Markets are crashing....
Stock markets are crashing…
One large American bank is about to go into administration and there will be a run on the
banks….
Bitcoin is going to 0….
Jeffrey Epstein is alive and working for mossad (Israeli secret service)....
These are the gist of some of the news headlines that have been in the papers / online this
week
Pretty doom and gloom - right?
No point doing anything with your money, might as well put it under the mattress
Or buy some precious metals?
Gold is a good one
Oh, wait…. That also had it’s biggest one day drop since 1980s
12% loss on January 30th
Just noise.
The best way to predict the future is to look at the past
Because it is impossible to predict the future, ‘black swan’ events (COVID, Russia/Ukraine
War, etc) will always happen without warning
But human nature never changes, and has never changed, so looking backwards gives us
insight into the future
Market corrections usually happen 7 + years, and markets always recover to new all time
highs
Dot Com Bubble - 2000
Financial Crisis - 2008
Covid 19 Crash - 2020
The 2025 Correction - 2025
This concept is very eloquently explained in the book ‘Same as ever’ by Morgan Housel
Property?
The signs are suggesting something different.
The bank of England base rate was held this week at 3.75%
UK house prices have hit an all time high at over GBP300k for the first time ever
A 98% mortgage for first time buyers from Santander (look at what the same thing did in
Australia last year)
The signs are suggesting that we are set for a growth phase….
Rates lower and trending down, pent up demand returning to the market (resulting in
record prices), and the market becoming more affordable for more people (98% mortgages, lower interest rates).
A pessimistic perspective;
You buy a property at the UK average house price of GBP300k. You put down a 30%
deposit at GBP90k (not including stamp duty).
It grows at a pessimistic 3% per annum for 10 years… property now valued at GBP390k,
equity in the property of GBP90k, or a 100% return on your deposit monies.
Inflation adjusted? A GBP55k gain, still 61.1%. Not bad for a pessimistic view.
Rents? Say rents start at GBP15k, and you get to keep GBP5k of that after costs and
mortgage (pre tax), then in 10 years with rents growing at 3% per annum (pessimistic and
under average), then income of GBP20k per annum.
Lets say costs of two thirds again, then income of GBP6,600… a 7.3% net real return on
the money you put down.
Again, not bad for a pessimistic view. Considering we could actually be entering a growth
phase.
Ignore what is going on in the markets
Take a long term view
‘Hold Fast’
This long term approach is discussed in our podcast this week
Thanks,
Callum