Oil Up, Gold Up: what does this say about inflation in 2008?

Melissa177

Oil touched $100 a barrel today (light sweet crude around $99.4 currently), and Gold is up $22 an ounce.

Lots of fear in the markets, clearly....

What does this say about the housing market in 2008? Will inflation - and fear of inflation - make the housing market slump?

WTF?_2

Melissa177 wrote: »

Oil touched $100 a barrel today (light sweet crude around $99.4 currently), and Gold is up $22 an ounce.

Lots of fear in the markets, clearly....

What does this say about the housing market in 2008? Will inflation - and fear of inflation - make the housing market slump?

Not to mention, Sterling is plunging on the Foreign Exchange markets.

Doesn't look rosy at all. I hope no-one on this board was stupid enough to listen to our 'head in the sand brigade' who have been trying to suppress discussion of the topic of a deteriorating economy/market for the last few months ... and have thus jumped neck deep into property debt.

free4440273

....and Sterling against the Euro in free-fall. Huge movements in the $/Yen also today. Like I've said before, I still think a crisis in the foreign exchange market will precipitate a plunge in equities. Sterling also falling against the $, so more inflation here (although obviously the BofE will keep on spewing out their own 'official' inflation figures :rotfl:

merlinthehappypig

It really does look bleak, I agree. Hard to see how the government will be able to lie their way out of this one.

I posted this in the HPC thread earlier, but sensible posts seem to get lost amongst the angst in that thread so I'll make no apologies for repeating it here:

Britain this year faces the most difficult economic conditions since the dotcom bubble burst, according to the Financial Times annual survey of leading economists, which shows deepening pessimism about the impact of the global credit squeeze.

The annual survey of 55 top economists shows confidence has tumbled from a year ago. The experts also fear that compared with 2001-02, the scope for financial authorities to mitigate any downturn is far more limited.

Nearly nine in 10 think public finances are not in good order so there is no leeway for discretionary tax cuts or increases in public expenditure, and the third most-mentioned risk to the economy is inflation, limiting the ability of the Bank of England to cut interest rates.

Nearly two-thirds of the economists from the City, academia and including five former members of the monetary policy committee thought house prices would fall this year [2008], although there was wide disagreement over the effect of a housing downturn on the economy.

Even those usually optimistic sounded a more cautious note after five months of deepening financial market problems.

Sir Alan Budd, provost of Queen College Oxford and former chief economic adviser to the Treasury, said: 'I'm quite worried . . . mainly because some of the problems are unprecedented and don't seem to be responding to treatment'

Many of the problems stem from abroad, especially the likelihood of a housing market slump in the US. Sir Howard Davies, director of the London School of Economics, saw a high probability of a recession in the US and added: 'That would be likely to spread to the UK and some other European countries, notably Spain, where property prices seem similarly out of line'

But at home, concerns centre on the limited ability of the government to mitigate any slowdown because it was still running a large deficit when the economy was performing strongly between 2004 and 2007.

Martin Weale, director of the National Institute of Economic and Social Research, said: 'The public finances are in very poor shape . . . HM Treasury has managed several years of self-delusion. No doubt it will explain that it did not foresee the credit crisis and use this as an excuse'

With inflationary pressures likely to be evident in the first half of 2008, the majority view was that life had got much tougher for the Bank of England, particularly since banks' unwillingness to lend had reduced the ability of the Bank to influence monetary conditions.

Most, nevertheless, hoped the Bank would choose to turn a blind eye to short-term inflationary pressures and cut interest rates, since they believed that the coming economic slowdown would control inflation and the economy needed the stimulus of looser monetary policy.

With house prices falling across the country, most economists did not think a troubled housing market would be the cause of further weakness. Some of those predicting the sharpest falls in house prices were also the most confident about the economy's ability to withstand a housing downturn.

beingjdc

Maybe house prices will stay up as French and Germans use their new wealth to buy up cheap holiday homes at an advantageous exchange rate.

No, thought not

epz_2

oh well at least we have plenty of productive industry so we can export our way out of trouble, oops.

the really interesting bit will be what happens to all the public sector workers whos pay has shot up as has the number of them, its ok in a growing economy but with falling tax take its a lot less sustainable.

TediousPhoenix

I work for a bank in the asset management sector and it's my job to process daily pricing for equities, money markets, bonds, FX rates etc. My job only processes them, we do not make any decisions.

My manager asked us what we, his 'trusted team' thought house prices/economy would do. Everyone of us went with the slow-down/ fall. He then asked why the fund managers were all investing in asset-backed securities. He said 'do they know something we don't?'.

It made us think, that's for sure.

Part of my pension is in these people's hands so I hope they know what they are doing!

epz_2

didnt they do a study compairing prediction by top city fund managers, todlers, and a guy throwing darts at the FT, i think the fund managers came botom.

imho the stock market is just an untaxed bookies.

Melissa177

A (young!) friend of mine in the City has converted everything he owns into gold. All his houses are mortgaged and converted to gold, all his savings are in gold, and his bonus this year is going to go straight into gold.

This same guy also predicted that CDOs were going to go belly-up about a year ago - he's a credit trader and his desk made a lot of money out of it.

That said, he's not too worried about the housing market long term.

Generali

TediousPhoenix wrote: »

I work for a bank in the asset management sector and it's my job to process daily pricing for equities, money markets, bonds, FX rates etc. My job only processes them, we do not make any decisions.

My manager asked us what we, his 'trusted team' thought house prices/economy would do. Everyone of us went with the slow-down/ fall. He then asked why the fund managers were all investing in asset-backed securities. He said 'do they know something we don't?'.

It made us think, that's for sure.

Part of my pension is in these people's hands so I hope they know what they are doing!

That's because you missed the first rule of professional investing: better to be all wrong together than wrong alone.

If you get it wrong and everyone else gets it right then you're out of a job. If everyone gets it wrong then you might just hang in there.

TediousPhoenix

Melissa177 wrote: »

A (young!) friend of mine in the City has converted everything he owns into gold. All his houses are mortgaged and converted to gold, all his savings are in gold, and his bonus this year is going to go straight into gold.

This same guy also predicted that CDOs were going to go belly-up about a year ago - he's a credit trader and his desk made a lot of money out of it.

That said, he's not too worried about the housing market long term.

If it all goes tits up at least he'll have a house made of gold.