Steven Keen may have been right all along...

I had a meeting with my CEO who was a merchant banker and he told me he keeps tabs on the financial tracking numbers (don't know how he does this), and he told me that Australia will hit a major recession around August/September in which major layoffs will become everyday news. He told me to buckle up as this was going to be a prolonged recession, that this talk about a recovery in 2010 is rubbish, he sees the recession lasting til 2013 at least. This is the same guy who told me in June last year that a major recession was a year away, so I trust his analysis and opinion. His exact wording to me was "Ive been tracking the numbers and this thing is huge, it is actually frightening"

I asked him about houses and he believes they will in fact go into freefall, and those with the largest mortgages are the most at risk.

Now I know none of you guys know me and this is all just second-hand talk, but for the first time, I am actually a little worried and will be post-poning my purchase until next year and see if these dire predictions come true.

Has anyone here heard anything similar from people in the know?
 
Aren't merchant bankers part of the problem? They didnt see this coming 12 months ago, how can they know when it will end. A few months ago we (hubby and I) predicted unemployment will hit 10% while everyone else was saying 7%. Time will tell.

Housing in Australia is different to most other places due to supply and demand. If prices fall too much then people will not voluntarily sell. Unless unemployment crunches in, people will simply stay put.
 
Which merchant bank was he working for? And do you know what numbers hes tracking. Theres talk of 10%+ unemployment rate which is double what it is now so when we get there, it shouldn't be surprising. It has been said we should look to UK for some signs of where Australia would be heading in 6-12 months time. Its pretty dire over there but no ones slashing their wrists quite just yet.
 
Aren't merchant bankers part of the problem? They didnt see this coming 12 months ago, how can they know when it will end. A few months ago we (hubby and I) predicted unemployment will hit 10% while everyone else was saying 7%. Time will tell.

Housing in Australia is different to most other places due to supply and demand. If prices fall too much then people will not voluntarily sell. Unless unemployment crunches in, people will simply stay put.

Lol ...pushki I just love your blind faith. The deck chairs on the SS Australis have been rearranged while the ship is sinking and your hanging onto "Its different in Australia:rolleyes: Your going to need more than your wellingtons sweetie:D
 
possible

But as a scientist I always have trouble with non specifics.

I Love " freefall".....................................

Technically speaking I vaguely recall that means accelerating at 9.8 m/s/s until the terminal velocity is reached.

Its like the old media favourite of "decimated'...............usually means reduced by one tenth



ta

rolf
 
So we are all going to camp out in trailer parks like they do in the US? Hey, if you dont sell then you dont lose. I think housing prices have been inflated for around 2 years anyway, they could afford to fall 30% and it wouldnt even cause a ripple in my sweet little world!

Maybe he worked for B and B! That worked out well, didnt it! Not that Macs is any better.
 
I had a meeting with my CEO who was a merchant banker and he told me he keeps tabs on the financial tracking numbers (don't know how he does this), and he told me that Australia will hit a major recession around August/September in which major layoffs will become everyday news. He told me to buckle up as this was going to be a prolonged recession, that this talk about a recovery in 2010 is rubbish, he sees the recession lasting til 2013 at least. This is the same guy who told me in June last year that a major recession was a year away, so I trust his analysis and opinion. His exact wording to me was "Ive been tracking the numbers and this thing is huge, it is actually frightening"

I asked him about houses and he believes they will in fact go into freefall, and those with the largest mortgages are the most at risk.

Now I know none of you guys know me and this is all just second-hand talk, but for the first time, I am actually a little worried and will be post-poning my purchase until next year and see if these dire predictions come true.

Has anyone here heard anything similar from people in the know?


mmmm what a great way to stop employees asking for a pay rise.:D

Seriously though i can nearly guarantee you that we wont have a recession lasting longer than 2013 at least. Do you realise what this means, a negative GDP reading for EVERY QUARTER for the next 20 odd quarters.

No what i can see as a possibility is anemic growth for the next 5 years (ie slipping between negative growth, low growth, no growth etc).

What the bullish half glass half full have to take into account is:
What is the catalyst that will propell the world into its pre-2007 economic growth conditions

I can guarantee you it wont be an asset price spiral/debt funded consumer spending spree in the west funded by cheap consumer items and money from the east.

Thus western nations are going to have to get off their backsides, start saving, permanently reduce consumer expenditure as a % of GDP to more realistic levels of around 60% (from current 70% odd). This will involve huge structural changes in the economy which will take several years to work themselves out.

Will there be opportunties: hell yes. Are those opportunities likely to be a repetition of 2003-2007 opportunities, i very much doubt it.
 
I this is all just second-hand talk, but for the first time, I am actually a little worried and will be post-poning my purchase until next year and see if these dire predictions come true.

Nothing wrong with a bit of caution. A spruiker once described it as being like trout fishing. You don't chase the one you saw swim past. You wait for the next. There will always be a next.
 
You know as time is progressing through this financial crisis, i am getting more and more confident that we DEFINATELY will not see a drop of 40% in nominal medium priced residential property accross the whole country.

Given the D&G around, if i was wealthier i would be happy to underwrite this statement for a reasonable insurance premium. It would be a near guaranteed money maker. For those people who are worried i could charge say 4-5% of the value of their property as an insurance premium against a pledge (not against the price of their individual property) that if property prices against the whole of australian medium priced property fell 40% i would pay out the lessor of the independent valued fall in their individual property or 40% which ever is less.

In fact maybe this is a good business opportunity, i wonder whether i should approach QBE, the only problem is for all the whinging about D&G, i wonder how many people would put their money where their mouth is.
 
Nothing wrong with a bit of caution. A spruiker once described it as being like trout fishing. You don't chase the one you saw swim past. You wait for the next. There will always be a next.

Yes Sunfish this is a very good comment.
You dont have to do something today, sometimes inaction is the best action of all. It just depends on your personal circumstances.
 
hey that's given me a great idea... you could write lots of those premiums, then bundle them all up and on-sell them as AAA investments. My local council could be interested.
 
hey that's given me a great idea... you could write lots of those premiums, then bundle them all up and on-sell them as AAA investments. My local council could be interested.

yeah but unlike the crap they where offloading on wall street during the good times, when risk was greatly discounted, mine would have an adequate insurance hedge (40% drop or NO PAYOUT), plus i would be receiving an additional 4% premium which means i only 'loose' if property falls 44%:D
 
You know as time is progressing through this financial crisis, i am getting more and more confident that we DEFINATELY will not see a drop of 40% in nominal medium priced residential property accross the whole country.

You may be disappointed by this, but if I were leveraged into property I would draw no comfort from this at all.

No sane person would leverage into an investment, merely confident that it would fall by no more than 40%.
 
You may be disappointed by this, but if I were leveraged into property I would draw no comfort from this at all.

No sane person would leverage into an investment, merely confident that it would fall by no more than 40%.

Ah bet then you have to consider transaction costs of selling and repurchasing.

If my capital gains over the years on residential property is say 40%, then i would be paying roughtly 10% of the value of the portfolio in capital gains tax (40%*50%*0.5). (This is simplistic as it assumes no debt, if debt was used CGT would be higher)
I would be paying the agent and solicitor around 3% all up.
In the future when i want to buy again i would be paying stamp duty of say 3%.

So in total the property portfolio has to fall at least 16% otherwise i will be out of pocket by disposing of the properties, ie unless property prices fall at least 16% i am WORSE off by selling. This does not include other things such as bank exit fees etc.
 
yeah but unlike the crap they where offloading on wall street during the good times, when risk was greatly discounted, mine would have an adequate insurance hedge (40% drop or NO PAYOUT), plus i would be receiving an additional 4% premium which means i only 'loose' if property falls 44%:D

You're not a Wall St banker in drag are you? There is the odd trillion dollars of derivatives looking for a home right now because someone picked up a few percent on "unlosable" bets. Let's just put it this way: I wouldn't buy shares in your bank.
 
Ah bet then you have to consider transaction costs of selling and repurchasing.

If my capital gains over the years on residential property is say 40%, then i would be paying roughtly 10% of the value of the portfolio in capital gains tax (40%*50%*0.5). (This is simplistic as it assumes no debt, if debt was used CGT would be higher)
I would be paying the agent and solicitor around 3% all up.
In the future when i want to buy again i would be paying stamp duty of say 3%.

So in total the property portfolio has to fall at least 16% otherwise i will be out of pocket by disposing of the properties, ie unless property prices fall at least 16% i am WORSE off by selling. This does not include other things such as bank exit fees etc.
I can't see anything there which convinces me that property is a "buy". You merely articulated the problems involved with the illiquidity of property as an investment.
 
I can't see anything there which convinces me that property is a "buy". You merely articulated the problems involved with the illiquidity of property as an investment.


I never said property is a buy, i just stated that as time progresses i am becoming more confident that property will not drop 40% as some media personalities have presented.
 
You're not a Wall St banker in drag are you? There is the odd trillion dollars of derivatives looking for a home right now because someone picked up a few percent on "unlosable" bets. Let's just put it this way: I wouldn't buy shares in your bank.


Sorry to disappoint you but drag has never been my thing. In regards to financial investing, yip i love it. I am a nerd and proud of it:D I was so nerdy that in high school whilst the other guys were madly chasing the top girl of the class i was emershed in my fathers post graduate security analysis text books.

Ah but what is the pricing on those derivatives? The current market is pricing for excessive risk, there is DEFINATELY money being made now in this market. The trouble is evaluating the different derivatives, because many were over the counter issues, they are not standardised.

Haha, in regards to not buy shares in my bank, well if these sought of comments make you uncomfortable well, then you wont be buying shares in any bank or any insurance companies.
But thats ok, each to their own, there is no definitive right or wrong answers when it comes to investing.
 
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