rich so can bide our time and pick off the good investment property.