drbubb

The game's afoot! Barratt / BDEV.L is now trading above the 252d.MA ... update Let slip the "dogs of war" (hyping EA's)

THANKS for recalling these details of prior forecasts: I'm not really CHANGING any of that, just trying to clarify, as events play out. It looks like a rally is coming "too early" and from "too high a level", and so I expect it will be a mere "Dead Cat bounce" in the UK. I want to get the word out, so people will be more inclined to resist the temptation to buy. Rising rates, or falling disposable incomes, could easily kill this brief rally

(This is from the clone thread on HPC. I may add it to the header post also) Good post. It think it is very clear. Something I do in my own investing, is I look for "parallel markets" that give early clues. So in the case of UK residential property, the homebuilders have give a series of good early clues over many years. My basic signal would be when the Builder Bellwether Index (of 5 housing stocks) breaks thru the 252day (One year) moving average Builder Bellwether Index (BBI) / update: http://www.houseprices.uk.net/articles/house_builders_index/ It looks like it is happening now. If I am too busy to calculate this index, then I will use: Barratt Developments (BDEV.L) ... update - break looks set to happen Berkeley Group (BKG.L) ... update - break has already happened, some weeks ago Or: Persimmon (PSN.L- has given "buy"), or Taylor Wimpey (TW.L -not yet) When a majority of these have broken above the 252d.MA, then I get a signal. I had a one or two day "false signal" of a breakdown in the BBI back in October 2005. But it was quickly reversed, and went back into an upmove until Q2.2007, when it (accurately) signalled a top. I am seeing the first Buy signal now, and it looks like it is coming with enough volume and momentum that it is unliekly to be reversed. Like LuckyOne, I think UK home prices are overvalued, and it would be far too dangerous to "buy the bounce". Transaction costs are too high, and it is slow process to sell, so I am recommending that would be home buyers ignore the "buy" signal, and stay on the sidelines. It may feel good to be ahead, watch your home value go up for 6-9 months (if we see that), but is it really worthwhile to find yourself locked in, if we see a resumption of the downtrend? The other dangerous posibility is that "the bounce" will be very short lived, only a month or two. If that happens, you may find yourself losing money on your UK home even before the closing has happened. Do be careful.

I plan to start a thread on Larry Pesevanto's techniques. Perhaps we can discuss it there Meantime, take a look at the Gartley pattern: http://www.traderslog.com/gartley-pattern.htm "The next step in the development of this pattern was the addition of the mathematical relationships of Sacred Geometry (which includes the Fibonacci Summation Series). Adding the Fibonacci Ratios to this pattern gave the Pattern Recognition Swing Trader the tools to determine price entry, exit points and stop levels for risk control. The final step was empirically and statistically testing the validity of these patterns. Gartley had emphasized that the pattern was correct approximately 70% of the time. Testing weekly, daily and intraday patterns over the past 40 years has proven that Gartley’s original premise was indeed accurate."

A good question, and there's a good answer for it, I think. The UK panicked fewer months into its downturn, and pushed rates to historic lows after only a 20% drop. The US monetary authorities "hit the panic button" as the drop approached 30%. Now what does this mean? Once the "dead cat bounce" is out of the way (let's say by year end), then the UK will still have far further to fall, and over a longer time, than the US. There's a decent chance that teh US will make its low in 2010 or 2011 with a retest of early 2009 lows, and maybe go a bit lower. While the UK may plummet after that for another year longer, after the US low is in place. That second "nastier" leg down, should be considered as a "gift" of the wasteful Mr.Gordon Brown, whose policies will be most to blame for the awful price drops that the UK is likely to see by 2012-13.

Fibonacci retracement ratios show up in nature Okay. Now it is. But look back at prices before 1909, and you will find these patterns too. In fact, you will find them even before Leonardo Fibonacci was born in Pisa, Italy in the 1300's. "Margin Calls" This is big news. "The banks’ requests have come as lenders start exercising little-known clauses that allow them to demand additional funds if the owner’s equity shrinks in relation to the value of the property. Plummeting property prices mean landlords who paid little notice to these hidden clauses when the market was booming are falling foul of the rules." The banks may lean on their clients, if we see a property price bounce short term. But they will hammer hard, if rates rise isometimes in 6-12 months. Then the really "nasty part" of the downwards cycle will begin.

Okay. But that proves my point. They used the ratios to make money because fibonacci ratios were showing up in price moves. But these remained fringe ideas, understood and used by few, until Prechter became well know, and published The Elliottwave Principle in the late 1970's. That's my opinion anyway.

My expectation is this: 1/ Prices will be pushed higher by "bargain hunters" taking advantage of low rates, and the talk they will be hearing that we will soon see the bottom in the UK econoimic cycle, Surging stock prices may help build this confidence, 2/ There will be a decent recovery, lasting for several months, maybe even a year, when prices will bounceback perhaps by 6-10% off their lows. 3/ Then the recovery will be undermined by rising rates and/or rising unemployment 4/ A deeper slide towards the final bottom will begin. This will be lower. probably much lower than the low of the first half of 2009. So to answer your question, rising rates are part of steps 3 and 4 in this scenario I dont see things that way at all. The market is not there to support "causes" or make you or your friends winners or losers. It has a nature of its own, and its best to understand it, so you can live in harmony with the nature of the market. It doesnt move in straight lines for long. And it has already been operating at "crash cruise speed" for quite a few months. Sentiment has become very negative now, and a bounce is due. The Builder stocks are telling us, the bounce is likely to start very soon. And maybe it is underway already. I am warning you now because I hope that if you see the bounce, you will them believe me when many people start telling you: "The low is in - Dont miss out on the bargains." And then you will believe me in 6-9 months when I insist the bottom is certainly not in yet. Yes. And some foreigners too, who find that the combination of lower house prices and lower Sterling makes UK house prices look doubly cheap - like over 50% off their highs. I agree, we are not going to see demand pull" inflation driven by higher wages. If we see inflation, we will see "cost push" inflation driven by higher food and energy prices. This type of inflation will eventually put interest rates up, and will HURT, not help property prices. Some fools (who dont understand these basics) will buy property thinking it will benefit from inflation. They may do alright in the US where mortgage rates can be easily fixed for 20-30 years, but tehy are likely to get hammered by inflation and higher rates in the UK.

SURE. You find these numbers are over nature. I dont think people spoke about fibonacci ratios before the 1970's. Go back and look at charts of 50 or 100 years ago, and you will find the ratios in stock prices.

Haha. Of course they never heard of fibonacci. Price moves are a reflection of human sentiment, and the cycles of sentiment trace out these patterns. And it has always been like that, whether people were watching the fibonacci points and trendlines at all. I know it sounds unbelievable at first, but I have seen these patterns develop so many times (to within a percent or two of my calculations), that I have confidence in using them as part of my arsenal of technical tools. If you study enough price moves , and calculate the Turn points, you will see what I mean. HOUSEBUILDER SHARE PRICES will reflect changing sentiment FASTER than actual property prices, which is why they give "early" warnings of trend changes: "The beleaguered UK housebuilding sector received a welcome boost in the latest industry data, which not only shows house prices rising for the first time since October 2007 but also a slowdown in the rate of decline in the overall construction sector. Sentiment was also lifted as shares in troubled housebuilder Taylor Wimpey surged more than 20pc, closing up 5½p at 29p, after the company moved closer to a deal to restructure its debt. The entire housebuilding sector rose on the back of figures from Nationwide Building Society showing that UK house prices rose in March for the first time in 16 months. Barratt Developments gained 20pc to 107p, Bellway gained 9pc to 780p, Bovis Homes added 8pc to 458p, and Persimmon added 12pc to 405¼p. /more: http://www.telegraph.co.uk/finance/newsbys...-show-rise.html ...more... "Despite the enthusiastic reaction amongst investors, it is far from clear that a recovery in the housing market is imminent. Nationwide cautioned that it would be unwise to read too much into the latest figures, saying it is too soon to say whether a trough in the market had been reached. It added that it would take time for the Government's stimulus measures such as interest rate cuts to trigger a "sustained recovery" in house prices." (I have news for them: there is not going to be a "sustained" recovery in home prices. Not for several years, but nonetheless a nice upwards correction is starting. Just as people think it is going to be sustained, it will be undermined by negatives like rising rates, and falling rentals.

I have a very precise "best guess", and that is that the Nationwide index will fall -46% from the top. Do remember, it is only a guess. Pds.186,000 x 54% = Pds. 100,000 on the Low ? Hong Kong fell 69% from 1997 to 2003, and I wouldnt rule out a similar fall, maybe a fibonacci 61.8% in the UK. (Note: 186,000 x 38.2% = Pds. 71,052 )

It might be a whole lot safer to just buy some Sterling and wait another 2 years or so. Or maybe even a Call option on Sterling, which could fall further

A WARNING for HPC members - I may start this thread there : (A a successor to this old thread? A WARNING to would-be UK homebuyers, a "Dead Cat Bounce" will soon be underway!): I SAW IT COMING (in the UK): I posted, back in Jan.2006: "We are only two turns of the credit screw away from a Crash: The first will put HP inflation into reverse, and the second will be a more severe credit tightening, which will be a reaction to all the problems thrown up by the first. When the tightening is done, BTL loans will be back down to a maximum of 60-70%, and a price slide will be well underway." . . "Labour's "economic miracle" has been built on lies, and one of the most dangerous is that the current rate of dent increase is sustainable- it is not. The vulnerabilities that are getting built into this debt-fuel economy are frightening. Unaffordable house prices is one important symptom, but there are many other risks that are faced when the populace becomes over-indebted.": LINK : http://www.housepricecrash.co.uk/forum/ind...showtopic=21887 Buyers now, are "jumping into a precipice": . The real situation of UK Housing Jumpers .... - .... Some saw it coming, got out Poll on : STR, has it worked?[/ IT WAS STILL EASY to get stuck in (elsewhere): I bought property in Hong Kong, on the basis that it was "at a different point in its long cycle." I still believe that, but it didnt stop property here from falling maybe 25% in the 4th quarter of 2008. Luckily, we bought most of the properties well before the peak, so we are probably still near breakeven overall, and are certainly at a very nice profit, if you convert our HK$ prices back into Sterling (which has fallen by 30%) THE UK WILL BE MUCH WORSE: 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. The bounce has already brought prices up maybe 10% from the lows in Hong Kong. And I sold one of my properties at 12% more than I paid for it last week. I will probably sell 1 or 2 more, to take my debt down, way down. I do think that property will perform MUCH BETTER in Hong Kong than in the UK, where things look dire on a 2-3 year horizon. 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. Study this: "The Coming "Bull Trap" in Housing" , if you want more info.

People need to keep their heads and not overpay for newly built properties. You should always compare the price (in Pounds per square foot, not in number of bedrooms!), with the nearby secondhand stock. Remember, when you buy it, it is new, when you sell, it will be secondhand!

Interesting. I have seen the same thing in HK, looking back over historical data. A sharp drop over about 12 months, followed by a bounce. Sometimes the bounce erodes back into a renewed slide, like after 1998, and sometimes it has led to something sustainable. I dont think the UK bounce will last for over a year or so, if it comes. THE CALL No problem. I think that Frizzers may have recorded the call. Assuming he got capture, I will try to get it up in the next few days

LOL. I saw that. Of course, the Bull Trap upturn is only being signalled now, by the following indicators: + The anomolous jump in the recent Nationwide figure + The rally in the shares of "leader" Berkeley Group to above the 252d.MA : see BKG.L update + Tony Pidgely (Chmn. of BKG) recently said, "the bottom is at hand" + Main UK bellwether BDEV.L looks set to breakout, above the 252d.MA : see BDEV.L update + Another bellwether, Persimmon, has broken above the 252d.MA : see PSN.L update As you may have seen in the poll, the vast majority of GEI and HPC respondents think that "Crash Cruise speed" will remain underway. I disagree. I know from past experience that markets do not fall straight down, and that often a correction takes place with aa A-B-C move - where the upwards "B wave" a mere "dead cat bounce", between a downwards A-wave and downwards C-wave. The upwards B-wave appears to be underway in the stocks, and may start soon in the UK property market.

The call went well. We had a good discussion about Uk property, and looked at some relevant charts. Thanks to those who participated, and those who may listen later.

Yes. I will stick to that UK time. But I am really not 100% ready. Please send me a PM on Skype (to "energyi") if you want to be invited on the call.

SAVED FOR MORE ARGUMENT ========= WHAT GOT ME THINKING there could be a "Dead Cat" bounce in the immediate future? About three weeks ago, I saw this chart in a NY Times article: Clearly, US house prices are at there "most affordable level" in many, many years. After a 20%+ fall in the UK, the same thing is just beginning to happen in the UK. The trick is, making prices even mroe affordable by driving down mortgage interest rates. And that is being done both in the US and in the UK. US cycle vs. UK cycle The UK is being speeded up by recent Uk actions US cycle (Charts and argument continue here): xxx

First, I looked at the recent price history, and saw a clear downtrend, in both the US and the UK. CRASH CRUISE SPEED RULES ! In the Anglo-American world, we see falls averaging 1% per month. "Crash Cruise speed" in the UK ................................... : "Crash Cruise speed" in the US ............. UK prices are -20.5% from peak (Nationwide) ............ : US prices are -28.0% (Case-Schiller) /Feb.2009 Pds.147,746 / Pds.186,044 = -20.5% in 17 mos........ : $150.66 / $206.52 = -28.0% in 30 mos. Many of those who bought during the "Winner's Curse period" (the last two years or so leading into the peak) are now into negative equity. Defaults are rising, and bank balance sheets are being undermined. ============ I was curious what others were seeing "on the ground". So, I took a Poll on GEI, and HPC, and found THIS: (The Second column, and 2nd percentage, is from an identical poll on HPC) SPEED OF PRICE FALLS Poll : On GEI : On HPC How are you experiencing house price declines in your area of the UK ? ============================================ Property price falls are speeding up ................................... [ 5 , 15 ] [16.1%, 15.0%] Crash cruise speed - prices falling at a steady rate, 1%? [ 12, 51 ] [38.7%, 51.0%] The rate of decline has slowed noticeably.......................... [ 2, 14 ] [ 6.5%, 14.0%] Prices seem to be stable - have stopped falling................ [ 1, 03 ] [ 3.2%, 03.0%] Prices are now showing a slight uptrend............................ [ 2, 00 ] [ 6.5%, 00.0%] Prices are rising in a healthy way........................................ [ 0, 00 ] [ 0.0%, 00.0%] The picture is very mixed. No conclusion is possible......... [ 6, 15 ] [19.4%, 15.0%] No comment....................................................................... [ 3, 02 ] [ 9.7%, 02.0%] = = Based upon the results above, most seemed to think that the present "Crash Cruise Speed" trend of steady price falls, near 1% per month was likely to continue for some time. And this seemed to be what people were seeing (or maybe expecting to see) "on the ground" in their local areas. Personally, I did believe the falls would continue. Instead, I expected a typical A-B-C pathway for prices, which might look something like this: This is a typical pattern in a housing correction. Essentially, what happens is this: After the peak in prices some potential buyers sense the market is turning down and they hold off buying. But once prices have fallen (by say 25-30%) they "smell a bargain" and jump in. This is exactly what happened in Hong Kong after the 1997 peak, and is what is happening again in HK now. After a 30% drop, the buyers are jumping in. But will the property buying last? It didnt last long in Hong Kong. After the jump in mid-1998, there was stability for a few more months, and then it began to ease off, as unemployment rose. I dont think it will last in the US or the UK either. (I am less sure that the current rally in HK will be snuffed, since HK is at a different place in its 18 year cycle than the US and the UK. More on that on the HK property cycle thread, for those that are interested.) In the US and the UK, we need to be alert for the same factors that snuffed Hong Kong's 1998 recovery. Let's see what others thought about the chances for a UK bounce, and a sustained recovery: My belief about a bounce, or sign of stability ? ====================================== There will be no bounce this year........................................ [ 12, 53] [46.15%, 53.0%] What I am seeing, will be nothing but a Spring bounce...... [ 11, 35 ] [42.31%, 35.0%] The stability could eventually lead to a recovery................. [ 0, 06 ] [ 0.00%, 06.0%] This is THE LOW in the cycle............................................... [ 0, 03 ] [ 0.00%, 03.0%] No comment......................................................................... [ 3 , 03] [11.54%, 03.0%] A key thing, will be the price and availability of finance. Most seemed to think that loans of about 70-75% were available to borrowers with sufficient income to make payments. Availability of finance ? ====================== It is virtually impossible to borrow to buy a home where I am [ 0, 5 ] [0.00%, 5.0%] Loans can be obtained by those who have a 40-50% deposit [ 3,22 ] [11.54%,22.0%] Mortgage loans of 70-75% LTV are available....................... [ 9, 37 ] [34.62%,37.0%] 80-85% loans are available (tell us more)............................ [ 6, 06 ] [23.08%, 06.0%] Loans of 90-100% can be obtained...................................... [ 0 , 05] [0.00%, 05.0%] No comments........................................................................ [ 8, 25 ] [30.77%, 25.0%] ======= Total Votes: ( 31, 100 )

You have nailed it ! This is a very temporary fix, that is a Bull Trap, and will lead to a catastrophic fall in one or two years. I am "all over this", and will do my best to save people for the inevitable disaster. When I scheduled today/Friday's GE Conference Call, it was a glimmer of a possibility, now it has become more likely event as every day goes by !

What's "mysterious" about that? Do some people really think that Deutsche Bank was punting such huge amounts of gold for its own account? Of course, they had someone on the other side. Now we know who it was : someone who kept their gold with the ECB, and maybe the ECB itself OF MORE INTEREST to me is... What will the Buyer do with all that Gold? I fear that most people here have done their buying already

What's "mysterious" about that? Do some people really think that Deutsche Bank was punting such huge amounts of gold for its own account? Of course, they had someone on the other side. Now we know who it was : someone who kept their gold with the ECB, and maybe the ECB itself

GOLD - RELATIVE CAUTION My own relative caution on Gold has been rewarded "Gold falls on optimism crisis may have bottomed By Moming Zhou, MarketWatch Last update: 3:48 p.m. EDT April 2, 2009Comments: 411NEW YORK (MarketWatch) -- Gold futures fell 2% Thursday to end below $910 an ounce on optimism that global leaders meeting in London are taking measures to tackle the financial and economic crisis, which left investors more inclined to move into riskier assets. Adding to the bearish gold tone, the Group of 20 leading and emerging nations said a statement released after the meeting that it endorses 403 tons of gold sales by the International Monetary Fund. The proceeds will be used to provide finance for the poorest countries over the next two to three years. See full story on IMF gold sales. Gold's losses came amid big rallies in global stocks and in crude-oil futures. Industrial metals such as copper also made gains on speculation that the economic crisis may have bottomed or is close to doing so. "With the markets pricing in the thought that we may be seeing some upside movement out of this recession, I think that some of the flight-to-quality trade is leaving gold and bonds," said Zaharay Oxman, managing director at TrendMax Futures. Gold for April delivery fell $18.70 to end at $907.40 an ounce on the Comex division of the New York Mercantile Exchange. The more active June contract also lost ground, down $18.80, or 2%, to $908.90." /more: http://www.marketwatch.com/news/story/gold...amp;sid=3219852 = = = = = Larry P. is talking about how a drop thru $900, could be followed by a plunnge to $790-800. My own technique shows likely support near GLD-$85 / Gold-$865 Yesterday's decent bounce after a $28 selloff, was somewhat encouraging, but I still believe that gold is "overowned", especially for this time of the gold season (the Indian "wedding season" is over.)

The Coming "Bull Trap" in Housing / per Conf. Call #3 Let's monitor the "Dead Cat", looking at charts, trends -- Orig. title : Notes for Friday's Conference Call ================================== : Link to Podcast of Conference Call #3 We will be talking about UK Housing, and the prospects for a forthcoming bounce in UK House prices QUOTE (DrBubb @ Apr 1 2009, 12:28 AM) : Instead of: "I got my foot on the housing ladder", perhaps you should be saying: "I stepped into the housing precipice, hoping it would be a bungy-jump." .. The Crash- some saw it coming ....... The real situation of UK Home Buyers? Poll on : STR, has it worked? == == LINKS: ==== Clones : HPC : GHPC