Inflation v Deflation - next 36 months

[willair]

You profess to wanting to understand where I'm coming from but then take pot shots. Come on keith I've shown mine so now show us yours

Nonrecourse, there are other sites out there that cater for that sort of thing,maybe try on of those sites,lol..willair..
Go Telstra..

 

[keithj]

I see your at it again I hope all those resi-properties you have are not all in your name, because if your going to go with the conventional on this site your geared at 80% accross the board. I have been quite open about what I have done to protect my assets and I think its time you explain how you have covered your posterior in these rather unusual times.

NR..... the point I continue to make (& you continue to avoid answering) is that you are making forecasts, but have no idea either WHY they will occur, or WHAT PROCESS will lead to them occurring.

You say res IP will fall 50%, but you haven't sold all of yours.
You say comm IP will fall 70%, but you haven't sold all of yours (though I acknowledge that you have tried. Did you get a a bid above 30% of it's current value ?).

Do you see a contradiction in what you SAY and what you DO ?
Why should anyone take any notice of your continual D&G posts when YOU ignore the advice yourself ?

Your forecasts may be right..... tell us why... I'm v. happy to hear reasoned, logical thought.... the continual blanket 'Youre all doomed cos IP is gunna fall 40%' type statements tend to be a waste of bandwidth.

You profess to wanting to understand where I'm coming from but then take pot shots. Come on keith I've shown mine so now show us yours

The point I'm making is that forecasts are mostly useless. Any uTube whacko can make a forecast - most of them are parroting other whackos and 99% of them will be proved wrong. Why is yours in the other 1% ?

I prefer not to make short term forecasts.... I 'd rather adapt to whatever conditions I find around me. I expect those adaptions will include buying quality c/f +ve IP over the next part of the cycle, fixing IRs long & low, buying quality c/f +ve ASX50 cpys, using up some of my cash buffer.

However, if you really want a forecast here's mine -
Those investors that ignore short term D&G posts & keep the big picture in mind, will, in the long term prosper provided they have good risk management.

Explain how over the next two years your going to continue to gear your expanding property porfolio (I assume you have more than one property)

I don't think I've ever said I plan to. If opportunities arise, I may take them, if not then I'll invest elsewhere or not.



P.S. I note that you failed to respond to any of the questions I asked in post #91 above.

 

[murtagh]

You profess to wanting to understand where I'm coming from but then take pot shots. Come on keith I've shown mine so now show us yours

Explain how over the next two years your going to continue to gear your expanding property porfolio (I assume you have more than one property)

Hi,

I might be pointlessly sticking my nose in here, but I have been waiting for some real "this will happen and this will be the outcome, and that leads to this" from you for a while, NR.

I appreciate your view, and I'm not just asking for crystal balling so I can pick it apart .. I just want to understand why you hold the views that you do.

I think Keith is getting at the same thing - it's all very well to say that property will fall 50%, but I still don't understand the conditions you think will lead to that outcome?

Cheers.

 

[BayView]

but I don't think there will be a crash of 40-50% across the board....

I don't know why but........ i'd like to hear others opinions as well

Key phrase there would be "across the board".

This implies an average. So, we will have some drop only 10% while others drop close to 90% to keep the average? Yeah, of course.

What about the areas that - dare I say it - keep on going up?

I can't imagine any of my properties dropping by 50%.

Or even 40%.

But then, I only own properties that the average person would (be able to) buy, and not about to sell any of them any time soon (except the PPoR at the end of next year).

 

[BayView]

Remember that NR holds mostly commercial property...... he failed to sell his commIP at auction a couple of months ago. Commercial property may well fall by 50% (or more). The majority of the Commercial Property Trusts listed on the ASX have already fallen by between 50% and 95% (or 100% for a couple).

The value of comm property is directly related to it's rental yield.

Resi isn't, so unless they change the valuation process for resi in the near future, the two are worlds apart.

Is NR possibly YM or HG?

 

[nonrecourse]

NR..... the point I continue to make (& you continue to avoid answering) is that you are making forecasts, but have no idea either WHY they will occur, or WHAT PROCESS will lead to them occurring.

You say res IP will fall 50%, but you haven't sold all of yours.
You say comm IP will fall 70%, but you haven't sold all of yours (though I acknowledge that you have tried. Did you get a a bid above 30% of it's current value ?).

Do you see a contradiction in what you SAY and what you DO ?
Why should anyone take any notice of your continual D&G posts when YOU ignore the advice yourself ?

Your forecasts may be right..... tell us why... I'm v. happy to hear reasoned, logical thought.... the continual blanket 'Youre all doomed cos IP is gunna fall 40%' type statements tend to be a waste of bandwidth.

The point I'm making is that forecasts are mostly useless. Any uTube whacko can make a forecast - most of them are parroting other whackos and 99% of them will be proved wrong. Why is yours in the other 1% ?

I prefer not to make short term forecasts.... I 'd rather adapt to whatever conditions I find around me. I expect those adaptions will include buying quality c/f +ve IP over the next part of the cycle, fixing IRs long & low, buying quality c/f +ve ASX50 cpys, using up some of my cash buffer.

However, if you really want a forecast here's mine -
Those investors that ignore short term D&G posts & keep the big picture in mind, will, in the long term prosper provided they have good risk management.

I don't think I've ever said I plan to. If opportunities arise, I may take them, if not then I'll invest elsewhere or not.



P.S. I note that you failed to respond to any of the questions I asked in post #91 above.

There you go again Keith demanding explanations but refusing to divulge anything about your blue sky I'll just keep investing nonsense as the credit markets continue to contract. Despite the bleeding obvious you keep pumping out absolute drival about residential property being unaffected.

I started a thread to discuss ways to cope with the financial squeeze on credit markets but the sommersoft taliban doesn't want anyone to pop their myth that the real estate market will continue increasing in value forever with no discernable loss to property investors.

But then I guess if you have been investing in match boxes in the sky you can continue to delude yourself. This use to be such a great site to learn about property but it seems most of the real investors are out protecting their property assets and have left you blue sky wannabees to your Alice in wonderland fairy tale. Over the next two years anyone gearing up to 80% of their portfolio will discover what happens to fools and their money.

 

[chilliaa]

There you go again Keith demanding explanations but refusing to divulge anything about your blue sky I'll just keep investing nonsense as the credit markets continue to contract. Despite the bleeding obvious you keep pumping out absolute drival about residential property being unaffected.

I started a thread to discuss ways to cope with the financial squeeze on credit markets but the sommersoft taliban doesn't want anyone to pop their myth that the real estate market will continue increasing in value forever with no discernable loss to property investors.

But then I guess if you have been investing in match boxes in the sky you can continue to delude yourself. This use to be such a great site to learn about property but it seems most of the real investors are out protecting their property assets and have left you blue sky wannabees to your Alice in wonderland fairy tale. Over the next two years anyone gearing up to 80% of their portfolio will discover what happens to fools and their money.

Well mate if you dont like the tone of the so called remaining posters STOP visiting it.
Nobody is forcing you to post on the site.

 

[Shadow]

There you go again Keith demanding explanations but refusing to divulge anything about your blue sky I'll just keep investing nonsense as the credit markets continue to contract. Despite the bleeding obvious you keep pumping out absolute drival about residential property being unaffected.

I started a thread to discuss ways to cope with the financial squeeze on credit markets but the sommersoft taliban doesn't want anyone to pop their myth that the real estate market will continue increasing in value forever with no discernable loss to property investors.

But then I guess if you have been investing in match boxes in the sky you can continue to delude yourself. This use to be such a great site to learn about property but it seems most of the real investors are out protecting their property assets and have left you blue sky wannabees to your Alice in wonderland fairy tale. Over the next two years anyone gearing up to 80% of their portfolio will discover what happens to fools and their money.

your blue sky I'll just keep investing nonsense
you keep pumping out absolute drival about residential property
the sommersoft taliban
you have been investing in match boxes in the sky
you can continue to delude yourself
you blue sky wannabees
your Alice in wonderland fairy tale
fools and their money.

So I see you just avoided the questions again and reverted to personal abuse instead. As usual.

This is getting very obvious now NR. At least make some attempt to look like you can back yourself up!

Cheers,

Shadow.

 

[ffc1883_1996]

Chill NR

NR,

You do yourself no credit by flying off the handle and complaining to Keithj. Never before have you posted such a load of rubbish. Do you really expect Keithj to align HIS investments with YOUR extremely negative outlook? He’s entitled to back his own experience and track record.

Holding assets in trust or in Super or whatever is NOT an alibi for doing nothing in spite of your dire predictions. A property that looses 70% of it’s value doesn’t care what name is on the title. I suspect that the reason you haven’t sold up is that you inwardly concede the forecast that you regularly present here is a little unlikely and some other (more positive) scenarios may well develop.

You’ve been invited time and time again to explain the reasoning behind the predictions that you make and when you do, Keithj, myself and others will all pay due attention and read your views with interest. Until then, don’t go accusing members of being “sommersoft taliban” when they out that your views appear to lack foundation. Nobody has tried to stifle you or block your input. In fact, your opinions have been sought and debated by some of the most respected members of this community. Take this line of questioning as a compliment – you’re not merely being ignored as a troll.

Furthermore, you accuse Keithj of “refusing to divulge anything” about his investments and plans. Really mate, after a quick search and a lot of reading, I doubt you could find another Somersofter that has been more open about his/her investing philosophy over a long period of time.

Regards - Ben

 

[Kenster]

NR..... the point I continue to make (& you continue to avoid answering) is that you are making forecasts, but have no idea either WHY they will occur, or WHAT PROCESS will lead to them occurring.

Providing NR gives us a full explanation of WHY thing will occur and WHAT PROCESS will lead to them occurring, what are we going to do about it?

 

[chilliaa]

Providing NR gives us a full explanation of WHY thing will occur and WHAT PROCESS will lead to them occurring, what are we going to do about it?

What we are going to do about it will depend on each individuals circumstances, finances and cash flow position.
There is no uniform one answer fits all solution, there never is when it comes to investments.

If your properties are cash flow postive and you are comfortable in meeting bank repayments then there is not too much to worry about, especially if you are comfortable meeting bank repayments under a long term fixed loan.

If you are relying on capital growth to offset cash flow shortages then in this market you could be playing a risky game, but again it depends on your own personal circumstances. Some people might be in secure employment (eg a doctor) and is using negative gearing as part of a tax strategy, in which case the decision may relate more to the size of the debt relative to the income.

There are so many if's

 

[keithj]

There you go again Keith demanding explanations but refusing to divulge anything about your blue sky I'll just keep investing nonsense as the credit markets continue to contract. Despite the bleeding obvious you keep pumping out absolute drival about residential property being unaffected.

Hi NR,

Sorry you feel that way. I don't think I've ever mentioned Blue Sky..... if you search my previous posts, I'm on record as saying that I haven't bought resIP since 2003 - altho I have swapped PPORs. If you do as others have suggested & search SS for my previous posts you'll find I've been fairly open about how I manage risk. IP hasn't been my preferred asset class for a while, although I expect that to change soon.

This use to be such a great site to learn about property ...

Yes.... that's the point I'm making.... you appear to have been successful in res & comm investment, as well as business, and have survived more than one cycle. I think we may be able to learn from you.

....but it seems most of the real investors are out protecting their property assets and have left you blue sky wannabees to your Alice in wonderland fairy tale. Over the next two years anyone gearing up to 80% of their portfolio will discover what happens to fools and their money.

OK..... instead of us learning the hard way over the next 2 yrs... can you tell us what you think might happen to anyone with resIP geared to 80%. I think a common scenario would be to assume that the investor has a perfect record of repayments, has a mixture of full doc & lodoc loans, is cashflow neutral, with fixed rates for 5 yrs, pays interest only and has a secure job. Also has exposure of less than $1M to any one lender and has no X-coll. And assume that some IPs are in personal name & some are in discretionary trusts.

Some resIP risks I can think of are -

• bank refuses to allow IO, & insists on P&I
• IP values falls & LVR increases to >80% (other threads have discussed this, and the consensus appears to be that banks don't care much unless fraud is suspected or repayments are not met)
• loss of job/income -> fails to make repayments
• tenant stops paying rent so c/f neutral becomes c/f -ve -> fails to make repayments

There are numerous threads on SS discussing these issues & how to mange these risks.

Can you think of any other risks NR ?

 

[keithj]

Providing NR gives us a full explanation of WHY thing will occur and WHAT PROCESS will lead to them occurring, what are we going to do about it?

I'd agree with chilliaa..... depends on what the risks are

I'd guess that NR is expecting one or more of -

• house price falls & banks foreclose if LVRs go above 80% (or 100%?) even if repayments continue to be made
• sharp unemployment jump, so fail to make repayments
• high IRs (like early 90s recession) leading to failure to make repayments ..... however it's different from this time since we have low IRs

....and it depends on personal situation & investment timeframe & risk management already in place. Most here are long term investors, so price falls/stagnations are to be expected. Most here have reasonable risk management in place & can afford repayments.

Bottom line - dunno the answer because we don't know the circumstances .

 

[nonrecourse]

Providing NR gives us a full explanation of WHY thing will occur and WHAT PROCESS will lead to them occurring, what are we going to do about it?

Since you asked so nicely Kenstar I will provide the Why and What process but it will take me some time. Since xmas is coming I will play around with a word document and cut and paste (my kids tell me I am digitally challenged

 

[VYBerlinaV8]

OK..... instead of us learning the hard way over the next 2 yrs... can you tell us what you think might happen to anyone with resIP geared to 80%. I think a common scenario would be to assume that the investor has a perfect record of repayments, has a mixture of full doc & lodoc loans, is cashflow neutral, with fixed rates for 5 yrs, pays interest only and has a secure job. Also has exposure of less than $1M to any one lender and has no X-coll. And assume that some IPs are in personal name & some are in discretionary trusts.

Some resIP risks I can think of are -

• bank refuses to allow IO, & insists on P&I
• IP values falls & LVR increases to >80% (other threads have discussed this, and the consensus appears to be that banks don't care much unless fraud is suspected or repayments are not met)
• loss of job/income -> fails to make repayments
• tenant stops paying rent so c/f neutral becomes c/f -ve -> fails to make repayments

There are numerous threads on SS discussing these issues & how to mange these risks.

Can you think of any other risks NR ?

OK, now we are starting to get to the meat and veg - what we do about risk. I have what I believe are adequate risk mitigation measures in place for all the risks described above.

I would also recommend trying to build a cash reserve to give you the ability to provide additional security to banks, or to make extra repayments for a while if necessary.

 

[topcropper]

Now deflation moves into other food industries besides grain,.....

http://www.abc.net.au/news/stories/2008/12/19/2450901.htm?section=justin




"........Farmers worry as milk price slashed"......

"........Wholesale milk price for Murray Goulburn farmers is slashed by 12 per cent. A dramatic downturn in dairy export prices will slash incomes for Victoria's dairy farmers next year.

Murray Goulburn is cutting the wholesale milk price by 12 percent from February the 1st.

Murray Goulburn Chairman Ian McAuley, says some export prices have fallen 60 per cent in the last month.

"It's been a very difficult period, it's been very rapid," he said.

Mr McAuley says it is the first fall in the farmer's milk price in three decades.

"The major drop has occurred just in the last three weeks and you're always unsure as to how long such a thing will last but we have put out some warning signals earlier but we' had to take the action.

Dairy farmer Graeme Anderson, says many family businesses could lose 200 thousand dollars in income next year.

"I think it will make a huge difference because we had worn out a milk vat and we were looking at upgrading everything," he said.

Mr Anderson says he will have to review his budget to absorb the price cut.

"There'll be a family conference this morning and then probably a bank conference, I don't know where we go, we still have to do things to keep in existence."

He says the cuts will hit the broader economies of dairy communities across Victoria'.......




See ya's.

 

[chilliaa]

Now deflation moves into other food industries besides grain,.....

http://www.abc.net.au/news/stories/2008/12/19/2450901.htm?section=justin




"........Farmers worry as milk price slashed"......

"........Wholesale milk price for Murray Goulburn farmers is slashed by 12 per cent. A dramatic downturn in dairy export prices will slash incomes for Victoria's dairy farmers next year.

Murray Goulburn is cutting the wholesale milk price by 12 percent from February the 1st.

Murray Goulburn Chairman Ian McAuley, says some export prices have fallen 60 per cent in the last month.

"It's been a very difficult period, it's been very rapid," he said.

Mr McAuley says it is the first fall in the farmer's milk price in three decades.

"The major drop has occurred just in the last three weeks and you're always unsure as to how long such a thing will last but we have put out some warning signals earlier but we' had to take the action.

Dairy farmer Graeme Anderson, says many family businesses could lose 200 thousand dollars in income next year.

"I think it will make a huge difference because we had worn out a milk vat and we were looking at upgrading everything," he said.

Mr Anderson says he will have to review his budget to absorb the price cut.

"There'll be a family conference this morning and then probably a bank conference, I don't know where we go, we still have to do things to keep in existence."

He says the cuts will hit the broader economies of dairy communities across Victoria'.......




See ya's.

Im not a farmer so i could be shooting off in completely the wrong direction, but when prices rapidly spike upwards they can also over correct in the short term on the downwards side.

The important issue is to look through the short term 'noise' to get a feel for what the underlying price will be.

I also note that fertiliser prices seem to be dropping like mad as well 'Benchmark diammonium phosphate (DAP) swap price for January dropped 44% on the month to US$350/st fob New Orleans, 66% below the mid year peaks' What ever this means?
So input prices are comming down as well, now i know this is not directly related to producing milk, but it but more for grain crops.

On the other side of the picture, look at the benefits this could have on consumer spending:
1) oil prices down big time
2) now food prices may come down as well

All this is starting to act as a counterbalance against the global credit crisis.

Many average consumers, so long as they keep their jobs, may start to feel in 2009, that things are actually better for them than in the 'good times' prior to 2008:
1) oil prices down hence petrol cheaper
2) food prices down (hopefully)
3) interest rates down
4) easier to purchase a house now, competition for house buying is much lower

Maybe im just an optimist, but things always have a way of working themselves out.

 

[topcropper]

Im not a farmer so i could be shooting off in completely the wrong direction, but when prices rapidly spike upwards they can also over correct in the short term on the downwards side.

.

Yep, agree. You've pretty much summed up the entire debt bubble there in one go. Everything was a bubble, not just commodities. Property, shares, commodities, debt, consumption. Due to easy credit and excess debt. Everything is now coming back down to earth.

That's deflation.

See ya's.

 

[Ausprop]

just need to see some deflation in consumer prices now. unfortunately there is no sign of it.

 

[Rockstar]

Yeah no sign yet in retail building supplies. At least steel has stopped going up but there are no signs of it deflating according to my supplier - despite the huge increases over the past yr.