AUD 0.38 A question for NR

[Aaron Sice]

well I think we're in the eye of the storm and you are wrong ... but goodness me another POV? that's ludicrous!

who said property would never drop? we said it was unlikely - spouting solid reasons why. it's called a debate - and there are no right or wrong answers, just opinions. time WILL tell if you should have sold it all and moved to Bangladesh with all your cash and lived like a king, or if you should have held tight and moved on.

if i follow your historical example - i should be investing. through all the world wars, depressions, recessions, oil crises and credit crises - the sharemarket and the property market has risen in value.

so there's a correction....? sorry for all you folks that bought at the height of the boom. but some people did. if i were one of those people i'd be licking my wounds for sure. i'm sure there's people on here who can think about things other than depression and maybe buy a CF+ property or two the help with the neg gearing...? but no - we can;t have a different opinion, can we...?

opinions are like belly buttons - everyone's got one, and they're all full of fluff at the end of the day - both yours and mine.

do what you want dude.

 

[quoll]

I want some idea about what is going on and how to get through it, a quick fast forward 12 months and then come back so I know what's going to happen ... fat chance of that one happening.

Looks like I'm just going to have to guess.

Oh well.

 

[nonrecourse]

well I think we're in the eye of the storm and you are wrong ... but goodness me another POV? that's ludicrous!

who said property would never drop? we said it was unlikely - spouting solid reasons why. it's called a debate - and there are no right or wrong answers, just opinions. time WILL tell if you should have sold it all and moved to Bangladesh with all your cash and lived like a king, or if you should have held tight and moved on.

if i follow your historical example - i should be investing. through all the world wars, depressions, recessions, oil crises and credit crises - the sharemarket and the property market has risen in value.

so there's a correction....? sorry for all you folks that bought at the height of the boom. but some people did. if i were one of those people i'd be licking my wounds for sure. i'm sure there's people on here who can think about things other than depression and maybe buy a CF+ property or two the help with the neg gearing...? but no - we can;t have a different opinion, can we...?

opinions are like belly buttons - everyone's got one, and they're all full of fluff at the end of the day - both yours and mine.

do what you want dude.

Don't get upset your hair will go grey and then you will need a blue rinse

We have had some good discussions in the past but I obviously have hit a raw nerve with you and many on this site. The truth is very unpleasant.

Fact number one; We are only one third of the way into the sub prime losses and this is not my opinion its documented. I can't blame you for wanting to believe we are in the eye of the storm, but you will get more than two black eyes if you do

Fact two; the Citibank rescue plan, like Bear stearns, like Lehman brothers, like Freddie Mac, like Fannie Mae like Meryll Lynch, like Goldman Sachs, like JP Morgan chase, like Morgan Stanley,like Wachovia,like AIG,like WaMU..........Crisis what Crisis?...just a media beat up

Fact Three; History lesson 101 lets look at what happened at the bottom of the 1929 crash. It took until 1954 for share prices and property to recover their pre 1929 levels

Fact Four; You want an opinion about purchasing investment properties now? Ya go ahead and while your at it bend over put your head between your legs and kiss you @ssets good bye.

 

[Bill.L]

Hi all,

nonrecourse. I have seen you come up with these fact before.....

Fact Three; History lesson 101 lets look at what happened at the bottom of the 1929 crash. It took until 1954 for share prices and property to recover their pre 1929 levels

Sorry, but here in Australia that is just plain wrong.

The stockmarket here peaked at an All Ords equivalent of 52 in 1929, the low point was in 1931 at 28 and by the end of 1934 we were at 56. Our market surpassed the '29 peak 5 years later.

You are probably referring to a different market and an unweighted index (DJIA).

As regards to property taking the same amount of time to recover, I'd love to see the statistics from that time.

bye

 

[nonrecourse]

Hi all,

nonrecourse. I have seen you come up with these fact before.....



Sorry, but here in Australia that is just plain wrong.

The stockmarket here peaked at an All Ords equivalent of 52 in 1929, the low point was in 1931 at 28 and by the end of 1934 we were at 56. Our market surpassed the '29 peak 5 years later.

You are probably referring to a different market and an unweighted index (DJIA).

As regards to property taking the same amount of time to recover, I'd love to see the statistics from that time.

bye

I stand corrected on the Australian share market. Your right that was theDJIA However on the property market;
Following the worldwide depression of the 1930s, World War 2 together with postwar building restrictions and material shortages, building development in Melbourne remained fairly static until the early 1950s.

My source http://www.onlymelbourne.com.au/melbourne_details.php?id=6075

 

[nonrecourse]

Just a little history about land speculators

http://www.austlii.edu.au/au/journals/AJLH/2004/5.html#fnB66

Just a snipet of the link;

Speculators lacked an appreciation for land’s hazards, its poor liquidity and potential for inflated valuations. The state of land valuations epitomized the paltry information generally available to investors.[64] On the surface, lenders seemed prudent by advancing money secured by real property to the value of 60 per cent of appraised value.[65] However, that margin was based on so-called market values. Without a process to determine real property’s intrinsic worth, its so-called value originated in dubious assessments. A popular commercial handbook placed Australians ahead of Britons, Americans, and Canadians in per capita wealth by including land values; this was misleading.[66] How were land valuations prepared? George Meudell claimed ‘revenue or rents were never used to test values’.[67] Valuers ‘departed from capitalizing the earning power of a property, and estimated to suit their clients’.[68] In some English-speaking jurisdictions, assessors estimated the value of real property on potential rents factored at a six per cent annual return. Another way was to value property as if it faced a forced realization, which would have acknowledged liquidity problems.[69] Instead, to shape market values, boomers auctioned suburban allotments. Auctioneers worked with ‘puffers’ or ‘dummies’ who pushed up bids.[70] If these agents placed the winning bid, then a reserve price had been made. This dodge put no coins in vendors’ pockets. In fact, it cost auction fees, though friendly auctioneers might reduce commissions.[71] A fake sale might have fooled a lender into maintaining a vendor’s overdraught coverage. Lenders were misled by ‘false valuations and silly asses of auctioneers’.[72]


High market valuations also originated in a structural feature of land markets. There was no futures market for urban space.[73] The inability to arrange land sales for a future transfer date precluded involvement by doom-sayers. Not only had these players in commodity markets introduced caution, but they sold short, increasing contracts, easing supply pressures. Land markets could only accommodate bulls who demanded land immediately to meet growth, or an assumption of continued growth. Acting quickly in expectation of profits, they heavily discounted the future, accepting both a premium price and heavy debt burdens. Victoria had acquired the preconditions for a land bubble. Alterations to cautious English banking practices had allowed a differential in interest rates that helped draw British investors to the colony and promoted a cavalier attitude toward land as collateral. Australians borrowed more abroad on mortgage security than any other primary producing area.[74] Land valuation was biased toward unrealistic heights. Corporate evolution provided Melbourne with competitive lending firms which increased the availability of mortgage funds. The ways funds could be lent multiplied. Some land vendors borrowed against contracts from buyers.[75] Easy credit encouraged participants in the city-building process to produce new urban space.[76] It was not just institutional credit that expanded. Booms could be financed through personal credit. Insolvency records show that Melbourne witnessed an explosion in personal credit, as promissory notes financed land sales and contributed to market price inflation. Many who signed notes believed that a quick land sale would quickly relieve them of the contracted debt. It shocked them when creditors enforced obligations when the land market became sticky. One witness to manipulation recalled that ‘if a suburban estate was turned over and sold five or six times at a paper profit that meant five or six sets of bills owing on one property’.[77]

 

[Witzl]

Hi all,

nonrecourse. I have seen you come up with these fact before.....



Sorry, but here in Australia that is just plain wrong.

The stockmarket here peaked at an All Ords equivalent of 52 in 1929, the low point was in 1931 at 28 and by the end of 1934 we were at 56. Our market surpassed the '29 peak 5 years later.

You are probably referring to a different market and an unweighted index (DJIA).

As regards to property taking the same amount of time to recover, I'd love to see the statistics from that time.

bye

Bill... i think you are just going to get the same answer again and again.......

... p.s. humour is good.

 

[james_w]

Bill... i think you are just going to get the same answer again and again.......

... p.s. humour is good.

lol cool pic also are we in a world war if we are I haven't heard about it call the troops setup the bunkers

 

[Bill.L]

Hi all,

Thanks for the links nonrecourse, but they are not really statistics that are of much use. Lots of anecdotal beliefs in there but not any real figures.

Of course we need to remember that governments restricted the money supply in/during the depression, they are doing the opposite at present.

I would expect that because governments/central banks are acting differently, the outcome will be different.

I'm also pretty sure we will see many examples of how people have lost huge percentages on some properties, due to overpaying in the first place. However the slightly below median value house on a good block of land in reasonable (as in near facilities/transport) capital city location is very unlikely to see the much touted 40% declines. One reason being that there are too many investors licking their lips at the thought of 20% declines and positive cashflow.

bye

 

[Sunfish]

Bill... i think you are just going to get the same answer again and again.......

If you ask the same questions you will (surprise, surprise) get the same answers.

 

[Sheryn]

Risk management (a basket case) = money managment

OK


To make it simple....and discuss/debate...

If someone has 100k in AUD (cash) how much 'buying power' does one have in Australia?

If someone has 100K in Australian property how much 'value/equity' does one have in Australian property if property is not going to be sold?

If someone has 100K in superannuation invested in 'cash' how much does someone have?

If someone has invested 100K today in Australian shares (after RIO dropped $21.00 today) how much can they 'leverage' OR how much is their dividend worth?

If someone had 100K in a mortgage fund and the fund is 'frozen' how much do they have?

MONEY is a tool............the skill is managing risk.


AUD .38 a question for NR is NOT a problem for me as I am not going overseas....but if I wish to buy an imported car eg. Landcruiser it will be an issue.


Regards
Sheryn

 

[nonrecourse]

Hi all,

Thanks for the links nonrecourse, but they are not really statistics that are of much use. Lots of anecdotal beliefs in there but not any real figures.

Of course we need to remember that governments restricted the money supply in/during the depression, they are doing the opposite at present.

I would expect that because governments/central banks are acting differently, the outcome will be different.

I'm also pretty sure we will see many examples of how people have lost huge percentages on some properties, due to overpaying in the first place. However the slightly below median value house on a good block of land in reasonable (as in near facilities/transport) capital city location is very unlikely to see the much touted 40% declines. One reason being that there are too many investors licking their lips at the thought of 20% declines and positive cashflow.

bye

Hi Bill your rational is based on continued normal liquidity. The only investors that will be licking their lips will be those who can afford to purchase out right. As I have stated before I really do hope your scenario is correct. These are not normal times and people when pushed panic and act irrationally.

 

[nonrecourse]

How to Depression proof your property portfolio

1. Look at your situation and determine your worse case scenerio according to your cirumstances.

2. Build an emergency reserve fund that is at arms length away from your creditors.

3. Ensure that your invaluable in your workplace

4. Develop alternative income streams... cash is king

5. Have a good relationship with your banker

6 Live well below your means

7. Cut your expenses, outgoings, liquidate high maintenace doodads

8. Seek professional advice on how to protect your assets, understand your contracts and commitments and improve your fiscal literacy.

9. Reinvest your reduced interest expense to retire more debt.

10. Read the land boomers by Michael Cannon, Printed by Melbourne University Press

 

[Ausprop]

of course that's protecting the downside. don't forget to look out for the upside.... look out for panicking vendors and good deals, pick up some oversold shares, buy durables cheap. These are the times when you will really make some money.

 

[Bill.L]

Hi all,

nonrecourse,

These are not normal times and people when pushed panic and act irrationally.

I tend to agree with the second bit but not the first.

I do not believe in "normal times", When were things ever "normal", how long did they stay "normal"?? What does "normal" mean???
When you look back on all sorts of 'market' history, prices of everything are constantly changing, yet governments/central bankers have decided that some of these changes lead to bad outcomes and do (are doing) everything in their power to stop them.
To stop deflation/depression the creation of money is happening, governments printing money and an indication they will keep doing it as long as necessary. The Zimbabwean government shows what is possible and happens if they go a little too far .

With this huge amount of money creation going on, what you need to own to hold value is assets, yet this is where your "panic and act irrationally" is coming in by many. They are selling the assets that are likely to hold value along with everything else.

With banks having guaranteed deposits and all of this money creation eventually finding its way into banks, then they will have to do something with all this cash. I believe that they make their money by lending

All things take time, so that what is happening today will take time to filter through the system, which is why markets overshoot to both the upside and the downside.
As an investor if you wait for "normal times", it will have you investing at the end of a year like 2007, rather than in the "abnormal times" like now, or 1992, or 1983, or 1975, or 1931.....

bye

 

[nonrecourse]

Hi all,

nonrecourse,



I tend to agree with the second bit but not the first.

I do not believe in "normal times", When were things ever "normal", how long did they stay "normal"?? What does "normal" mean???
When you look back on all sorts of 'market' history, prices of everything are constantly changing, yet governments/central bankers have decided that some of these changes lead to bad outcomes and do (are doing) everything in their power to stop them.
To stop deflation/depression the creation of money is happening, governments printing money and an indication they will keep doing it as long as necessary. The Zimbabwean government shows what is possible and happens if they go a little too far .

With this huge amount of money creation going on, what you need to own to hold value is assets, yet this is where your "panic and act irrationally" is coming in by many. They are selling the assets that are likely to hold value along with everything else.

With banks having guaranteed deposits and all of this money creation eventually finding its way into banks, then they will have to do something with all this cash. I believe that they make their money by lending

All things take time, so that what is happening today will take time to filter through the system, which is why markets overshoot to both the upside and the downside.
As an investor if you wait for "normal times", it will have you investing at the end of a year like 2007, rather than in the "abnormal times" like now, or 1992, or 1983, or 1975, or 1931.....

bye

Hello Bill; The "money" your talking about does not appear out of nothing in normal times. What you are talking about when you mention this money creation is a thing also known as a fiat currency that is backed by a U.S. government that for all intensive purposes is insolvent. The Federal reserve has been playing pass the parcel with the rest of the world's economies.

"We inflate our paper currency, we repair commerce with unlimited credit, and are presently visited with unlimited bankruptcy."
- R.W. Emerson, The Young American, 1844

 

[Ausprop]

this money creation is a thing also known as a fiat currency that is backed by a U.S. government that for all intensive purposes is insolvent. The Federal reserve has been playing pass the parcel with the rest of the world's economies.

"We inflate our paper currency, we repair commerce with unlimited credit, and are presently visited with unlimited bankruptcy."
- R.W. Emerson, The Young American, 1844

whic is why i believe in the medium term that USD at $1.50 is justifiable vs 38c, but there are a lot of things to work thru the system first

interstingly a lot of foreign mortgage money is making its way to our shores because even the yanks can see their dollars strength has to reverse. This slush of funds inevitably contributes to the pulling up of property prices. these foreigh borrowings I don't mind so much if they are deflated away with a stronger dollar

 

[Bill.L]

Hi nonorecourse,

Money is constantly being created out of thin air by central banks and normal banks, that is why/how the M3 money supply grows. Repayment of debt (cancellation of book entries) is how money is destroyed (shrinking of M3).

RBA figures show that M3 has grown 20% in the last year. All that money will find a home. (might help explain fall in $A). The US don't publish M3, but judging on the ongoing bailouts it is probably high.

All money has been 'fiat' since it left the gold standard. I do not think going back to one is a realistic option.

bye