Last summer I met my old friend Leslie Kent, a stock broker of considerable experience and a shareholder-director in JM Finn Capital Markets in London, for our now annual lunch. Then he accurately predicted that a United Kingdom recession and bear market were coming in short order, and had just made this then bold claim live on Bloomberg TV.
So it was clearly going to be a good idea to catch up with Leslie twelve months on to hear his prognosis for the outlook in the UK over the next year.
"What the stock market is not taking into account is the very sharp fall-off in business activity in all areas over the past six months," he told me.
"That means the profit figures this autumn are going to be awful and that will take the market down again."
The UK is reeling from a double-whammy this summer. The credit crunch since the sub-prime crisis that hit last July has sent house prices into freefall, while the tripling of oil prices over the same period has brought a squeeze on disposable income not seen since the 1973 oil embargo.
As I write this column the headlines proclaim the latest energy price shock: a 25 per cent rise in electricity and gas prices for 10 million consumers. This rise in basic living costs comes on top of a 27 per cent surge in petrol prices.
It is no wonder that people have less to spend in the shops, which are having their worst summer since the recession of the early '90s.
When is this downward spiral going to end? "That is a very good question and all I can be certain of is that it is going to get worse before it gets better," says my old friend, a veteran housing analyst who I first met at his Morgan Grenfell house building seminar two decades ago.
However, Leslie is unable to share my sentiment that an October stock market crash is expected in this environment, something similar perhaps to what happened in 1987 or 1974. He thinks it will be more a slow drip process as stock prices grind lower for a year or two more. It amounts to the same thing. But Leslie remembers many recessions and warns that the bottom in the stock market usually arrives before the bottom in the real economy. He thinks that will leave scope for some interesting bottom fishing in the property sector, the kind of strategy that Dubai's Zabeel Investments has made no secret of pursuing.
Personally I reckon the contacts and experience of somebody with Leslie Kent's experience would prove invaluable, and indeed he is in contact with one group of Saudi investors that managed to make a series of very astute purchases in the early '90s in the UK, buying blue-chip tenanted commercial property in the South East with an 11 per cent yield and later reselling for a seven per cent yield.
This sort of opportunity only comes in a really severe recession, and that appears to be where the UK is heading right now. The outlook for inflation is quite frightening, although the official measures of inflation conveniently ignore energy and food, which is where the pain is being most felt.
Even rents are beginning to experience inflation as people are finding it impossible to get a mortgage to buy a home, which is increasing the demand for rented accommodation. At the same time mortgage rates have been rising and therefore putting an additional strain on the stretched budgets of home owners.
However, these are early days for the downturn in the UK. Business activity is contracting so fast that huge rounds of redundancies look inevitable, and are just starting as businesses trim their costs to much reduced levels of turnover. This will hardly help the property market to recover either.
So for UK expatriates or any other investors from Arabia poised to buy up real estate in Britain at depressed prices the best advice would seem to be patience. In the late 1970s Arabs bought up vast swathes of Central London in Knightsbridge, Mayfair and Belgravia and in the summer months there are almost as many Gulf as British number plates in these areas.
For that reason the best Oil State property buys in this recession are unlikely to be in these districts as the prices are still supported by oil wealth. On the residential side inner-city buy-to-let projects have suffered from overbuilding and have slumped in value.
Or it could be that the best deals emerge for prime office space in the City of London, especially if the financial crisis gets worse. But this certainly is a buying opportunity because the supply of property is always restricted in the UK and that exaggerates price swings and ensures a recovery. Those more patient buyers from Arabia will find themselves well rewarded.