I experienced the .COM boom and lost thousands in it but was lucky not to lose a lot lot more.

I have thought on a few occasions about the similiarities between then and now. I thought i'd share these in case other STR's have been influenced by the same events.

I was an IT contractor so was flooded with money. I'm not very materialistic so ended up playing the markets with my spare cash. It's the emotion and attitudes of the time that remind me so much of the current house price boom.

Everyone was talking about shares and the money they had made. I didn't gloat but had a smug self satisfaction from the money I'd made. I recognise this in others at the moment with house prices. It seemed that if you was prepared to put your money where your mouth was then you made profits and they were deserved. I remember reading a few bearish articles but prices kept going up so I ignored them. Fundamentals didn't matter, the massive increases seemed reasonable not extravagent and if you was not taking part then you was missing out.

I was extremely lucky that one of my friends lent me a book about investing in shares (The Zulu Principle). It seemed so out of touch with what was actually happening yet at the same time so knowledgable that I read it cover to cover. I didn't follow it's advice at the time but didn't forget it. I saw nothing ahead but raising profits, it seemed that things would never change.

But it did change. When the prices crashed I even bought into a mini bear rally. Telewest was a favourite share of mine. i held at 280 and had just bought in at 570. I'd seen it raise to peak at around 650 then dropped. (If my figures are a little off forgive me it was a few years ago). I sold at 480 but that old greed was still there and stupidly bought back in at 450 waiting for a bounce, well it did all the way down to 320 before I sold up and gave up.
I just could not believe that prices could drop so much so quickly, how could something be worth 650 and half in value to 320 within a couple of weeks. I see the same thing with houses, people can't/won't believe that house prices can drop.

It seemed that I could believe massive increases in price (doubling/trebling) but I could not believe them dropping the same amount. I get this same response when I mention to people that if there house price has gone up 100% in 3 years it's not impossible to believe it dropping by 50%. People think I'm being absurd.

I remember someone I knew (earning maybe 15k/year) who worked at Telewest and was in the employee share buying programme. Every day he sat and worked out just how much money he had made. But (like houses) he couldn't just sell them he had to wait 12 months first. But that didn't stop him planning how to spend his money. Thank god he didn't have access to lots of credit or I believe he would've borrowed the money that he planned to make. (Like a lot of those MEWing over the last few years).

Just so you know.... Telewest share price fell to 1p before being given to the bond holders and turned into an american listed company. So I could've lost everything if fear hadn't made me pull out and stay out. Other companies I invested in faired similary massive gains followed by massive loses. The bigger the gain meant the bigger the loss. Houses that have risen the most will also lose the most.

This is the reason I STR and keep out of the housing market. Timing is everything I decided to sell before the turn being happy to lose that extra 10% on sale price if it meant I got out with a good profit actually my time was perfect/a touch late (It sold in Sept this year)

If i'd managed the same timing with shares I would've made many many thousands instead of losing money. I got burnt but it taught me a lesson..... Don't get too greedy.

My biggest concern:
The aftermath of the .COM boom the big bust was nasty but it was mainly people losing money they had either already made or there savings. With the house price bust it will involve a lot of money that people don't own, it'll be debt. I'm waiting to see how big/fast the downward trend will be. Lumpy transactions and the inability to believe prices can drop means it should be slow, but the fear driven by high levels of debt could turn it into a stampeed. Last one to sell will lose the most so make sure you one of the first to sell, if this happens it could be very very nasty not just for the people concerned but for the wider economy.

I'm sure the bulls will think I'm a fool for believing that house prices are going to crash. I don't blame them as I felt the same about bearish articles when I was a share bull.

Good post.

We are still the experiencing the mentality of greed/denial from the bull camp but this shan't last for much longer. Currently, I have two bets with friends that the market will fall at least 15% over the next 2 years. What great odds.

One friend is an ex-EA (who does not even accept London prices have fallen) and the other is a solicitor, who has just purchased his second house. I can accept my first friend being a muppet (after all he was an EA) but I would not have believed my lawyer buddy has bought into all this hype. He has even told me he can get me a good deal (15/20% off market 'price') if I wanted to buy now. I declined his offer and said I planned to wait another couple of years before considering buying a home. After we had made the bet, I told him I believed house prices would fall by at least 40% over the next few years. He laughed uncontrollably and told me to "get a grip."

I asked him why I should pay nearly 3x what he paid for his first house 5 years ago (now 260k) but did not receive a logical answer. He told He told that me there was no point waiting as house prices would never drop more than 5-10% and if I left it any longer prices would be further out of my reach etc etc.

The coming crash is really gonna hurt with so many seemingly intelligent people believing property is a one way bet.

P.s Despite his views, during our conversation, he told me that many of his clients were offloading their properties etc. because they believe there will be a slowdown and maybe small falls. I told him to read between the lines and if the pro's are doing this, then a slowdown=a crash.

Pretty safe bet, do they want another one on the same terms?

And in some places 40% still won't be enough.

Found this on a trawl to find a small flat to rent in Central London

http://findaproperty.com/cgi-bin/agent.pl?...prop&pid=035552

I can't even be bothered to work out if the actual yield is above or below 5%.

Is he blind?



To quote DrBubb "Today's bargain is tomorrow's market level."



He/she who laughs last laughs longest, etc.

I knew a few Marconi Engineers whose share option were worth 1/4 Million each at the height of the dot com boom, each day I would receive a daily update of how another 5K had been added to their personal wealth etc etc, spoke to one last year who had lost the lot and was now working in a call centre for 10K pa. What can I say s*** happens, today’s property moguls are going to be tomorrows shoe shine boys, you'll see.

Muppet.

No the muppets would be the ones that knowing the money was coming bought a car, holiday there and then on the assumption that the money would eventually arrive.

If there are people stupid enough to do MEW there must be far more people likely to do the above.

A touch harsh he was a really sound bloke.
Looking back I agree he looks like a muppet. But at the time he just got caught up in the whole feeling that it was a one way bet.
I just used his case as an example of the mindset then. It's the same now, people looking at money they will make rather than money in the bank.

Two clever (Oxbridge educated) Londoners I know of sold to rent in Islington at the bottom of the market in 1997 and have just BTL at the top of the market a £3.6 million place in Bayswater......Do they know something we don't?

Excellent post. One thing I've learnt is that academically ability is often no substitute for being financial savvy. Greed blinds people and makes them arrogant - if they're in something - shares, property, etc - and making money while you're not, they must know something you don't, and therefore that makes them right and you wrong.

One quote I keep coming back to is: "The difference between the wise man and the fool is that the wise man learns from his mistakes, while the fool never does."

[quote=andrew_uk,Dec 28 2004, 02:37 PM]

Great post andrew_uk - I too got fingers SERIOUSLY burnt from that boom; only just recovering financially - almost 5 years later!

Lesson I learnt was NEVER to trust any of the 'pundits' - like so many other amateur investors I got sucked in by the professional rampers.

The strangest thing is that it seems to me that many of those that had a role in the ramping of stocks transferred their game over to property - having been duped by their hype once before I can see that they are doing almost EXACTLY the same again....

Having made a fortune out of duping naive 'investors' in the tech bubble some then went into buying property - ramping the market by issuing so-called independent housing market surveys in the popular press, and making approx 20% per annum - Obviously I can't mention any names, however if you investigate the backgrounds of the main figures who have been ramping property you will discover their backgrounds, and also discover that they are all linked in some way - thus the wonderfully coordinated timing of regular monthly press reports

Many have thought it weird that the housing market can boom when the stock market is falling or stagnant - well now you know how.....The housing market bubble of the last 5 years was not coincidental - IMO it was by DESIGN!!

Share prices and house prices are not really that comparable though are they? Aren't share prices much more volatile and subject to different economic factors than house prices?

Also, isn't it a bit of a one-way bet to hold off buying a house because you believe that prices will fall significantly? No-one knows this will happen for sure - it's still just a bet.

A one-way bet is one where there can only be one outcome (usually winning). These are fairly rare (if not non-existent).




Like betting on house prices rising you mean?

Doesn't matter what the yield is - the Estate Agent says it is an 'Ideal Invesment' - so it must be.

Like you I can't be bothered to work out the numbers but a cursory bang on the calculator reveals about a 0% yield. If the price fell to some sort of realistic level - say a 40% fall - it looks like an Ideal Investment for someone who wants to invest 26k and then lose that and a bit more again. Of course if you can stand the 0% yield - or less allowing for voids etc - and can wait the 12 years for the property to get back to where it allegedly is today - then it really is an ideal investment - for a complete fool.

[quote=Big Ears,Dec 28 2004, 05:50 PM]
[quote=andrew_uk,Dec 28 2004, 02:37 PM]

Great post andrew_uk - I too got fingers SERIOUSLY burnt from that boom; only just recovering financially - almost 5 years later!

Lesson I learnt was NEVER to trust any of the 'pundits' - like so many other amateur investors I got sucked in by the professional rampers.

The strangest thing is that it seems to me that many of those that had a role in the ramping of stocks transferred their game over to property - having been duped by their hype once before I can see that they are doing almost EXACTLY the same again....

Having made a fortune out of duping naive 'investors' in the tech bubble some then went into buying property - ramping the market by issuing so-called independent housing market surveys in the popular press, and making approx 20% per annum - Obviously I can't mention any names, however if you investigate the backgrounds of the main figures who have been ramping property you will discover their backgrounds, and also discover that they are all linked in some way - thus the wonderfully coordinated timing of regular monthly press reports

Many have thought it weird that the housing market can boom when the stock market is falling or stagnant - well now you know how.....The housing market bubble of the last 5 years was not coincidental - IMO it was by DESIGN!!

[/quote]
Very good Posts here -- Oh it so funny to see the bulls STILL ramping it all up. And yes, much of all this ramping over the last 5+ years has been massively ochestrated between the numerous [shady, in the background...] property "developers", "investors", etc. in concert with moneylenders and all PARTICULALRY using PR AGENCIES - THE EXPERTS at manipulating press & media reports AND TV prgrammes, "news Items" etc etc. - ALL TO ONE FOCUS & Message - "PROPERTY IS FAILSAFE" etc. etc. ALWAYS REMEMBER - MOST of what you read in the media and hear/see too -IT IS PUT THERE BY PR AGENCIES: THIS IS THEIR JOB, THIS IS WHY THEY MAKE SO MUCH MONEY!!!!

A friend of mine (I keep giving him huge grief) is in junior partnership with a guy who has been in the property "game" for 40 years - and I have been watching them play for the past 5-7 years; they have been going right accross the UK buying up all sorts of properties - ALL OVER the UK - renting them out, doing them up, etc etc. - and over the last 10-18 months they have sold ALL OF THEM OFF!! The senior guy has seen it and done it ALL before - and he knew EXACTLY what he was doing - and he has made MILLIONS AND MILLIONS - he is a total expert - he saw the fall coming over 18 months ago, and started off-loading as of then. ALSO: he and other partners in this property "game" have been spending very big amounts on "publicity" & PR - via many PR Agencies - placing vast nunbers of articles, items, tv clips, and even backing at least 2 of the tv property programmes (on the quiet, behind various guises, via "associates"), feeding the entire media machine in all sorts of ways, many quite subtlely, talking the WHOLE thing up and up. Of course those who are half switched on could not have failed to notice the INCREDIBLE saturation of media hype on the property scene,....

Well guys & girls!!! - It is almost entirely rigged - the whole thing has been ochestrated by the vested interests - and, yes!, you can't deny it - they've achieved their aims -they've "done well" - many many of them - even the thickos like Krusty Allcrap & S Beeny types -- they have ALL made huge amounts of dosh on the back of this... and it is NOT a coincidence that large portions of the media - particulalry the "reporting"/news media have NOT talked property down -look at eh BBC Website - it STILL reports the Wriggelsworth/Halifax CR*P/LIES as "NEWS"!!! - WHY??? Becasue Producers and Editors etc - THEY ALL have fingures in ALL SORTS of pies!!!! You may not believe this - but it is the case.

Also, v large numbers of MP's - including MANY "New Labourites" - have been using their generous salaries and allowances to buy into the scam too -Large numbers if them own SEVERAL properties, particulalry in London & area - this is a story that I urge any aspiring investigative journalist out there to pursue....

SO - the REAL PROS out there have known all along that this is a game!!! - and have understood that it is, in effect, a MASSIVE Pyramid Selling Game/Scam -- i.e. Get in at the bottom - and sell out at the top - timing is crucial....

There is, however, a way the poor FTB's can start to fight back; the poor FTB's who have been utterly USED by, in particular, their "friendly" banks and mortgage providers to feed this whole scam - by being led into the "dream" [etc.], like lambs to the slaughter - many of them persuaded to buy into the "market" at rip-off prices and feeding the "system" - acting effectively as the fall guys feeding hard earned money at vastly hyped up prices - feeding the rivulets and small streams - into the water supply further down - into streams, small rivers, large rivers,deltas, lakes, etc. etc. gorges, huge oceans etc etc. - which is where the ultimate winners in this "game" clean up at - HERE is where the players of the game clean up - take the money and run.

FTB's CAN fight back: They need to understand what has been going on - it isn't rocket science anyway!!!! - They simply ALL need to tell each other what is going on -- from college/university/job starter [etc.] levels upwards -- AND ALL REALIZE - THEY HAVE IMMENSE POWER: THEY ARE THE RAINFALL AND DROPLETS AND SMALL RIVULETS!!! THE WHOLE SYSTEM DEPENDS ON THEM!!! AND -- WELL, IT'S SO, SO SIMPLE!!! -- DO NOT BUY INTO THIS SCAM AT ALL: KEEP OUT: BRING IT ALL DOWN..

JUST SAY: "WE WILL ONLY BUY AT THE SAME PRICE AS YOU DID MATE - SO, IF YOU SLASH 60% OFF THAT PRICE - TO NEAR WHAT YOU PAID -- THEN- AND ONLY THEN - WE WILL THINK ABOUT BUYING THAT PROPERTY!!!! ALL FTB's JUST NEED TO TELL THEIR MATES/COLLEGE FRIENDS ETC. - LOOK AT HPC - ALL GET TOGETHER VIA TEXT/EMAIL/THE WEB ETC. - AND SIMPLY LOOK AT WHAT HAS BEEN GOING ON!!!! IT IS A PYRAMID SELLING SCAM!!! THE BIGGEST EVER!!! -- DO NOT ALLOW YOURSELF TO BE LEAD LIKE LAMBS TO THE SLAUGHTER!! JUST SAY NO!!! WE WILL NOT BE RIPPED OFF!

WHY SHOULD WE PAY "£180k" WHEN YOU BOUGHT IT 5 YEARS AGO FOR £60k??!!!!!!! NO!! - we MIGHT pay £65k - but that's it !!!!! That's all we are offering - because that is all we can afford - just like it was for you!! After all, Gordon Brown loves to boast how inflation has been a negligible "1-2%"!!! -- Well - that means we may pay a few hundred more that you paid 4 years ago!!! That is ALL it is worth!!!!

All FTB's out there - get out there and spread the word: You have the power. Use it. Fight back.

An interesting post.

I was a contractor in a senior consultancy capacity when Telewest's shares were soaring. They had, or so they believed, cornered the market in a new interactive home shopping Internet service delivered by a set-top box.

They were selling this heavilly to the City and, whilst I was there, I saw them sell the service to all the big names - Barclays, Lloyds, Abbey National, numerous Building Societies, numerous high street retailers, etc, etc. The list was endless and the Sales people were raking in huge commissions both in cash and in shares.... and the project was on time and under budget due to a mix of dedicated permanent staff and contractors.

Then, for reasons still unknown, someone high up decided to get in Arthur 'Andy' Consulting. The permie staff turned up on morning in Woking to find that all their stuff had been pushed into plastic boxes and sat at their desks, complete with name sign, was an 'Andy' drone complete in blue suit. You would not believe how much Telewest were paying for these drones with many of them, IMPO, very inexperienced indeed. One of their senior guys argued that such a thing as a 'firewall' was not needed.

Anyhow, permies and contractors started leaving and drones grew in numbers. Suddenly, a project that was on time and under budget went over both time and budget. Next thing we know Telewest is suing for bankruptcy protection and in debt for billions. Funny that.

Some time later I was working for a US tech company whose shares went over 100 USD. When they started falling people in the company, so brainwashed into the company culture, tok out loans to buy and many bought ALL THE WAY down to 15 bucks... Some people in London lost about a million, some people in the US invoked their shares but did not cash them in so by the time they cashed them in they had fallen to a fraction... yet they still owed the taxman money for the time at which they had invoked them... and ended up owing MILLIONS in tax! The peopel at the top are all worth hundreds of millions and even billions though... makes ya think...

An Article from 1999, a few months befor the bust.



Bubble psychology
David Dreman, 03.08.99

THE DOW IS HEADED for 1,000,000. That's what investors expect, although they probably don't know they expect it.

Just how unreasonable are investor expectations? Try this: A recent survey by the Institute of Psychology & Markets in Jersey City, N.J. (of which I am a director) found that the average mutual fund investor expects an 18.1% annual return on his capital over the next ten years.

To achieve this return, the Dow Jones industrial average would have to rise to 42,000 in ten years, assuming the dividend yield stays put at 1.7%. At the same pace, the Dow would climb to 1,000,000 in 31 years.

No, it's not unreasonable to expect stocks to return 18% in good years -- that's what the market has averaged over the past decade -- but it's folly to assume, as so many market newcomers assume, that this is the norm.

The S&P 500 index is trading at 32 times trailing earnings, a multiple that could only be justified if earnings were to shoot ahead at a better-than-20% rate for years. But rather than soaring, earnings were flat last year and are likely to advance, at best, 8% in 1999. How out of kilter is the S&P's current valuation? With hindsight, the market was wildly overpriced just prior to the 1929 crash, when it traded at a P/E of 22.

What you are witnessing today is a full-scale investor mania of the sort seen in the tulip-buying frenzy of 1636 or the South Sea Bubble of 1721. The bubble is visible almost everywhere in the market, but it is most conspicuous in technology stocks. Twenty-five large technology issues accounted for 93% of the Nasdaq's sizzling 40% gain last year, and 100% of its 5.8% gain year-to-date. By comparison, the average Nasdaq stock -- and there are 4,460 of them -- was down 3% in 1998.

Don't worry about these statistics, say the bulls: We are entering "a new era"; there is a shortage of stocks; the enormous inflows of new money into equities must push prices higher. They said all of the above prior to the 1929 and 1987 crashes.

Along with many others, I underestimated just how powerful the mania would become. Buying skyrocketing stocks has become a self-fulfilling prophecy. Who would have thought even a year or two back that there would be 5 million brokerage accounts on-line today? Individual players, often on margin, account for more than 50% of the volume in most new issues and sometimes in such established companies as Dell Computer, Cisco Systems, 3Com and other similar stocks. Many of these traders have discovered their nirvana -- a place where they will triple or quadruple their capital in the next several years, in a market that can only go down for microseconds before bouncing to new highs.

The stunning rise in these prices has also energized dozens of mutual fund managers who previously stayed aloof from the bubble. Even stately Magellan, the nation's largest mutual fund, now boasts it has Lucent, as well as other highfliers like Cisco, Intel and America Online, in its top ten.

What makes bubbles possible? It's that humans are not good statistical processors. For example, we tend to forget that red-hot new issues -- whether they were computer-leasing or semiconductor stocks in the 1960s or PC companies in the early 1980s -- have provided horrendous returns on average. A study of new issues between 1970 and 1990 showed a median return of minus 45% over five years. But people ignore the averages while focusing entirely on the memorable exceptions, like Microsoft.

Management incompetence?



And the lesson of the story is: don't believe your own hype.

It's not too difficult if you think about it....the ONLY factual data on house prices is from the Land Reg...and since this is historic it is unreliable/unusable for influencing monthly decisions on interest rates.

SO....out of nowhere pops up so-called 'independent' housing market tracking companies that claim to get regular up-to-the-minute data from a vast number of EA's from across the UK - from which they are able to give a more pin-point assessment of house price trends.

WELL, WELL, WELL.....tell me, who audits their 'raw data' and their fair interpretation and reporting of that data?? is there a law that requires them to be audited?

The answer is NO-ONE audits their inputs or outputs! In-fact, there is nothing to stop you or I setting up a similar company, bang up a web-site, and issue our own 'press-releases' about what we believe 'our data' tells us about the housing market!!!

Get a few of the vested interests along ie. Surveyor groups, lenders, EAs, Online portal for EA's, feature-writers....and hey presto we have a party!

The game has now advanced beyond ramping the property market, IMO they are now (have been for last 2 months or so) trying to manipulate the BoE MPC to lower rates - they know that this is the ONLY way to keep the 'game' going....

However, it may all be over in anycase - I think that now there are too many 'big-hitters' coming out and predicting falls (eg. Barclays) for them all to be poo-poo'ed as 'doom-mongeres' - However, you can be absolutely sure that these vested interests have all sold out by now, and have moved onto the next scam - which I guess may be Commercial property, or Commodities.

http://news.ft.com/cms/s/4cc1c7a4-5906-11d...000e2511c8.html


I think Commodities could well be the next bandwagon. It has all the signs:

"attracted by the strong returns provided by energy and metals markets over the past few years."

This is such stupid thinking: "I've missed out on huge gains in an asset class, so I'd better compound the error by buying in AFTER it has seen huge gains! Great idea! Muppets.

funny thing about the telewest shares. I know lots of people counting their thousands before share options matured, all waiting for the price to be about £6.00. Would have made lots of people very well off IF they had cashed in at that price. Price available at maturation , around £1.18. Fallen to around 1/5th inside 12/18 months. I also know people who borrowed fairly substantial amounts to buy telewest shares at 17.5p figuring they coudnt go any lower. Some lost it all, some sold at around 3p. These people are well educated but still bought into the percieved value of shares. Just goes to show that sometimes its just as hard to call the bottom as it is the top.

I agree about commodities and, as callous as it sounds right now, I have no doubt that beach-front complexes in SE Asia will also be one a few years down the line. We now live in the era of artificially generated financial bubbles.

Thanks to the power of the media - as discovered by new-labour, and also to the internet chat forums such as this one!!

I remember spending days & nights on such forums during the tech boom - looking back now it was soo obvious that each board was dominated by its 'regular' hard-core posters that were either ramping or de-ramping a particular stock - between them they would provide almost 24-hour coverage to either back-up any supportive post, or shoot down any sceptical/questioning post.....

Some might suggest that the HPC forum is not much different !! - Even so, I fully support its motives....while I don't believe that the HP Crash could be started by such a forum I most certainly believe that once the crash has started it can accelerate and deepen the crash - I hope so anyway

Just watch how the user numbers on this forum will mushroom over the next six months

Its a shame now there is not much left to debate, with all the bulls in hiding, But I will add .COM v HP.... there is a difference, with house prices what you see in your agents window today(ie:empty shop)will be news in 3 months time, with .com we all know its a much more liqid market and changes much more quickly.

I expect the new joiners to the forum will be the 'in-betweens' - not sure what is going on, and wondering what everyone else thinks - IMO the mass of buyers & vendors fall into this category. (The Bulls will have become extinct, while the Bears will be sitting back and enjoying!)

As regards the difference between trading stocks and houses - I agree that there is a big difference in the nature of the transaction in these, however my suggestion is that HPC forum will influence the rate and scale of the fall in ASKING PRICES.

My guess is that the 'What Are Prices Doing In Your Area' part of the forum will see a massive increase in posters, as people like to read for themselves first-hand experience of the market in their own areas. rather then be led simply by what EA's say or some so-called independent market report.

Oh I forgot to mention.....the 'victims' in the massive HP market hype are NOT the FTB's who have not been able to get on the ladder.....they will be the winners. The FTB's who did get on the ladder will just have to accept that they will live in their dwellings far longer then they imagined.

The real victims are the BTL'ers who have been duped into piling into a rapidly overcrowded market with diminishing yields, to prop up the bottom rung of the market and continually push everything higher.

Who says that BTL'ers are 'in it for the long term'? - Oh yes....it's ARLA - whoopee!...and who do they represent? ..The Letting Agents NOT the landlords!!

BTW, The 'consequential victims' are the MEW's who borrowed large sums against a notional value of their homes....

I was a paper millionaire in 2000 from dot com options, but I was sure the market was going to crash and would never see my paper profits so left my exposure at employment... and very nearly lost that in the subsequent redundancies.

Somehow we struggled on, and actually have options worth money now - not a huge amount but enough to do some home improvements etc. Every single one of the old hands who lived through 2000 sells pretty much on vesting day, the newbies hold on for the inevitable rise :-(

The thing that got me convinced the house market was going the same way was the self-confidence and the glint in the eye of the believers, I remember my boss telling me I was going to be a very rich guy in exactly the same way.

Brilliant post, highlighting the bubble psychology that applies to property just as much as shares. At the same time there are several big differences between shares and houses, including:
1. Houses are less liquid than shares
2. It's harder to hedge against falls in house prices than stock market falls
3. It's harder to go short on house prices than on shares

So, unless you put all your eggs into going long on a single share or share sector, shares are generally LESS RISKY than property! At the moment I'm generally long on shares, but will probably take out some hedging soon against a stock market crash/correction, probably primarily against NASDAQ; maybe FTSE and/or DJIA also. I'm also building up cash. I'd feel a lot less relaxed if I was heavily invested in property.

Someone mentioned commodities as the latest bubble. That is probably fair comment. It probably has some more momentum, as there are still supply constraints from the time when commodities prices hit rock bottom (you can't open new mines overnight). However, there will come a point when speculation pushes prices beyond a sustainable level, and prices will reverse. I think that will come quite a bit later than the reversal in property though.
It's all about timing- anyone buying property now is as daft as someone who went long on tech stocks at the zenith of their bubble. Patience WILL be rewarded!

Don't know that commodities has yet become a bubble. A hot sector, certainly, and a couple of years into a bull market, but imo it only becomes a bubble when prices start to bear no relationship to earnings and the greater fool principle rears it's ugly head. At the moment the commodities sector is bullish but earnings in the sector underpin this. It's often said that for a bubble to form, there needs to at first be good fundamentals in place, which is what we have in commodities right now.

The main reason that people in Telewest thought it was going to go up was the so called "insider knowledge" that NTL and Telewest were going to combine. Well it's true they will probably in the next 2-3 years but at the time it was thought to be imminent. The plan was just much longer term. basically
1) Build the infrastructure through massive levels of debt, funded by bond holders and share sales.
2) Pump up the share price to keep the money flowing in to build the rest of the infrastructure.
3) Then when realisation dawns of the massive debts holding back any hope of dividend payouts the share price tumbles.
4) At the bottom split the company so 99% goes to the bond holders and 1% to investors.
5) Move from the london stock exchange to an American one.
-> We are at this point but it's not a bad thing.
Share holders got shafted but we've now got a profitable cable company with an excellent network. It's good for the UK. Most telewest debt was changed into shares that the bond holders now have.

Next steps..
6) Combine NTL and Telewest. Unsure which will buy out which or if it'll be a merger.
7) The enlarged company can handle NTL's high debt levels and move forwards.

On a side note I worked for Andersen consulting for a while but in the bit that became Accenture. It's a strange company and they generally shaft everyone they dealt with. The team sat behind me worked out the costs to the client (outsourced) and some serious shenenigans went on. When it all went bad all records of the how the bills where calculated where destroyed.

I have managed to lose money in a number of interesting ways, but I was never a player in the 1999/2000 tech boom. It always had a "bubble feel" about it to me. And towards the end, valuations reached absurd levels.

Actually, I did make quite a bit of money from it, but in a strange way. I owned a number of bombed out mining shares, which were trading at nominal value. Two or three of them were used as shells for the injection of dotcom-related businesses. One in particular, i remember well: Toucan Gold.

It started as a gold exploration company, active in Brazil. Cost $2.50. But the exploration saw limited success, and the price gradually faded to under $1.00. It was one of the few shares left in a particular account which became inactive, so I used to check the price only once a month. One month it was about $0.60 or $0.70 cents. And then the next month I opened the statement, and the stock was quoted at $6.00. I thought, "Oh no, there's been a reverse split." But no reverse split. I had the same number of shares. But the company name had been changed to "Authorizor".

With a sense that I had received a gift from heaven, I went to the internet to update the price, expected to find it had fallen back to $4.00, still a nice gain from my $2.50 cost. The actual price was $20.00! I called the broker to sell, and what did he say. Sorry, I cannot do it, your forms are out of date. A few days later, when the forms were brought up-to-date, the price was... $25.00 and rising. I sold out the lot at $26.50, for a gain of more than $100,000. As I always say, I'd rather be lucky than smart- it's less work.

Here's the chart:

What happened to the share price after you sold DrB?

I posted the chart (above) later.

It is trading at $0.01 now

Amazing. You managed to get out just before the peak. Also, look at the volume: 2 volume spikes when the price spiked, another one after the price fell from $45 to $15, and another when the price had gone to zero, all the volume spikes are around a year-end.

I was lucky, it must be said.

However, one of the things that encourages "luck" in trading is technical analysis. Some things that i have learned is that most market noves come in three upwaves, with the second upwave the most powerful, supported by volume increases.



The historical chart shows that the last upwave (3) came on much lighter volume, and once that volume was exhausted, the price reversed.

In case anyone read the article...

I believe Telewest & NTL are now merged or very very close to it so in a way people where right they just didn't understand the debt that building a cable network requires.

I also think in years to come I'll repost this as........


The .Com Boom Vrs HP Boom Vrs Gold Boom

Tthink about 850$ gold in the 70's we'll hit $2,000 before falling back to $400.

Trick is to limit the risk. Where to put your money now is the key question. Speaking for my own position, I am looking to the new EU accession countries, Poland, Lithuania, Latvia, Hungry for capital growth and yield. Dispite their problems, (corruption, political instability etc) they will suffer less from any global property fall. Investment is pouring in at such a rate - infrastructure investment from the rest of the EU, China and Russia along with the US, - major business investment.

Unlike in the UK where people are borrowing heavily to afford property thus fueling UK boom, in these New accession countries finance is still difficult to get, thus the investment in property so far has been mostly by cash rich individuals; thus it should be protected somewhat from interest rate rises.

A friend of mine made the point that in times of recession, big business retreats back into their home territory. I however do not think this will happen to the same extent as in the past because of the low cost of labour in these countries - and the increased globalised state of these businesses will mean that they will cut jobs from regions with high costs certainly not from countries with high growth.

So in conclusion, investment in these new EU countries is relatively low risk compared to the potential gain especially when you consider the potential risk of investing elsewhere in the current global political and economical climate.

This isn't technical analysis, it's chartism.

How's that perfect storm playing out?

I'd 'double or quits' for the next two years if I were you!

Hi All,
I thought I'd add an update.
I now KNOW we are the same as the dot com boom.

Where I work someone working at goods in on 12K was telling me about:

His retirement/investment property in Indian (bought off plan and still not finished but he does have pictures of various stages of building)
His investment property in Turkey (another off plan)
And how he's lined up to invest in a complex of flats in Bulgaria. (off plan again)

He's aiming for investments totalling 120K on a 12K salary managed by taking equity out of his own house. Best of all the investments aren't even built yet.

But the clincher was his attitude. He had zero fear as he saw it as a one way bet. Why, simple because everyone else is doing it and many people are even jealous of how big an investment he's got.

Yet when someone offered him a very high paid job helping to sell these investments he turned it down as it wasn't safe.

Andrew

Only Indian citizens and Non-Resident Indians can purchase property in India...

You were turned down for the investment, right?

Hilarious anecdote.

Ummm... no. I was pointing out that either (A) his 'anecdote' is fictional or (B ) the guy is Indian in which case buying property in India isn't exactly crazy overseas speculation.

hehe this made me laugh! So here we are at the end of 2006! Funny thing is, people were saying this back in 2002 and even in 2000. I wonder if some people have been hanging on for half a decade waiting an waiting and have missed out on owning the home they wanted....

What strikes me is that people here seem to think a house is only an investment, yes it is, but it is also a home. Having been forced out of rental accommodation the security of being in control of my destiny is worth a big price - and I think other people do to. But there are some very odd anecdotes around, like the one in this thread about 2 oxford grads (as if that makes them property experts!) who sold to rent and bought again. Maybe they were looking for a new home and, like many, decided to rent for a bit to avoid annoying chains. Not everyone operates on greed!

Anyway, we could spend all day digging up old posts from people who swore blind a crash was coming in 2004, no wait 2005, no wait 2006, no wait 2007...? tbh who cares - I bought my place, through hard work, because I wanted a home, im sensible enough to ensure im not overstretched and my deposit protects me from negative equity (hopefully !). If prices drop it makes the next step easier but it will still be a step ahead of those waiting and waiting and waiting....

Whether prices go up or down, as long as my career keeps on track (no guarantee there ), my next place will be the 4/5 bed detached family home I want to provide for my misses and kids. Why hang around?

And im not sure shares are comparable to property, a share price is determined by a companies percieved future profitability - in time the company will either make lots of money to justify the price, or it wont. To me it seems like an objective measurable. A house cant be judged in the same way. Shares are investments, houses are investments to some, but also homes to many too.

You deposit provides some protection the bank against negative equity should the owner fail to keep up repayments. Means they can sell at a lower price to recover any remaining debt.

I don't know anyone talking about a housing crash in 2000. That was .com fallout time.

I do remember renting a room in a house in 1996 where the building society couldn't repossess because they would lose money if they did. The owner, who had a portfolio of properties, had fled to the Russian Urals (at least that is what we told his creditors), and our rent was going straight to the bank to cover the mortgage interest payments until they could repossess. Essentially we were renting from the bank. Bit like getting an I/O mortgage at the moment I guess, without such a sizeable deposit to lose, transaction costs, surveys, insurance, etc.

btp