Monday, 14 January 2008

Housing, Stock , China, India : 'all on the downside'

"European Central Bank council member Michael Bonello said inflation may moderate toward the bank's target by the end of the year as oil prices decline and economic growth slows. "

"The economic outlook is 'surrounded by considerable uncertainty'' and growth risks are 'all on the downside,' " Bonello said in an interview in Malta on Jan. 11.

"If commodity prices retreat as expected, 'then I think the projections that we have for inflation coming down again close to 2 percent by the end of the year could very well materialize.' "

Interest rate might go down by the end of the year...I think it's clear that the golden era is behind us. U.S. is entering or is already in recession. India and China Economical Growth has peaked and is entering into a readjustment phase. Finally, global housing is readjusting...

House prices have peaked and will fall , synchronized with the fall of interest rates as they have always done in the past.

Stock markets around the world will see a correction in the next 6 months. Although some corrections will be severe as in India and China; some will know, somewhat, a mild correction i.e the US and Europe.

As I started this year blog with an article describing 2008 as the year of the Tsunami (which referred, indirectly, to the global housing correction to come), it will be fair to call it as well the year of the "Nano Dragon". Dragon referring to China and Nano to India Tata nano car. Combining then gives the idea that some emerging economy such as India and China that started to be considered as the dominant will be seen weak and finally only having a "Nano" position or effect in the global Economy in the short and medium term.

For some it will bring back the reminders of Japan in the late 80's, a giant that everybody thought will dominate the world economy, went into it's knees for the past 20 years...

Indeed when the U.S and Europe Sneeze the rest of the world catch a cold....

Coming back to housing, interestingly enough when house price and interest rate rises then every body is buying... on the other hand , as we will witness, when prices and interest rates will be falling, nobody will be buying, depressing even more the housing market.

Source: Bloomberg

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