13 European Housing Markets Sure Look Like Bubbles

soap bubble

Could Sweden or Finland be the scene of the next European financial crisis? It is actually far likelier than most people realize. While the world has been laser-focused on the woes of the heavily-indebted PIIGS nations for the last couple of years, property markets in Northern and Western European countries have been bubbling up to dizzying new heights in a repeat performance of the very property bubbles that caused the global financial crisis in the first place.

Check Out Europe’s Housing Bubble Country-by-Country >

Nordic and Western European countries such as Norway and Switzerland have attracted strong investment inflows due to their perceived economic safe-haven statuses, serving to further inflate these countries’ preexisting property bubbles that had expanded from the mid-1990s until 2008.

With their overheated economies and ballooning property bubbles, today’s safe-haven European countries may very well be tomorrow’s Greeces and Italys.

I’ve named this massive multi-country housing bubble “The Post-2009 Northern and Western European Housing Bubble.”

(The Post-2009 Northern and Western European Housing Bubble is a part of the overall Post-2009 Global Housing Bubble or “Housing Bubble 2.0″ that I’ve identified.)

UK and London Housing Bubble

UK housing prices have nearly quadrupled from the mid-1990s to 2008, briefly fell 20% in 2009 and have since rebounded enough to keep property prices firmly in the stratosphere.

UK property prices are very overvalued, currently valued at 128% of their historic price-to-income ratio and 140% of their historic price-to-rent ratio. [1] In a pattern similar to France, the UK housing bubble (since 2008) has been primarily driven by price gains in the capital city of London.

Prime London housing prices rose a hearty 11.4% in the 12 months to October 2011 [2], up 40% from their post-credit crunch low [3], while most other investment markets fell in a very volatile year.

Like Paris, the city of London has such a strong level of international “brand recognition” and a perceived safe-haven status that wealthy foreign investors are clamoring to buy property in prime areas such as central London.

“London property is the ‘Swiss bank account’ of the 21st century,” says Robin Hardy, an analyst at London investment firm Peel Hunt. Rich people in places like Egypt, Syria and southern Europe are rushing to get their money away from the turmoil, and for want of a better alternative, they are plunking it down in the “millionaire’s playground” of central London. [4]

The nouveau riche of China, India and other emerging markets are also keen on diversifying their wealth into prime Western property markets such as London, Vancouver and Manhattan, while one hedge-fund manager said that London property was a “laundromat for Russian money.”

An entire generation is locked out of the city’s broken and outrageously-bubbled housing markets as the average Londoner would need to triple their salary to £87,000 to buy an average price property. [5]

The prime London property bubble is highly vulnerable to the popping of the precariously-teetering China and emerging markets bubbles as well as job losses and decreasing bonuses for City of London financial workers. [6]

UK and London Housing Bubble Articles List

French and Paris Housing Bubble

After zooming 120% from 2000 to 2008 and briefly dipping 5.6% in 2009, French property prices have continued their inexorable march higher since late 2009. French property prices are highly overvalued, currently valued at 135% of their historic price-to-income ratio and 150% of their historic price-to-rent ratio. [1]

Though property prices are strongly rising throughout France, the French housing bubble is largely driven by the Paris region, where prices have jumped 18% in 2010 and approximately 10% in 2011, up more than 40% since 2005. Some posh districts in Paris have risen at a 27% rate in 2011. [2]

France’s housing bubble was goosed by a 2009 law that was meant to stimulate the housing market by creating a significant tax incentive for buyers. Mortgage rates that plunged from 6.5% in late 2008 to 3.5% in 2011 were another major catalyst for soaring property prices, causing fixed-rate mortgage lending to increase by 73% by early 2011. [3]

The French property market now has the dubious distinction of being the most overvalued in Europe and the third most overvalued market in the world, behind only Hong Kong and Australia [4], which have property bubbles of their own.

The Paris-based OECD warned that “there is a risk that a prolonged period of easy finance could result in a price bubble,” which may endanger French banks [5], while Hervé Boulhol, the OECD’s France economist, warned against treating French real estate as a safe-haven and that the property market’s powerful rise without a corresponding rise in income “may signal a bubble phenomenon, as a bubble is a disconnection with fundamentals.” [6]

Moody’s also issued a warning that the French property market was overheating and that the least cautious lenders could face steep losses in a more price severe drop. [7]

By October 2012, the French property boom showed signs of an abrupt slowdown, with new mortgage loans dropping 45.8% (yoy) and a 30 to 40% decrease in home sales in Paris and Ile-de-France. [8]

French Housing Bubble Articles List

German Housing Bubble

While Germany was fortunate and sensible enough to have avoided engaging in the 2000s housing bubble folly with the rest of the world, Germans certainly seem eager to make up for lost time.

The European Central Bank’s ultra-low key interest rate, while appropriate for the ailing PIIGS nations, is too low for faster-growing Germany resulting in negative real interest rates and fears of inflation.

As is common in countries with negative real interest rates, German investors are pulling money out of low-yielding bank accounts and investments and plowing it into all types of real estate, causing prices to boom for the first time in a very long while.

Property prices in Munich and Hamburg rose by more than 10% in 2011 [1] , while obscure fields and forests in northeastern Germany’s Uckermark region have soared by as much as 20 to 30 percent. [2]

In September 2012, George Soros said “You have a serious danger of a housing bubble developing in Berlin. It has a lot to do with the flight of capital and negative real interest rates.” [3]

It is too early to determine if Germany is in the midst of a property bubble, but it is certainly a situation that warrants monitoring, especially if there is a temporary improvement in global economic growth and sentiment.

German Housing Bubble Articles List

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6 Movies For The End Of The World

2012 movie

If you forgot to flip the page on your Mayan calendar this month, we have some bad news.

The world is coming to an end on Dec. 21 thanks to the preordained Mayan Apocalypse. At least, that’s what dubious sources have spent the past few years alleging.

But if the apocalypse means widespread fear and panic to the average person, it means something else to Hollywood: Great entertainment.

So just in case tomorrow isn’t the last day Earth exists, here are six recent movies that will let you the enjoy the end of the world vicariously.

1. Seeking A Friend For The End Of The World (2012)

It’s probably too late for you to find your own new friend for the end of the world, but you can revel in this underrated, underseen romantic dramedy, which stars Steve Carrell and Keira Knightley as neighbors spending their last weeks together before an asteroid destroys Earth.

2. Melancholia (2011)

If the thought of Earth’s complete obliteration bums you out, you’ll feel right at home with Melancholia.

Kirsten Dunst plays a deeply depressed young woman whose life is altered by the announcement that a mysterious planet, dubbed “Melancholia,” has emerged from behind the sun — and may be on a collision course with Earth.

3. The Road (2009)

Doomsday enthusiasts can’t agree on the form the so-called “Mayan Apocalypse” will take, which makes The Road — a post-apocalyptic film in which the cause of the cataclysm is never explained — ideal viewing.

Viggo Mortensen stars as a man trying to protect his son from cannibals, scavengers, and thieves.

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HOUSE OF THE DAY: Rihanna Just Picked Up A $12 Million Estate In Pacific Palisades

rihanna house

Pop star Rihanna has just bought a Pacific Palisades estate that was on the market for $12 million, Trulia reports.

The 11,000-square-foot, seven-bedroom mansion was built in 2010 and has an awesome elevated pool area.

We hope the singer has better luck with this home than her last one; she listed her Beverly Hills mansion last year at a $2.4 million discount after filing a lawsuit saying the home was unlivable after it flooded during a rainstorm.

Here’s what the house looks like from above. There’s a sundeck on the top floor and a 6,000-square-foot yard.

The biggest perk is the pool area, which has a spa, BBQ and bar.

The house has seven bedrooms and nine bathrooms.

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FINANCIAL ADVISOR INSIGHTS: Advisors Are Getting Flooded With Questions About Gun Stocks

FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.

Advisors Are Getting Flooded With Questions About Gun Stocks In Aftermath Of Newtown Shooting (The Wall Street Journal)

Gun stocks like Smith & Wesson’s and outdoor goods retailers like Cabela’s that also sell guns, got crushed in the immediate aftermath of the Sandy Hook massacre. Amid the outcry and the Obama administration’s plan to change gun policies, advisors expect clients will want to sell gun stocks but that it might be difficult to clear portfolios. Others however warn that this uproar about guns will die down in six months.

The Four Big Investment Themes Of 2012 (The Reformed Broker)

Investment advisor Joshua Brown says there were four major themes for investors this year. The first was the Apple obsession, but the stock’s recent downward trajectory has left investors in unfamiliar terrain. The second and the biggest winning trade was in homebuilder stocks. The third big theme was investors piling into bond funds.  And the fourth big theme was the inflows out of active funds, and into passive funds like Vanguard.

Wall Street’s Biggest Geniuses Reveal Their Favorite Charts Of 2012 (Business Insider)

As we wrap up 2012, Business Insider’s Matthew Boesler reached out to some of our favorite analysts, economists and traders to get their favorite charts of 2012. Of the 70 charts he curated Boesler said John Stolzfus and Matthew Naidorf’s gold chart was his favorite. Here is their explanation:

“Uncertainty, financial crisis, currency debasement, accommodative monetary policies, and central bank additions to gold reserves undoubtedly wheaten investors’ appetite for the ‘safe haven’ and ‘storehouse of value’ attributes of the metal. We believe, however, that ultimately it was the accessibility and liquidity provided by the ETF structure that facilitated the momentum and scope of gold’s performance. Our chart illustrates the rise of gold eight years before and eight years after the launch of SPDR Gold Shares (GLD).”

gold chart

If You’re Investing In Alcohol, Long Bourbon, Short Beer (Citi)

Per capita beer consumption has been falling and bourbon sales have surged in comparison, according to Citi’s Vivien Azer. Meanwhile, spirits also give alcohol drinkers more “buzz for their buck”.

“While we like the pockets of growth that remain in the U.S. beer category, overall we continue to believe that the U.S. spirits segment offers a more attractive return profile for investors, given the less impressive trends that we expect to continue to see for the U.S. beer category, generally. As such, our favorite name within our alcoholic beverage coverage remains Brown-Forman, where we have an $80 target price, which represents 28% ETR from current levels.”

A Baker’s Dozen – 13 Investment Themes for 2013 (Credit Suisse)

Credit Suisse analysts expect 2013, to be “disappointingly similar to 2012” but identify 13 investment themes for next year. These include healthcare reform, U.S. housing, shale revolution, and, automation.

In housing, homebuilders and building product companies will benefit from the improvement in home sales and prices. Among banks Wells Fargo will likely be the biggest beneficiary, and, mortgage REITs and insurers will also be key winners. The biggest risks to housing are  “elimination of the mortgage interest deduction and/or significantly higher FHA down payment requirements”.

Here’s How Index Funds Can Save Your Retirement (Marketwatch)

Paul Merriman, founder of Merriman LLC writes that moving money out of individual stocks and active funds, into index (passive) funds can help people retire earlier. 

Index funds add money to savings and help avoid stupid decisions. Merriman highlights ten ways in which index funds can help savings, these include reducing turnover since they rarely replace stocks and bonds, saving on taxes, and reduced risk through diversification. 

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REVEALED: The Full Story Of How Facebook IPO Buyers Got Screwed

Mark Zuckerberg black and white

The Facebook IPO in May was a disaster.

Hyped up as the must-buy of the decade, the stock faltered as soon as it opened, and the shares then crashed more than 50% over the next few months.

IPO buyers got demolished. Facebook’s reputation took a dive. Lawsuits and recriminations commenced.

The main problem with the IPO was that investors paid way too much for the stock. 

Most of the responsibility for this decision, unfortunately, lies with the investors themselves. No one made anyone pay $38 a share for Facebook.

But some of the fault lies with Facebook, Facebook’s bankers, and some idiotic IPO information-disclosure rules.

During the IPO roadshow, sophisticated institutional investors got important negative information about Facebook that small investors didn’t get. This made the institutions much less enthusiastic about Facebook than some less-informed small investors turned out to be.

I wrote about the unfairness of this in the wake of the IPO disaster last spring. But now, thanks to an investigation by Massachusetts securities regulators, we have the blow-by-blow details on how small Facebook IPO buyers got screwed.

The Massachusetts “consent decree” tells the behind-the-scenes story of how the negative information about Facebook was shared with some investors and not others. It also shines a light on many aspects of the IPO process that still aren’t well understood:

  • The story reveals, for example, that analyst “estimates” for companies going public aren’t really “estimates” but company guidance.
  • It emphasizes just how big an information advantage sophisticated investors have over small investors.
  • It makes a mockery of the fiction that investing is “a level playing field.”

The investigation also reveals that some IPO rules should be changed immediately. I’ll explain how at the end.

But first, the full story about how Facebook IPO buyers got screwed.

At the beginning of an IPO, company managers meet with research analysts to teach them about the business. Sometimes, the company gives “financial guidance,” the way some public companies do.

Mark Zuckerberg did not attend this meeting, but Facebook’s CFO David Ebersman did.

CFO Ebersman gave the analysts a very specific forecast for Facebook’s performance. This forecast was never shared with small investors.

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THE MONEYGAME 70: The 70 Most Important Charts of 2012

Monk reading

There’s no better way to understand the world than charts.

Business Insider reached out to its favorite analysts, economists, and traders to get their favorite charts of 2012.

The responses we received vary dramatically, and the insights are revealing.

Responses cover all of the big stories of the year: the Treasury rally, the year in stocks, Europe, the changing nature of global energy, and the era of the central banker.

We’d like to express our huge things to all of the people who contributed to this feature.

Byron Wien, Blackstone Group

Matt King, Citi

Doug Kass, Seabreeze Partners Management

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LAST CHANCE: Subscribe To A Newsletter For A Chance To Win An iPad Mini

ipadmini

Just in time for the holidays we’re giving you have a chance to win an iPad mini.  Become a newsletter subscriber now and you’ll have a chance to win Apple’s latest tablet.  If you’re the lucky winner you will have all of these great features at your finger tips and can stock up on our favorite iPad mini apps.  Click below to enter and to start receiving one or more of our newsletters to keep up to date with the news you need to know.

Entry deadline is December 21.

As a newsletter subscriber, you’ll get daily updates and alerts on topics that matter most to you. You must subscribe to at least one newsletter to be eligible, so if you have not already, be sure to choose one or more newsletters before submitting your entry.

CLICK HERE TO ENTER >

On or before December 21, 2012, we’ll announce the lucky winner.

You must be a legal resident of the U.S. and a newsletter subscriber to win.

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Why Richard Branson Will Knee British Airways’ CEO In The Crotch In 2017

Last week, Delta bought 49 percent of Richard Branson’s Virgin Atlantic, launching a joint venture between the two airlines as well as a spat between Branson and British Airways CEO Willie Walsh.

Walsh angered the Virgin boss by suggesting the deal would lead to consolidation and the disappearance of the Virgin brand. When Branson bet Walsh $1.6 million (to be paid to either company’s employees) that Virgin would still exist in five years, Walsh proposed a knee to the groin instead of the money.

Branson accepted. And from what Delta is planning, it looks like he’s going to win.

At a Delta/Virgin press conference last week, Business Insider asked Delta CEO Richard Anderson if there was any credence to Walsh’s suggestion. “No,” he replied curtly, “That actually gets my blood to boil…The whole purpose is to join the networks and join the brands together.”

In a phone conversation today, a Delta spokesperson reaffirmed the plan to retain the Virgin brand. The two airlines will continue to operate separate flights, but will collaborate on scheduling, and share costs and revenues.

Customers will know which airline they are flying when they buy their tickets, and the frequent flier programs will be merged.

Craig LaRosa, a principal at innovation and design consultancy Continuum, believes Delta has bought itself a chance to improve its own brand. Virgin is one of the few airlines with loyal customers and is a “standout in the industry,” he says.

Instead of taking Virgin’s profitable slots at congested Heathrow Airport in London and gutting the brand, Delta can mine Virgin’s experience.

Some of that could be adopting the little things Virgin does to make long flights more pleasant. “Virgin is really well known for doing simple things and making them sophisticated,” LaRosa says. For instance, passengers can order their meal when they want. “That’s one of the things Delta can learn from Virgin.”

For now, Delta is not offering specific examples of how the joint venture will change the in-flight experience, but it is excited about the positive impact Virgin could have on its own brand.

“It’s a great association for us,” the spokesperson said.

Based on the company line and the potential upside for Delta in using Virgin to bolster its own reputation, come 2017 we expect Willie Walsh will be (supposed) to go to Virgin headquarters to get kneed in the groin.

SEE ALSO:  Here’s Why Delta Bought A Huge Chunk Of Virgin Atlantic

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CITI PRESENTS: The 27 Greatest Consumer Brands In The World

nike air jordan 28 sneakers

Citi has has identified the 27 “World Champions” of the consumer discretionary sector.

The team of analysts led by Greg Badishkanian believes that these companies have “significant and enduring business models over the long term.”

Citi’s analyst also have favorable ratings on all of these stocks.

Here’s Badishkanian’s screening criteria:

  • Market cap exceeds $3 billion;
  • Minimum of top 3 in market share in a third of the company’s businesses; and
  • Significant revenue streams from outside its domestic market.

The note very expressly states that subjective factors were instrumental in creating the list.

The report also highlights Coach, Intertek, and Nissan as the “best of the best” in their sectors based on financial and qualitative analysis.

Adidas

Ticker: ADS

Target Price: 76.00

3-yr EPS Growth: +16.4 percent

Sub-Sector: Textiles, Apparel and Luxury Goods

‘Why it’s a Champion’: Adidas holds 20 percent of global sportswear market share, and stands to benefit from sales growth and scale economies.

Source: Citi Research

Amazon.com

Ticker: AMZN

Target Price: $275.00

3-yr EPS Growth: +2941.0 percent

Sub-Sector: Internet & Catalog Retail

‘Why it’s a Champion’: Amazon is the leading online retailer in the U.S. and around the world,and remains well-positioned for continued market share gain and profit margin growth internationally.

Source: Citi Research

BMW

Ticker: BMW

Target Price: 68.00

3-yr EPS Growth: -2.6 percent

Sub-Sector: Automobiles

‘Why it’s a Champion’: Globally, BMW is near the top of the luxury car industry, but faces risks to its growth in China.

Source: Citi Research

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Don’t Mess With The Traffic Cop In North Korea’s First Ever Video Game

North Korea’s first-ever video game (according to Shanghaiist) let’s you drive through a virtual Pyongyang. The game is produced by Nosotek, a western IT company based in North Korea, and you can play it for free on the website of Koryo Tours.

We gave it a try and will share our impressions.

image

The first thing that’s clear from the game is that Pyongyang is a welcoming place. There are lots of exclamation points and friendly statements welcoming the player and potential tourist. The soundtrack is a tinny, exhuberent, and bizarre symphony, typical to mid-90s video games, except in this case it may be what North Koreans actually listen to.

The controls are simple enough, as is the directive to plow into petrol barrels so that your car doesn’t run out of gas. There’s also a warning that if you crash into ten other cars you will lose (more on this later).

image

I get off to a bad start. After trying to drive off the road to explore uncharted areas of Pyongyang, and getting teleported back to the road, my steering wheel gets stuck to the side and my car keeps veering to the side and teleporting back again.

The game scolds me: “Pity they can’t teach you to improve your driving.”

 

image

As I cross the first intersection, I meet an attractive traffic lady. She too scolds me: “Drive straight on. Don’t stare at me, I’m on duty.”

In the background there is a large propaganda poster. I can’t help but notice Pyongyang is a ghost city.

 

image

Chafing against the reigns of this totalitarian society, I crash my car into the first vehicle I see. The traffic cop reappears and she isn’t pleased. “If you hit three vehicles, you will be stopped for bad driving,” she warns me.

Three?? I seem to remember the instructions at the start of the game saying ten.

 

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Driving around I encounter certain tourist attractions, like the famous Pyongyang Gymnasium.

 

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I see a billboard that suggests that they have car dealerships that sell Volkswagons in North Korea. Can this be true?

 

image

Game over.

Play for yourself >

Don’t miss: These Pictures Give A Rare Glimpse Into North Korea’s Changing World >

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