Carney vows to take action on the BTL sector

cells

Generali wrote: »

This is about anticipating and mitigating risk, not about predicting the future.

all of finance is about predicting the future

cells

Graham_Devon wrote: »

Who are you trying to convince lately? Only it seems it's yourself.

it did occur to me that i might be doing that subconsciously

however I went and had a look at the land registry data for a couple of areas in London that have high BTL and a couple of areas that had lower BTL and it showed no additional price siwngs and the transaction levels fell and rose largely in tandom suggesting that there is no additional pressure or risk from BTL mass selling in a downturn

also when you look up ons data for rental stock it expanded by about 600,000 in the two downturn years of 2008-2009 so landlords were adding not selling further dispelling the myth that if prices fall or look likely to fall the BTL crew jump ship

So yes maybe there is some trying to convince myself but its from a basis of data rather than hope.

Had the data shown the opposite, eg higher BTL areas suffering larger price drops and that landlords were net sellers in 2008-2009 I would join your side of the fence but thats not what the data suggests

cells

Generali wrote: »

You're missing the point.

The point isn't that BTL investors will rush to the exit en masse, it's that they might and if they do it's a big problem.

This is about anticipating and mitigating risk, not about predicting the future.

What if, instead of panic selling, landlords lower net sales (eg buy more sell less) during price dips, which is what the data suggests?

PS what do you think can/should be done to limit the risk of landlords panic selling in a downturn (which the data suggests they dont do)? and should it be the job of the BOE and do they have the correct tools?

For instance if I was in charge and I did not want Landlords to sell in a downturn I would put a temp 3% second home sellers stamp duty onto transactions. That would put a lot of Landlords off from selling until the tax is lifted, supporting prices. The BOE does not have that power nor is George going to give the BOE tax powers

Generali

cells wrote: »

all of finance is about predicting the future

I hope you don't work in finance if that's what you think! Finance is mostly if not entirely about managing risk.

cells

Generali wrote: »

I hope you don't work in finance if that's what you think! Finance is mostly if not entirely about managing risk.

what is managing risk if not trying to predict the future?

Graham_Devon

cells wrote: »

what is managing risk if not trying to predict the future?

Dealing with the present?

cells

if you have the problem now in the present, you were quite poor at predicting the future in the recent past

virtually all of business and finance is about predicting the future.

put it this way, if you could send yourself emails back in time how great a businessmen or financier would you be? probably much better than the best in the world

Generali

cells wrote: »

what is managing risk if not trying to predict the future?

It's about trying to understand the range of things that could happen and mitigating their possible impact. It's not about saying that Trans Express is going to win the 1:55 at Ascot tomorrow.

Nobody can predict the future with any accuracy. What we can do is say that there are a range of possibilities that will probably happen.

When the oil price was at $100/bbl it could have gone up to $200 or fallen to $50. A good portfolio manager would have positioned for both possible outcomes.

Generali

cells wrote: »

if you have the problem now in the present, you were quite poor at predicting the future in the recent past

virtually all of business and finance is about predicting the future.

put it this way, if you could send yourself emails back in time how great a businessmen or financier would you be? probably much better than the best in the world

If you could send back information from the future you would have removed all risk. That is what would make you successful.

However, as there is no way in the real world to remove all risk we seek to diversify in such a way as to mitigate it.

cells

Generali wrote: »

It's about trying to understand the range of things that could happen (in the future?) and mitigating their possible impact. It's not about saying that Trans Express is going to win the 1:55 at Ascot tomorrow.

Nobody can predict the future with any accuracy (of course they can, I predict this time next year the population of the UK will be higher). What we can do is say that there are a range of possibilities that will probably happen (completely the opposite of no one can predict the future, anyway yes pinpointing the future is impossible but business and finance tries to predict as accurately as possible the future which might be as accurate as up or down or future demand to a couple of %).

When the oil price was at $100/bbl it could have gone up to $200 or fallen to $50. A good portfolio manager would have positioned for both possible outcomes. (and a better one would try to predict future supply and demand than put a 50:50 on either side

Using housing as an example. An investor tries to predict the future. Population changes, laws, politics, demographics, taxes, finance costs, labour costs, wages, rules and regs.

calling all of those factors right to a pinpoint will be close to impossible but predicting the future direction of movement not so impossible