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The Rat and Mouse interview - Moneyweek's Merryn Somerset-Webb
Continuing with our series of summer interviews, we're delighted to have had the opportunity to chat with Merryn Somerset-Webb, editor-in-chief of Moneyweek, author, radio and TV commentator, and always a lively, interesting voice on the economy in general, and property in particular. Here, Merryn discusses who knows what, how our obsession with property damages the UK economy, and the worst financial decision of her life.
I’ve been doing a little research into your professional background (nothing stalker-ish… just a Google) and noticed you were a broker before you were a writer. Could you describe that period… what you were doing and why you moved into journalism? Do you think having a practical investment background gives you a better perspective as a financial journalist?
Yes. The one thing I know that not all financial journalists know is just how little most of the City knows…
You were early to warn of the impending property price bust in 2007, having been bearish on property – against the tide of opinion – for a while. Indeed, didn’t you sell at the beginning of the year and rent? What were the (most compelling) warning signs?
 We were recently looking through old editor’s letters and I'd say that back in 2001 I was incredibly bullish on property. I was really pleased to see it as it reminded me that I am not bearish just for the sake of it. That said, I was too early – I turned bearish in 2004-ish I think and even tried to sell my flat in 2005. Luckily no one would buy it and I was then able to sell in 2007. The warning signs then? Massive overvaluation, low and falling yields, whole city centres full of empty flats, ludicrous over-confidence, the signs of the beginning of the sub prime crisis in the UK…. We rented until last week when we moved into our new house. We have bought purely for family reasons – we want a longterm base. But I fully expect it to be the worst financial decision I have ever made.
Do we – as a nation – have a problem when it comes to property? Sometimes it seems as if we define our personal success by the entire false measure of how much our houses are worth. Is it time we separated our sense of home from our sense of wealth?
Read more, after the jump.
Technorati Tags: property, real estate
Yes we do. All too often we confuse homes with wealth. How many times have you heard people say their home is their pension? Not only is this just not safe – investing everything in just one asset class is asking for trouble – but it is incredibly bad for the economy as a whole. If we pour our money into property at the expense of every thing else how can we expect to develop a varied and resilient economy?
Do the media exacerbate the problem?
To a degree but it is worth remembering that in the main the media reports manias, it doesn’t create them. It wasn’t the media that kept global interest rates ludicrously low for a decade and it certainly wasn’t the media that invented the 100% mortgage.
What next? Is the market still overvalued? By how much?
The market is very overvalued indeed. Look at any historical measure of house price and that is totally obvious. The only question is when prices start their next lurch downwards. Over the last year the indicies have been held up by low interest rates allowing lack of supply. There have been fewer forced sellers than one might have expected. But now supply is increasing fast. Ask any honest estate agent and he’ll tell you he’s very busy: he is taking a lot of instructions but not doing much in the way of viewings. And with credit still very hard to come by it is hard to see how prices can’t fall. If the crunch has taught the property world anything it is surely that the price of a house is not defined by how mnay people would fancy living in it but how many people can raise the finance to buy it.
Moneyweek magazine seems almost defined by its bearishness, and often seems a little contrarian in nature. Is there ever pressure to take the controversial view, or are you just a natural fit?
I honestly don’t think that the staff at Moneyweek are naturally bearish. But we launched in 2000 and the last ten years have all been about the credit bubble and the credit bust. That has made for – to us at least – a naturally bearish environment. But we’ve been bullish on all sorts of things along the way. We were mad for commodities pre-crunch, we’ve always loved precious metals and there are lots of individual stock exchanges and stocks we’ve been into at various times. I think we’d call ourselves sensible rather than automatically contrarian.
You’re one of the most prolific and consistently interesting financial writers out there. What keeps you doing what you do? What keeps you interested?
I don’t see how you couldn’t be interested in finance at the moment. We are seeing one of the most important financial crises of the last century unfold before our eyes. It is totally fascinating and all the more so because it is impossible to know, even now, what the end game to it is.
Any more books in the pipeline?
I wish there were. But right now there simply isn’t time for book writing. Next year perhaps…
You can read Moneyweek here; and Merryn's book is available here.
Comments
She's absolutely right when she says city workers know less than you think.
They rely on their position in the info curve and the fact they get their trades on first. I deal with many on a day-to-day basis and the lack of knowledge I've found astounding.
Posted by smlaing at
August 5, 2010 8:15 AM
Comments
Great read, have to agree that the market is terribly overvalued still and it is bad for the economy for people to invest so much in property. Savings is so crucial for the economy as a whole in a few different ways.
Posted by Chris at
August 9, 2010 7:28 PM
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