Has the market peaked?

GreatApe

The crazy fact is in 1997 London housing stock was just 1.5 x GDP it is now 3.9 x GDP

The 1990s was far far too cheap for housing. This distorts crash cheerleaders views on what is fair value. How can housing be just 1.5 x GDP?

Well the answer was it couldn't. Which is why prices powered up so much between 1997-2008 up 260% in 11 years then there was a pause for about 4 years due to the recession and then back to business from 2012-2018 which is going to be up 60% in 6 years.

London is not a bubble it just went from ridiculously cheap at 1.5x GDP towards fair value at 3.9x GDP
Anything between 3x-5x GDP is reasonable and its right in the middle of that

economic

GreatApe wrote: »

The crazy fact is in 1997 London housing stock was just 1.5 x GDP it is now 3.9 x GDP

The 1990s was far far too cheap for housing. This distorts crash cheerleaders views on what is fair value. How can housing be just 1.5 x GDP?

Well the answer was it couldn't. Which is why prices powered up so much between 1997-2008 up 260% in 11 years then there was a pause for about 4 years due to the recession and then back to business from 2012-2018 which is going to be up 60% in 6 years.

London is not a bubble it just went from ridiculously cheap at 1.5x GDP towards fair value at 3.9x GDP
Anything between 3x-5x GDP is reasonable and its right in the middle of that

How’s do you know 3x to 5x is reasonable? What makes it reasonable?

GreatApe

economic wrote: »

I got to admit london property doesn’t look good as an investment but it’s not a bubble.

If Brexit goes well or had not happened there is a 30% upside in real terms imo

Without brexit my plan was to sell around 2020 and diversify which is when it would have hit 5 x GDP as my guess

Now I dont know. Bad brexit and we could go down to 3x GDP good Brexit and up to 5x GDP but it will take longer perhaps towards 2025. Of course pure speculation on my part.

The wild card are the communists get in around 2022 the Tories are a shambles at the moment

economic

GreatApe wrote: »

If Brexit goes well or had not happened there is a 30% upside in real terms imo

Without brexit my plan was to sell around 2020 and diversify which is when it would have hit 5 x GDP as my guess

Now I dont know. Bad brexit and we could go down to 3x GDP good Brexit and up to 5x GDP but it will take longer perhaps towards 2025. Of course pure speculation on my part.

The wild card are the communists get in around 2022 the Tories are a shambles at the moment

But bad Brexit could also mean uk becoming a tax haven and so property suddenly looking bullish no?

Yeh wildcard is labour coming in. Too much risk imo entering now but you’ve done well and you have enough margin of safety to ride out any sell offs. But the question is always about opportunity cost.

GreatApe

economic wrote: »

How’s do you know 3x to 5x is reasonable? What makes it reasonable?

UK GDP per worker is about £40k the the labor element of GDP

3-5 x that is £120k-£200k which is a reasonable band for what it costs to build a new home in the UK exc Land

GreatApe

economic wrote: »

But bad Brexit could also mean uk becoming a tax haven and so property suddenly looking bullish no?

Maybe but who knows.

Corp tax is already 19% and due to fall to 17% by 2020

Should really go to 10% imo but without a big majority I dont see how the Tories are going to be able to do that.

economic

GreatApe wrote: »

Maybe but who knows.

Corp tax is already 19% and due to fall to 17% by 2020

Should really go to 10% imo but without a big majority I dont see how the Tories are going to be able to do that.

With the US reducing uk will have to do more to remain as competitive as prior to the us cuts.

Also it’s been 8 years since the last recession. I’m willing to bet we get a recession within the next 4 years leading to a corbyn win, sharp fall in pound, recession and then who knows?

economic

Which asset class/sector/region will outperform over the next decade?

Will be really get tightening by central banks as much as the market thinks?

Global growth has been good, US growth very good. How long will this continue?

GreatApe

economic wrote: »

With the US reducing uk will have to do more to remain as competitive as prior to the us cuts.

Also it’s been 8 years since the last recession. I’m willing to bet we get a recession within the next 4 years leading to a corbyn win, sharp fall in pound, recession and then who knows?

World is more linked than ever, 2008 was pretty much a global recession (of course the developing countries did not contract but their rate of growth did)

I am hoping we do not see another recession until the 2030s might work out if the promised for self drive tech arrives over the next 5 years that would add 10% points to real GDP over a 10 year period. So +1% a year just from that one invention. Also hopefully the 2020s will see a cap on energy prices as China and most the rest of the world try to go green keeping oil/coal/gas affordable. The world could really use another country developing a proper shale industry its beyond belief that the yanks are the only ones blessed with shale deposits when every continent on earth has large conventional deposits. Really the world owns the yanks a lot but all we do is complain. $50 oil instead of $150 oil thanks to their do it and ask question later attitude. While in the UK we put a 7 year ban on fracking because of two tremors no one could detect without specialized equipment.

If the communists get in depending on how far they actually go the UK could well see a recession while the rest of the world just powers on. Who knows maybe they will mellow I cant see an actual communist agenda surely the center ground of his party will keep him in check if he wins. Almost makes me wish the scots had won the independence vote

economic

GreatApe wrote: »

World is more linked than ever, 2008 was pretty much a global recession (of course the developing countries did not contract but their rate of growth did)

I am hoping we do not see another recession until the 2030s might work out if the promised for self drive tech arrives over the next 5 years that would add 10% points to real GDP over a 10 year period. So +1% a year just from that one invention. Also hopefully the 2020s will see a cap on energy prices as China and most the rest of the world try to go green keeping oil/coal/gas affordable. The world could really use another country developing a proper shale industry its beyond belief that the yanks are the only ones blessed with shale deposits when every continent on earth has large conventional deposits. Really the world owns the yanks a lot but all we do is complain. $50 oil instead of $150 oil thanks to their do it and ask question later attitude. While in the UK we put a 7 year ban on fracking because of two tremors no one could detect without specialized equipment.

If the communists get in depending on how far they actually go the UK could well see a recession while the rest of the world just powers on. Who knows maybe they will mellow I cant see an actual communist agenda surely the center ground of his party will keep him in check if he wins. Almost makes me wish the scots had won the independence vote

Why would self driving cars add 10 points? Sure you have more efficient way to traveling thus savings peoples time but how does that add to the GDP at 1% a year?

I was thinking, say Google corners the driverless car market. They could expand their ad revenue by a multiple folds then currently. You can show advertising in the cars whilst the people use the cars. The ads will be more valuable as people can not just get out of a car if they don't want to watch the ad. they need to wait till their destination.

You could have ads played on the windscreens and the back of the seat headrest. The total space for google ads would rise considerably then what is there currently (which is pretty much just PC screens and phone/tablets). Phones/tablets have small screen real estate and most people use a laptop which is small as well. i think this is a huge untapped market - self driving cars plus ads in the cars. not sure how this would translate to GDP though.

We could very well have a uk election before 2022. It could be called before then and very likely given brexit.

We have been in a very shallow recovery since the great recession. I would say most likely we stay low growth for now (the cycles between recessions could be longer now then before) with a recession hitting if Labour come in (the recession would already have started prior to election).