Australia is a leveraged time bomb waiting to blow

[hobo-jo]

Some interesting long term stock charts in this article:

The first surprise came when comparing the S&P500 to the Consumer Price Index over the last century - since what really tells you whether the stock market is "performing well" is not just whether it's rising, but whether it's rising faster than consumer prices. Figure 1 shows the S&P500 and the US CPI from the same common date-1890—until today.

In contrast to house prices, there are good reasons to expect stock prices to rise faster than consumer prices (two of which are the reinvestment of retained earnings, and the existence of firms like Microsoft and Berkshire Hathaway that don't pay dividends at all). I therefore expected to see a sustained divergence over time, with of course periods of booms and crashes in stock prices.

Figure 1: The S&P 500 and the CPI from 1890 till today

That wasn't what the data revealed at all. Instead, there was a period from 1890 till 1950 where there was no sustained divergence, while almost all of the growth of share prices relative to consumer prices appeared to have occurred since 1980. Figure 2 illustrates this by showing the ratio of the S&P500 to the CPI - starting from 1890 when the ratio is set to 1. The result shocked me - even though I'm a dyed in the wool cynic about the stock market. The divergence between stock prices and consumer prices, which virtually everyone (me included) has come to regard as the normal state of affairs, began in earnest only in 1982.

http://www.zerohedge.com/news/2013-07-07/guest-post-bubble-so-big-we-cant-even-see-it

 

[oracle]

Some interesting long term stock charts in this article:



http://www.zerohedge.com/news/2013-07-07/guest-post-bubble-so-big-we-cant-even-see-it

Interesting Hobo, the above article is authored by Steven Keen

I will share with you another chart. Hopefully, I am not breaching any copyrights here. This chart is from a book Stocks for the Long Run by Jeremy Siegel (Professor of Finance at The Wharton School, University of Pennsylvania)

Not sure from where Steven Keen obtained his data, but Prof Siegel has obtained his data from Center for Research in Security Prices (CRSP) which has been analysed extensively by academics and professional money managers.

Make what you think of the two charts

(EDIT: Does Prof Keen's chart include re-invested dividends because Prof Siegel's chart does include re-invested dividends).

Cheers,
Oracle.

 

[Deltaberry]

Steve Keen should use a pen name. Will help with the credibility these days.

 

[stargazer]

Hi all

Is is the same with ASX or is it the DOW. How does one buy say the top 200 stocks on the ASX and are the returns consistent over time.

Regards
Stargazer

 

[Crabnet]

Hi all

Is is the same with ASX or is it the DOW. How does one buy say the top 200 stocks on the ASX and are the returns consistent over time.

Regards
Stargazer

I suppose to trade the ASX200 index you could buy an Exchange Traded Fund (ETF) offered by an asset management company.
As an example State Street Global Advisers amongst other companies offer a product that tracks the ASX200 top companies.
Ticker symbol STW.
Ongoing Management costs 0.29% deducted from fund value.
Statistics of performance and components of the fund on their website.
http://www.spdrs.com.au/etf/fund/fund_detail_STW.html
Not a personal endorsement of that particular just an example pulled up from Google of the type of product that is available.

 

[stargazer]

Hi

Thank you very much for your response

Regards
SG

 

[random]

Strange. Saw a thing on the US bubble and their charts leading upto it and how they were saying how obvious it was and had to pop. The spikes in the charts and property prices .
Yet very few point out in Oz , that our spikes and charts, house price jumps and rises in cost of living make the US's look like a speed hump.

You just can't help but scratch your head if you compare ours to the US , scary sh@t- add China, crikey !

 

[random]

Hobo , I was wondering if you were still here.
Geez mate you were spot on about gold btw .

 

[Eza]

The negative effect a slow down in mining will have on the Australian economy is overstated. Mining contributes roughly 6-8% of Australia’s GDP, and employs less than 3% of the work force. A slow down in mining may slow the economy slightly, but I think the benefits a weaker $AU will have on other Industries such as tourism, retail, agriculture, etc, will offset any risk of recession.

Whether or not there is a bubble in the Australian housing market is also debatable. I don’t believe there is. We have an undersupply which is only increasing with a growing population, and we have an established system of negative gearing, which people will consistently rely on to reduce their taxable income.

Honestly, im not looking at writing an essay, but I could go on for pages on reasons why Australia's future is looking bright. (Providing our incompetent politicians dont screw it up).

 

[topcropper]

The negative effect a slow down in mining will have on the Australian economy is overstated. Mining contributes roughly 6-8% of Australia’s GDP, and employs less than 3% of the work force. .

I hear this stat all the time. That mining is just 6-8% of the economy is meaningless in an economy that is mostly services. All wealthy economies are mostly service based. The wealthier the economy, the greater the percentage is services. It's the efficiency and productivity of primary and secondary industries that allow services to exist.

Mining makes up over 50% of our exports, so it is by far the most important wealth producing industry. If you think a crash in mining won't effect us, I hope we don't find out by how much.

What do you think would happen to say Japan if their manufacturing industries shut down? Manufacturing to Japan is the same as mining to Australia.


See ya's.

 

[Crabnet]

The negative effect a slow down in mining will have on the Australian economy is overstated. Mining contributes roughly 6-8% of Australia’s GDP, and employs less than 3% of the work force. A slow down in mining may slow the economy slightly, but I think the benefits a weaker $AU will have on other Industries such as tourism, retail, agriculture, etc, will offset any risk of recession
.

Don't forget how much tax miners pay. Those budget surpluses we had when commodity prices were booming and the miners responded to by investing in new capacity were equivalent to the annual tax paid by Rio and BHP.

 

[Eza]

I hear this stat all the time. That mining is just 6-8% of the economy is meaningless in an economy that is mostly services. All wealthy economies are mostly service based. The wealthier the economy, the greater the percentage is services. It's the efficiency and productivity of primary and secondary industries that allow services to exist.

Mining makes up over 50% of our exports, so it is by far the most important wealth producing industry. If you think a crash in mining won't effect us, I hope we don't find out by how much.

Yeah of course the mining industries contribution to GDP is greater than 8% when taking into account services from other industries. Keep in mind many of those services are transferable and will therefore hopefully take less of hit with a construction boom likely over the next decade due to housing shortages.

Australia's economy is much more diverse than Japan's. Apples and oranges really. With global food shortages expected in the future, Australia is well positioned for an agriculture and aquaculture boom, which would also help pick up the slack from any reduced mining exports.

 

[buster]

How so EZA, with the costs, regulations, and standards, imposed on our producer, that our importing competitor don't have. When it costs more to transport a tonne of food a few hundred kilometres down the road than from the otherside of the world. When other countries are dumping food here at 17% cost of production. Australia s last canning company just went broke, Water entitlements being reduced and "saved" for the environment. Orchards being bulldozed, fruit rotting on trees and vines because no-one wants to pick it. You cant compare Australian apples and oranges, you would battle to find an Australian orange and apples are going the same way. World leading Research and development centres closed down and funding slashed. Infrastructure such as road and rail falling apart. The same old mantra been spruiked for 30 years yet we have to increasingly import more food and attrition of farmers continue. Governments destroying industry at the drop of a hat by banning trade to some countries.












. With global food shortages expected in the future, Australia is well positioned for an agriculture and aquaculture boom, which would also help pick up the slack from any reduced mining exports.[/QUOTE]

 

[Eza]

How so EZA, with the costs, regulations, and standards, imposed on our producer, that our importing competitor don't have. When it costs more to transport a tonne of food a few hundred kilometres down the road than from the otherside of the world. When other countries are dumping food here at 17% cost of production. Australia s last canning company just went broke, Water entitlements being reduced and "saved" for the environment. Orchards being bulldozed, fruit rotting on trees and vines because no-one wants to pick it. You cant compare Australian apples and oranges, you would battle to find an Australian orange and apples are going the same way. World leading Research and development centres closed down and funding slashed. Infrastructure such as road and rail falling apart. The same old mantra been spruiked for 30 years yet we have to increasingly import more food and attrition of farmers continue. Governments destroying industry at the drop of a hat by banning trade to some countries.

[/QUOTE]

I completely agree with you. The amount of red tape being slapped on the agriculture and aquaculture industry is appalling and we wont ever see a boom the way things are now. Fortunately for us we have the capacity to produce large amounts of food, which is the important thing going into uncertain times in regards to climate change and food availability. Hopefully the Government can get there act together and get rid of the bureaucracy and start investing in the infrastructure needed. Maybe then our farmers wont be so inclined to sell off farms to foreign companies. This recent "action on live exports reform" is not a good start though.

On a side note, a good friend of mine is a marine biologist extremely smart and business minded. He was trying to start a fish farm of his own (with his own genetically modified fish) but ended up giving up due to all the regulations in place at the moment. He ended up being poached by a company in Argentina.

 

[random]

Yeah we seem to have too many services and little men running round with pads everywhere . You just can't help but wonder who's gonna be doing all the building and manufacturing and trades in the end at this rate.

l've got a question for you's that really puzzles me.
Who exactly is making all the money from our ridiculously high cost of living and prices of everything in Australia ?

Companies seem to be going broke a lot .
Yet remember , even when we were kids, damn near everything we ever bought was made in China , Korea . Yet now with the internet , we all see just how cheaply even you or l could import stuff from them.
My brother makes 1700% on his motor bike parts , he's laughing !

How could our mobs even be going broke at those sort of margins unless they use everything Australian , then l could see it .

Along the lines but on a different note, interesting simple little thing on Ebay right. We use to be able to buy phone covers from Hong Kong , for a dollar and free postage right.
Now those same guys are charging Aussies 6 and 7 dollars for the same covers , plus 3 or 4bucks for postage .
Imagine what they're thinking - it's Christmas !

I was looking at importing a big Goose neck trailer 12 mths back right . China was selling beautiful jobs with the works for like 12grand. Extras like say an air con were like and extra 100 bucks or something .
So I contact one of them with the best prices and the say oh , hang on , we'll put on our Australia guy for you. Gee thanks !
Suddenly the 12k Goose neck was 22k , with no extras . An air con went from 100bucks up to 800bucks and all in all , all fitted out it was suddenly a 28k Goose neck and with things like carpet and stuff still added onto that.
The kitchen was another one l remember , 200 dollars or something like that before, suddenly it'd jumped to 1800 .

 

[atti]

house prices are up again this quater 2.5 % APM. bubble will not burst so get in make quick buck or two in next 2-3 years

 

[Deltaberry]

I don't know if it's a time bomb.

All I know is if you're not in melb or syd blue chip now you'd be spewing blood.

One month ago I was saying the market is moving fast. Now it is just crazy.

 

[redwing]

I don't know if it's a time bomb.

All I know is if you're not in melb or syd blue chip now you'd be spewing blood.

One month ago I was saying the market is moving fast. Now it is just crazy.

We've no Syd Bluechip, only Syd westside Bluecollar

 

[tambourineman]

I don't know if it's a time bomb.

All I know is if you're not in melb or syd blue chip now you'd be spewing blood.

One month ago I was saying the market is moving fast. Now it is just crazy.

800k for a shoe box ? You can have em

 

[Deltaberry]

800k for a shoe box ? You can have em

Who cares what they are. If a piece of rock goes from $100k to $800k, and you bought it, it's a good move.

Same could be said about gold. A more useless commodity.