Pal

Just because you do not know the future with 100% certainty,

it does not mean you are "just guessing" with the accuracy of a 50/50 wager, such as coin flipping.

 

If you develop a technique which can improve your accuracy from a random 50/50, to a useful 60/40,

or a very useful 70/30, then you have an "economic edge" which can allow you to beat random chance,

provided you manage your money with discipline.

Forgive the rarity of my postings though I do lurk and enjoy reading many postings. I think you have nailed it accurately there DB.

Successful trading is not looking for perfection, as it is not attainable, but merely to improve the win loss ratio. In fact even if you have a win/loss ratio of 30:70 you can trade successfully if your money management is good enough. Merely a matter of making sure the wins are big and losses are small (easier said than done of course). I think your constant reminders that "Anything can happen" is absolutely vital for traders and is what makes money management so important.

I'd love to see more discussion on maoney management and position sizing.

If this is in the wrong thread please move it to the trading thread or wherever suitable.

Gotta hand it to the manipulators, they have played it absolutely perfectly with gold just going decisively downwards through the 50 day EMA. It looks like being a deep correction now down to around 1550-1600 and I think that the yearly top is in at 1920.

 

Edit: The next target would I guess be the 150 day EMA which is at around 1620. It hasn't closed below that since April 2009.

It could easily go lower but I expect to see it fill the gap from August 5th at around 1660. Anywhere around that level looks like a good buying opportunity to me.

The assumption that I would question here is Average Household size

 

In a severe recession, I reckon it will RISE

New government policy starting next year which could indeed cause average household size to rise - Single people under the age of 25 (may be 35, I will have to check) will no longer be able to claim HB for 1 bed flats. They will need to enter share accommodation. This is causing local councils a lot of consternation though as they see a potential huge rise in people being evicted due to HB being stopped and then claiming emergency housing from them. They have very limited places available in the B&B type sector and the cost is far higher so they are trying to get this decision changed.

Of course, this could equally just lead to an increase in demand for 2 bed flats, where 2 singles will then share the rent and get full HB.

Other planned changes which could cause changes are a stop to HB completely. The decision has been made to make a single "Universal Payment" to the claimant. They would then decide where they live and how much they spend on rents. Again, this is being fought hard as last time they stopped direct payments to landlords arrears and evictions rose sharply. There are already schemes being promoted to get around this by credit unions. The idea for the government is that by giving a single payment they can simplify the system and reduce the amount allowed on housing benefit without it looking like a direct cut.

Nice bullish hammer yesterday. Could well be the end of the correction if today holds.

With the gold market looking strong but over extended in the short term, just wondering what protection people are putting in place? I guess this is aimed more at paper gold traders than physical holders, though could be pertinent to both.

I'd like opinions on the idea of selling a straddle to offer some protection. With ATM December call and put options both selling in the region of 100 this could offer upto $200 of downside protection and not produce any loss of profit unless gold gains over $200. If it pulled back over $200 then I'd consider this a fantastic buy opportunity anyway so not over concerned about protecting beyond this figure.

I realise I could also buy puts to cover the downside but that potentially takes away from upside profit, whereas selling options stands a far better chance of adding to the gains, unless it gains over $200 in this period, which I accept is possible but fully expect a pullback before those gains happen. The options would not necessarilly have to be held to maturity and the calls could be bought back for a nominal amount if we do get a big pullback.

 

 

In general, I believe that silver will further outperform gold over the years, but I need to stick with my long term strategy which means I will reduce my silver exposure step by step to take volatility and risk

I'd be interested in your reasoning as to why you expect silver to outperform gold over the next few years.

I am still buying in stages although JP of financialsense recommends maybe a put options contract on SLV for september or december may be good insurance against a sharp decline. If history repeats itself expect the correctin by May/June.. but noone knows.

 

I have some serious amounts of dry powder at the moment due to some share options maturing which i cashed in. trying to get it into PM's but having to be very cautious. I am going to buy over the next 6 months or so in stages although - any correction and i'm all in!!

Sounds like a good plan

That's $45 taken out with ease...

Yes it really is like a charging bull at the moment. Whilst I agree about the medium/long term direction I think a quite sharp pullback is highly likely sometime soon. Not that I've got the balls to short it.

Feeling dizzy! If you look at 5/8/10yr charts, that is a parabola isn't is?

Silver looks mental.

I agree. Does anyone else think this is overdue a correction?

Something I have noticed is how much the banks manipulate the prices. When they were aggressively lending they allowed very loose valuations and high LTV loans, which pushed prices higher constantly. Now they are funds restricted they have instructed valuers in some areas (particularly the North and Wales) to down value. This means many sales fall through or buyer have to put in bigger deposits. This looks good for the banks, who can then show they are lending freely (when in reality they are holding the market back) and also gives them a cushion against further falls.

The above actions are actually leading the market, so very useful for short/medium term forecasting. I can see how some areas are being deliberately pushed downwards and other areas (London is a prime example) are being protected and eased upwards. I realise supply/demand are prime drivers but with their lending policies the banks do control a lot of this supply/demand.

I think DrBubb's method of watching builders shares possibly gives similar results to a degree as builders profit forecasts are very reliant on lending policies.

The next several years could be an opportunity. Perhaps they could release land when prices start to stabilise / go up with inflation. Let the land out at a measured pace to keep the rises slow.

This is what I think they should do also. However, I very much doubt they will do this as the incumbent government will want to show how they have sorted out the problems caused by the last government and the economy is now beginning to grow nicely. HPI adds to this feelgood factor and will be sort after as an election looms.

There can still be some good opportunities with this scenario but you need to be alert to them and the part of the cycle we are in at any particular time. If you can add to that with some expertise allowing you to buy at significant discounts to the current market value it can be very profitable. I'm not by any means trying to suggest that people should all go out and become landlords, as that is a business in itself but there can also be trading opportunities.

Having said all the above - It is difficult to argue against simple commodity and option trading and investing at the current time. I guess to a degree they are different beasts though as property is more of a business than a passive investment, unless we are talking about just purchasing your own home rather than profiting from property.

I totally agree with you DrBubb, hence why I said it would balance out.

There is a major problem with supply in this country, deliberately orchestrated by government planners, which keeps house prices high. If land was cheaper, due to more supply being released, house prices would fall and we would not have a shortage.

Realistically no govenrment is likely to deliberately engineer house price falls as this would alienate a large percentage of voters but they could easily manage the supply of land to ensure we had stagnant nominal prices and erosion in prices through inflation. This would make the country more competitive in the longer term as we would not need to spend so much on housing.

Whilst I believe this would be the right way to go I have no faith in any governments doing this, as they like the feelgood factor that HPI gives the general population. Plus of course the constant mewing for consumer spending stimulates the economy and provides jobs. Bearing all this in mind I try to base my investment decisions on what I "think" will happen, rather than what I believe should happen.

Thanks, I hear you both.

 

But the SUPPLY of properties for renting and selling is the same Supply - there is no barrier between.

 

+ A property that is not easily rented, may get sold, and

+ A property that is not easily sold, may get rented

 

So if people shift from BUYING to RENTING, then the Supply will just shift to match their preference.

 

To put it another way, fewer houses being SOLD, means more available for rent. So a drop in selling, means a greater supply of homes and properties to be rented.

Another thing to consider is that many people who have been unable to sell have rented out their properties (accidental landlords). As they manage to pay down their debt and/or prices pick up slightly, many of these will probably sell. I see this as having a balancing effect on supply of rental property.

One of the main issues with UK property is supply & demand and until the governments decide to relax planning laws I expect the lack of supply to put a floor under prices (though I still expect some further falls, especially as interest rates rise).

Yes I think it does. (I know you understand the point, but perhaps I didn't put it very well).

 

Those that used to buy with a 100% mortgage are having to rent (as they do not want to (or can not) live with parents etc) and are having to save for a few years to get their 10% deposit.

 

Once that period is over, those coming behind will continue the cycle. So we have a 3 to 5 year gap where the first start saving for their deposit. But once that has worked through the system, the demand for rent levels back (and if mortgages become more available, the demand for rentals will drop.

 

That is one of the reasons why I think there is a rise in rents (and demand for rented property) at present. ie 3-5 years of new renters that normally would have been new buyers.

 

 

 

 

True, hence the increase in rental demand now, while in a few years the demand for rental should drop back as the demand to buy returns.

Hi DrBubb

Yes I'm the same poster that used to post on SP. I've been enjoying your forum for some time now, though I rarely post. It is good to see such a wide range of knowledgeable investors discussing various points of view and I appreciate the sharing nature.

I've enjoyed seeing the rise in gold over the last few years since you brought it to the attention to many on SP and i'm sure some will have benefitted from this.

Due to my position within the property investor community and financing i'm in quite a priviledged position to see what plans many are making and where there is pent up demand or over supply. Inspite of all that the one thing I can state with absolute certainty on the property market (or any market really) is that I've learned enough to know that you can't be certain of anything.

Thanks, Pal, for that useful remark.

Could you be the same PAL as posted on SP?

I'm more of a lurker than a poster on this site, though I do enjoy many of the gold articles. I thought I should add a little detail on this here.

Many of the "Cash purchases" are actually financed via bridging finance (I know this as I own a bridging finance company). These are then later mortgaged but still go down as a cash purchase initially.

My own feelings on the market are that we are still likely to see another slide in prices after the summer and we have had a couple of interest rate rises. I own quite a few properties myself but have held back from buying more for the time being (except for the occassional steal that I can't refuse). I doubt that we will see a huge crash as there still very many people desperate to buy when the financing becomes available, the old supply and demand story.

Spring is always quite bouyant but October to December is generally a great time to pick up bargains.

That's pretty much my thinking.

 

I had the actual figure earlier on this thread for the number of properties owned outright, I was shocked when I first read it (Thought was actually nearer 70%).

 

Of course, only those buying and selling dictate the market, but it seems as Financial planner rightly pointed out on SKY the other day, certain areas and certain types of property have already crashed massively (indeed, everywhere has when valued in gold/euros etc).

 

Also shows what a really small sample Halifax and Nationwide have for their indices, when nearly half of all sales are cash.

 

There are still a lot of very comfortably well off people in the country, way more than in the last crash. These are the ones holding up demand and prices in the nice areas. Without a major shock, or a massive increase of nice houses in nice areas, the only real falls we are likely to see in these places are of the slow inflationary type.

 

As for elsewhere, I wouldn’t suggest “getting on the ladder” just yet.