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#1 DrBubb

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Posted 04 October 2010 - 04:55 AM

Posted Image : DrBubb's Property Blog
====================================================
Link to here: http://tinyurl.com/GPC-Diary / Data: http://tinyurl.com/UKtrap

SUMMARY of Updated views : (end Sept. 2010)
+ UK: Has started the second leg down into possible 2012-13 Low
+ US: Bottom not in place yet. Maybe 2011-12
+ HK: Another dip coming before cyclical blow-off?

FAVORITE CHARTS
UK Market - H&N Index is average of Halifax and Nationwide
Posted Image
(more charts to come)

DATA
UK: http://tinyurl.com/UKtrap
HK: xxx
US: xx
Spline's site ::
London Population :: http://www.londononl...ile/historical/
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#2 DrBubb

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Posted 04 October 2010 - 05:08 AM

BUBB's BLOG - First Entry

Let me begin with a "shocking" admission: I sold my London property in 2001. If I was given a Pound coin for everytime somebody on HPC, SP, or elsewhere jumped on this fact, and went on to use it as part of an argument to try and undermine my forecasts, then I would be wealthy man on these payments alone.

Let me tell you this: The premature sale was NOT a mistake. Here's why: I cashed an approximate 4x profit on the sale, and it gave me much of the start-up capital that I needed for other investments - mainly in the Gold mining sector.

HUI - the index of Unhedged Gold Miners
: update HUI : 12mos

I took my equity out of UK property and put it into Gold shares, and gold shares in 2001 - right near the bottom in the precious metals cycle. My gold share portfolio went up much more than the value of my UK property would have done, so that was a happy choice. But I did not give up entirely on property.

I moved away from the UK to HK in 2006. I watched and studied the HK property market for several months. In early 2007 I decided to shift a portion of my wealth out of shares into property in Hong Kong, as I saw potential for an interesting rising in HK property prices, even as UK property appeared to be peaking that year. Over the next year or so, my partner and I were able to buy a total of 10 properties, all 2BR and 3BR flats. I can tell you that my equity in those 10 properties was worth more than that single property in London. On top of that I retained a nice portfolio of Mining related shares, and paid all my living expenses for years. So I must have been doing something right.

We have now sold 9 out of our 10 properties in Hong Kong, each one at a profit (albeit some sales were with tiny profits.) We retain the most valuable HK property, as our home and it is virtually debt-free, with a miniscule mortgage so we retain a relationship with our bank. And right now, I am sitting on goodly amount of cash, mostly in C$ and HK$, as well as some residual mining shares. I also hold a decent number of puts on the stock indices, as a hedge for those mining shares, and a possible source of profits if stock markets fall.

My blog here will not be primarily about my own investments, but I thought some readers might like to know the larger context. Investing is not an easy game, and I don't see it getting any easier in the years to come. So I feel I am fortunate to have been able to make a decent living at this game, while building up enough capital that I can consider myself "comfortable" now, and able to concentrate on my private investments and developing this website.

In the next few panels, I will give some background on how my views of the UK property market have evolved, and also some views on the HK property market.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#3 DrBubb

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Posted 04 October 2010 - 06:16 AM

CALLING THE TOP ON LONDON PROPERTY - Has not been easy

As anyone who trades in markets will tell you: It is easier to pick bottoms than tops. And picking the top on the London property market has been a frustrating game. Only Fred Harrison, the proponent of the 18 year cycle, seems to have gotten right. I think that I am better at calling turns now, but it has been a long learning process, and no doubt I will continue to make mistakes in the year to come. Having said that, I have made money on every one of the 12 properties that I have bought and sold, so I really cannot complain.

Back in 2001 when I decided to sell my Kensington property, I wanted to leave a dark lower ground flat that I was living in, and was looking at what I could do with the money (buy Gold shares!), than I was thinking about the length of property cycles. Many would say that UK property was cheap then, as hindsight has shown it to be. But that wasn't so easy to say that about a dark flat in overheated Kensington.

: q1-2009 source

Back in 2001, the ratio of Property prices to incomes was near 4:1, the Long Term average, but it was much higher than that in London. Most importantly, I was able to cash a huge profit, by selling the property for more than 4-times what I had paid for it 16 years earlier. As someone who then had no job and no regular salary, I could not allow a profit of that size slip away. I needed the money to launch my career as a private investor and trader.

Talking Property "on the boards"

Throughout my ten years as a fulltime private investor, I have been a regular participant on internet chat boards. I find it useful to develop my ideas to the point that I am ready to share them with others. And the reactions that a poster receives are a sort of reality-testing process. (BTW, sometimes it is more useful as a contrarian indicator than a useful clue about where you should invest your money.) So throughout the last decade, I have posted my property forecasts regularly on various internet forums. And along with charts, I would usually post a reasoned argument about why I was expecting a particular move, up or down. These forecast have inspired debate, controversy, and sometimes outright abuse. My overwhelming sense from the reactions that I read, is that few reactions were made with anything like the care that I take in making the initial forecast. I don't think the the average internet poster on most chatboards is ready to put in the work needed to develop an independent forecast (though GEI and GPC may prove an exception.) Most would rather just make a quick comment and move on. Perhaps that is easy to do when there is no money at stake. But I have heard it said that most people spend more time studying which sound system or car to buy, than they do studying property markets before they plunk down 3-5 years of salary. That's strange behavior.

One of my first cyclical property forecast was done in about 2004. I had looked at about 2-3 decades of UK property price data and concluded that there was a 15-16 year cycle in UK property, and it was due to peak in 2004 or 2005. Moreover, I was looking at various charts showing the ratio of House prices to Incomes, and by then the Ratio was stretching into record territory, and it looked as if prices might soon rollover. In fact, there was a multi-month pause in property prices in 2005, and by late summer 2005 there were many thinking prices could go negative on a year-on-year basis. I had begun to play around with UK homebuilders as a "early warning system" for changes in the property market, and my charts looked as if key support levels were being threatened.

..

The Bank of England may have been seeing some of the same signs, and in August 2005, they cut base rates by 0.25% perhaps because they were worried that the UK economy was headed towards recession. The decision was a controversial one, since the BofE governor Mervyn King voted against the rate cut. Later, after it touched off a renewed boom in property prices King and his colleagues agreed it was a mistake, but the damage was already done by the time they saw it.

The Builder Bellwether - a very brief "false break" in Oct.2005
: Cal.2005 : last 12mos

Ironically, the property market did not recover straight away, and the UK homebuilder stocks actually drifted lower (on light volume) during September and October. One of my principal cyclical indicators has been the 12 months moving average (252 days), which I apply to various stock charts. In late September 2005 this was broken for a day or two. So eager had I anticipated this, that I boldly proclaimed that a property correction had arrived "on schedule" in late 2005 and the market might be soon headed into a period of "crash cruise speed" with monthly falls averaging 0.5 - 1.0% per month. But I had spoken too soon. The UK homebuilder stocks bounced from oversold, and went into a nice sharp rally upwards. By November it was clear that it was more than short-covering, and by December I had to backtrack on my forecast of a forthcoming drop. I vowed to be a bit more careful in the future, and wait for a break of more than a day or two, and to pay more attention to trading volumes, which were light during that October "false break."

I eventually turned to study the cyclical theories of Fred Harrison. He has developed a theory that Property prices move in a cycle of about 18 years. At the time of the apparent "false break" in late 2005, he was saying that the property market rally still had two years to go. He expected it to peak in 2007 or 2008. I bought his book and studied his cycles, and eventually (in mid-2008) wound up making three videos for YouTube talking about his cycles :


From: : Intro : part1 : part2 .

One of the very interesting parts of his theory is that the last part of the upcycle, lasting about 2-3 years, is the so-called "Winners Curse" period. Anyone who buys at the time feels lucky, since there is limited supply for sale, and great competition amongst buyers. But when the markets down, they will soon find themselves nursing losses. That proved to be a rather good description of the 2005-7 period. During the 32 months from Jan. 2005, the H&N Index rose a handsome 23.5% to its August 2007 peak at Pds.192,490.

UK Builders compared w/ Key MA's: BDEV, PSN, BKG, TW


Fortunately, I did not give up on my Builder Bellwether indicator. It gave a great early warning of the property Peak in the first half of 2007. Key stocks like BDEV and PSN had peaked in January or February, and then they slid below the 1year/252d MA in early June, on rising volume - giving a clear warning that property prices were about to peak. I telegraphed this warning on HPC, GEI and on other websites that I visit. Some listened and became cautious on the markets. But some of the usual bulls on the websites dismissed the warnings, without bothering to understand the importance of the heavy selling volume in Builders stocks, and the fact that interest rates were rising rather than falling as they had during the "false break" of 2005.

Just after this warning, I recorded a podcast with Dominic Frisby and the "bullish" John Wriglesworth for CWR ( July 2007 ) and I went through the litany of reasons why I expected a top, and a possible property crash in 2008. So keen was I to get the warning out, I learned how to make videos, and recorded my very first one, taking my parts of the CWR podcast, and adding some key charts. This has to be one of the clearest warnings of the impending peak in UK property prices, which came a few months later in August 2007.


From: / CWR-July 2007: Moonbound or Pear-shaped

The August 2007 peak was an important one. From there, the slide soon picked up steam. The first shock drop was in January 2009, when the NSA index fell by Pds. 2,832, that's -1.5% in a single month, then during 2008 the slide speeded up. The drop for 2008 was a whole was Pds.32,964, or -17.5%. And by the low in February 2009, the H&N Index was down to Pds. 153,477, -20.3% off its peak. Over 18 months, that's a nice average "crash cruise speed" of -1.13% per month.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#4 DrBubb

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Posted 04 October 2010 - 06:18 AM

LONDON's "BULL TRAP" RALLY (e.g. the "Dead Cat bounce") - Is it over?

I think it is ...
Let's look at how I anticipated price moves often before they happened, using UK Builder share prices as my guide.
= = = = = = = =

I posted many times here (and on HPC) about my expectation for a so-called "Dead Cat bounce" in UK property prices.
If you had read those posts carefully, you would have been able to get on the right side of that price move, and ride it through the end of 2009, and perhaps longer.

1/ March 2009
I began to signal the possibility of a Dead Cat bounce in late March 2009 with a post on HPC. I was answering a question:
"Dr Bubb, you have previously considered shares in housebuilders to be an important bellweather for the future direction of HPI. They have risen significantly this past 2/3 months."

DrBubb / Posted 29 March 2009: link : cache
Not yet. A BUY signal hasnt been flashed yet. But it could happen soon. I am particularly watching Barratt, and comparing its price action to the 1 year (252day) MovingAverage :

Barratt Dev'l (BDEV.L) ... update


A move above key resistance near BDEV-120p / the 252d.MA (52 weeks) would be a sign that the "Bull Trap" move may be about to begin.
. . .
What I find very interesting is that Berkeley / BKG shares have recently flashed a "BUY", by exceeding their 252d.MA and that Tony Pidgley, BKG's chairman (who is well-known for his timing prowess) has recently said that UK property is near a cyclical Low.

Fundamentally, I cannot see this as THE LOW, but I think that a nice Bull Trap is about to be set, and for a while Property buyers will think they 'caught the low', only to find themselves trapped in a losing investment when interest rates go back up."
= = = = = = = =

2 A/ April 2009 -
I saw that a major upthrust in Builders shares was starting:

A WARNING to would-be homebuyers... A "Dead Cat Bounce" may soon be underway !

DrBubb / Posted 04 April 2009 on HPC : link : cache

A Global "dead cat bounce" in property will soon be underway, I reckon.
I make the argument for this elsewhere , we even recorded a podcast about it yesterday. For many, this bounce may give a last chance to sell, and reduce debt before the second leg down into a Greater Depression hits.
. . .
I really want to save UK people from a probable Bull Trap, which may will fall into, if they buy on this "Dead Cat Bounce". They will then watch with horror as prices start sliding again, when rates begin their inevitable rise, probably 9-18 months from now.



I still expect a UK low no sooner than 2011, and very probably 2012-13, or later.
====

2 B/ April 2009
On the early April thread announcing the Bull Trap, and you will see this in post #3:

The Bellwethers should help tell us when to get out.
Right now, the Bellwethers are signalling a "surprise bounce".
How long might the bounce last? My guess is about 6 - 12 months, maybe 18.
I think it will be very hard to buy, and resell, and get out with a decent profit.
Let's face it, transaction costs in property are not cheap.
= = = = = = = =

3/ June 2009 "wooble"
Along the way, I had a brief "wobble", since I had done some scary reading about 1930 events that had convinced me that we might only see a 6-9 months rally in stocks. If a second leg down in stocks began in summer 2009, I did not want people exposed to an overly bullish property forecast. But I was careful to suggest that a quicker downturn in UK property would have to be signalled first by a drop in the UK Builder share prices. (note: some of my detractors on HPC picked up on this "wobble", and misquoted my comments without the careful language I had used.)

Dr Bubb / Posted 09 June 2009 : link

I think the DC Bounce will be over before the summer is gone, but as for the specific TURN date, I am watching UK homebuilding stocks to give me an early warning for the Turn. So for those who want to get advance notice of the turn, I would say:

"BUILDERS - need watching" / The others are still holding up, but I note that...

Berkeley Group (BKG) ... update


...has slipped back below its 252d.MA. This shouldnt be happening if the property Low is now in place..
I would expect to see it back up above 900p very soon, but if it slips lower, that would be an early sign that the DC Bounce may be losing its momentum soon
= = = = = = = =

4/ October 2009
Since stocks held up through the summer, I did not see the conditions that I thought would signal a new property downturn until late October:

It's nearly over, the Dead Cat Bounce, Property should peak by year end (my forecast)

Posted 28 October 2009 : link : cache

I cannot ignore those price falls in the Builder shares any longer.
I think it is time to flash : the REVERSAL WARNING !



Having called the Dead Cat Bounce was underway on April 4th, I now think it is time to say: I believe we are seeing the end of it.

I believe now that UK property should peak before year end, and within the first quarter of 2010, you will once again see a sliding market.

The following charts of the Builders are my own prima facia evidence of a market that has lost its upwards momentum:

All Together : BDEV + PSN + BKG + TW ... update / intraday

. . .
post #2: Posted 28 October 2009
Here are the charts that convinced me to make the Call ... orig. image


The very high volume on the selloff is the main thing convincing me that turn is happening.
The Builder stocks are being ditched with real enthusiasm
= = = = = = = =

5/ October 2010
Looking back at the price action we have seen during 2010:

Whilst UK Builders peaked in late October 2009, and most broke through their 252d/1-year AMs around the same time as Barratt did (April 2010), the major property indices began to roll over in the first half of 2010. Here are the peaks in the main benchmarks that I follow:

+ Halifax SA peaked in Jan. 2010 - at £169,484
+ My H&N index (average of Halifax and Nationwide) peaked in April 2010 at £169,187
+ Rightmove's index peaked at 237,767, and their Greater London at 429,597 in June 2010

It should be clear by now whose prognosis has been worth paying attention to, that downside momentum in the indices is increasing:

+ Hometrack has reported in September the biggest drop in 18 months.
+ Rightmove has reported a 7.1% drop in Greater London over 3 months
+ Nationwide's own report says:

Martin Gahbauer, chief economist at Nationwide, said September had proven to be an uneventful month for house prices.
He said: "The seasonally adjusted price index for a typical UK property was essentially unchanged in September, edging up by a marginal 0.1 per cent from its August level.
"The three month on three month rate of change, a good indicator of the near term price trend, fell from 0.0 per cent in August to -0.9 per cent in September.
"This represents the first negative reading for the three month rate of change since May 2009 and is consistent with the clear loosening of housing market conditions observed over the summer months."


To me, we are moving into a period of continuing slides, where prices may fall and average of 0.5-1.0% per month or more. I call that rate of decline "Crash Cruise Speed."
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#5 DrBubb

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Posted 04 October 2010 - 07:50 AM

(UK - Tools for assessing the ongoing health of the market: conventional versus my unconventional tools)

When to buy: The tell-tale signs, per an HPC poster:

1. Unemployment stabilising:

More people in work means there is an increased demand for properties and fewer repossessions.

2. A sharp increase in mortgage approvals:

This shows that people want to start buying and this will get the market moving once again.

3. It becomes cheaper to buy than rent:

People will realise they could own their homes for the same money they are paying to the landlord.

4. Rising consumer confidence:

When people are feeling upbeat they are more willing to spend – whether that's in the shops or by making major purchases, such as a house.


SOME good thinking here, but also a flawed understanding of the relationship between prices and sentiment .
He seems to think that sentiment changes first at the low, and then prices begin to move up afterwards. And he is not paying sufficient attention to the long term cycle which moves the market. A brief bounce inspired by ultra-low rates, is not what is needed to start a new major cyclical upturn.

= = = = =

(My response - the above post is not looking at the Bigger Picture):

This comment says: the time to buy is "When people are feeling upbeat they are more willing to spend". Just the opposite. If you wait for the clear improvement in mass sentiment, you will miss the bottom by many months. And reports of positive sentiment will continue to be heard after the market is rolling over. And there can be a brief multi-month fake-out rally, or a "dead cat bounce" in the midst of a larger downturn.

This rise in confidence, together with (temporary) low interest rates, seems to have inspired a brief Dead Cat Bounce in UK house prices, which we predicted with confidence some weeks ago (early April 2009.) But anyone who buys now (expecting many years of continuous prices rises) will regret it when prices sink back.

Why am I so confident prices are headed lower within the next year or two? Several reasons:

+ Less than two years off the cycle peak is not enough for a final low. I reckon it will take 4-5 years to reach a low. About 4 years after the peak is normal, in the property cycle, which normally lasts about 18 years, give or take.

+ And affordability ratio of 4.34 is just not low enough. At cycle lows, this will often come in at 3.00 times average incomes or lower. And with banks now lending prudently again, after re-learning the lessons of how reckless it was to throw away the rule book, they will probably remain prudent for another decade or two, until the current crop of bank managers have retired. This means those ultra-high ratios of 5x - 6x earnings that we saw at the peak of the bubble may not come back for decades. The peakees, who bought at the top were "stuffees", and unless they bite the bullet, and take their loss now, they are going to stay stuffees, and see their equity erode even further.

+ Interest rates are at record lows (ever, in the history of Britain!) This may sound like good news, but once you buy a property, if rates go back up you will pay more. So if you take on a level of debt that you can just afford, and rates rise, you are buying trouble. Not only that, every other buyer also looks at what mortgage they can afford, and so if others are overpaying, because they think rates will stay down, then prices will rise. And that dynamic, plus aggressive ramping by Estate Agents and others with vested interests is what has pushed up prices, into a Dead Cat Bounce.

+ When rates begin their inevitable ascent, probably by year-end, or in the first half, of 2010, you will see Uk home prices coming under substantial downwards pressure.

I don't expect a bottom until 2011-13. Why not check out more articles on: GlobalEdgeInvestors dotcom, if you find this posting to be a rare breath of fresh air.

(Lost HPC - the above was first posted in Mid-2009, and then wiped out by HPC mods in their purge of my material)
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#6 DrBubb

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Posted 04 October 2010 - 08:53 AM

(PANEL SAVED - for discussion on Hong Kong property prices)
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#7 DrBubb

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Posted 04 October 2010 - 10:19 AM

US PROPERTY And a Comparison with the UK (& Ireland)


UK property prices were still rising after the market turned, but the UK eventually joined in the Global property downturn, about a year to 15 months after the US. It was behind other markets in its big correction when the 2008 financial crisis hit. Less damage had been done in the UK to lenders balance sheets by late 2008. So the big cut in rates engineer by Gordon Brown and the BofE "saved" the market (temporarily) from realising the full force of a property downturn.

Because less damage had been done, it was easier to "repair" sentiment. But this prop-job may just be setting the UK market up for a bigger and more damaging crash in the second leg down, which I believe started in 2010. In 2-3 years the UK may be in the midst of a severe property depression, while the US and Ireland are beginning to form bottoms, and move into a healthier situation. The coming late bust in UK housing may be thought of as "Brown's Revenge."

UPDATED - From post #24, below:


(more coming later)
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#8 DrBubb

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Posted 07 October 2010 - 08:26 AM

Halifax Hpi September 2010 -3.6%!?
: see a HPC page

My comment :

This report looks like a game changer.
It is going to be tough to restore the Bullish consensus after such a large fall.

Buyer are going to want discounts to buy, and that should help keep the falls coming month-by-month,
the psychology which is needed for "Crash Cruise Speed"* to be maintained over months, even years.


(BTW, if you want to quote me on HPC, I recommend that you say:
"The guy on the Property Cycles website says..." / any reference to "DrBubb" is now getting deleted there, unless it
is unfavorable - what a bunch of absolute bankers the Mods there are !)
== == ==

*Falls averaging 0.5-1.0% per month, perhaps more.
The September fall made up for 3-6 months of possible misreporting
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#9 DrBubb

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Posted 07 October 2010 - 11:24 PM

QUOTE (Cuthbert Calculus @ Oct 8 2010, 07:04 AM) <{POST_SNAPBACK}>
Has anyone considered the possibility that there might be some sot of aberration here? It's such a big number, perhaps we'll see rises from this next month?


Sure, a small bounce is likely.
But if this price report has broken the bullish psychology, then the old "crash cruise mentality" may take over, where people will insist on a "discount to market" as a reason to buy.

Remember how we discussed this a few years ago:
UK House Prices to fall up to 50% / CWR pt.3

"People are reading about price falls... the only real reason that people will buy is if they think they are getting a bit of bargain.
Today's bargain is tomorrow's market price... And the first round of price cuts, induces another... (and so forth.)"


The only thing that broke that downwards biased psychology was the huge cut in rates, to near zero. But that option is now "off the table" since interbank rates, and rates paid to savers are already near zero. If the BofE tries to go any lower, people will just take their money out of the banks, and stuff it into a mattress, or buy gold - and that makes capital totally unproductive. And the economy less efficient, and less able to grow. Some level of rates need to be paid to savers, or the economy will go ex-growth, like Japan.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#10 OneHundred

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Posted 16 October 2010 - 07:09 AM

Nothing new?
What do you make of this week's slide in Barratt shares?
PSN is holding much better.

#11 DrBubb

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Posted 17 October 2010 - 01:12 AM

EXCERPT from another post- giving more detail in how I use Builder share prices as a bellwether:

RESPONDING TO A NITPICKER

QUOTE (the_duke_of_hazzard @ Oct 14 2010, 06:43 PM) <{POST_SNAPBACK}>
I prefer the analysis here:

http://www.housepric...rice_predictor/

as it's based on actual market activity, rather than relying on imperfect market knowledge in a secondary market.

I like Spline's work also, and on his site he certainly rates my Builders Bellwethers which tends to give an early turn signal, ahead of most of the other indicators he looks at.

My Builders Bellwether appears on his site. Here's a chart from Spline's site showing it:


Note my markings, showing how much earlier the turn warning came before the Turns in the various Housing indices.

Given the historical lags, and the potential for brief false signals, I recommend awaiting a "confirmation" signal. This would come when several of the Builders Bellwethers, such as Barratt (BDEV) moving through their 252d/1year moving average, to the upside or downside - suggesting a trend change is coming in house price indicies.

Look here, and you will see that the 252d MA was broken to the upside in early April 2009 .. update


That upside break gave me the confidence to predict a Dead Cat Bounce in a (once very popular) HPC thread I started on 4 April 2009. As you have mentioned above, I saw signs of a peak in the UK Builders in October 2009, and that led me to suggest we could see a turn in the index by year-end, or at least within 6-9 months. Had I been more cautious, I would have said in my original October post, that one should await a confirmation of the signal, by seeing the BDEV price drop below the 252d MA. (I mentioned this requirement in various other posts on the same thread in October and November. But the nitpickers have chosen to ignore the need for a confirmation.)

While I would recommend that people treat these Builder Bellwether signals as "useful but not perfect" indicators - In fact, they have worked very well in this latest cycle. As the chart above shows, the 252d MA was broken to the downside in March 2010, and the 21d and 76d MA's did not fully rollover and turn significantly lower until May 2010. These subtleties should be carefully observed by those who want to use the BB's in their own forecasting. They should also pay attention to trading volumes in the shares, which should provide another important confirming indicator. For instance, the recent breakdown to new lows in BDEV with high trading volume, increases my confidence that we are headed into a period of falling home prices - "Crash Cruise speed" with falls averaging 0.5 - 1.0% per month (or more) seems likely.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#12 DrBubb

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Posted 17 October 2010 - 11:25 PM

QUOTE (Member100 @ Oct 16 2010, 03:09 PM) <{POST_SNAPBACK}>
Nothing new?
What do you make of this week's slide in Barratt shares?
PSN is holding much better.

...this post from a thread on Main contains an update...

Which Force wins?

QUOTE (bigtbigt @ Oct 17 2010, 10:35 PM) <{POST_SNAPBACK}>
For the record, I fully agree with your arguments for why house prices might fall. But against these, I also see stimulus packages everwhere and currencies being debased (with governments and CBs everywhere ensuring this happens), which means rising asset prices - especially higher quality assets (higher end properties).

So the question then becomes: which force wins?

I prefer to debate this, rather than just each try to insist we know best.

What represents "a win" for you?

Prices will not rise or fall forever. They move in cycles.
My view is that prices have clearly signaled that prices are headed lower - the cycle is rolling over.

The -3.7% fall in Halifax, shows up as a -1.49% fall in the H&N Index in Sept. / see: http://tinyurl.com/UKtrap
...which I take as a clear indicator that prices are rolling over, following the Builder Bellwethers lower, as I have forecast:

Barratt / BDEV ... update


Persimmon / PSN ... update


(I take BDEV as an indicator mainly for London, and PSN for the rest of the UK. But neither are perfect bellwethers.)

It is possible that the drop which has been signaled can be reversed. But I presently count that as unlikely.

What evidence do you see?

To me, it is more a question of following Cycles (and indicators that have worked in the past) than worrying about Conundrums.

But if you have a different point of view, and want to argue for it, please do. (Don't just say that: "your statements of 'certainty' don't really leave very little or no space for anyone to discuss/debate." May you argument. I presented my view, as my view, not as a "certainty.")

I think that an argument in favor of a continued upswing can be made, and it might be made by pointing at Rents, which may or may not still be rising. I would be curious to see what arguments could be made now for the Bull case.

Here on a GPC thread, you will see a bet that I made with an Estate Agent selling London property in HK. When we got down to discussing specifics, he quickly gave up.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#13 DrBubb

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Posted 18 October 2010 - 01:04 AM

A 5% Shocker, or just a normal seasonal "cheeky trying it out"?

QUOTE (DrBubb @ Oct 18 2010, 09:29 AM) <{POST_SNAPBACK}>
Meantime, the Delusion Index is getting seriously "pumped up", it seems:

A. : : 232,241 : 405,058 : 158,200 - 0.3% / 166,507 = n/a = 168,124 168,889 : £167,698 :- 0.68% :138.5%
S. : : 229,767 : 399,019 : 157,600* -0.4% / 166,757 = n/a = 162,096 163,639 : £165,198 :- 1.49% :139.1%
O : : 236,849 : 418,778 : est.DI: 143.4%
mom:+3.08% :+4.95% : 157,600* -0.4% / +0.15% : = n/a = :-3.59% -3.25% : - 1.49%

This shocker came out from Rightmove:

London Home Sellers Raise Prices by 5% as Housing Weathers Budget Squeeze
EXCERPT
Given the challenges of the current market, the behavior of sellers in raising their average asking prices by over 7,000 pounds takes some explaining,” Miles Shipside, commercial director of Rightmove, said in the statement, referring to prices across Britain. “It’s not likely to be a successful tactic.”

While the U.K. economy grew at the fastest pace in nine years in the second quarter, recent data indicates the recovery is weakening. Manufacturing growth slowed in September, jobless claims rose and Nationwide Building Society’s consumer- confidence gauge fell to an 18-month low as Britons braced for the government’s spending cuts to reduce the budget deficit.

For some odd reason, Rightmove doesn't refer to prior year JUMPS in October asking prices, which have always been huge:
Comparison:
Mon.: Rt'move : London : Hometrack / Na'wide H.old.SA Hali.SA Hali.nsa: H&Nindex : mom :DelusIdx
2009
S : : 223,996 : 390,768 : 156,118 +0.2% / 161,816 163,533 163,487 164,854 : £163,335 :+1.40% :137.1%
O : : 230,184 : 416,157 : 156,430 +0.2% / 162,038 165,528 165,349 165,430 : £163,734 :+2.44% :140.6% : RM '09 Hi
==================
chg: + 6,188 : + 25,389 (+6.50%)
2010
S. : : 229,767 : 399,019 : 157,600* -0.4% / 166,757 = n/a = 162,096 163,639 : £165,198 :- 1.49% :139.1%
O : : 236,849 : 418,778 : est.DI: 143.4%
==================
chg: + 7,089 : + 19,759 (+4.95%)
mom:+3.08% :+4.95%

This year's 4.95% jump in Great London asking prices seems a shocker, until you see that last year's rise was 6.5%.

And if you review last year's jump on: http://tinyurl.com/UKtrap , you will see that most of those higher offering prices did not hold. Within two months, Pds.17,731 of the Oct.2009 rise melted away.

Rightmove's own press release prepared sellers for disappointment:

Market fundamentals remain poor as property per branch rises from 69 in October last year to 78 now and mortgage availability continues to deteriorate
However, 105,769 new October sellers asked £7,082 more for their homes than last month’s sellers
Why would new sellers test the market at asking prices 3.1% higher than a month ago?...
- Bullish pricing is a normal characteristic of the autumn selling season with average asking prices increasing in every October for the past decade
- Vendors struggle to react to the increasing stock as most are unwilling or unable to adjust to new market conditions
- Post-HIP speculative sellers can now test the market at minimal cost

Disappointment is the likely outcome for many sellers as evidence shows high launch price damages chances of securing a later sale

/see: http://www.rightmove...ex/october-2010
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#14 DrBubb

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Posted 19 October 2010 - 11:49 PM

(Perhaps because people do not read this thread and others carefully enough, I get some comments telling me that I was "wrong" and I don't agree. Usually, it is because someone did not read or remember my comments carefully enough. The result is that I am forced to go through the material carefully for a second time - Like this from the GPC thread on Main):

QUOTE (bigtbigt @ Oct 20 2010, 01:02 AM) <{POST_SNAPBACK}>
Hi. I agree you called the start of the bounce well, but you also (like me) felt it ought to end much sooner than it did. The point I was making, however, was that in the autumn of 2009 I also dared to suggest we could both be wrong (since we were being logical) and it could go up much longer and further still (because Joe 6-pack investors don't see the/our logic). And thats how it turned out!

Who's to say we're not in exactly the same position again now, with house prices? The buying desire I see from friends and family, suggests that's more than just an outside possibility. If so, prices may not fall (much or at all), but just stay level and then start climbing again in 5 years or so.

Okay. I see your point.
But that is exactly why I watch the Builder bellwether - I never got a sell signal from the BB's last summer,
so my initial early-summer thought that prices would turn down in late summer 2009 was never confirmed.

This is how I put it as the summer came on last year (2009) , as I worried about a quick downturn in the DC bounce:
QUOTE (DrBubb @ June 9 2009)
I think the DC Bounce will be over before the summer is gone, but as for the specific TURN date, I am watching UK homebuilding stocks to give me an early warning for the Turn. So for those who want to get advance notice of the turn, I would say:

"BUILDERS - need watching" / The others are still holding up, but I note that...

Berkeley Group (BKG) ... update


...has slipped back below its 252d.MA. This shouldnt be happening if the property Low is now in place..
I would expect to see it back up above 900p very soon, but if it slips lower, that would be an early sign that the DC Bounce may be losing its momentum soon


So I "wobbled", but never confirm that we would see an early end to the DC bounce, because I never got a signal from the BB's. If you could read the old HPC posts, you would see that many of the old HPC "antibodies" tried very hard to trap me into making a statement that the DC bounce had fizzled out. But I was careful, and never said that, since we never got a clear break in the BB's.

Eventually, the Builder shares peaked in October 2009, and they generally turn 3-6 months ahead of the price indicies. That is why I thought we might see a peak around year-end, with a downturn in Q1-2010, and that is more or less what happened. If one was even more careful, you would have waited for the major Builder shares to drop below their 252d. MA's.

Barratt/ BDEV did that (unconvincingly) in Feb.2010, and then with conviction in April/May 2010.

And here's an update:


Now Barratt is well below the 76d and 252d MA's, and even thought there was a brief blip up from the Rightmove figures (being misinterpreted IMHO), the rally has no volume behind it.

This is why I am (currently) expecting further downside, and I think that the October 5% jump in GL asking prices, is nothing more than a seasonal blip, driven by delusional ideas by Vendors. The rug will be pulled on them soon, as little demand emerges, even at lower prices.
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#15 DrBubb

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Posted 20 October 2010 - 11:20 PM

LOL. The temporary nature of hope.

That stupid little "Rightmove rally" got reversed in two days ... BDEV chart : BDEV-vs-PSN



I wonder how many fools rushed in and bought on a mere seasonal blimp in Delusional thinking?

The used to say: "the early bird catches the worm", now it will be:
"The sensible vendors will catch the few buyers."
The delusional ones will be left chasing the market lower in the months to come.
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#16 OneHundred

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Posted 23 October 2010 - 05:45 AM

QUOTE (DrBubb @ Oct 20 2010, 11:20 PM) <{POST_SNAPBACK}>
LOL. The temporary nature of hope.
That stupid little "Rightmove rally" got reversed in two days ... BDEV chart : BDEV-vs-PSN


BDEV Closed at 80p.
How far do you see it falling?
When will it show up in the property indices?

#17 DrBubb

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Posted 23 October 2010 - 08:16 AM

QUOTE (Member100 @ Oct 23 2010, 01:45 PM) <{POST_SNAPBACK}>
BDEV Closed at 80p.
How far do you see it falling?
When will it show up in the property indices?

DANGER ! A Key breakdown in Market sentiment seems to be underway.

BDEV.L / We are in a treacherous part of the chart ... update : BDEV-mas : PSN-mas


BDEV has fallen to a new LOW for the year, and is now in a part of the chart where there is little historical support, and it could fall quickly to near 60p or even to near 40p.

I think the property indices will follow BDEV down, if we see those deep falls. We could see sharp falls right through the winter, and then we could see a disappointing bounce next spring.

Don't "hang your hat" on these educated guesses, based on my chart reading. Since we will need to monitor subsequent price action. But the current action in BDEV provides a grim foreboding.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix

#18 PositiveDeviant

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Posted 28 October 2010 - 09:41 PM

One Third of Britons See House Prices Falling, Rightmove Says

QUOTE
The number of Britons who expect house prices to fall outnumbered those forecasting an increase for the first time since 2009 in the third quarter as concerns about the economy mounted, Rightmove Plc said.

Some 32 percent of the 25,584 people surveyed said prices will be lower in a year, the operator of Britain’s biggest property website said in a report published in London today. Thirty six percent forecast home values would be “about the same,” while 27 percent said they would be higher. A year earlier, 56 percent predicted higher prices.


Looks like that's it for sentiment, volumes are already very low, the wheels are really falling off now

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#19 DrBubb

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Posted 29 October 2010 - 11:38 AM

QUOTE (Perishabull @ Oct 29 2010, 06:41 AM) <{POST_SNAPBACK}>
One Third of Britons See House Prices Falling, Rightmove Says
Looks like that's it for sentiment, volumes are already very low, the wheels are really falling off now

Yes.
The latest Nationwide index was down -0.7% - that's right in the middle of the -0.5 to -1.0% "normal Crash Cruise speed."

House prices fell 0.7% in October, says Nationwide

House prices dropped in October compared with the previous month as the property market saw an autumn fall, according to the Nationwide.

The building society said that prices were down 0.7% compared with September, with the average home now costing £164,381

The more reliable three-month on three-month comparison showed prices fell by 1.5% in October. The average home still costs 1.4% more than it did a year ago. However, this was closer to parity than in September, when the difference was 3.1%.

"If the recent trend in house prices were to continue through November and December, the annual rate of house price inflation would drop to between 0% and -1% by the end of 2010," said Nationwide's chief economist Martin Gahbauer.
. . .
"First-time buyers - the life-blood of the housing market - are almost entirely shut out," said Stewart Baseley, executive chairman of the federation. "We desperately need an increase in lending and a properly functioning and sustainable mortgage market."

(NO! Stewart, what is needed is for the banks to tighten lending to "investors", and for the government to stop paying such unrealistic and high housing benefits, and that will "cut the legs off" the artificial payments that help to prop up BTL investments. If prices continue sliding at near 1% a month, than within 2-3 years, they will be much more affordable to prudent and patient First Time Buyers. The smart ones are waiting for that day.)
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#20 DrBubb

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Posted 29 October 2010 - 05:34 PM

FTSE has been weaker than the SPX in recent days / FTSE update



The 3d.MA has crossed below both the 8d and 21d MA's

In the past, FTSE has often led US markets lower.

By comparison, my favorite property bellwether, Barratt / BDEV ... update


... is on a nice "lazer beam" slide to the downside.

The BDEV slide does not bode well for UK property prices in the months to come.
The market is "bipolar", swinging back and forth from a focus on Inflation to Deflation. Bet on swings; and stay flexible. What are bipolar markets? See: http://tinyurl.com/GEI-Manix




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