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    CRASH! How I Lost a Hundred Billion and Found True Love (Kindle Single)
    by Julian Gough

    The UK Kindle Single #1 hit.

    Jude lives in a henhouse with no roof, that he bought for ten million euro, at the height of the Irish property bubble. One day, his mortgage is rated the debt in Europe most likely to default... The political and financial elite of Europe arrive, with a plan: help Jude put a roof on his henhouse, stabilize his debt, and reassure the markets. It all goes horribly wrong.

    "This novella is very funny – laugh-out-loud at times…Gough is one of our most talented satirists" — The Irish Independent

  • Jude in London
    Jude in London
    by Julian Gough

    Shortlisted for both the Guardian's Not The Booker Prize, and the Bollinger Everyman Wodehouse Prize, Jude in London is an epic, comic exploration of the bizarre love triangle between language, consciousness, and reality. Which is all very well, if you're into that sort of thing.

  • Jude: Level 1
    Jude: Level 1
    by Julian Gough

    Shortlisted for the 2008 Wodehouse Prize for comic fiction.

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    Juno and Juliet
    by Julian Gough

    My first novel, of which I am very fond. The adventures of teenage twin sisters Juno & Juliet, in their first year away from home. Life, love and literature, in Galway and Tipperary.

     

    "Like Roddy Doyle in an extremely good mood" - The Washington Post

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« Who Killed Tony Wilson? We Name The Guilty Men. | Main | Prison, murder, fork-lift trucks, whisky and milk. »
Sunday
Aug122007

Biggest crash in world history coming up

None of my friends want to talk to me about economics, which is frustrating. Because I think we are in for an almighty wipeout in the financial markets, which has only barely begun to get going. And that is interesting, and worth a conversation.

 

As I have posted previously, I think a lot of exotic financial products, and a lot of very exotic investment strategies done with borrowed money, are about to fail spectacularly. As a side effect, a lot of perfectly solid markets (in stocks, bonds, property, commodities) are going to be cut in half, and a lot of institutions, to their intense surprise, are going to be wiped out.

 

More specifically, I predict the implosion of a very large number of hedge funds over the next year or two (and probably a lot sooner than that). Let's be more specific: I suspect that more than 25% of the hedge funds in existence today will not exist in two years time. (Oh come Julian, don't be shy, what do you REALLY think? Well, I really think at least half of them could vanish, but I'm trying to sound conservative and thoughtful here.)

 

And I think we'll lose more than one really, really big, globally known bank, insurer, and/or pension fund.

 

We may not lose them technically: governments and central banks will probably try to coordinate a rescue. But if they survive, they'll have been artificially resuscitated after having gone under.

 

Also, a lot of junk bonds will turn out to be junk. A shedload of private equity firms will go bust, and a stack of grossly overleveraged companies will collapse before 2010.

 

And residential property prices will fall through the floor in real terms over the next couple of years in a bunch of countries, including the USA and my dear and darling Ireland. (Put a figure on it... OK, from peak to trough, a fall of over 30 % in real terms. There. The trough may well take a lot more than a couple of years, mind you, and inflation may mask the fall, but in real terms I'd be surprised if it's less than 30% in Ireland's case. America, being vast and varied, I'll call a fall of over 30% on the coasts and large urban areas, before it eventually bottoms out. Again, I'm being conservative, and secretly think it could be more.)

 

Note that I think the real-world economy is in pretty good nick right now. But the financial world, across many asset classes, is about to have the biggest crash (in dollar terms) in the world's history. Bigger than the dotcom blowout? Yes. Will it wreck the real economy? Don't know. Haven't I predicted enough for ye? Don't be greedy.

 

Ah, sure, while we're at it, we'll lose at least one of the Big Three American car companies. 

 

Well, that has the potential to make me look very stupid indeed in 2010...

 


Anyone want to argue? 

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Reader Comments (19)

I hope you are wrong, since I am a real estate developer here in Georgia. I do not know what the raw data will look like for the regional markets or the micro-markets within the regions, but I doubt you will see a 30% correction.

Data released this week showed a 22% increase in new home sales in the west and a small tic up in the south.

I would not argue, however, because I have never been able to predict anything, the economy notwithstanding.
August 25, 2007 | Unregistered CommenterJerry
I have felt for a number of years now that the government of this country (UK) has been artificaily inflating the housing market by commissioning the BBC to produce endless home improvement programmes. First ot was interior decoration, then garden design,followed by property development and most recently 'neighborhood regeneration'. Sarah Beany may actualy be an MI8 operative.

I'd also note with worry the unwillingness of public figures to speak out on economoic matters. Given the importance of 'confidence' to global financial markets it seems that any public statement on 'unconfidence' is seen under new terror legislation as an attack on national security, and MI9 have legal authority to eliminate you with full prejudice. I'd hate to see the next Gough novel artificially curtailed in such a way.
August 27, 2007 | Unregistered CommenterDamien G Walter
Hi Gerry, and hi again Damien, lovely to hear from you both. I agree, the financial universe (it's too big to call it a world) is far too complex to be understood by anyone. I was just applying my novelist's intuition to it (and my reading of history), and I sniffed a big, big fall. But the future is not written.

Really, my motivation for that post (and for my long February post, ) was entirely unworthy and egotistical: I wanted to go solidly on the record with a couple of predictions, because if I turned out to be right, I wanted to be able to grab my friends, point to the posts, and say "Told you so!" (The least appealing words in any language.) It all reflects very badly on my character.

I've been arguing with my friends for years about Irish house prices. I've been maintaining Ireland's been blowing an ever-increasing bubble (driven by ludicrously loose credit, and by eurozone interest rates set to suit a depressed Germany, not an inflationary, booming Ireland), and that it'll end in an immense house price crash.

Most of my friends not only disagreed, but bought a second house, just to annoy me.

We shall see.
August 27, 2007 | Registered CommenterJulian Gough
I meant Jerry, not Gerry, sorry Jerry. I've been emailing a friend called Gerry lately... and there's a comma inside that set of brackets because I was going to go back and type in the name and date of my February economics post, but I forgot... Sheesh. Messy. (It was Debt & Derivatives: A Prediction, on February 27th, 2007.)
August 27, 2007 | Registered CommenterJulian Gough
Just read your rather good essay in July Prospect - financial markets as the new religion. came here. found this. and now think you're even smarter...
July 30, 2008 | Unregistered CommenterOJ
I blush, OJ, I blush!
July 31, 2008 | Registered CommenterJulian Gough
oops. I didn't get to this one yet! Moving from the past to the present, etc...
August 7, 2008 | Unregistered Commenterneassa therese
Hiya Neassa Therese,

Glad you've been finding it interesting.

Predicting the debt & derivatives debacle is probably the achievement I'm proudest of on this blog. That and stealing Will Self's pig, I suppose.

I must get back to that subject soon. (The debt debacle, not pig theft). It really does fascinate me...
August 13, 2008 | Registered CommenterJulian Gough
smarty pants.
December 11, 2008 | Unregistered Commenterrock
Oh how right you were.

http://xroads.virginia.edu/~hyper/Allen/Cover.html

Site has published Frederick Lewis Allen's excellent 1931 book "Only Yesterday." From the chapter Home Sweet Florida, about the land speculation in the mid-1920s: "Just as it began to be clear that a wholesale deflation was inevitable, two hurricanes showed what a 'Soothing Tropic Wind' could do when it got a running start from the West Indies."
January 18, 2009 | Unregistered CommenterDonna
Thanks for that, Donna. I had a dip into the book you link to and found it fascinating.
January 20, 2009 | Registered CommenterJulian Gough
The really annoying thing is, I remember you being among the first to predict the tech crash too.

Sure you're in the right job?
August 12, 2009 | Unregistered CommenterRichard
Richard! How are you! And how's Galway? Have prices dropped enough so I can afford to live there again?

Yes, I do sometimes think wistfully that I should take a few years away from writing, and just trade ferociously. But noone would trust me with money in advance of my predictions coming true. Who'd have given me twenty million to short the NASDAQ in 1999/2000? Who'd have let me short property and financials in February 2007, when I was predicting a global debt and derivatives debacle?

Anyway, if I was inside the financial system, I'd have no perspective on it, and my edge would be blunted.

It's fun being right though. And if anyone ever does want to finance a contrarian fund whose investment strategy is based on reading lots of novels and some second-hand paperbacks of German philosophy, well there's a Mail Me button over there somewhere on the right hand side of the page...
August 13, 2009 | Registered CommenterJulian Gough
Julian,

As i write, I'm finding it hard to keep in the giggles. Sitting in a freezing office of a construction company in the Liosban Este. on the Tuam road in Galway. Im posting on this article but i've spent most of the morning reading way way to many of your posts and articles as i dont really have anything to do here at the moment. Like yourself i didnt engage in the property speculation during the boom. I was travelling for two years and returned to Galway in 2006 when the party was in full swing. If felt a bit like going into a bar sober at 11pm on St. Patricks day. I began working here in June 2006 when the housing boom was at its height. I don't own a car, an have always been considered a deviant in my job. Secretly im delighted that that the entire thing has come crashing down. At least once a week for three years i would have a conversation that went something like this:

Celtic cub: "Where are you living Mike?",

Me: " I'm renting a place in town"

Celtic cub:(Smugness starting to creep in) "Oh renting? . . and how much is your rent?"

Me.: "Its around €600 a month"

Celtic cub: (Smugness snowballing) "And why don't you buy a house? you could get a mortgage for less than that, And you could rent out the rooms. We've just moved into our new house in (athenry/ Oranmore/ Dough Uisce/ Ros cam) and we're renting our place in wellpark/ westside etc. The rent in town is paying the mortgage for us"

Me: "Houses are too expensive at the moment. I'll wait until they come back to normality"

Cub: "You should get on the ladder now while you can, sure you will have first time buyers allowance. . . Renting is money down the drain!"

me: " I dont think its "money down the drain" it gives me the freedom to live where i want and not be tied to a house"

Cub: "Money down the drain. you are just paying the mortgage for someone else"

at this point i would notice something in the distance which needed my immediate attention. I have an almost owerwhelming desire to stand infront of the worlds media this week outside the Dail with a banner reading "Money down the drain!!"
November 26, 2010 | Unregistered CommenterMike Leane
Hi Julian,

Reading your post after seeing your "portrait" in Courrier International, about how you survived the Irish properity. Your post is pretty accurate and sensible, and reminds me that back in March 2007, leaving in the City in London, a colleague of mine was also talking about the butterfly effect the subprime crisis would have on the world. He was a visionnaire.

Now, it's been 3 years since the beginning of the crisis, and it seems people are not learning a thing from history - even from the very recent and still burning one...

Good Luck!
November 27, 2010 | Unregistered CommenterJuanita
Juanita, glad you liked it. No, nobody ever learns anything. Human nature has certain built in distortions of perception. They mean we make the same mistakes again in every generation. C'est la vie.

Mike, lovely stories. Yes, I recognise those conversations... Best of luck with the construction company! Perhaps you can tender to build a bunker for the Fianna Fáil leadership. They'll need one, to survive the fallout from last month's events.
November 29, 2010 | Registered CommenterJulian Gough
"And if anyone ever does want to finance a contrarian fund whose investment strategy is based on reading lots of novels and some second-hand paperbacks of German philosophy, well there's a Mail Me button over there somewhere on the right hand side of the page"

I'm sure Hugh Hendry would appreciate your research and analysis style, it seems to quite closely match his own so far as I can tell. (http://news.bbc.co.uk/2/hi/programmes/newsnight/8565245.stm)

What are your most recent economic prophesies, you know, aside from structural imbalances in the Somali goat market?

~Cheers and thanks for the wonderful writing
January 7, 2011 | Unregistered CommenterAriel
He may be but he has something you and I don't have and that is the overwhelming power of influence over hoards of id10ts. That alone affords him the luxury of being wrong without irreparable damage
Looking at this with the benefit of hindsight from 2012, your 30% crash in Irish property prices was actually optimistic.
March 1, 2012 | Unregistered CommenterGraeme

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