i find it very hard to argue or disagree with this point.
Eye of the Storm
- Thread starter keithj
- Start date
i find it very hard to argue or disagree with this point.
I think I agree with more in this post than anything else I've seen from you so far here...agree historically US has been safety haven, that will and is changing. Gold currently rising because supply is being exceeded by demand, India, China, Russia, Sri Lanka, worlds best hedge fund managers, etc are all buying. The Amero or replacement of the USD with something else will be crackpot material until it actually happens. There won't be warning, there won't be a chance for those that don't believe the change will occur to shift thinking, one day the crackpots will wake up and they will have been right. If we see serious inflation then you are probably right with Gold and debt, but doubt property will be the place to be, what happened in places like Germany when hyperinflation set in....did Gold or housing perform betterHard to know with any degree of certainty.....
I don't think that really answered the question, did it ?
- Historically the US$ has been where people put their $$ for safety, then gold.
- ATM gold is rising mostly because of the US$ printing, not because of any imminent D&G.
- The 'Amero' is currently not seriously on anyones radar, except for a few 'whacko consipacy theories' (apologies to some here
).
- Copenhagen Treaty forcing a world govt & currency is another.
- IMFs Special Drawing Rights may become the reserve currency
- Would commodity currencies become place to fly for safety ?
- Equities would be hammered, as would bonds.
- Owning real estate & gold (& having debt?) would be one of the safest options.
- 6 months ago there was an even chance of inflation or deflation - impossible to plan for both.
- If things got really bad & world trade collapsed, a veggie garden,a bicycle & an AK47 would be more useful than gold.
I think there's way to many possibilities to plan for..... adapting to reality is the only way to go, planning for all the different low probability events is impossible.
Money is based on trust, if enough people (Chinese?) don't trust it, then a veggie garden is the way to go.
? Thing is Australian housing is expensive, I would expect ratios would correct back to 3-4x wages, so if we see wages rising I suspect we would see housing flat to have the ratio catch up and then it might take off. I suspect there still might be some wealth destruction/deleveraging to occur which may see asset prices across the board tank again (e.g. JPM or Goldman went down we'd probably see this).There are definitely different ways this could playout, some what dependant on how world governments continue to react to the issues, but with probability of turmoil ahead (and happening now under the suface) I think precious metals are the place to be.
It always will...until it doesn't. The USD has been required the last 30 years for oil trade, with middle east moving to euros, other foreign currencies and the looking to form their own joint currency (might still be years away) it will not be needed. From what I've read 70% of USD are outside of the US, what happens when demand continues to drop and the USD start to make their way home? This is just one of the challenges the USD faces.
I think it's foolish to think that the USD will always be strong/have power.
But which crackpots ? Times such as these bring out even more fruit loops than usual... and they've all got a different theory about why the end is nigh
.. and all backed up with plausible explanations, detailed historical data, scientific studies, and some of them can even help you buy gold stocks or sell you a weekly bulletin about how bad things will get.Of course, between 99% and 100% of them will be wrong.
As a worst case, property is an eachway bet, if things go just fine, then property will do well, OTOH if one of those crackpots is right then property (with debt) is likely to do better than most other asset classes.
There are plenty of other threads that cover this.
SUSPECT ? A few posts back you had it 100% guaranteed !
Exactly...... there's a huge quantity of unknowns out there.
... that ol' chestnut again....
When will this statement of "house prices should be 4x wages and therefore housing is unaffordable" ever die?
As covered in about 3 threads in the last month.... you should be looking at "wages vs MORTGAGE", because prices dont dictate what people are paying on their mortgage.
So do you own any property hobo-jo?
Do you understand how property works?
... or do you just read the internets and spend your life on forums?
I did. Bought 2006. Sold Nov this year, settles Jan 2010.
You can think what you like,to me someone like you suffers from risk phobia, we all know the US has problems on several fronts, and if you look back over fin history overe the past 40 years each time they come back from the brink of the never-never ,why because 1 it's a free country unlike China don't get that simple fact wrong freedom is everything,
plus there is still a strong demand for the USD ..2 capitalism only works in countries that are free ..just think about that for 5 seconds what is capitalist fredoom in free market ecom like we have in Australia-US and several other countries around the world,greed always overtakes fear..
willair
There is no true capitalist society, it doesnt exist. I'm sure thats been established in the past 2 years.
I think the statement "greed overrides any economic ideology" sounds a bit more accurate.
We've all seen this first hand with family, friends, acquaintances etc...when everything goes up up and up all of the sudden everyone is a staunch capitalist, but when things go down than these same people are the first to beg for handouts to 'save' them (or beg the banks to give them a 'fair go' hoping they will act as chairities), in other words, to socialise their losses
Greed overrides everything.
A true capitalist will book their losses as long as it comes with a lesson, and thus becomes wiser of what not to do in the future. Trial and error somewhat.
The rest are just greedy people going with the flow who never learn from their mistakes, and change allegiances with the wind.
I think the statement "greed overrides any economic ideology" sounds a bit more accurate.
We've all seen this first hand with family, friends, acquaintances etc...when everything goes up up and up all of the sudden everyone is a staunch capitalist, but when things go down than these same people are the first to beg for handouts to 'save' them (or beg the banks to give them a 'fair go' hoping they will act as chairities), in other words, to socialise their losses
Greed overrides everything.
A true capitalist will book their losses as long as it comes with a lesson, and thus becomes wiser of what not to do in the future. Trial and error somewhat.
The rest are just greedy people going with the flow who never learn from their mistakes, and change allegiances with the wind.
LOL risk phobia? Willair, around 3/4 of my net worth is in Gold/Silver stocks, 3/4 of my Gold/Silver stocks are juniors/small cap. You were saying?
People here from what I can gather tend to stick with property because it's what they know and are in it for the long haul. That's what I though in 2006 when I bought as well. Situations and the market change, you either change with it or miss out on where the significant gains are going to be made.
I don't think everyone should drop their properties and run for the hills, especially if you have been holding for significant lengths of time, have a low LVR with positive cashflow (or can work positive cash flow deals from todays market, like nathan on SS seems to be able to do), but I do think those that are highly geared (and especially those with variable interest rates) should consider selling down some of what they have and look at other sectors to diversify into.
Is it really capitalism (and a "free" country) where those destined to fail are bailed out? Where the money of the people is devalued to bailout the rich... That's not really my idea of freedom. Is it yours?
You simply cannot compare the events and credit bubble of today to anytime in the last 40 years. When have we had similar conditions to this? A lot of the products (derivatives, subprime mortgage products, high LVR loans, etc) that drove this credit bubble to where it is have only been introduced or become popular in the last 10 years.
There was a strong demand for USD, that is changing as I've said, if that wasn't the case then why have we seen the USDX drop so signficantly over the last 18 months? This trend will continue, not only because they are devaluing it with further printing, but also because foreign central banks are starting to diversify out of it into Gold and other strong currencies. It is also being driven down by investors exiting the USD and/or selling it in the carry trade.
In the last period of this Gold/Silver bull market, I agree greed will overrule fear...
Without wanting to express an opinion as to the correctness or otherwise of your current investment strategy, some people do not have the time to be speculators/traders. Their main form of income comes from labour (ie their employment). In such situations it makes investment sense to look for investment strategies that can operate under a 'buy and hold' strategy. This allows them to concentrate on their most productive resource: their employment careers.
Residential property is one of the few investment vehicles that offer such an opportunity over the long term.
diversify into what?
Warren Buffett and Peter Lynch say, and i agree, diversification for the sake of diversification leads to diworsification of investment performance.
If you are suggesting people move into precious metals now as a means of diversification, i would strongly disagree. If you know what you are doing i am sure there is much money to be made in this sector (especially as a trader the trend is your friend), however be under no illusions, there is a high probability that precious metals are currently under significant speculative positions.
Of course this wouldnt be your position, you have positioned your investments in the hope of financial catastrophe. Fortunately for the rest of us central bankers are not gold conspiracy huggers. I am sure to the dismay of many gold huggers the intervening of centrals banks last year to prevent another global depression was viewed with dismay.
Oh yes you can. Try reading 'Money Culture' by Michael Lewis. Light hearted reading of the late 80's and early 90's. Try going though Buffetts commentary about the 40's-50's.
The pictures are similar just the paint thats different.
The first part is true, but we do not know whether the trend will continue or not. There are numerous push/pull factors at work some short term, some longer.
Thats all i wanted to know..
.LOL risk phobia? Willair, around 3/4 of my net worth is in Gold/Silver stocks, 3/4 of my Gold/Silver stocks are juniors/small cap. You were saying..
I just hope the other 25% of your portfolio is in something more solid then gold-silver tin pan miners,a lot of people who rushed into the ASX will now from the volumes i see in front of me, all run for the same back door at the same time,once the herd mentality kicks in..imho..
As with Capitalism,you tell me,fredoom seldom comes to countries where the state controls most of the companies in one way or another,and if you don't play the game,,you end up with a bullet in the back then they send you a bill for the bullet..
willair
Well, your motivation for this line of argument is now a little more obvious. I hope you have made the right choice with this investment strategy - I wish you well.
Nevertheless I would always suggest taking seriously the merits of other investment strategies if you wish to protect and grow that wealth. Particularly investments that provide a stable income stream...
Such as junior / small cap Gold and Silver companies, perchance? Not that you would be talking your book of course!
It's more that personally I only reserve a small amount of my net worth for speculative capital gain plays ("diversification") and like most of my portfolio to hold assets that provide reliable and predictable income. That helps me sleep at night anyway...
Investors in the precious metal class can invest in different ways as well, those that were fortunate to be experienced enough in the sector 10 years ago would have done well to buy and hold the physical product or ETF equivalent. In fact they would have approximately quadrupled their initial capital. Other asset classes (and I'm not just talking about PMs) can take as little time out of your day as property. Twist it however you like, property investors are also speculators, funny how some on this site seem to indicate that it's not speculation. I'm sure I could find 100s of posts on this forum that support that they have bought predominantly for the CG....we are all speculators. There are definitely some advantages to using property in the journey, for example without the leverage offered by property (and of course capital growth over the time I held) I wouldn't have easily taken the large position in the stock market that I did and at such a low interest rate compared to margin loans, etc.
I'm not saying diversify into 1 sector or 10 sectors, but in my opinion housing has had it's time in the sun for a few years now and if investors are looking for significant capital gains then they need to be looking elsewhere. I have taken a position in precious metals because I think it is likely to get to a mania stage. Other areas I have considered are foods, energy & other commodities. I'm not saying diversify for the sake of it, I'm saying diversify to achieve higher capital returns.
There does not need to be financial catastrophe for Gold to do well. It's been in a bull market for 8-10 years, it would still be doing well even if we hadn't had the GFC, infact there is a good chance it would be doing better now without the GFC having decimated asset prices globally.
Reading? Painting a picture? How about you describe to us how the problems of the 80s and 90s compare to the situation we have now. I'm not denying that things were bad at the time, the number of financial institutions that collapsed in the US over that time was massive, but none had the significance of the recent Lehman's collapse and the number of institutions failing in the US are still increasing, we are not at the peak of this mess (hence this is the eye of the storm
, had to keep these posts relevant somehow), I feel that the number of institutions that fail over the coming years will exceed that of those in the S&L crisis. Agree that there are short term factors that will pull/push the dollar, but long-term there will always be one direction for the USD to travel (against goods, not necessarily other currencies)...have a look at the value against a basket of goods over the last 95 years and tell me what direction it is
Upon sale of the house it will be cash.
The income provided by property is only of real benefit if it exceeds your loan payments. As I said earlier I'm not suggesting those in a cash flow positive situation sell what they have. If I had a cashflow positive IP I probably would have ridden out the low/reverse growth period as well.
Lo and behold within a couple of days of this post we see the next $1t+ spending bill/stimulus package is passed through congress:
http://www.usatoday.com/news/washington/2009-12-12-spending-bill_N.htm?csp=34
As well as the US debt ceiling being raised to $14t ($1.8t rise).
So looks like this market could be set to rally further or at least stay buoyant.
As I've said all along in this thread, things may not play out exactly as I see it. It does somewhat depend on influencing factors such as the above government intervention. All they are doing though is delaying the disaster in the US...
The risk to equities in my opinion is not the sustained public stimulus packages financed by debt.
The risk is the rolling over at maturity of public (government) debt intruments at 'reasonable' rates. If the 'bond masters' go AWOL, then the cost of financing public debt will skyrocket.
But even then i dont know whether we would test the march lows on a global basis. Public companies have been doing capital raisings left right and centre, which means there own balance sheets are much stronger now.
The one worry i have for Australia, if you notice the composition of our ASX200, its now comprised very heavily with resource companies. These companies are inherently risky given the number of factors that are outside of their control.
If resources get slammed then because of their increased composition in the market, the ASX could deteriorate significantly.
It can also go the other way and the US Dollar starts to climb again ,if you want control of something you just make it more available..willair..
That is exactly why our Little Oz Dollar has rallied so much. The Looney has done almost as well, as Canada is heavily weighted to resources too. Would you prefer that our ASX still be dominated by banks as they were pre-GFC? They too are subject to external factors, so much so they received Gov protection.
Hobo must do the study which takes time, but finding a couple of winners in the junior resource sector is both exciting and rewarding. Been there, done that! I've taken a few grand to a few hundred grand which may well get another zero before this resource bull market dies.
Is investing in junior miners "Risky"?
I have a million shares in a gold miner who put out a good report today. But my original investment was less than the "out of pocket" costs of buying a property. I have no borrowings against it, but you can't borrow against your legals and stamp duty either but I never again have to dip into my pocket if I choose not to.
I have another which I paid even less for five years but could sell today and buy a Miami condo with the proceeds. It was a prospector when I bought it but is now a mid-tier producer with millions of free cash flow every qtr and is out trying to buy small projects. There is no need for me to watch it daily because I don't trade it.
The cash at risk is small but profits can be intoxicating. I'm too old to wait for property.
We'll have to swap notes, Hobo.
I have a million shares in a gold miner who put out a good report today. But my original investment was less than the "out of pocket" costs of buying a property. I have no borrowings against it, but you can't borrow against your legals and stamp duty either but I never again have to dip into my pocket if I choose not to.
I have another which I paid even less for five years but could sell today and buy a Miami condo with the proceeds. It was a prospector when I bought it but is now a mid-tier producer with millions of free cash flow every qtr and is out trying to buy small projects. There is no need for me to watch it daily because I don't trade it.
The cash at risk is small but profits can be intoxicating. I'm too old to wait for property.
We'll have to swap notes, Hobo.
I don't understand why you have that worry specifically with the ASX? Doesn't it apply to the rest of the economy as well? And surely having the ASX full of companies that actually produce a good is better than a heap of companies like banks and retail and just about everything else that are more dependant on services and the debt loads of the consumer?
If resource companies are risky, then so is Australia's economy, as it's not like we produce much else that the world needs.
What would happen to Australia without the mineral and energy industry and with our manufacturing industry on it's knees?
See ya's.
DIAC's looking to rebalance the intake of migrants so that it favours the knowledge based economy. One statement I saw was that it's apparently much easier for a hairdresser than a research scientist to land permanent residence in Australia, and that was felt to be wrong.
To answer Topcropper's question, my guess is that the long term economic plan is to move from being a supplier of rocks to somewhere that can do the expensive part of adding value. So research, development, design and other, related occupations.
Incidentally, my guess is that migration will have fallen off a cliff at the end of September when DIAC changed the rules (I'll do a post on this later, when I've got time). A lot of would-be migrants are now rather upset that they can't move Down Under for two or three years.
To answer Topcropper's question, my guess is that the long term economic plan is to move from being a supplier of rocks to somewhere that can do the expensive part of adding value. So research, development, design and other, related occupations.
Incidentally, my guess is that migration will have fallen off a cliff at the end of September when DIAC changed the rules (I'll do a post on this later, when I've got time). A lot of would-be migrants are now rather upset that they can't move Down Under for two or three years.
I would agree with you but I don't think any other major share market in the world have financials with so much weight on the index capitalisation like Australia (these days, i believe around 50% of market capitalisation is financials...less then 10% energy and less then 30% materials)
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