Bill Zheng newsletter - lack of global credit to cause price crash.
- Thread starter DavidMc
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Yes myla there is a lot of money flowing into the big four. The safest is...... you guessed it that bank the commonwealth. All those mum and Dad pass book holders that the other 3 spurned during the 16 year boom are a nice little cushion.
Someone asked where did I get the info on how much of the housing market is dependant on foreign capital.. the same place I learned about Aussie banks exposure to derivatives.... 13 trillionIts all there in black and white on the reserve bank website. Have a look at their september discussions.
As for your comment what are the banks going to do with all that cash.... the same as they did in the early 1980's before deregulation. Some of you were sucking on dummies then and have no experience on how difficult it was to obtain a simple home loan.
All the banks big and small requirred you to have your savings with them for two years in a low interest account. The building societies also requirred a long savings history.
My 28 year old business banker the other day was chatting to me about my mortgages and was making the point that many of the mortgages I now hold will if and when I am refinanced go to a higher commercial rate because they are almost all commercial properties at home loan rates.
I laughed and said oh so we are going back to the early 1980's when banks charged an extra 2% if it was an investment property and 4-6 % extra if it was an industrial or commercial property.
I remember the ups and downs in the 60's, 70's 80's and 90's and there has been nothing like this. To argue that this is just another recession is myopic and more importantly it is delusional.
I am happy to discuss what we should all be doing to protect ourselves. I don't suffer fools easily, thats the nice thing about getting older you cut to the quick.
Some smart #ss made the remark that I am somehow wearing this as a badge. The reality is the wife and I live and breath property investing. We have a deep distrust of financial planners and the razmataz of the carpet baggers called investment advisors, share traders,property sprukers and blue sky nutters who think that owning property exempts you from Newtons third law of thermodynamics ( For every reaction there is an equal and opposite reaction).
Most people come unstuck because although they talk the talk they don't walk the walk. That is why Pareto's principle applies and why 80% of the population rely on the government in old age.
If you hold your investments in your name, you don't use a discrestionary trust that then owns units in a unit trust that holds your long term properties then your a target. We didn't initially either that's part of the learning curve.
The learning curve now is surviving and growing over the next 10 years.
how dare you sound so black and white with your opinion's and also mis quote Newton whilst trying to appear as intelligent. "every reaction has a equal and opposite reaction" ???......thermodynamics?????. Be carefull you do not fool anybody with your reference. You also say you do not suffer fools easily. Take some time for reflection.
Question
Haven't I & J Somers always purchased their properties in their own name??
I have followed this path thus far as I don't fully understand the mechanics of Trusts.
In what way are you a target?
Simple explanation.
buy in a trust now, means the trust owns the property later, meaning you do not need do a dutiable transfer at a later date to protect the asset (when the transfer cost is based on the value of the of the assett).
At some point the property will be discharged from the lender and it is like having the property owned by another person who you control but yet the bank will find it very difficult to touch if they a claiming on another debt you have defaulted against.
Thanks Jjj,
So you are only a target if you can't meet your debts or you get sued by someone?
If I am a good boy and keep sensible LVR's and cashflow buffers then having the properties in our own name is ok? I assume this is the foundation of Ian and Jan's strategy and why they chose to KISS?
So your suggesting that you don't use pencils that have an eraser on the end and unlike most humans you don't have clay feet? If you don't like my heat in the kitchen you can just ignore my posts, I won't be offended
When I have made a mistake and its pointed out I usually post a
Someone asked where did I get the info on how much of the housing market is dependant on foreign capital.. the same place I learned about Aussie banks exposure to derivatives.... 13 trillion
Black & white? There is so much data in there it so easy to let lost among it.
Which RBA tables enable you to make that observation?
Thanks,
Correct.
It doesn't take a lot of financial nouse to realise that borrowing money and then continually adding to that debt without paying it back in the short-middle term, whilst hoping for the asset behind it to go up in value to absorb the extra debt is fraught with danger.
You might do it because you are cash-strapped for a short time, but I'd never do it as strategy for investing.
Liquidity and the soft depression
Bump; I think its time we all reviewed Bill Zheng's take on lack of global credit
that was posted in October as it is increasingly going to be more of an issue as 2009 and 2010 progress
Bump; I think its time we all reviewed Bill Zheng's take on lack of global credit
that was posted in October as it is increasingly going to be more of an issue as 2009 and 2010 progress
Alan Greenspan was quoted today as saying the world is facing a financial tsunami unlike anything since the 1930's.
For almost a year now I have been saying that a soft depression is headed our way. It amuses me how politically incorrect it is to say the D word depression.
I can see from the feed back on this thread that most of you are in denial about what is happening. Never mind that we now have the property trusts in Australia freezing redemptions of capital or we have the federal government so concerned about a run on the banks it has made the silly call to guarantee bank deposits with no thought of the repercussions that are now unfolding.Most of you naively believe that property is immune to the fiscal tragedy that is unfolding
Your property portfolio is not like a castle that you can pull up the draw bridge to ward off the barbarians from your keep. Unless you own the property outright and have a steady cash flow to pay the holding costs your eternal source of wealth is exposed to the irrational vagaries of the financial
tsunami that is unfolding.
There is nowhere to run there is nowhere to hide. If you have not recognised the problem your debt will eat you and your family alive in the next three years.
Bill Zheng is just another messanger telling the truth. I see some wanting to attack him because in the past he has made money advising people to gear.
The time for negative gearing has long past. If you do not adapt you will perish.
His advice of having seven years of interest reserve
The law of the jungle applies to investing; only the fit will survive. A moron could make money during the 16 year boom we just went through. We are about to find out if we are really as smart as we have been telling ourselves By gearing to the hilt many are about to discover the downside
Back from holidays refreshed and prepared for what is coming
Here is a little taste of what is coming;
http://www.news.com.au/couriermail/story/0,23739,24862557-952,00.html
The property sold on 24.01.2009 for $9,010,000
Even mid past year, Bill Zheng was warning that lenders int he wholesale market were looking closely at Aust with a view to tightening credit as they felt their money was safer in other markets. That was long before the big meltdown. The events which followed made things a lot worse for us.
Unlike many commentators who make predictions AFTER the event, Bill seems to not be shy to put it out there up front.
I greatly admire his intellect and his courage to share his views, even when time might prove him wrong.
He made some dire predictions at his seminar last August. Some people in the audience got quite argumenative with him. He said he hoped he was wrong and would be happy to be wrong if it meant smooth sailing for the world economy. Sadly, he was not wrong.
Rob I believe that Bill Zheng got most of it correct.
However, based on the research I have done, the credit squeeze is mostly felt in Commercial Lending, Commercial Property, and high end property.
Most of the houses under 500k are getting approvals by the banks albeit they do take longer and are strictly adhering to serviceability rules. This is also explains why mortgage rates are continuning to fall whilst Commercial rates are stubbornly high!
I for one just had an assessment and nearly choked on my drink when I was told I could borrowing over $1.2m by one of the big four! So much for the credit squeeze!
The issue I have is finding the deals in the lower quadrant of the market...the competition from those pesk first home buyers is intense. Whilst prices are rising it is not substantial .....yet!
However, based on the research I have done, the credit squeeze is mostly felt in Commercial Lending, Commercial Property, and high end property.
Most of the houses under 500k are getting approvals by the banks albeit they do take longer and are strictly adhering to serviceability rules. This is also explains why mortgage rates are continuning to fall whilst Commercial rates are stubbornly high!
I for one just had an assessment and nearly choked on my drink when I was told I could borrowing over $1.2m by one of the big four! So much for the credit squeeze!
The issue I have is finding the deals in the lower quadrant of the market...the competition from those pesk first home buyers is intense. Whilst prices are rising it is not substantial .....yet!
Some of the trusts the banks will have you by your short and curlies. Your job is to ensure that as your portfolio increases you pay off some of the properties and hold the titles outright, in a then ungeared unit trust with no guarantees and this is then held by a discretionary trust also with no guarantees.
You also have to be smart enough to read your loan contracts and strike out the all monies clauses. My concern is not the bankers, its the tall poppie cutters who invariably come along and think hmm I'll have a piece of that.
Unfortunatly one consequence of the republic that the pollies want us to have is its a lawyer's (read liar's) feast.
That is the other reason why I suggested you set up an SMSF and purchase a commercial property with a limited recourse loan as this is another way of diversifying your property portfolio as you continue to grow. As I mentioned to you before once you reach 6 properties ++ your in a rarefied atmosphere that few formites attain. All the more reason to protect your end game. If you put it off it gets even more difficult and too expensive to transfer assets across. Your better to start with your next acquistion and just accept that your backside is waving in the wind for someone to kick.
Hi Non Recourse and other SS investors,
I'm really interested in your views about trusts. We had a meeting with our property lawyer who advised us not to bother with a trust as the banks could go for everything anyway (or something to that effect...). We have recently bought in my husband's name only for general asset protection as in my line of work I can be sued for malpractice. Our accountnt also advised to transfer all our properties (total of 4 now) to my husband's name.
Questions...how can I learn more about trusts so I know how to direct the lawyer (he is a property investor himself!!???)?
Also, we are about to go to an LVR of 80% (as of a recent acquisition no. 4), so would you say this far too risky? We have good cash reserves and two properties are just about CF+. I am woul like to know if a bank can call in a loan even if you continue to make your payments on time (e.g., if property pxs drop substantially)? Can you say a bit more about the all monies clause and how is the removal of the clause negotiated with the bank?
Sorry to be a bit dumb but who are the tall poppy cutters?
Finally, what is a SMSF and how does the purchase of commerical property fit into the asset protection plan? Could you also say more about a limited recourse loan?
Many thanks for your valuable insights and sharing your knowlege.
MH
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