There are no revelations to date which have changed my view of the outlook for the market. This collapse was expected. If you read over my market commentary blog that will be evident enough. I did actually expect the derivatives market to require the bail out, but actually that aspect of the financial market has been secondary.
So what is coming. In my last 'market commentary' post I stated that the US Congress will approve the bail out. Some commentators are expecting less than $700 billion because of a reluctant Republican Congress. I would however argue that that is mostly political posturing and the $700 billion figure will be required to preserve confidence. The other option is making a smaller commitment with the possibility of more if required.
The property market in the USA is falling because its highly leveraged. The same is true in a number of Western countries. This is not the case in a number of Asian countries. With the prospect of inflation, and low debt levels as a percentage of GDP, places like the Philippines make a lot of sense for investors. Japan is already in recession, has high public debt, but its domestic debt, not foreign debt. We can expect a subdued market in Japan but yields on non-CBD property are still good. In the countryside yields on foreclosed property are very good.
The Philippines can expect a lot of support from OFWs, though some of those will be returning home. At the end of the day, higher interest rates and inflation are not going to undermine the market significantly because most property buyers/holders paid cash, or are supported by OFWs. That spells little downside for Philippines property.
In contrast, the US property market has more downside then several years of consolidation as taxes and interest rates rise to reflect the higher inflation. A serious and protracted recession for the USA, but not a depression unless the Fed does something silly. There is also the prospect of some countries with surpluses stimulating the global economy, eg. EU, China, South Korea and Australia with increased domestic spending. Japan would need to increase taxes to justify increased spending. One would expect energy taxes to be the principal target for tax because its discretionary cost (at least directly speaking) and it helps achieve greenhouse gas objectives.
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Andrew Sheldon www.sheldonthinks.com
So what is coming. In my last 'market commentary' post I stated that the US Congress will approve the bail out. Some commentators are expecting less than $700 billion because of a reluctant Republican Congress. I would however argue that that is mostly political posturing and the $700 billion figure will be required to preserve confidence. The other option is making a smaller commitment with the possibility of more if required.
The property market in the USA is falling because its highly leveraged. The same is true in a number of Western countries. This is not the case in a number of Asian countries. With the prospect of inflation, and low debt levels as a percentage of GDP, places like the Philippines make a lot of sense for investors. Japan is already in recession, has high public debt, but its domestic debt, not foreign debt. We can expect a subdued market in Japan but yields on non-CBD property are still good. In the countryside yields on foreclosed property are very good.
The Philippines can expect a lot of support from OFWs, though some of those will be returning home. At the end of the day, higher interest rates and inflation are not going to undermine the market significantly because most property buyers/holders paid cash, or are supported by OFWs. That spells little downside for Philippines property.
In contrast, the US property market has more downside then several years of consolidation as taxes and interest rates rise to reflect the higher inflation. A serious and protracted recession for the USA, but not a depression unless the Fed does something silly. There is also the prospect of some countries with surpluses stimulating the global economy, eg. EU, China, South Korea and Australia with increased domestic spending. Japan would need to increase taxes to justify increased spending. One would expect energy taxes to be the principal target for tax because its discretionary cost (at least directly speaking) and it helps achieve greenhouse gas objectives.
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Andrew Sheldon www.sheldonthinks.com
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