Bulls and Bears

JonnyBravo

Cleaver wrote: »

What's your feelings on people investing in shares of companies who invest in property? Or property funds? Or would you like to see these companies shut down so that people can't invest through them?

<snip more detailed questions>

I admire your resilience Cleaver. Just so you're not left hanging, I thought I'd warn you I suspect the conversation is going to go something like the one he had with Generali yesterday.

angrypirate wrote: »

Surprise surprise. Posen says you cant just look at the data. You have to look into the future which only he can do and he promises you that we need more QE. What the hell is this guy on.

Generali wrote: »

To use an over-used analogy, using the data alone to set interest rates is like trying to drive a car while looking in the rear view mirror.

Having said that, more QE would be a waste of time or possibly even dangerous IMO unless banks get another bail out (possible IMO).

angrypirate wrote: »

At least if you look in the rear view mirror you can see where the road was and adjust your course to try and get back on the road again. Right now they are steering further and further away from the road without a care in the world.

Generali wrote: »

I thought I was over-using the analogy!:D

I take your point. What's your position? That there has been too much stimulus and so the risk is very high inflation and a bigger bust?

angrypirate wrote: »

Something like that. I think that QE + low interest rates is only prolonging the pain of the recession instead of having a more painful one but very quickly.

Generali wrote: »

Do you think there is a mechanism by which that will occur? What will QE and low interest rates cause to happen that is bad do you think?

<silence>

You can almost hear the tumbleweed, imagine the steam coming out of his ears and the confused look on his face as he looks about for help.

Does not compute.

Linton

Radiantsoul wrote: »

I am curious as to just how much bulls and bears differ in their viewpoint on house prices over the short and medium term. I wonder if the huge disagreements are just over a few percent or really more fundamental?

Do you consider yourself a bull or bear? And what do you think will happen to house prices over the next five years(in terms of percentage increases or decreases)?

There is a different difference.

Bears appear to believe that at some stage houses will be so cheap they and all their friends will be able to afford one.

Bulls believe there are far more people who would in principle want to buy than there are houses available. So houses will always be at a price to make them unaffordable to many wanabe FTBers.

Now whether that unaffordability price level is high or low depends on the wealth of the potential FTBers and so is in turn dependent on the wider economy. So you cant guess future house prices in isolation.

I am a bull on all fronts. So my guess is that sufficient people will be sufficiently more wealthy in 5 years time to raise prices by 30%. (Or we will be seeing the start of rampant inflation which will have raised prices by 30%). For the next year or so - stagnation with minor ups and downs.

Thrugelmir

Linton wrote: »

I am a bull on all fronts. So my guess is that sufficient people will be sufficiently more wealthy in 5 years time to raise prices by 30%. (Or we will be seeing the start of rampant inflation which will have raised prices by 30%). For the next year or so - stagnation with minor ups and downs.

And where is the wage inflation that is required going to come from to fund a 30% rise ?

What's noticable is the rising cost of food generally. Definate inflationary pressures in this area.

Radiantsoul

Thrugelmir wrote: »

And where is the wage inflation that is required going to come from to fund a 30% rise ?

What's noticable is the rising cost of food generally. Definate inflationary pressures in this area.

I suspect the increase in the price of food might be a bit of a one off as a result of the decline in sterling and a few crop failures in the developing world. And so its effects on inflation should fall off.

I can't see much chance of rampant wage inflation in the next few years though.

Loughton_Monkey

I prefer not to use Bull or Bear in the house market. The terms properly apply to Stock Markets, which are different from House Markets.

Just about everyone buying a share does so because they expect it to make a profit either in capital growth or income (dividend). The motivation for buying a house revolves very much around wanting somewhere to live, and affordability. As an obvious side effect, most people would like to think that the value of the house will go up.

In theory, the Equity Markets reflect the sentiment of all shareholders, since in concept at least, every single shareholder is reasonably free to decide to retain, sell, or buy more at every minute of every day.

The property market, on the other hand, is extremely bad in reflecting the sentiment of all houseowners. The vast majority of house owners, in practice, simply carry on living in the house. Yes, they have 'sentiments' but they exist only in concept as in ("Look at this, Martha. Looks like we've made £50K profit on this house..." or "Bl**dy Hell, Frank, we're just about in negative equity here...")

Hence the actual 'market' is dictated by the specific circumstances of the extremely small %age of people who are actively thinking of buying or selling.

I consider myself neither a bull or a bear. I'm a Boar. In other words, Bored, Old And Realistic about the whole subject.

Radiantsoul

Loughton_Monkey wrote: »

Hence the actual 'market' is dictated by the specific circumstances of the extremely small %age of people who are actively thinking of buying or selling.

I consider myself neither a bull or a bear. I'm a Boar. In other words, Bored, Old And Realistic about the whole subject.

Property prices have much higher transaction costs, and so fewer transactions. But I am not sure what impact this will have on prices. Presumably it means larger swings are needed to encourage people to buy or sell. The fact that each property is heterogenous is probably a factor that acts to limit transactions.

Percy1983

I am a bear in the sense that I think prices should come down for the benefit of the future generations, but as far as predictions go I believe stanation is the best I can hope for.

But I do believe BTL should be heavily taxed, interest rates should rise to a 'normal' level and those who can't afford there houses should be kicked out of there houses.

Cleaver

Percy1983 wrote: »

I am a bear in the sense that I think prices should come down for the benefit of the future generations.

Sorry to say this yet again, but I just can't let another one of these comments go by.

The fact that you want prices to go down doesn't make you bearish about the housing market, in the same way that if I wanted house prices to go up it doesn't make me bullish. Bullish and bearish feelings about an asset price relates to what you think will happen, based on your analysis of the market, not what you want or feel should happen.

Just to illustrate this point one more time, it's possible for someone who's just bought five BTL properties to wish with all their heart that house prices will double over the next five years however, if they start to think that house prices will actually fall then you would say that that person is bearish about the property market, even though they desperately want it to rise.

I'm obviously aware that the terms bull and bear and have taken on a whole new, weird meaning for the purposes of this website.

Radiantsoul

Percy1983 wrote: »

I am a bear in the sense that I think prices should come down for the benefit of the future generations, but as far as predictions go I believe stanation is the best I can hope for.

But I do believe BTL should be heavily taxed, interest rates should rise to a 'normal' level and those who can't afford there houses should be kicked out of there houses.

I think those policies would have and odd impact as rents would rise, and property prices would fall.

Radiantsoul

Cleaver wrote: »

The fact that you want prices to go down doesn't make you bearish about the housing market, in the same way that if I wanted house prices to go up it doesn't make me bullish. Bullish and bearish feelings about an asset price relates to what you think will happen, based on your analysis of the market, not what you want or feel should happen.

There does seem to be a confusion between what people want to happen, what they think will happen and what they believe is morally right to happen.

Too often people attach a lot of emotional energy to attacking someone's beliefs on property price movements as if believing prices are going up is immoral as it is robbing future generations, or falls are robbing savers.