Stockmarket crash imminent? With house prices to follow?

cloud_dog

dunstonh wrote: »

He inherited an economy that was well positioned by the previous Govt, got lucky with global growth, global cheap borrowing and global low interest rates.

Normally I find your posts fairly balanced but in this instance isn't this just a bit of showing some political colour ;-)

All governments (chancellors) are affected to a large degree by the global economy or outside factors. Whether I am pro or anti GB I think the economy and its growth has been sustained - not something you could argue against Labour Gov's in the past. Additionally, the seperation of the BoE and giving it an inflation policy was a huge gamble; high interest rates in order to keep inflation low would hurt the voter - politically a bit dodgy.

Interestingly complaints about the lack of FTSE (or company growth) could quite easily be replaced by compaints about equity bubbles and imminent collapse - you can't have it both ways.

Back on to the OP.............

I think that the Fed have signalled by the 0.5% interest rate cut that they will go all out to try to have a soft landing, keep people's feel good factor in play and inflate their way out of trouble. To some degree they know that other countries cannot afford / sustain exchange rates which are too high against the dollar and will take steps to remain competitive (reduce interest rates). How they sidestep inflation and the effects of that I'm not sure.

For the US a weak $ will make their products cheaper, will enhance exports, will help GDP (and jobs), will keep the feel good factor, etc, etc.

Yes, very simple I know, the big question is if the Fed can manage the landing so that they are able to retain / create jobs.

The other thing to bear in mind is that there is trillion of hedge $ with no home, the stock markets fairly small in comparrison so uif this money decides to get invested (stocks / commodities) then the potential upside is significant.

cloud_dog
(am hoping for a continued uptread in stocks, certainly resource based ones, the $ to continue comming under pressure, and for the gradual realisation by the populous that commodities / resources are not high in price).

dunstonh

Normally I find your posts fairly balanced but in this instance isn't this just a bit of showing some political colour ;-)

If you want me to balance it, then I can say that the same Govt that positioned the economy well towards the end of its time in power also made some absolute howlers as well. cough.. ERM.. cough.

I didnt give it quite the balance in a single post as ramborai's Gordon Brown love fest of a post needed the balance

It's difficult to put economics into a small post and ecomonists always have different ideas on what is best so what hope do the rest of us have.

Also, what is a success and a failure? For many the growth in their net worth (mainly down to house prices) will be seen as a success by Gordon Brown. Whilst others will say it is a failure as housing is no longer affordable.

missile

dunstonh wrote: »

If you want me to balance it,.

then I would comment on David Cameron's financial track record when he was Special Advisor to the Chancellor of the Exchequer 92-93. :rotfl:

free4440273

So, 15K on the Dow by year end? It's possible, and if that seems far fetched then certainly 14,400/500 within reach. i cannot see how fundamentals justify such a move but technicals, as i said above, are pointing to such.

cloud_dog

The other thing to consider is that there are all these people out there who manage all this money and historically Xmas /EoY is when their bonus are calculated (based on returns) soooooo..............perhaps 'people' will try to drive the markets higher - all in a good cause :-o

Jonbvn

dunstonh wrote: »

If you want me to balance it, then I can say that the same Govt that positioned the economy well towards the end of its time in power also made some absolute howlers as well. cough.. ERM.. cough.

I didnt give it quite the balance in a single post as ramborai's Gordon Brown love fest of a post needed the balance

It's difficult to put economics into a small post and ecomonists always have different ideas on what is best so what hope do the rest of us have.

Also, what is a success and a failure? For many the growth in their net worth (mainly down to house prices) will be seen as a success by Gordon Brown. Whilst others will say it is a failure as housing is no longer affordable.

IMHO, Governments generally have much less control of the stockmarkets and economies in general, than they like to think. When things go well they get the glory, and when they don't they carry the can.

[Deleted User]

My own opinion is that government can have an influence.

Cut corporate tax give handouts and the stock market booms.

Increase legislation and tax and you can wipe out whole sectors of the economy - coal mining etc.

free4440273

free4440273 wrote: »

Have a look also at the Hang Seng Index: remarkable day on day increase.

This, by coincidence, from today's FT: "Most alarmingly, Hong Kong's Hang Seng has gained 46 per cent in less than two months...The two charts [Nasdaq in 1999 and the Shanghai Composite now ] are similar, except that Shanghai has accelerated even more" {FT Money Section}.

Flynn_2

Yant1 wrote: »

1987 - stock market crash (USA - 40%, UK 25%)
1989 - housing market crash (UK 40%).

It's a very different land to that of the 89 property crash with the biggest part of that difference being the buy-to-let boom. For that reason I'm not sure that history helps us much.

In 1988, the steep rise in property prices created what amounted to a panic to buy that had private buyers stretching far beyond what they could afford. When the tide turned there was an even greater panic that shattered the simplistic faith in "bricks and mortar" for nearly 10 years afterwards.

The key is knowing how landlords will react to price falls. Will they make a rush for the exits as many predict and launch the market into freefall or will they be a stabilising influence by taking the long term view. The latter may depend on how many have the finances to do that.

Also worth noting that the origins of the current buy-to-let boom was the perception of poor returns from equities so there's some pressure to move in opposite directions.

free4440273

NR shares down 20 per cent today...FTSE down slightly, but trend (technicals) is still up