Why don't you like banks? Would you give any consideration to a high yielding bank?
I understand they're looking at cutting expenditure and selling off assets to the tune of $15billion to reduce their debt. What is your opinion of how much they need to reduce it by?
From your previous posts Sunfish I note you have much more experience with equities than I do, can you explain a few of your answers to me?
Why don't you like banks? Would you give any consideration to a high yielding bank? ....... I've been rubbishing banks for years. You can't expect me to stop now.They are still the epicentre of the GFC. "High yielding"? A P/E <5 is high yielding, but that must be on reasonably expected future earnings, not history.
I understand they're looking at cutting expenditure and selling off assets to the tune of $15billion to reduce their debt. What is your opinion of how much they need to reduce it by? .... I don't know but they're not there yet.
I'm sure there are plenty of reasons not to but why wouldn't you touch them? ...... QAN is an airline. No further comment needed. Pacific Brands is in freefall. Don't try to catch falling knives.
Cheers
You may be right HE. I remember AGK as Australian Gas Light, a gas pipeline owner/operator. (Australia's oldest listed company) It isn't a miner so I don't follow it closely. Nor do I operate a SMSF.
I'm afraid blue card your reference period of 10 years is the period when historians looking back at this soft depression will identify the mindset of borrowing huge amounts and looking at unrealistic capital growth targets with absence of regulation as the raison d'etre GFC
Your pot of gold at the end of the rainbow when you reach the horrizon will be a financial abyss if your gearing isn't manageable. Continuing to gear up is fiscal Seppuku
http://en.wikipedia.org/wiki/Seppuku
Then Mr market is going to put you on the canvas for the count of ten BB.
Sorry its many many posts back that I explained the term a soft depression. Unlike the dirty 1930's with millions of people out of work and bread lines, a soft depression is where the wheels of commerce grind to a crawl due to a lack of liquidity. The banks will not lend money to each other or to anyone other than those who don't need it.
What we are entering is a long and painful period (10 years) where credit contracts and simple financial transactions that are part of modern life is no longer going to be simple.
You'd think that would drive the cost of money up and it will in some countries like the US and the UK. where their fiscal ineptitude has brought on this whole mess.
In Australia because we are the exporter of raw materials to china I think you will see the Aussie interest rates pulled down by the reserve bank in a desperate attempt to keep those cogs squeeking along. That will mean that the spread in interst rates here and overseas will drive the dollar down to ... dare I say it 38 cents?:
Now I know your thinking what is this poor little sick puppy smoking. Both our solicitor and banker last November thought I was a nutter when I first started ranting about CDO's and adjustable rate mortgages. In recent months here in Melbourne a lot of people have started to take note of the syndicated articles called planet wall street that has been running in the age.
The information has been out there on the internet for well over a year but as my father who had a grade three education but a special ability to read people said. Common sense just isn't very common among educated people.
Most of the nonsense about things are improving, pumped out by the gang of seven from wall street; Merrill Lynch, Bear Stearns, Lehman Brothers, Morgan Stanley, Goldman Sachs, JP Morgan Chase and Citigroup, has been aided and abetted by the financial press. There is trillions of dollars in further losses coming as a consequence of hundreds of smaller banks failing throughout the western economies of North America and Europe. That is without counting the number of insurance companies that will also soon start to crash.
As far back as the mid 1990's Warren Buffet described Wall Street as an apple that is rotten to the core. Around 2003 he was quoted saying that derrivatives were financial instruments of mass destruction that one day would case untold suffering. Warren Buffet doesn't understand derrivatives and unfortunatly for the rest of the world neither did the gang of seven.
Which brings me to the Somersoft Property Investment Forum. There are a lot of posters who can't see the forest for the tree's. Many on this site think they are going to continue to make a killing in property. Like the product disclaimers on most investment sales literature. Past performances in property investing is no indication of future returns.
We are now entering a period of massive financial upheaval. You need to go back and read about businesses that thrived in the great depression. The days of easy money through mortgage originators like Aussie that used collateralized debt obligations are going. If you want to grow your property portfolio you are going to have to generate your income from your internal operations ,be it your properties, business income or salary.
The use of negative gearing and using your existing equity to gear up is going to become much more difficult. The more senior posters on Somersoft need to warn the newies that you can lose your savings investing in property just as easily as you can speculating in the share market.[What I am saying is that the credit squeeze overseas is going to continue to get worse in 2009 and 2010 as we are only part way through the collateralized debt obligation mess. Too much faith is put on what governments can do to fix the problem.
The problems that Japan went through in the 1990's is some indication of how long this will go on. At least a decade. You cannot drop trillions off of balance sheets with no ongoing consequences.
Like it or not we are directly tied to the international money markets. Paul Keating was quoted yesterday as saying the peanuts at the reserve bank are dreaming. He is optomistic says it will last only 8 years Ed Chan talks about having a seven year buffer now for your investment property. A year ago he too was gung ho on using a property trust to negatively gear up to the eye balls.
The property investing game is not stagnant. Things change. Negative gearing is not a smart strategy now. That means you need to change your focus..... Think and grow rich.The reality is there has not been a financial melt down like the world is experiencing this time since 1929. Talk that here in Australia the worse case scenario is a 1970's like recession or a 1987 crash is just ludicrous.
We are only at the beginning of a very long and painful adjustment. I am not anti-property, my continued concern is with the mentality that you can continue to finance your property acquisitions with 80% borrowed funds. Yes interest rates are going to continue to decline and yes rents will continue rise and the yields will go up to historical means, for residential property of about 7-8% during the prolonged soft depression.
You are seeing the results of greed and now fear that is taking hold of every asset class. If things really turn nasty then some form of rent control will be implemented like what occurred in the dirty thirties here in Victoria.
The nonsense about how the stock market/aka/ property markets bounced back in 1931 and if you were not in the market you missed out beggars belief. Share values and property markets did not recover their pre 1929 value until 1953/54.
There will always be property nuggets that some people will point to during the hard times as proof that property is a safe sure bet. In the next two years there will be a lot of purchases undertaken with the idea that time in the market beats timing. What a lot of property disciples are going to discover is that that so called golden nugget is nothing more than fools gold.
The laws of sound property fundamentals is all about numbers. In the recent past this has been corrupted by the negative gearing slant. In the 1990's it could be justfied. With the tax rates today, plus the state government and council bandits the equation has changed.
In the recent past I have been able to call the stock market crash because of all the signs using the internet. Until recently a lot of SS posters scoffed when I spoke about the reserve bank dropping its rates to 2%. I note at the moment the call is for the reserve rate to drop to 3.5%
We also have a lot of misinformation put out by the real estate industry, the banks and the government continuing to spin the Australia is different our banks and property markets are rock solid. If you wish to continue to believe in a fairy tale......
Most SS investors are exposed because they have too much gearing. Gearing is a double edged sword. In good times it multiplies gains in bad times it eats you alive particularly when faced with a collapse in values.The reality is there has not been a financial melt down like the world is experiencing this time since 1929. Talk that here in Australia the worse case scenario is a 1970's like recession or a 1987 crash is just ludicrous.
We are only at the beginning of a very long and painful adjustment. I am not anti-property, my continued concern is with the mentality that you can continue to finance your property acquisitions with 80% borrowed funds. Yes interest rates are going to continue to decline and yes rents will continue rise and the yields will go up to historical means, for residential property of about 7-8% during the prolonged soft depression.
You are seeing the results of greed and now fear that is taking hold of every asset class. If things really turn nasty then some form of rent control will be implemented like what occurred in the dirty thirties here in Victoria.
The nonsense about how the stock market/aka/ property markets bounced back in 1931 and if you were not in the market you missed out beggars belief. Share values and property markets did not recover their pre 1929 value until 1953/54.
There will always be property nuggets that some people will point to during the hard times as proof that property is a safe sure bet. In the next two years there will be a lot of purchases undertaken with the idea that time in the market beats timing. What a lot of property disciples are going to discover is that that so called golden nugget is nothing more than fools gold.
The laws of sound property fundamentals is all about numbers. In the recent past this has been corrupted by the negative gearing slant. In the 1990's it could be justfied. With the tax rates today, plus the state government and council bandits the equation has changed.
In the recent past I have been able to call the stock market crash because of all the signs using the internet. Until recently a lot of SS posters scoffed when I spoke about the reserve bank dropping its rates to 2%. I note at the moment the call is for the reserve rate to drop to 3.5%
We also have a lot of misinformation put out by the real estate industry, the banks and the government continuing to spin the Australia is different our banks and property markets are rock solid. If you wish to continue to believe in a fairy tale......
Most SS investors are exposed because they have too much gearing. Gearing is a double edged sword. In good times it multiplies gains in bad times it eats you alive particularly when faced with a collapse in values.
