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PostPosted: Wed Nov 07, 2007 11:14 pm 
retrobike rider / Gold Trader
retrobike rider / Gold Trader
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Wow - deep topic!

Are we going to see a recession? I hope not. A recession is defined as 2 consecutive quarters of negative GDP growth. Q3 2007 showed a growth of around 0.8%, consistent with the past 12 months, so a full on recession would be a quite a shock.

Is there a problem with personal debt in this country? Yes, I think so. But then I'm risk averse. I don't have a credit card, but I am fortunate in that I don't need one. Culturally we have changed and personal debt is not only acceptable, it is expected, and I think this is a bad thing because debt compounds and most people do not understand this. Will this cause problems? Yes. More debt -> more personal bankruptcy -> higher cost of credit -> less purchasing power for the individual -> retail sales down ...

Housing market: market pricing interest rates at unch to slightly down in the next 6 months, which isn't a bad thing for a slow cooling, but if there are more credit crunch surprises this could have an effect. Changes in stamp duty would help bolster the housing market, as would a retail downturn. The worrying thing is the cost of getting a mortgage (arrangement fees etc.) has gone up a lot which could impact re-arrangement of mortgages, especially on buy to let, which might lead to sales. IF a sell-off starts, prices will fall, and quickly but you won't see it in the stats until a couple of months later (ie: when the stats based on sale-prices, as opposed to asking prices come out)

Russell has it on the head with fuel prices and strong pound being quite worrying bear signals, but there is still plenty of opportunity to make money in a declining economy. At the moment, I think we're uncertain - just check the volatility in the Equity markets right now - but a few days of -1% soon adds up if it's not chased back up the following day.

Blimey. Rant over. Sorry ...

Rampant Capitalist


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 Post subject:
PostPosted: Wed Nov 07, 2007 11:17 pm 
Old School Grand Master
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Christ, don't make financial decisions based on what I've written. A-level Business Studies and a module or two in Economics at Uni make me an educated observer, not an informed advisor :)


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PostPosted: Wed Nov 07, 2007 11:22 pm 
retrobike rider / Gold Trader
retrobike rider / Gold Trader
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Russell wrote:
Christ, don't make financial decisions based on what I've written. A-level Business Studies and a module or two in Economics at Uni make me an educated observer, not an informed advisor :)


Ditto for me! Apart from A-level business studies and Economics modules at grad level - none of that here!

An education is the only investment that'll guarantee you a return


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PostPosted: Wed Nov 07, 2007 11:25 pm 
Old School Grand Master
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Location: No brakes? Way to commit soldier.
Kestonian wrote:
An education is the only investment that'll guarantee you a return


Deep.

If that's the case, then this country is very deeply in recession and heading for an almighty crash, but that's another topic.


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PostPosted: Wed Nov 07, 2007 11:26 pm 
East Midlands AEC
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well I did econmics at Uni too and you're making sense!! :wink:


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 Post subject:
PostPosted: Wed Nov 07, 2007 11:26 pm 
Retro Guru

Joined: Fri Dec 09, 2005 3:49 pm
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My take would be this;

There's been a surprising amount of liquidity in the financial system over recent years, which has resulted in cheap credit for consumers, and a change in societal values which means borrowing is no longer seen as a bad thing.

At the same time, people's perceptions of the most important asset class have shifted from equities (relatively poorly understood, volatile on an individual level, suffered around 2001) to property (people think they understand it, has been easy to make substantial profits on what is essentially a leveraged investment).

It's therefore true that we are loaded up with personal debt, and massively over-exposed to the housing market, which is driven by little more than confidence (the fundamentals went out the window a long time ago).

I think we'll see an increase in reposessions, bankruptcy and defaulting on debts - horror stories will emerge of people ending up with £1m of debt incurred on city-centre studio apartment buy-to-lets, or having been lent more than their annual income across a number of credit cards. However, I don't think we have the same catalysts as the US, nor the same structural problems.

House prices will remain broadly level over the next year - perhaps down as much as 20% for specific types of property in specific areas (i.e. buy-to-let studios in Northern city centres) and up 5% for family homes in Greater London.

Equity markets will suffer a blip, but recover in the medium term. Some sectors will be hit more than others, but once the full extent of sub-prime losses across financial services becomes apparent some shares will rise when investors realise they've been overly cautious.

The retail environment will be tough because people will concentrate on repaying their outstanding debts rather than loading themselves up with more. However, the remainder of the economy should remain relatively strong. Certainly growth will remain at the lower end of expectations, but it will be there.

So, all in all a bit of a soft landing I'd suggest.


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 Post subject:
PostPosted: Wed Nov 07, 2007 11:37 pm 
Mr Darcy
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There is a severe downturn in the US car market at the mo - GM shut manufacturing for a month :shock: This will certainly affect Europe in time, as often happens with USA health.

Affected us by a cancellation of a Christmas party :twisted: :twisted:

Still, plenty of growth in Asia/Pacific region, which is where our sales are being focussed now. Bad part of this is the high import costs to China etc, which means local sourcing again...
As long as we stay shit-hot at engineering, we'll be fine.

Think Europe as a whole is reasonably stable at the mo, but shortage of housing in UK and low interest rates not the best situation.


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 Post subject:
PostPosted: Wed Nov 07, 2007 11:42 pm 
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Hmm, Asia is deffo the place to be. Marks and Spencers released plans this week to move into the Middle East and Asia, surprised alot of people as they relatively recently pulled out of a load of foreign territories. No plans to open up in the US though, which says a lot about confidence in that country.


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PostPosted: Thu Nov 08, 2007 10:03 am 
Gold Trader
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Location: Somerset
Am I the only person here who benefits from $90 a barrel oil?

$100 barrel of oil is very interesting from a point of view of altenative energy.
When oil reaches $25 or less it is no longer economically viable to explore for new oil fields.
When oil reaches $100 fuel cells & hydrogen etc all become economically viable.

However global shipping runs on heavy fuel oil (380cst) currently at $450 per tonne.
A big (3000 container plus) ship, the type of which carry 98% of consumer goods, burn 150-200 tonnes per day, covering 620 miles a day.
These ships charge to carry based on a tonnes / miles calculation. The cost of shipping has to be passed to the consumer as the industry cannot absorb the fluctuations as shipping is a small percentage big volume industry.

Intersting times ahead.


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PostPosted: Thu Nov 08, 2007 3:32 pm 
Ain't no party like an S Club party
Ain't no party like an S Club party
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Russell wrote:
Kestonian wrote:
An education is the only investment that'll guarantee you a return


Deep.

If that's the case, then this country is very deeply in recession and heading for an almighty crash, but that's another topic.


Are you aware of the money that has been invested in education over the last decade?

Don't expect instant results from something that had been so heavily un-invested in but things are changing education-wise.

Finland didn't get 100% literacy rates over-night...


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