This could be a monster boom ...

padington

http://www.zerohedge.com/news/2015-10-22/what-happens-after-three-years-negative-interest-rates

Generali

padington wrote: »

http://www.zerohedge.com/news/2015-10-22/what-happens-after-three-years-negative-interest-rates

Below the line comments are a bit fruity:rotfl:

FWIW, I expect the next change in rates from the Fed is going to be upwards, maybe even before the end of the year with the BoE following the Fed up.

padington

Generali wrote: »

Below the line comments are a bit fruity:rotfl:

FWIW, I expect the next change in rates from the Fed is going to be upwards, maybe even before the end of the year with the BoE following the Fed up.

Small, slow changes in the U.S. / UK interest rates isn't going to do that much if China and Euro keep the hot money taps on though, will it ?

Generali

padington wrote: »

Small, slow changes in the U.S. / UK interest rates isn't going to do that much if China and Euro keep the hot money taps on though, will it ?

US interest rate rises will very quickly become the Emerging Markets' problem as they tend to borrow in US Dollars and a rise in US rates will push up servicing costs via a higher USD and a higher interest rate (if borrowing at a variable rate). China's corporate USD denominated debts alone sit at $367,700,000,000 according to Dealogic quoted in The Journal.

http://www.wsj.com/articles/yuan-slide-takes-toll-on-chinese-firms-1439489280

While the offshore market remains a fraction of China’s $18 trillion in domestic debt, the yuan’s 3% tumble since Tuesday makes the bill on that debt pile a lot bigger than it was three days ago, amounting to some $11 billion in currency-exchange loss for those borrowers.

The solace is that it is an accounting loss and won’t deplete companies’ cash flows until their debt matures and borrowers have to pay down the principal, the bulk of which will come due in two years. And the yuan could regain value.

If anything, looser monetary policy in China would simply make this problem worse.

cells

if Japan can have zero rates for 30 years then so can we

buglawton

Generali wrote: »

US interest rate rises will very quickly become the Emerging Markets' problem as they tend to borrow in US Dollars and a rise in US rates will push up servicing costs via a higher USD and a higher interest rate (if borrowing at a variable rate). China's corporate USD denominated debts alone sit at $367,700,000,000 according to Dealogic quoted in The Journal.

http://www.wsj.com/articles/yuan-slide-takes-toll-on-chinese-firms-1439489280



If anything, looser monetary policy in China would simply make this problem worse.

That zero edge article linked to another about empty Chinese shopping malls. Funnily enough US shopping malls are also spookily empty atm per what I saw there recently. Hallowe'en effect? Anyway, no substantial US interest rate hike anytime soon methinks.

Generali

buglawton wrote: »

That zero edge article linked to another about empty Chinese shopping malls. Funnily enough US shopping malls are also spookily empty atm per what I saw there recently. Hallowe'en effect? Anyway, no substantial US interest rate hike anytime soon methinks.

I'd be wary of that sort of anecdotal analysis without thinking through the possible reasons for it in the US.

Yes the malls are doing badly. On the other hand, Amazon's sales are up 78% year-on-year with eBay revenues up 12%. Overall retail sales are up about 2.1% year-on-year to September 2015.

http://www.census.gov/retail/index.html

The US data is mixed but generally pretty strong I would say. Unemployment is 5.1%

http://www.bls.gov/news.release/empsit.nr0.htm

And the Government debt position is stabilising pretty rapidly with borrowing being around $400bn for the past year and that figure dropping all the time as the economy grows at an annualised rate of almost 4%.

I think it's very easy to overdo the bad news and, much as I enjoy Zerohedge, they are a prime example of bad news selling better than good.

lisyloo

Small, slow changes in the U.S. / UK interest rates isn't going to do that much

Won't even small increases in interest rates make it increasingly unaffordable for buyers to buy.
BTL is now less attactive at todays prices (it doesn't stack up on some central London flat for income, only if there's capital gain).
So most BTLers and foreign investors are only getting in whilst there's capital gain.
I know there's a element of safe haven money but enough to keep the market going indefinitely?

Generali

lisyloo wrote: »

Won't even small increases in interest rates make it increasingly unaffordable for buyers to buy.
BTL is now less attactive at todays prices (it doesn't stack up on some central London flat for income, only if there's capital gain).
So most BTLers and foreign investors are only getting in whilst there's capital gain.
I know there's a element of safe haven money but enough to keep the market going indefinitely?

An increase in rates from .25% to .5% is a doubling of rates.

cells

lisyloo wrote: »

Won't even small increases in interest rates make it increasingly unaffordable for buyers to buy.

didn't the MMR already have banks only give out mortgages that would be affordable at 8% so it wont matter if rates go up as the banks are already only giving out loans as if rates are that high now

for BTL the rental cover is the limit and the most competitive banks lend on 5% rental cover at 125% of rent. What that means is if interest rates go up but the banks keep the same rental cover the max amount a BTLer can bid stays the same

cells

lisyloo wrote: »

So most BTLers and foreign investors are only getting in whilst there's capital gain.

depends on what the alternative is. 10 year gilt at 1.7% interest or buy a London property and sell in 10 years time when there are a million more people in London earning 50% more in wages and few additional homes to go around

lisyloo wrote: »

I know there's a element of safe haven money but enough to keep the market going indefinitely?

yes for a lifetime