Dan Gheorghiu's Weblog

HOUSE

http://www.economist.com/finance/displaystory.cfm?story_id=12725898

Barclays Capital says house prices may fall by about 15% over the next two
years, hitting their long-term trend levels next year, then overshooting on the
downside for another year.

OIL

http://www.economist.com/finance/displaystory.cfm?story_id=12725914

Michael Lewis of Deutsche Bank argues that OPEC’s past efforts to prop up
prices have succeeded more often than not. Since 1993, cuts in production have
led to higher prices on three-quarters of occasions. The exceptions, however,
have occurred when the world economy has slowed unexpectedly—most notably in
1998, after the Asian crisis, and in 2001, after the dotcom bubble burst. On
those occasions, the price kept falling for more than six months after OPEC
first began reducing its output. In 2001, for example, the cartel had to resort
to a series of cuts, totalling 5m barrels, before the price finally began to
recover.

If events take a similar turn this time, Mr Lewis reckons, OPEC will have to
keep cutting its output for another year. The price may not hit rock bottom
until early 2010. But the world economy looks less healthy now than it did in
2001, so OPEC may face even more of a struggle this time, he thinks. Deutsche
Bank, for one, sees prices falling as low as $35 at times between now and then.
After adjusting for inflation, Mr Lewis points out, that would only take the
price back to its average level since 1972.