The next bubble: Priming the markets for tomorrow's big crash.

S

Sunfish

This may be my swansong post. Think of it as a parting gift. LOL I'm tired of arguing with twerps and few here are willing to try to see the big picture (it ain't easy) so I think it's time I walked away.

This is a bit of a read but it really is worth while.

http://www.harpers.org/archive/2008/02/0081908

Quote:

Fictitious value is the delta between historical-trend growth and growth brought on by asset hyperinflation. As an anonymous South Sea Bubble pamphleteer explained: “One added to one, by any rules of vulgar arithmetic, will never make three and a half; consequently, all the fictitious value must be a loss to some persons or other, first or last. The only way to prevent it to oneself must be to sell out betimes, and so let the Devil take the hindmost.”
 
Sunfish said:
This may be my swansong post. Think of it as a parting gift. LOL I'm tired of arguing with twerps and few here are willing to try to see the big picture (it ain't easy) so I think it's time I walked away.

This is a bit of a read but it really is worth while.

http://www.harpers.org/archive/2008/02/0081908

Quote:

Fictitious value is the delta between historical-trend growth and growth brought on by asset hyperinflation. As an anonymous South Sea Bubble pamphleteer explained: “One added to one, by any rules of vulgar arithmetic, will never make three and a half; consequently, all the fictitious value must be a loss to some persons or other, first or last. The only way to prevent it to oneself must be to sell out betimes, and so let the Devil take the hindmost.”
Click to expand...
Come on Bill,not again just because the ASX will drop into the unknown this morning does not mean you have to chuck a girlie:rolleyes:man fit and run away..
BTW, i think you wil find a lot of people like what you post about and i am one of them,what name will the next be..willair..
 
hi all
a very interesting article and it can be looked at from australian ees as we are doing the same.
I have said for a long time that there is avery big difference between value and price and they are not on the same curved line.
price is governed by what some one will pay and value is governed by what someone thinks its worth.
and that is the problem.
if you increase price because more people want it that doesn't auto make it that it has increased in value.
the trouble with the us and the australian values is that they are being driven not by inherant value but demand driven by rentals.
and as long as you aloow to get a tax rebate for any loss by chosing the wrong property or gambling on the idea that the value will increase and if it doesn't then you can file it to tax.
you are in effect manipulating the value of the asset.
now thats fine as long as the value of the asset is moving with regards to others assetts in the same pool.
when the assett outpaces the other assetts in the pool then they correct.
not because of value but because of price.
as the price is to high for the value that is being asked.
a very good example of this is the commercial market in real estate.
if you look at value against price there is a huge differential at the moment and it can be up to 50% difference for no other reason then price has not kept up with value.
and these are the areas that you try to exploit if you can.
in the case of say the us problems there values are being corrected as less people want to buy the notes and so the price comes down.
yes there is supply and demand issues but if the underlying commodities value is alot lower then the price and the price has been increased not by values but because a whole load of lemmings decided to buy there and the value was not there in the first place( and I can see that in a couple of areas here in Australia) then when price does get reflected against value the market corrects and if you are one of those lemmings then you are going to take a hit.
this is the propblem with areas that post a 45% increase in one year or the company that has 300% profit increase and is the highest performing fund.
if the value has not increased then you are as the us are doing now hold a worthless piece of paper.
we are in a market for me here in Australia that has got some very big problems not in interest rates as such but we have sydney for instance.
thats has a fall in 2003 so thats 5 years ago and no increase in value at this stage and prices that are creeping up.
rentals that are increasing in resi to around 10% last year
rentals in comm of about 15% and comm value up by 20% not price value(as value is now chasing price as the comm value is lower then other states)
with construction at an all time low.
and rising interest rates that will only fuel not value but price.
so in essance you have a pressure cooker set to a very high value using price to heat it up.
but there is not more water being added and if you do that you will blow or burn dry and destroy the pot.
and I don't know which is going to happen.
from my 2009 to be an increasing market there needs to be alot of water added to that pot and there is non at the moment.
sunfish I don't agree with taking your ball and walking off as I find your links very interesting.
this is not the us market but as one of the guys at mcdonalds once told me the americans see us as the 57 state.
and its good to see waht they do and look at our markets.
if you do not believe what I am saying look at perth,seq the gold coast yes these are fueled by the commodity markets but the value hasbuying into not increased not of the house you are buying but the area you are into.
and it may be to generic to say perth but it just an example.
I think for a long time we have been increasing price thats not on the back of value (I have) but that will come to bite home at some stage.
my .002
 
I just posted a link to an article which explains our economy v well. If the author is right (he is well credentialed) then many here (including the twerp) will find they are on the wrong horse, wondering why they took no notice of Thommo.

And all you guys are interested in is my new nick. Do you really wonder why I no longer care?
 
Sunfish said:
Do you really wonder why I no longer care?
Click to expand...

If you want to go Sunfish, just go.

Makes no difference to me.

Unless you want to join the ranks of those who wail "I'm sick of this place, you're all mean and I'm leaving now..." and then a 300 post long thread ensues which is just one giant daisy chain and, after all is said and done, no-one leaves and everyones ego gets stroked. /me gags

But somehow I don't think that's you.

So, farewell and good luck.

M
 
if the forum all agrees with each other it will be a boring forum. I won't beg, but Sunfish it would be good if you stuck around, I certainly appreciate your postings.

before too long I may be convinced that LOE is a good idea...
 
Hi all,

What is the difference between real value and fictitious value??? This is a fundamental flaw in the doom and gloom articles.

The current price that someone is willing to pay for something is the 'real value'.

Thommo, Sunfish, We have been agreeing much too much lately, time for you to go:p

Before you do though, can I recommend a book that I have been recently reading, it is called "The Only Three Questions That Count" by Ken Fisher. it raises many commonly thought of scenarios regarding finance and questions them. It is certainly different and 'out there' with some of his economic thinking and theories.

One of his theories for today and it might be relevant to you is the following.

If gold is meant to be such a good investment now, then how come it has been such a bad investment over the last 82 years (even including current record high prices) when compared with a market return from the SP500??

Or, if savings, low debt and low inflation are so good, then why has Japan stagnated over the last 18 years compared to the USA???

Good luck for the future if we don't hear from you again.

bye
 
Ausprop, I don't want people to agree with me. All I want is a debate and that isn't happening.

I own a few properties and I am concerned where the economy is going so when discussing the future I don't want a cheerleader. The article I linked to started a lively discussion on HC but they were talking about shares, tech analysis in particular. I doubted it would do so here and if not, what is the point of my continuing to post if I'm the odd one out?

Reply if you're interested in the article, if not let the thread die.
 
the article itself is convincing and could be 100% spot on, however I could pick up another article and the opposing point of view could be equally convincing. There are so many macro issues that may or may not happen (or may or may not currently exist) that I really don't know what to think anymore. I had made a determined decision not to be a BnD'er with real estate any more, then I met an old timer yesterday espousing the virtues of holding for the long term, how well it has served him, never sell quality property, so I walk away with my head messed up again.

I think I hold these key points true still: focus on eliminating bad debt (includes cars, PPOR debt, holiday homes, credit cards etc), then... focus on investments that are cashflow neutral. I still don't think this is the right environment for leveraging up on BnD property or shares, tho in 30 years I may be banging my head on the table regretting I didn't go crazy on all those $500k houses that seem so ludicrously cheap in hindsight.
 
Bill.L said:
What is the difference between real value and fictitious value??? This is a fundamental flaw
Click to expand...

He believes in the reverting to mean theory, as I do. But I accept that property has, rightly, appreciated above inflation. I guess that's because wages have too and dis-inflation imported from China has left a much larger chunk of "discretionary" income. Some buy flash toys other flash houses.
 
Bill.L said:
Before you do though, can I recommend a book that I have been recently reading, it is called "The Only Three Questions That Count" by Ken Fisher.
Click to expand...

Hi Bill,

Where did you get this book from? I'm dead keen for a squizz. I'm a big fan of Ken's dad Phillip (his book Common Stocks and Uncommon Profits is one of my top three favourite share related investment books) so it would be great to read Ken's book as well.

Mark
 
Hi Mark,

I picked it up at Borders for $41.95.

You can probably get it online, though I have not looked.

It is from John Wiley & Sons.

bye
 
SF, 80% of the forum don't contribute much apart from opinions formed in the little time they have between working and family.

Your opinions have a lot more substance behind them....reading, research, action, consciously observed life experience.

Have a break by all means. I think we all cycle in our attitude towards the forum and the repetitive nature of the questions and responses.

But don't stay away too long.

It takes forumites a lot of time reading one person's posts to get a feel for that person's credibility and personality, and there's many here who have got to know you over many hours of reading your posts. You are one of the guys who is here for the intellectual stimulation and to freely pass on valuable experience. You don't use the forum as a profit centre or alternative to real life.
 
Hi all,

That is actually a good synopsis of the book. Of course there is a lot more in the book with examples etc.

I don't agree with everything in the book, but it makes you think outside the square, which is what I do like about it.

bye
 
Sunfish said:
This may be my swansong post. Think of it as a parting gift. LOL I'm tired of arguing with twerps and few here are willing to try to see the big picture (it ain't easy) so I think it's time I walked away.

This is a bit of a read but it really is worth while.

http://www.harpers.org/archive/2008/02/0081908

Quote:

Fictitious value is the delta between historical-trend growth and growth brought on by asset hyperinflation. As an anonymous South Sea Bubble pamphleteer explained: “One added to one, by any rules of vulgar arithmetic, will never make three and a half; consequently, all the fictitious value must be a loss to some persons or other, first or last. The only way to prevent it to oneself must be to sell out betimes, and so let the Devil take the hindmost.”
Click to expand...

Hey Sunfish am i a one of the twerps because our disagreement over resource vs non resource companies?:D
 
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