Musings of a London Property Finder
A month ago Anthony Bolton, frequently named ‘Britain’s leading fund manager’ gave an interview to Bloomberg predicting an end to the bear market and said that we are now at the beginning of a long running bull market.
His reasoning is essentially that from his analysis of previous bear markets, in terms of length and severity, he believes we’ve passed the low point. He regards sentiment as being at a low not seen since the 1970s, despite some recent improvements and that this has led to investors holding historically high cash positions. Money market funds in the US are now half the size of the stock market, compared to just 20-25% in previous lows. Further, on many metrics, stocks are on historically low valuations and he rejects the view that it’s different this time, and that we need to throw away what we’ve learned over the past 35 years. Specifically, he does not expect the S&P 500′s low of 666 to be revisited, and anticipates this rally lasting for several years.
Bolton has been bullish about pretty much all sectors, including property and questionned the wisdom of holding only traditional ‘recession stocks’ such as government bonds.
This morning it seems rival fund manager Invesco Perpetual’s Neil Woodford has dismissed this view, warning that the downturn has ‘a hell of a long way to go’. His reasoning is that economic recovery won’t occur until both the UK and global economies have rebalanced, which means reducing leverage and rebuilding the banking system to a point where it is prepared to lend to businesses again.
‘My view is the problems that led to this recession - problems of excessive leverage in the consumer economy, excessive leverage in the banking system - have not been corrected at all,’ Woodford said.
‘There’s been no discernible, no significant increase, in consumer saving. There’s been no rebuilding of balance sheets effectively in the personal sector. If anything, leverage has increased in recent months and arguably because of course there’s been a fall in asset values and a fall in house prices. So there’s been no paying down of debt. The banking system has to some extent reduced its leverage but I believe it has a hell of a lot further to go.’
Certainly both views are based on truth and this London Property Finder firm certainly won’t be pitting their wits against these two city heavy weights, except to say that there still seems to be a great deal of cash sloshing about, certainly in property, both from within the UK and in-bound as foreign investors pile in. Who can blame them? They smell bargains when the Brits stop buying and sterling falls. As we all know, many fortunes are made out of a recession and the canny are keen to invest where they see value.
It is true that Joe Bloggs is probably more highly geared than he was 18 months ago, but then it’s unlikely he is going to get us out of the recession, except for the fact that he keeps spending and helping businesses to grow and banks to keep lending. Also, we work closely with several banks and anecdotally they seem to be lending where the business plan stacks up and they think they are going to get their money back. And that’s the point. The mood seems to have changed, people with cash can see opportunities and they know they need to invest to keep their money working.
In my capacity as a London Property Finder, not a week goes by without me spotting a truly amazing bargain and if I had any spare money, I would certainly be shopping and it wouldn’t be shoes!
Tags: Bottom of the market?, London house price crash, London House Prices, London Housing Market, London Property Finder, London property prices