Latest / Merryn Talks Money / UK Housing Perks Up, China's Bazooka Stimulus Sparks a Stock Rally

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UK Housing Perks Up, China's Bazooka Stimulus Sparks a Stock Rally · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: Welcome to the Marin Talks Money Weekly round up, our
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  Speaker 2: debrief on the biggest stories and markets and economics. I'm
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  Speaker 2: Meyrin sum Set webs In, your opinion columnist.
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  Speaker 3: And I'm joined stephic senior reporter and not of the
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  Speaker 3: Money Distilled newsletter.
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  Speaker 1: John.
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  Speaker 2: Do you remember how you were right about Russia and
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  Speaker 2: I said, it's so cheap it discounts pretty much anything.
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  Speaker 2: If you are interested in just buying cheap stuff, you
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  Speaker 2: should buy Russia. And you said, no, no, to be ridiculous, Maren,
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  Speaker 2: that is uninvestable and no one should buy that, and
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  Speaker 2: you were absolutely right.
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  Speaker 3: Remember that, Yes, I remember it. Well.
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  Speaker 2: Anyway, we've been talking about China a little bit over
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  Speaker 2: the last few months, and You've been saying uninvestable, and
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  Speaker 2: I've been saying, yeah, kind of cheap.
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  Speaker 1: And here we are.
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  Speaker 2: Who won this one?
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  Speaker 3: Okay, you won this one, but just wait, I won
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  Speaker 3: this one.
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  Speaker 2: All right? So here we have massive what you might
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  Speaker 2: call bazoukas from China as everyone is calling them, huge
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  Speaker 2: fiscal monetary stimulus basically drugy whatever it takes, whatever it takes,
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  Speaker 2: print money, you spend money, and of course it has
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  Speaker 2: had the most extraordinary effect. These are indices that have
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  Speaker 2: been doing absolutely nothing for years and years and years
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  Speaker 2: and suddenly up whatever whatever part of the stock market
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  Speaker 2: you look at, it's just soaring.
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  Speaker 1: Now.
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  Speaker 2: There had been extreme pessimism and now we look like
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  Speaker 2: we're moving into extreme optimism. Is this John a ball market?
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  Speaker 3: Well, I mean there's a booll market. It's up twenty
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  Speaker 3: percent from the bomber.
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  Speaker 2: Everything that I read on it says, oh, well, it
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  Speaker 2: doesn't affect the real problems in China. And Diana says
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  Speaker 2: is We had that wonderful podcast with Diana Tooilever a
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  Speaker 2: couple of weeks ago, but she said, you know, these
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  Speaker 2: these problems in China are just huge in the property
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  Speaker 2: market and particularly trying to get the Chinese consumer to
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  Speaker 2: get out there and really spend, spend, spend, and this
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  Speaker 2: doesn't fix that.
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  Speaker 3: I think all of that's true. And obviously China's in
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  Speaker 3: a bitter a pickle. It's sort of got a balance
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  Speaker 3: sheet recession, which is basically which pins problem was for
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  Speaker 3: ages and ages. However, as we always point out the
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  Speaker 3: economy as in the stock market, and something I wanted
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  Speaker 3: to I took a look at this because you know,
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  Speaker 3: remember Draggy's actual word, but it takes moment. So that
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  Speaker 3: happened in summer twenty twentelve, and obviously obviously Draggy just
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  Speaker 3: saying that didn't fix all of Europe's problems.
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  Speaker 2: Indeed, you fix any of them if I remember right now.
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  Speaker 3: The same problems, Yeah, exactly. But if you want to
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  Speaker 3: know what, I'm to this euro stock. So that's the
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  Speaker 3: effectively the foot see one hundred for the Eurozone, it
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  Speaker 3: went up eighty five percent, and that's excluding evidence. So
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  Speaker 3: you could probably call it a double over the next
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  Speaker 3: three years basically in a straight line. I mean, it
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  Speaker 3: then did nothing for five years because people probably realized,
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  Speaker 3: oh we are men, nothing's actually fixed in Europe. But
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  Speaker 3: the point is that whatever it takes moment had this
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  Speaker 3: stratus very impact on what we're extremely cheap Eurozone stocks,
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  Speaker 3: and so I don't really see any reason why it
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  Speaker 3: shouldn't have the same effect in China.
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  Speaker 2: Yeah, and this is this is the Bill b Lane approach.
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  Speaker 2: You know, heap it out in it on this very thing,
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  Speaker 2: saying that this isn't going to make any difference to
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  Speaker 2: the economy, and it turned the response to the GFC
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  Speaker 2: in the in the West didn't make much much difference
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  Speaker 2: to the economy. We still ended up with rubbish realeconomic growth,
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  Speaker 2: horrible productivity, and endless spending of the free money on
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  Speaker 2: stock buybacks rather than on capex or anything nice like that.
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  Speaker 2: And anyone holding equities entered up rich workers, so flat
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  Speaker 2: rail wages for forever long. But the stock market has
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  Speaker 2: gone berserk result of QI and zero interest rate policies
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  Speaker 2: and the lesson there was just don't look at the economy,
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  Speaker 2: just bye bye bye. And if the Chinese are willing
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  Speaker 2: to do the same kind of thing, whatever it takes,
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  Speaker 2: then you might as well just buy and wait.
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  Speaker 3: Yeah, I mean absolutely, I mean, don't get me wrong.
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  Speaker 3: I mean I think that I'm still not king in
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  Speaker 3: China explicitly because the lack of confidence and property rates.
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  Speaker 3: They tend to change the mind and that kind of
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  Speaker 3: thing quite quickly when they do shift it. And obviously
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  Speaker 3: there is an element of are they actually will't they
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  Speaker 3: do whatever it takes. I mean, it kind of looks
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  Speaker 3: like at the moment, maybe it will fezzle at some
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  Speaker 3: point and they just won't follow it through. But as
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  Speaker 3: soon as if the mentality has changed and given how
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  Speaker 3: cheap Chinese stocks were.
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  Speaker 2: Out Yeah, and still are actually. I mean, you know,
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  Speaker 2: twenty five thirty percent on top of markets that cheap
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  Speaker 2: still leaves them cheap. I mean, if you've got a
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  Speaker 2: discount for not having clear rule of law, etcetera, of
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  Speaker 2: course you've got a discount for that, but even so,
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  Speaker 2: still cheap at these prices. I mean, I think what
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  Speaker 2: I would recommend people do is go back and listen
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  Speaker 2: to that podcast that we did do with Diana, which
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  Speaker 2: goes through a lot of these things, and she does
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  Speaker 2: say towards the end, if you're going to invest in China,
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  Speaker 2: probably the place to be is in dividend paying stocks
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  Speaker 2: because a lot of this is about an attempt to redistribute,
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  Speaker 2: and a lot of what the Chinese government are trying
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  Speaker 2: to do, not necessarily with all these bits and bobs,
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  Speaker 2: but if they want to see a decline in wealth
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  Speaker 2: inequality and they want to see wealth redistribute, it a
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  Speaker 2: little bit that will come through the dividend paying stocks
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  Speaker 2: and particularly the state owned enterprises that do pay dividends.
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  Speaker 2: So maybe go back listen to that, and that may
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  Speaker 2: be a way to approach trying to get exposure to China.
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  Speaker 2: Under these new circumstances of that.
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  Speaker 3: Yeah, And I mean the other thing is just like
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  Speaker 3: I mean China's fault. The Chinese stock market is senting
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  Speaker 3: like the Shane's entree hundreds fallen by almost forty five
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  Speaker 3: percent or fail. But with forty five percent from it's
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  Speaker 3: high in twenty twenty one to the more strecent law.
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  Speaker 3: So in all bones and can there twenty five percent
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  Speaker 3: from here? Can still you know, it's still it's a chunk,
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  Speaker 3: but it is. There's a long way to go before
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  Speaker 3: we get.
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  Speaker 2: Well, you are not yet back with this, with this
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  Speaker 2: sharp rise. You are not back where you were in
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  Speaker 2: two thousand and seven. You are not back where you
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  Speaker 2: were in twenty fifteen, and you are not back where
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  Speaker 2: you were in the early twenty twenties. So there's a
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  Speaker 2: long way to go to even make a lot of
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  Speaker 2: people evens, which of course leads to the question as
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  Speaker 2: to whether Western investors will will will be just looking
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  Speaker 2: to get evens and get out.
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  Speaker 3: And that sort of thing. I mean, if it does
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  Speaker 3: it's onto the highs, then people will just expect more highs.
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  Speaker 3: That's usually what follows a fresh high. I think more
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  Speaker 3: it will depend on the kind of follow through from here.
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  Speaker 3: But if it looks as if the Chinese has came
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  Speaker 3: I mean the end of the day. You know, China
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  Speaker 3: partly wants to do this because I mean, it's done
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  Speaker 3: this before. It's like it realizes, oh no, we're running
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  Speaker 3: on money. We better get some foreign idiots to funnel
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  Speaker 3: some capital in here. And then the foreign idiots but
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  Speaker 3: bledgingly line up and eventually does enough connect cautital being
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  Speaker 3: raised and you know things can return to you know,
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  Speaker 3: been under Chainer's control again. But you know, in the
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  Speaker 3: interdem period you can make a lot of money as
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  Speaker 3: long as you don't regard it as our buying hold investment.
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  Speaker 2: Okay, excellent, So we're choking this one up as a
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  Speaker 2: win for Merin Thank you, John. Moving on to somewhere
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  Speaker 2: where neither of us are winning, and nor is anyone else.
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  Speaker 2: The UK property market, instead of crashing like it's supposed to,
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  Speaker 2: it's now beginning to pick up again, right, I mean
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  Speaker 2: it has full a lot of real time. Let's let's
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  Speaker 2: not be too down on this. The real price for
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  Speaker 2: house in the UK has come down significantly over the
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  Speaker 2: last couple of years inflation adjusted, but nonetheless prices and
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  Speaker 2: morte approvals are taking up right.
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  Speaker 3: Obviously it's been happening for a while, but this week
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  Speaker 3: the mortgage approvals figures, particularly for last month came out
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  Speaker 3: and the backup to just under sixty five US mortgage approvals.
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  Speaker 3: Now what that is. This is the Bank of England
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  Speaker 3: figures for the number of mortgages that have been approved
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  Speaker 3: for new home purchases, So this is new sales. And
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  Speaker 3: in the five year period between twenty fourteen and twenty nineteen,
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  Speaker 3: so after the last big crash and before the pandemic,
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  Speaker 3: the kN normal rate of sales was about sixty six
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  Speaker 3: thousand a month, so basically back to that level. The
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  Speaker 3: kind of transactions crash is basically over. House prices are
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  Speaker 3: picking up again, mortgages are getting easier to get, and
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  Speaker 3: I mean, like Nationwide grabbed a few headlines this week
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  Speaker 3: because they've said that they will now offer six times
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  Speaker 3: income to first time buyers on a five percent deposit,
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  Speaker 3: as long as you've got a certain amount of household
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  Speaker 3: income and as long as you take it a five
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  Speaker 3: or a ten year fix. I mean don't know, none
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  Speaker 3: of this stuff is anywhere close to the sorts of
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  Speaker 3: madness that we saw in two seven. I don't think
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  Speaker 3: I'll ever get to those levels. Whether people are off
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  Speaker 3: one hundred and twenty five percent mortgages on you know,
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  Speaker 3: a kind of minimal interest rate. You know, it is
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  Speaker 3: a sign that basically the looser credit gets, the higher
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  Speaker 3: prices will go, because that's just the way house prices work.
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  Speaker 3: I mean, one thing you notice from the nationwide figures
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  Speaker 3: is that the more expensive the area, the less prices
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  Speaker 3: have gone up. So basically the south, the South of
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  Speaker 3: England prices are still kind of flat. Everywhere else they're
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  Speaker 3: properly picking up speed. And Northern Ireland is obviously its
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  Speaker 3: own we market. It's like went up like eight percent
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  Speaker 3: in the last quarter year on year. But that's what
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  Speaker 3: that thing reflects, its connection they kind of you know,
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  Speaker 3: Ireland itself and those two markets could kind of mixed
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  Speaker 3: up and influence each other.
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  Speaker 2: Yeah, and I suppose there is the differences, as you say,
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  Speaker 2: there's differences between the expensive areas and the sabs and
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  Speaker 2: cheaper is in the north, et cetera. But also at
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  Speaker 2: the very high end, we're hearing a lot about people
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  Speaker 2: having trouble selling and this may be connected to uncertainty
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  Speaker 2: ahead of the budget. It may be connected to non
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  Speaker 2: doms moving out, et cetera. There's a lot of uncertaintyer
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  Speaker 2: at the top end of the market and at the
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  Speaker 2: different parts of the market. Of course, you've got people
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  Speaker 2: slightly dashperate to sell before the new capital gains rules.
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  Speaker 2: We assume there will be new capital rent gains rules
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  Speaker 2: before they come in, so a variety of articles on
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  Speaker 2: the newspaper about how to sell before the budget just
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  Speaker 2: in case it comes in overnight, et cetera. So I
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  Speaker 2: think there's a lot of people trying to sell, and
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  Speaker 2: that may mean that people are more flexible about pricing,
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  Speaker 2: and there is now just looked it up, the number
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  Speaker 2: of houses for sale are still at a seven year high,
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  Speaker 2: so thirty three homes per state agent, which is relatively high.
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  Speaker 2: So there's a lot, a lot of choice out there
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  Speaker 2: for by it.
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  Speaker 3: Given those circumstances, you know, I mean, you're effectively it's
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  Speaker 3: on but people who they're not quite forced salers, but
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  Speaker 3: they are keen salers. You or it's showsly Tommy, that
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  Speaker 3: shows the poet of credit that that environment is not
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  Speaker 3: proven to be more more more conducive to fall in prices. Basically,
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  Speaker 3: if you get people panicking before the budget kicks in.
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  Speaker 3: You know, you're not you're not going to shift at
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  Speaker 3: who's now in the next thirty d's unless you're well
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  Speaker 3: and you taking offer yeah, or we.
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  Speaker 1: Buy any house to that agency exist.
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  Speaker 3: It kind of exists in the last bubble, didn't they.
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  Speaker 1: They did, and they certainly existed back in the early
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  Speaker 1: nineteen nineties, that terrible crash.
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  Speaker 2: You could yeah, or you could you could give your
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  Speaker 2: house in part exchange, and I mean all sorts of things.
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  Speaker 3: We buy any mintion dot com.
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  Speaker 1: We buy anything from fleeing non dorms dot com.
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  Speaker 2: Hey, although it looks like those rules that may now
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  Speaker 2: be watered down, we're not going to get onto non drms,
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  Speaker 2: but well maybe we could get onto nondoms. It looks
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  Speaker 2: like the new government of finally beginning to see sense
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  Speaker 2: and realize that there are consequences and that incentives work,
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  Speaker 2: and that if you put up taxes very high on
• 11:53
  Speaker 2: one particular group, and in particular, if you tell them
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  Speaker 2: that forty percent of their assets will be subject to
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  Speaker 2: UK inheritance tax rules for ten years after they leave
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  Speaker 2: the country, they might just go and maybe you we'll
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  Speaker 2: raise any money. There seems to be a change of
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  Speaker 2: thinking that, which is interesting and be fascinating if this
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  Speaker 2: government began to understand the very hard laws of incentives,
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  Speaker 2: which they certainly didn't in opposition, and they haven't shown
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  Speaker 2: much sign of understanding so far, but maybe if they
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  Speaker 2: begin to grasp that, we'll have made some progress. Thanks
• 12:32
  Speaker 2: for listening to this week's Maren Talks Money. If you
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  Speaker 2: like our show, rate review, and subscribeerever you listen to podcasts,
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  Speaker 2: Also be sure to follow me in John on x
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  Speaker 2: or Twitter at marinas w and John Underscore Steppeic. This
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  Speaker 2: episode was produced by Semisadi, Production support and sound design
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