Yesterday had been called Blue Monday. It is the day when, apparently,most people are at their lowest mood for the whole year. The reasons given are varied. Money worries following the christmas spend-fest, disappointment at failing to keep to new year resolutions and some people are depressed because of the winter weather.
So, it is interesting that yesterday turned out to be the day when the stock market saw its biggest falls for years. Perhaps people were feeling a bit down after christmas but it takes more than one seller to change the mood of a market. Individual shares and markets are mood driven. It is feelings, confidence and doubt that drives markets and share values.
Some things change slowly and some change fast but moods tend to build up over a period of time and suddenly that mood overspills and big changes happen. It would seem this is what happened yesterday.
There has been a steady build up of bad news over the last year. It has been very noticable that over the last year commentators talking about house prices have been slowly but steadily changing their view of the market. They started off saying that there were minor problems but the market would be unaffected, then there were bigger problems but the affect would be minor. Finally they are now saying that they expect prices to drop but they don’t expect a big drop in house prices. They may be correct but the next step would be for them to accept that there will be a big drop in house prices. It may happen or it may not but the message has slowly got through to people and the mood has eventually changed.
People have had a wake up call. The consumer led boom has been driven by borrowed money and a lot of that money has been borrowed against these inflated house prices. New cars, tvs and designer handbags have been bought on money borrowed against house values that are now seen to be unsubstainable, at least in the short term.
People are suddenly realising that this money has to be repaid. While house prices continued to rise it may have felt like free money. It was, in the words of the song, ‘Money For Nothing’. It is no longer the case and that money will need to be repaid from income rather than rising house prices.
Repaying debt from income is tough when you originaly got those debts to maintain a lifestyle that you couldn’t really afford from income. There are hard times ahead for a lot of people and this will have a huge impact on business. The boom in coffee houses, restaurants and car showrooms may come to a sudden and shuddering halt. When people don’t have money available to spend the people whose businesses depended on that free spending lifestyle will suffer.
Those who avoided the temptation to spend the expected profits of the housing boom will, however, be well placed to benefit from bargains in every area. A lesson, perhaps, in keeping your head when all around are losing theirs.

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