Don't tell me what, tell me WHEN

[tubs]

Another day, another article about the property 'bubble' that's going to burst.

What I don't get is that if these apparent experts are so good at knowing what's going on, why can't any of them tell us when it's going to happen. If they truly understand their subject ie economic prediction they should be able to interpret the data to tell us when to expect it all to unravel.

But they don't. Steven Keen tells us sometime in the next couple of decades.

And that's the most specific they get.

The idea of "it'll happen some time" lets them still get media attention because they haven't been wrong yet, despite clearly not having very good predictive models.

 

[Bargain Hunter]

Even Pantene give you some indication of when it will work. Perhaps we can say, 'tomorrow the property market in Australia will take a 40% slide'. As tomorrow never comes it will be as credible a prediction as any other currently being spruiked.

 

[hobo-jo]

What I don't get is that if these apparent experts are so good at knowing what's going on, why can't any of them tell us when it's going to happen. If they truly understand their subject ie economic prediction they should be able to interpret the data to tell us when to expect it all to unravel.

But they don't. Steven Keen tells us sometime in the next couple of decades.

And that's the most specific they get.

The idea of "it'll happen some time" lets them still get media attention because they haven't been wrong yet, despite clearly not having very good predictive models.

Does it matter when?

Picture an inflated balloon that is stretching at the edges…there are several birds with sharp beaks flying around it that could pop it at any time. There is possibly room for another few puffs to go into the balloon, inflating it even larger, but it is already stretched and failing a bird hitting it we might see it self implode anyway.

Do you put money on the balloon continuing to inflate or do you park your cash elsewhere?

I don’t see a crash the size of Keen’s likely and don’t think it will be as quick as some bears hope, however I don’t see value at today’s prices. I don’t see much room for real growth in prices, the rental return on most metro properties is dismal and I see too many risks…

 

[marg4000]

27th April, 2013.

You heard it here first.
Marg

 

[Bargain Hunter]

Does it matter when?

Absolutely.

If a specialist told me that I am going to die I would assume a level of urgency, yet if a preacher told me the same thing (providing I wasn't in hospital and he'd come to give me the last rites) I would take a more generalist point of view. After all we are all going to die eventually.

Keen's message is one of a preacher not a specialist.

Regards

Andrew

 

[tcocaro]

although I agree be carefull as you are putting yourself at real risk of jumping on the endless merry go round with that comment... particularly against hobo-jo.

Personally I beleive any economist or "preacher" that provides an absolute prediction (such as property will fall by X% by Y years) is always wrong and if right it was purely coincidental.

I beleive your use of the medical analogy is much better than that of a balloon. For instance say a morbidly obese man (the economy) walks into a doctors office complaining of shortness of breath and with chest pains (softening prices) what would the doctor say?

If Dr Keen was there he would say your dead within 10-15 years.

If Dr Logical was there he would say that if you dont start to loose weight (reforms\policy) and exercise (macro\micro stimulus) you will most likely start showing more medical issues such as back pains, muscular pains etc (finance falls, sale numbers falls) and studies show obesity can shorten ones life (recession).

Lets say the patient does what the dr orders and looses weight\etc and improves does it prove Dr Keen prediction was wrong? No it only proves how useless making absolute predictions are regardless of how sound the information or your training is because things can change particularly over long periods.

Therefore it is a much better approach to look at the economies fundamentals as it applies to property and see what macro\micro policies will likely be put in place in response and what affect this would have on your investment decisions.

Keen's message is one of a preacher not a specialist.

 

[Sunfish]

Quote:
Originally Posted by hobo-jo
Does it matter when?

Absolutely.

If a specialist told me that I am going to die I would assume a level of urgency,

The specialist owes you, the account paying client, the benefit of his knowledge. Who among the Gurus owes you anything? Who among the Gurus knows to what extent the gov of the day will will "manage" the market to prevent market forces correcting distortions?

No governing political party will "allow" a correction of the property market on their watch. Did you notice what happened to the Repubs in the US? Slaughtered, and it would have been the house price fall and the subsequent "loss of wealth" effect which swayed the voters. Electorates always vote their hip pocket.

 

[evand]

If the market was left to its own devices (pure free market) it would be much easier to say when.

But that's not the case, with govt intervention and minor and major events (overseas and locally) popping up every now and then (plus other factors) , its almost impossible to predict even a rough 'when'. They are not psychics.

I thought that was pretty obvious.

Its similar to trying to predict the price of a company's shares. Its impossible with unknown occurrences either spiking the price or hammering it.

Another day, another article about the property 'bubble' that's going to burst.

What I don't get is that if these apparent experts are so good at knowing what's going on, why can't any of them tell us when it's going to happen. If they truly understand their subject ie economic prediction they should be able to interpret the data to tell us when to expect it all to unravel.

But they don't. Steven Keen tells us sometime in the next couple of decades.

And that's the most specific they get.

The idea of "it'll happen some time" lets them still get media attention because they haven't been wrong yet, despite clearly not having very good predictive models.

 

[Propertunity]

No governing political party will "allow" a correction of the property market on their watch.

Absolutely right, as has been borne out by recent events with the FHOB, SD cuts etc.

It was interesting to see Wayne Swan & Joe Hockey this morning on Ch 7's Sunrise both saying that "there is no bubble" in the AU housing market - so you know where both sides stand on this issue, no matter who is running the country next week we are in for more protectionism (if needed).

 

[Sunfish]

Absolutely right, as has been borne out by recent events with the FHOB, SD cuts etc.

It was interesting to see Wayne Swan & Joe Hockey this morning on Ch 7's Sunrise both saying that "there is no bubble" in the AU housing market - so you know where both sides stand on this issue, no matter who is running the country next week we are in for more protectionism (if needed).

You will note that I put allow in " "s. Bush didn't "allow" the property crash there but he was unable to prevent it. And Greenspan didn't see any bubbles either.

So we agree that the gov of the day will do everything in their power to prevent anything bad happening to home owners. We differ in that I believe that eventually they will fail, you believe they will succeed.

The history I've read and observed doesn't convince me that you are right. The big failure I observed (you are too young) was Pres Nixon's efforts to stare down George Sorros and the French (think it was de Gaulle) who were insisting on gold delivery in exchange for their US$ notes. Nixon lost (it was the making of Sorros) and he was forced to decouple the US$ from gold and revalue it up significantly. The point I'm making is that no-one knew when Nixon would crack, but did it matter?

 

[hobo-jo]

It was interesting to see Wayne Swan & Joe Hockey this morning on Ch 7's Sunrise both saying that "there is no bubble" in the AU housing market - so you know where both sides stand on this issue, no matter who is running the country next week we are in for more protectionism (if needed).

What need will there be for protectionism if there is no bubble?

 

[Propertunity]

What need will there be for protectionism if there is no bubble?

Asset values can go down for many reasons other than a "bubble" being popped or deflating. Just to name a few off the top of my head:
1. Consumer sentiment
2. Supply exceeding demand
3. Credit squeeze etc.

And no, I don't think we will need govt. intervention at this point, but it must be a comfort factor for many who are invested and having their thinking influenced negatively by the D&G merchants and nay sayers.

Whilst I believe that any investment should 'stand on its own two feet' so to speak, (and yes I own shares), it must be of some comfort to homeowners and investors that goverments of all persuasions are intent on supporting the property market.

 

[evand]

I dont think there would be a precedent of govt intervention in your 3 point list.

Only extreme market conditions would necessitate protectionism.

And was the discussion about asset values per se or fear of a market collapse? General variation of asset values is accepted and even expected and require and get no govt. intervention.

BTW: I find it ironic that right wing liberal voters accept govt intervention (protectionism, socialism, big government by any other name) if it benefits them. But bag them mercilessly otherwise as commies, reds, blah blah....
too funny.

Asset values can go down for many reasons other than a "bubble" being popped or deflating. Just to name a few off the top of my head:
1. Consumer sentiment
2. Supply exceeding demand
3. Credit squeeze etc.

 

[WinstonWolfe]

And no, I don't think we will need govt. intervention at this point, but it must be a comfort factor for many who are invested and having their thinking influenced negatively by the D&G merchants and nay sayers.

But the problem we have now IS due to govt intervention. For the last 10 years, they have constricted supply of housing more than they have constricted supply of credit.

 

[Neophyte]

But not constricted supply of immigrants?

The issue with supplying credit often comes down to interest rates (Econ101 you can fix the supply but not the price or you can fix the price but not the supply). Governments all over the world like the idea of low interest rates because it promotes business growth. The problem is that low interest rates make more marginal investments seem reasonable and so the supply of credit increases dramatically. If interest rates are low then banks need a larger loan volume to make large profits. IF interest rates are high then the loan volumes are lower.

I don't think interest rates of recent years have been unreasonably low. We had a year or more of rates at "emergency lows" but that was always going to be temporary. However in places like the US a 30 year fixed rate loan is in the mid 4s. Here that would be more like 8-9% (15 year is about 8.5%).

 

[WinstonWolfe]

The issue with supplying credit often comes down to interest rates (Econ101 you can fix the supply but not the price or you can fix the price but not the supply)

It may often come down to rates, but not in the last 10 years....LVRs, DSRs, postcodes, lo doc, sourcing more foreign dollars when there's not enough local have all played their part.

In the heat of the boom, lenders were approving loans for property that permitted 20% passive growth in 6 months. How does a lender or mortgage insurer establish that rate of growth is justified when debt serviceability via average wage increased no more than 2% in that time period?

Further, every man and his dog has talked up a housing shortage for 10 years, so how ethical have lenders been to fuel existing property price growth above gdp growth....especially when they are restricting lending for new supply?

 

[Sunfish]

Don't tell me what, tell me WHEN Have you thought about just how lazy this makes you sound?

As an intelligent individual you should read/listen to the opinions put out there and over time, develop favorites. I, personally, have a lot of respect for a lot of commentators but wouldn't dream of following them on the day they say "buy/sell" regardless of their past record.

I sink or swim on my own judgement. Why do you expect someone to take you by the hand? unless you are simply joining your mates in a ritualistic sacrifice. But that's all the KKK do. It's good fun.