UK interest rate rise not a guarantee, says Mark Carney

[BlasterBates]

I think I mentioned this each time we see this graph.

It's an exponential curve.

A saver account in the Bradford-Bingley is also an exponential curve.

The basic theory of finance is that all assets will grow exponentially.

The other thing about exponential curves is they look incredibly scary at whatever point you choose to look at it.

In 20 years time the Dow Jones from 2000 to 2015 will look no different to how 1980 - 1995 looks now, and 2035 will look incredibly scary. That's the nature of exponential curves.

To demonstrate my point look at 1929, it barely registers as a ripple on the exponential curve, and that was and probably always will be the biggest bubble and biggest crash in the history of the stock market. It's a flat line now.

Will we see another 1929, well who knows but I severely doubt that. If we do, even as an investor with plenty riding on the stock market I'll be "laughing my head off" because it will be a chance to pick up more stocks at rock bottom prices, and you're talking 1000% returns when the market gets that low.

[PurpleGorilla]

PG I've seen you mention 'The Mother of All crashes' a few times on here.

Your nice charts aside, what are you basing this on?
Surely your graphs show nothing but a new precedent that has existed for the last 20 years?

Are you expecting the markets to crash to pre 1980 levels when they have been a lot higher for the last 20 years at least?

There's an 80 year mega cycle.

[PurpleGorilla]

I think I mentioned this each time we see this graph.

It's an exponential curve.

A saver account in the Bradford-Bingley is also an exponential curve.

The basic theory of finance is that all assets will grow exponentially.

The other thing about exponential curves is they look incredibly scary at whatever point you choose to look at it.

In 20 years time the Dow Jones from 2000 to 2015 will look no different to how 1980 - 1995 looks now, and 2035 will look incredibly scary. That's the nature of exponential curves.

To demonstrate my point look at 1929, it barely registers as a ripple on the exponential curve, and that was and probably always will be the biggest bubble and biggest crash in the history of the stock market. It's a flat line now.

Will we see another 1929, well who knows but I severely doubt that. If we do, even as an investor with plenty riding on the stock market I'll be "laughing my head off" because it will be a chance to pick up more stocks at rock bottom prices, and you're talking 1000% returns when the market gets that low.

Forget the curve, look at the boom bust trend. Combine that with the hideous amount of debt....

[LondonManc]

There's an 80 year mega cycle.

Is that some sort of SuperMarioKart power up?

[AtW]

Central bankers are afraid of deflation because it will not be eroding existing massive debts.

But they keep rates low, instead of increasing them thus forcing increase in prices because loaned money will be more expensive, wtf?

[ChimpMaster]

Forget the curve, look at the boom bust trend. Combine that with the hideous amount of debt....

PurpleG, let me tell you something I learned a while ago, something I sincerely hope will help you. I am a pessimist at heart, yes I wish I wasn't because it held me back during the property boom in 1995, it held me back during the dot-com boom and the stock market boom and the next property boom. FFS at one point I had enough money in the bank account saved up, that if I had just taken a chance and invested back then, I could have been rich now... but I thought it was safe to let it just sit there earning 5% interest. All because I thought the sky was going to fall down on me and on the whole world.

I had a plan, a plan to save up until assets globally crashed, at which point - like a financial genius - I would swoop in and AH-HA buy up property and shares dirt cheap! But the world governments slashed rates and didn't allow natural economic course to take place. I couldn't keep up with asset inflation and I could never be in with the rich getting richer. Eventually I just had to jump in.

Yes there will be a bust, but is your plan to just keep on calling Bust until it occurs? Would you miss out on 10 years of Boom to just prove that you were right if the Bust was to occur in 2025? If you call Bust long enough, of course - eventually - you will be right, but at what cost?

I think you're quite a bit younger than me. Don't wait 10 years to only look back in 10 years' time and wish you had invested then. Stop reading Leap2020, the gold-bug websites or whatever anti-capitalist sites you spend time on. Move on, get involved, be a part of what you want to be involved with. Keep working hard, hopefully stay in contracts, and invest surplus funds best you can.

[Zero Liability]

It's not just "gold bugs" and "anti-capitalists"; a lot of economists and other analysts see problems with current levels of indebtedness, as well as with the associated interventions that keep interest rates suppressed. BTW, you can both take advantage of booming markets but also maintain an awareness that they are being goosed up and may come crashing down at some point in the future. They're not mutually exclusive propositions.

[PurpleGorilla]

PurpleG, let me tell you something I learned a while ago, something I sincerely hope will help you. I am a pessimist at heart, yes I wish I wasn't because it held me back during the property boom in 1995, it held me back during the dot-com boom and the stock market boom and the next property boom. FFS at one point I had enough money in the bank account saved up, that if I had just taken a chance and invested back then, I could have been rich now... but I thought it was safe to let it just sit there earning 5% interest. All because I thought the sky was going to fall down on me and on the whole world.

I had a plan, a plan to save up until assets globally crashed, at which point - like a financial genius - I would swoop in and AH-HA buy up property and shares dirt cheap! But the world governments slashed rates and didn't allow natural economic course to take place. I couldn't keep up with asset inflation and I could never be in with the rich getting richer. Eventually I just had to jump in.

Yes there will be a bust, but is your plan to just keep on calling Bust until it occurs? Would you miss out on 10 years of Boom to just prove that you were right if the Bust was to occur in 2025? If you call Bust long enough, of course - eventually - you will be right, but at what cost?

I think you're quite a bit younger than me. Don't wait 10 years to only look back in 10 years' time and wish you had invested then. Stop reading Leap2020, the gold-bug websites or whatever anti-capitalist sites you spend time on. Move on, get involved, be a part of what you want to be involved with. Keep working hard, hopefully stay in contracts, and invest surplus funds best you can.

I do appreciate what you say, I do. Seven years ago I had a grand in my ISA, now there is eighty. That's been pure graft and sacrifice. I find it really hard to risk that. Especially when I see an unsustainable market. I didn't see ZIRP coming, or the QE. Who did. I do think we are close to a global crash. I have a low risk position where I can hunker down and take cover if it all goes to cock. If not, I can live modestly and put my money into my kids. Never had any BOMAD, but it is a BOMAD world.

[ChimpMaster]

I do appreciate what you say, I do. Seven years ago I had a grand in my ISA, now there is eighty. That's been pure graft and sacrifice. I find it really hard to risk that. Especially when I see an unsustainable market. I didn't see ZIRP coming, or the QE. Who did. I do think we are close to a global crash. I have a low risk position where I can hunker down and take cover if it all goes to cock. If not, I can live modestly and put my money into my kids. Never had any BOMAD, but it is a BOMAD world.

Forget BOMAD and look beyond any doubts and excuses. I know a lot of people (including contractors) that have done very well on their own, heck they’ve achieved more in 20 years of working/saving/investing than their parents did in 60. Of course having a BOMAD would help but it would make you lazy too… as it did with me!

I didn't see ZIRP or QE coming either and I bet against the markets and lost BIG and I tell you what, it f&&king hurt.

Of course a crash is coming. The question is not if, but when - so it’s a matter of timing, which going back to my post above again begs the question: are you just going to cry wolf for the next 5 to 10 years if the crash doesn’t occur until 2020 or 2025 or whenever. Are you going to leave your hard earned cash sitting in ISAs earning a pittance all that time?

I don’t have a penny left in ISAs because a 2% return is an embarrassment and tantamount to allowing the banks to rip you off even more.

You have decent savings that can provide a great launching pad. For example, put down a 30% deposit on a 250k BTL property and your interest-only payments on the 175k loan will be less than 600 a month. You can easily achieve 1,100 rental and possibly up to 1,500 if you know what you’re doing. So profit because costs are anywhere from 500 to 900 quid, i.e. a ROI of 7% to 13% on your 80k investment, before allowing for costs. Simple example but there are many variations on this theme.

Will house prices fall any time soon? Why would they? Interest rates are low and likely to remain low, employment is stable, wages are rising, demand for housing is rising, rents are rising. If you follow the Fed or Draghi’s conferences you will see that they have their finger on the trigger all the time, ready to drop rates into negative territory or to push out more QE: so yes, there will be a crash, but not any time soon.

[PurpleGorilla]

Forget BOMAD and look beyond any doubts and excuses. I know a lot of people (including contractors) that have done very well on their own, heck they’ve achieved more in 20 years of working/saving/investing than their parents did in 60. Of course having a BOMAD would help but it would make you lazy too… as it did with me!

I didn't see ZIRP or QE coming either and I bet against the markets and lost BIG and I tell you what, it f&&king hurt.

Of course a crash is coming. The question is not if, but when - so it’s a matter of timing, which going back to my post above again begs the question: are you just going to cry wolf for the next 5 to 10 years if the crash doesn’t occur until 2020 or 2025 or whenever. Are you going to leave your hard earned cash sitting in ISAs earning a pittance all that time?

I don’t have a penny left in ISAs because a 2% return is an embarrassment and tantamount to allowing the banks to rip you off even more.

You have decent savings that can provide a great launching pad. For example, put down a 30% deposit on a 250k BTL property and your interest-only payments on the 175k loan will be less than 600 a month. You can easily achieve 1,100 rental and possibly up to 1,500 if you know what you’re doing. So profit because costs are anywhere from 500 to 900 quid, i.e. a ROI of 7% to 13% on your 80k investment, before allowing for costs. Simple example but there are many variations on this theme.

Will house prices fall any time soon? Why would they? Interest rates are low and likely to remain low, employment is stable, wages are rising, demand for housing is rising, rents are rising. If you follow the Fed or Draghi’s conferences you will see that they have their finger on the trigger all the time, ready to drop rates into negative territory or to push out more QE: so yes, there will be a crash, but not any time soon.

Strategy at the moment is buy second house next year and rent first one out. But only if we can find something decent for the money. Might mean buying near the top of the market, but as you say, can't put life on hold. I'm wary of shares at the moment. Gold looks reasonable at these prices.