Pivot Point: 2012...a 1992 replay.

You may have noticed that this week large move occurred in the Finnish Government Government Bond (2 Year Bond below):


Since Summer, Finland seem to be the safe haven - Politicians and finance ministry have been glossing whenever they could that Finland is well managed, the economy is strong bla bla bla... the same broken tune...actually since a week something really got broken...

Maybe people realize that :

1- That the Finnish bond market is highly illiquid market hence volatile. When people see that inflation is becoming a threat or when they need the money asap (deleveraging i.e deflation force here), then all exit through the same door...and yield (interest rates) start to shoot up

2- Finland , whatever good economical and budget practices are made , remain a export oriented economy with an aging population and low immigration country. If the rest is sneezing, Finland get the Flu. Finland is not immune to the global slowdown or to an European slowdown.

So I have noticed a vague of layoff planned for 2012 by multiple of significant industry and company in Finland. The impact is going to be huge in term of employment and of course, our key focus housing price.

I bet, as I did in 2008 that the market will readjust except that this time I see little room for recovery as it did back then (due to mostly to global coordinated monetary and fiscal stimulus that resulted in a short spaced recovery). This time all the ammunition have been used or little is left. Of course, the central banker "magician" will make you think that it can make disappear all the problem - its an illusion, a confidence trick that has ran its course.

Be ready, the Mayan were right :-)..and of course the price will readjust by 2013 by at least 30%...if not then by 60% in the next 30 years a long slide similar to the japanese housing market: You were warned.

Let It Go!

The chart above is the 1 year yield of the Greek Government Bond.

Well the market believes it should default, or other nasty things... yet european politics seem confident they can resolve the problem.

Are the Greek issues a Lehman Brothers in the making? a predictable black swan?

ooops I Did It again: Britney Papandreou

Earthquake hitting Europe , the epicenter has been located in Greece.

Would the shockwave break the very "artificial" recovery and sink economies to the ground? answers...2012.

Housing Bubble Burst in China...overnight: 22% drop

A group of around 400 homeowners in Shanghai demonstrated publicly and damaged a showroom operated by their property developer after the company said it cut prices. Home buyers had wanted to speak with the developer to refund or cancel their contracts but were unsuccessful, according to local media. One report said the price cuts exceeded 25% per square meter.

The local media reports said an unspecified number of people were injured.

Chinese media separately reported that another group of Shanghai homeowners gathered on Saturday to speak with Longfor Properties Co., after it dropped asking prices to 14,000 yuan per square meter from 18,000 yuan per square meter at a residential development in the city’s Jiading district.

The Shanghai property-owner demonstration found little support on China’s Internet, where most still expressed worries that housing prices are too high.

The drop from 18,000 to 14,000 yuan is a 22% overnight drop and that is just a down payment on the carnage that is coming.

Source

While at the same time in Hong Kong the worse is to come during the period 2012-2013 according To Barclays Capital:

"Hong Kong’s residential property prices would drop by 35 percent to 45 percent over the next two years in the “hard landing” scenario of a deflationary economic environment, Barclays Capital Research said.

In a “soft landing,” continued mortgage rate increases and a slowing economy would drive prices 25 percent to 30 percent lower over 2012 and 2013, Andrew Lawrence and Vivien Chan, analysts at Barclays, wrote in a report dated today."

Source