Saturday 23 January 2010

Gulp...did Obama do it?

Courtesy of the Big Picture, this perhaps shows the future for the markets. The FTSE 100 has given up all its gains for the year so far. When the FTSE falls in January then it normally sets the trend for the whole year; last year being a notable exception.


Steven_L said...

I just read something in the Telegraph reckoning Barclays are about to announce £10b+ profits. That makes them a buy at 275p surely?

I'm also thinking about a small flutter on some out-of-fashion property related stocks this year. Enterprise Inns, Barratt Developments and Taylor Wimpey all strike me as risky long term buys with a big potential upside.

Everyone I talk to seems to think it's a good time to buy a house, but the markets seems to be pricing in a bad time for property.

Electro-Kevin said...

I reckon property still has a way to fall - certainly in terms of the value of the pound. If you can secure index linked wage rises then good for you.

Wage freezes, wage reductions, tax hikes and also carnage in the public sector are yet to come.

James Higham said...

We all keep our eyes on as many indicators as possible. Some of us like to consider ourselves realists but others would say pessimists.

The indicators seem to suggest that what the markets do bears little relevance to the overall health of the economy, that there will be a partial faux recovery, especially in confidence when the government changes hands but that certain EU policies and the staggering debt will bring it down like a house of cards.

There is a need for talking up the economy, sure but there's also a need for realism.

anon@9.30 said...

@el-kevo :-
I think you are correct, stating the bleeding obvious :
Houses are worth what people are willing to sell and buy at.
If people have more money, they will probably end up spending more on a house (and vice-versa)
Looking at the ONS family spending survey ( - page 65 )
You can see food/clothing/booze used about 27.6% of income in '92 and 23.2% in 08
You can see housing rising from about 17.5% to 20% of expenditure (+2.5%), and leisure rising by about 4%
Real incomes rose by about 11.4%

Of course these are government stats relating to average households so please treat them with caution :)

This says to me that where there is a real rise in income, about 25-30% of that rise is allocated to housing.

This works both ways.

So, if your income is going to drop by (say) 3-5% due to tax rises,
and your pay does not increase in real terms, you could geuss that people will spend possibly 2% less on housing.
Which is a drop of 10% in spending on that item.
If real incomes increase at about 0.7%, we will be back to the start point after 12 years or so.
Not quite a lost generation then, so that's alright.

Anonymous said...

Wheres the fillet on that cow?

CityUnslicker said...

SL - If property is going to fall then why would you but TW and barrats?

I agree property prices will fall some more, the correction was just not enough and the trough might be another 20% over the next couple of years. The phase we are in right now could be a classic bull trap.

On the other hand, it is really hard to understand what effect such low interest rates and QE are having.

A sharp rise in interest rates will kill the housing market stone dead.

Steven_L said...

I never said it would fall, I just don't know. All the youngsters I play cricket with - accountants, bankers and mortgage brokers included - are bullish on property. I think everything looks cheap thanks to low rates.

I also think the next government will do what it takes to keep them low, but that will mean higher unemployment, also bearish for housing, so the market does have a point.

But if you are looking for something cheap and risky, housebuilders and commercial property (pub) companies are about the only thing trading at discounts to book values.

I've been reading up on a few stocks over the weekend, I'm liking Barclays, Aviva, Enterprise Inns and Barratt as medium term buys.

I'm thinking about cutting the loss on GKN and selling a fund tomorrow to buy some of each in the morning. Of course, I might sleep in instead.

measured said...

Maybe you should think about buying some Provident Financial (a traditional weekly collected debt co) except taking on new customers doesn't make money initially owing to a higher incidence of bad debts (should have told Northern Rock and some US mortgage cos. that). Still the market is built on expectation; the pain is going to be spread over a number of years but a double dip with it hitting the buffers after the Election looks inevitable. I agree property is a good hedge against inflation but it does need to be weighed up against higher interest rates and job insecurity. I fail to measure any opportunities at the moment except to make sure I pay the 'right' amount of tax in these taxing times. No fillet, Mutley; commission is a very rare treat these days, reserved for carpaccio. :)