2007 recession

martyn4764

ferry wrote:

he seems to think the UK may be Ok,but times will get harder..

That article was written in 1998.

ZTD

lynzpower wrote:

Hang about why all this doom?

My mother works for bupa, and she deals with new employees of firms getting private healthcare.Business is utterly booming, she cannot sell fast enough. ( nortwest)

Dad works for an importer of fruit & veg mainly to the resturaunt & hospitality trades ( 2 trades that always take first knock when recession hits) Dads thoroughly exhausted, too much work far too busy. ( northwest)

Sister works as a PA for a sales team again, so busy she cant wait to take a holiday on her 4k bonus shes just recieved.

Freinds who work in the luxury & designer goods market in london noting massive sales & profits.

Much as Id like to see a correction in the housing market, Im not convinced that this is the recession just yet.

You don't go into a bust from a bust. You go into a bust from a boom.

It's to do with credit cycles. Debt builds up, so the amount of money needed to service that debt goes up. People (I mean companies too) start using additional debt to service old debt. That is not sustainable. The debt pyramid needs geometrically increasing levels of new credit in order to sustain it (linear isn't good enough). Of course nothing can increase geometrically for any length of time, so when enough new credit fails to appear, it collapses the whole structure. It normally never gets to that - the pyramid collapses early because somebody fears it's going to collapse, so withholds credit theyby collapsing it (IYSWIM).

Bankruptcies are at their highest ever. That won't matter until it matters. Then credit will dry up like the Sahara at mid-day.

DontDoDebtKids

This thread has become quite an interesting one! I'll try to be a little more definite with my opinions so I can get shot down quicker...

lazy&indebt wrote:

Do you think it's a case of 'if it happens' or 'when it happens'?

Well, if you believe that busts follow booms then it would be a case of "when". People get caught out when they believe that this time it's a "new economy" - e.g. the TMT bubble.

Conclusion: "when"

david_hellier wrote:

I think inflation will be the main driver of the next recession. Inflation will be driven by higher oil and gas prices. So it's not just higher interest rates we need to watch, it's our overall outgoings.

Using the traditional indicies, we are witnessing a small(ish) rise in inflation. If you consider the rise in, shall we say, necessary costs of living, then actually these have gone up a lot - I'm talking about how much renting/a house costs, petrol, heating costs, council tax. These you can't really avoid and these have been going up. This is what you NEED to pay. As these go up, everyone has less money to spend in the shops.

Add to this everyone's debts - too much on credit cards (this has been admitted to by the credit card companies, pretty much) and lots of people jumping on the BTL bandwagon.

It isn't looking rosy is it?

Some more informed people, however, think that the risk of inflation is over stated, as when consumers start running out of money, prices have to go down or they won't buy anything. Also, they point to the very low level of wage inflation and the strength of the pound - these are very good indicators of inflation, apparently, and are running at pretty steady levels.

Conclusion: I'm tempted to side with the experts on this so would say that there is low risk of inflation happening just yet.

david_hellier wrote:

As far as credit card companies are concerned they will charge enough to make sufficient profit, currently about 300% profit margin on the base rates.

Head. On. The. Nail.

david_hellier wrote:

Now is not the time to be in property or shares. Batten down the hatches.

I can't fully agree with this statement, however.

Property: I'm currently sitting on the fence with property myself - I see the market going up slowly (for no reason) for the time being but the risk is the prices will correct sharply. The problem is that, long term, prices will recover so as long as you are prepared to sit it out, you shouldn't have a problem. The problem is when you are FORCED to sell, which means you make a loss and, usually, a bad loss! That said, anyone selling now is no fool.

Shares: Bargains to be had here, my friends. The equities market in the UK is pretty cheap at the moment (lowish average P/E for a start) - you can pick up some very good companies for very reasonable prices, with good yields to boot. Research required, but money to be made here.

Conclusion: Property: Hold/Sell; Shares: Buy bargains

Locana wrote:

Maybe a silly question, but if there was a recession and the house prices fell, would that be a good time/idea to buy? (obviously if I was debt free, job secure and able to afford it)...

You'll make a very good investor if you can follow exactly these instincts! Buy cheap, sell high. Easy, right? Nope - these behaviours are very much against your genetic programming as a human! Using cold reason, you can, however, overcome these instincts: it's called contrarian investing - look it up if you're interested.

An oft-used analogy: When there's a sale in the supermarket, most people stock up. So why, when there is a stock market crash, do people not pile in and buy things cheaply?

Conclusion: Buy low, sell high

Dr._Shoe wrote:

However, there is a predicted rise in interest coming which could trigger a glut of former "buy-to-let" properties onto the market.

This worries me greatly, but also offers many juicy opportunities (depends on how much prices go down). I'll be into property like a shot if prices fall enough!

wigginsmum wrote:

Finance isn't immune, not in the City. The large banks and financial institutions typically cut back on Middle Office staff (risk management/credit etc) and Front Office staff (traders/salespeople) to start with.

Hence my slight caveat, "to a certain extent"! The smart investors in the city get to work when times get tough. Do you see the bosses being kicked out? Nope, just the small fry! You'd do the same if you were at the top.

ZTD wrote:

Bankruptcies are at their highest ever. That won't matter until it matters. Then credit will dry up like the Sahara at mid-day.

This has been slightly skewed because going bankrupt has been made easier (or so I read). You're right, though. The warning signs are there.

Conclusion: PAY OFF YOUR DEBTS NOW PEOPLE!

lil'H

lazy&indebt wrote:

Do you think that the self employed and the smaller firms are more at risk from job loss than if you are emplyed by a large company or are we all at risk?

Also, my OH is in thr process of finding a house to purchase...is it the wrong time to buy?

All depends on the business, I am self employed, have two different jobs, my main business would collapse in a recession, as it is offering an expensive, luxery service, my other job however is as a visiting school speaker, so that shouldn't get effected too much.

With regard to property I now very little myself but follow my Dads moves closely, he is in the property buiness, and rents all his out, he also used to be financial director for one of the biggest oil companies so knows a thing or two about finance! He hasn't brought any property for the last few months, and is investing elsewhere at present, and says now isn't the right time to buy. However for him it's an investment, not a place to live!

lil'H

earwig

my oh works in the constrution indusrty always the first to go it usally goses about a year before other industrys do and they have been struggling to find contracts for a while now things are not at the laying of stage yet but its slowing down all the time overtime has gone now so there could be one on the way

mystic_trev

Interesting article in todays FT


http://www.ft.com/cms/s/7129cfce-3d34-11db-9b3d-0000779e2340.html