and just wait until they decide to throw a few of their trillions into playing silly buggers with the stock market, let alone commodities futures.
Investor psychology - please post your state of mind
- Thread starter HiredGoon
- Start date
and just wait until they decide to throw a few of their trillions into playing silly buggers with the stock market, let alone commodities futures.
Sorry to go off topic a bit, but I was wondering with your knowledge of the Japanese recession whether rents followed house prices down? ie Did they crash as well, dip slightly or remain relatively similar to pre-crash amounts?
I don't have the stats for it. But I know that there are plenty of 10% yielding properties in Tokyo. However, Japan has a very different market to us: in particular, their buildings are not designed to last a long time. A brick apartment building in Oz can last decades and still look good with a new coat of paint. After 20 years, your average building in Japan is falling apart. It might be because of building codes, the fact they don't use brick (not a good idea in a place that has earthquakes), or just tradition.
Rentals in Japan tend to be very different. Longer contracts (at least 2-3 years) and there is a tendency to stay at a place for a LONG time. As in, years and years. Rents don't seem to go up much either.
Alex
Hi topcropper
Could you please elaborate on this please....
Hi hk
I can't find the graph which show a correlation between oil use and the growth in world population but its around somewhere.
basically it shows that the population has increased dramatically as oil products started to be used for fertilizer without oil or gas (a lot of fertiliser now originates from gas) then the worlds food production can only support about 2 billion people.
Here are some links in relation to peak oil
http://www.lifeaftertheoilcrash.net/
http://www.theoildrum.com/node/3726
With plenty of other references available using google.
In the past Andrew_a has posted some details which showed this food - oil link.
Cheers
Hi Andy
Thanks for those links.
Makes an interesting reading.
Cheers,
Thanks for those links.
Makes an interesting reading.
Cheers,
This time it's different
After reading a bit more about the causes of higher food prices
http://www.lifeaftertheoilcrash.net/
I've come with a different feeling about where we are heading.
As an observer of history, it is very risky to claim that "This time it's different".
Yet somehow I feel the next 50 years being very different from the last 50.
The last 50 years saw incredible growth fueled by a seemingly endless supply of resources. Resources followed a boom and bust cycle following under-supply and over-investment in resources production.
Yet this resources boom refuses to die. Many economists were expecting, based on previous history, resources prices to start declining by now. Yet resources prices keep going up. Demand keeps growing faster than supply. The pull of 2 billion Chinese & Indian consumers is huge compared to the previous demand driven largely by 700 million people in the rich world.
If you add to that the difficulty of bringing enough oil to satisfy demand, then the pattern that is emerging is very different to what we have been taken for granted in the last 50 years.
Higher oil prices drive up the the price of food, transport, commodities and just about everything we consume. This pushes inflation to levels we are not used to. This is not a temporary price hike like the one we ones we had in the seventies. It is fundamentally driven the global supply and demand. Unfortunately global supply of oil may be reaching its peak. After that, it will be resource with increasing demand and falling supply. That's a recipe for price growth, driving up inflation everywhere.
What does it mean for investor? My feeling is that the time of cheap interest rates is over. I don't expect to be able to borrow at 6% again. The RBA will either put up interest rates or accept higher inflation (maybe a bit of both). But we can't have the type of growth without inflation that we had in the past, as it was driven by cheap resources.
This year I was planning to buy another investment property in inner Sydney. I have done some preliminary figures that show that that another investment property will cost me $20k a year after tax in terms of cash flow.
That's not negligible. Sure, there should be some capital growth to compensate, but I am trading real cash flow with expected capital growth that needs bank favourable lending policy to convert to cash (actually debt). I'm certainly not expecting interest rates to come down in a hurry. That makes the timing of this investment delicate.
I'm not saying that the sky is falling. I think it is time to be careful and question our assumption that things will keep on on going like they have in the past.
Cheers,
After reading a bit more about the causes of higher food prices
http://www.lifeaftertheoilcrash.net/
I've come with a different feeling about where we are heading.
As an observer of history, it is very risky to claim that "This time it's different".
Yet somehow I feel the next 50 years being very different from the last 50.
The last 50 years saw incredible growth fueled by a seemingly endless supply of resources. Resources followed a boom and bust cycle following under-supply and over-investment in resources production.
Yet this resources boom refuses to die. Many economists were expecting, based on previous history, resources prices to start declining by now. Yet resources prices keep going up. Demand keeps growing faster than supply. The pull of 2 billion Chinese & Indian consumers is huge compared to the previous demand driven largely by 700 million people in the rich world.
If you add to that the difficulty of bringing enough oil to satisfy demand, then the pattern that is emerging is very different to what we have been taken for granted in the last 50 years.
Higher oil prices drive up the the price of food, transport, commodities and just about everything we consume. This pushes inflation to levels we are not used to. This is not a temporary price hike like the one we ones we had in the seventies. It is fundamentally driven the global supply and demand. Unfortunately global supply of oil may be reaching its peak. After that, it will be resource with increasing demand and falling supply. That's a recipe for price growth, driving up inflation everywhere.
What does it mean for investor? My feeling is that the time of cheap interest rates is over. I don't expect to be able to borrow at 6% again. The RBA will either put up interest rates or accept higher inflation (maybe a bit of both). But we can't have the type of growth without inflation that we had in the past, as it was driven by cheap resources.
This year I was planning to buy another investment property in inner Sydney. I have done some preliminary figures that show that that another investment property will cost me $20k a year after tax in terms of cash flow.
That's not negligible. Sure, there should be some capital growth to compensate, but I am trading real cash flow with expected capital growth that needs bank favourable lending policy to convert to cash (actually debt). I'm certainly not expecting interest rates to come down in a hurry. That makes the timing of this investment delicate.I'm not saying that the sky is falling. I think it is time to be careful and question our assumption that things will keep on on going like they have in the past.
Cheers,
True.
That's why I used the bold statement that 'This time it's different'.
If we are near peak oil, as more people are saying and prices are confirming, then it will be a different world we are entering into.
Cheers,
That's why I used the bold statement that 'This time it's different'.
If we are near peak oil, as more people are saying and prices are confirming, then it will be a different world we are entering into.
Cheers,
For what it's worth, I don't think we're near peak oil. I have no scientific reasons for this, but I simply don't believe the Saudis, South Americans, have been seriously exploring for oil, and there are other (though expensive) sources like oil sands. However, structure and political issues mean that we're not pumping enough oil to meet (probably unreasonably) increasing demand. South America and Russia aren't investing enough to increase production. The Saudis can but they seem to want to save some oil for another day. A lot of other oil is in places that aren't politically accessible.
Alex
....dunno, not from what I'm seeing at the coalface. Working in the industry I don't get the high level executive summary that everyone is interested in.....but then the media isn't privy to that info either.
The Yanks, via that most august body, the IEA or whatever, are screaming for more disclosure, particularly from OPEC members and the FSU states, so they can control the market better, but they haven't got a ghosts chance.
What I can say for sure, having lived in many parts of this world, is that modern man has either ridden the wave of cheap oil, or is desparately trying to as fast as he can, and they WILL NOT under any circumstances give up the advantages that it provides.
The price will need to treble or more before any of the rich folk in first world Oz even begin to think about changing their consumer habits. We are all way too fat dumb and happy with the status quo.
The lean mean inhabitants of the third world that I used to live with, who are just starting to have a taste of the luxuries that we take for granted, will not be giving up their new found luxuries in a hurry either.
Hi HK,
I agree that it's doubtful that thing will continue as they have in the past. However, I think things will be far better. Sites like Life After The Oil Crash are a waste of bandwidth IMO. They put forward the suggestion that nothing can ever replace oil and we're doomed because we can't find any more - (you'll note that there are paid links alongside the text for 3-day survival packs, hunting knives, etc). Technology is improving our lives exponentially, our dependence on oil will be significantly reduced. No-one knows for sure what that technology will be - biotech based, nuclear, hydrogen, solar, etc, but it WILL happen and things will change.
I'm not usually an optimist, but IMO peak oil is one of the bigger furphys around. An analogy - in 1800, people in London were concerned about peak manure - someone did projections that the amount of horse crap from the numerous carriages would be 20ft high in Londons streets within a couple of decades. Then the unimaginable happened - along came the steam car - horses were redundant, blacksmiths lost their jobs by the 1000,... AND THINGS CHANGED.
Cheers Keith
Hi all,
Alex,
My understanding about high interest rates through the '80's, was that when they did fall in the early '90's, everybody thought that the low rates were an aberration.
This also helps me to understand why property prices did not take off in the mid '90's. Again interest rates were thought to be artificially low, and were bound to go double digit, catching property buyers offside.
I was a believer in the club of Rome D&G stuff in the mid '70's, oil was never going to be cheap again. I know some people who have believed in the total D&G picture since that time. Consequently they never bothered to invest in anything, as in their minds it was all pointless.
There are always very good arguments as to why "this time is different", however that should be looked at in terms of the following....
Every major boom, in every commodity, throughout history has ended. There are many commodities, regarded as essentials, that have had excessive booms in the past that are not needed/used in today's modern society. Whether it be tea, horses, spices, tulips, railroad tracks, or internet stocks, there comes a time when there is an oversupply because of better use changed circumstances, or replacement.
Explain to me again how "This time it's different" please HK??
bye
Alex,
My understanding about high interest rates through the '80's, was that when they did fall in the early '90's, everybody thought that the low rates were an aberration.
This also helps me to understand why property prices did not take off in the mid '90's. Again interest rates were thought to be artificially low, and were bound to go double digit, catching property buyers offside.
I was a believer in the club of Rome D&G stuff in the mid '70's, oil was never going to be cheap again. I know some people who have believed in the total D&G picture since that time. Consequently they never bothered to invest in anything, as in their minds it was all pointless.
There are always very good arguments as to why "this time is different", however that should be looked at in terms of the following....
Every major boom, in every commodity, throughout history has ended. There are many commodities, regarded as essentials, that have had excessive booms in the past that are not needed/used in today's modern society. Whether it be tea, horses, spices, tulips, railroad tracks, or internet stocks, there comes a time when there is an oversupply because of better use changed circumstances, or replacement.
Explain to me again how "This time it's different" please HK??
bye
Which makes a lot of sense in terms of human psychology. People tend to assume the current situation will continue. So having been through the high interest rates of the late 80s, they assumed the 90s rate falls were just temporary. Similarly, people who only experienced low rates in the late 90s and early noughties assumed that would continue, and are getting caught out now. So when the cycle does change (only to change back another cycle later, of course) most people don't believe it and missed their chance in the mid 90s.
At the moment, we have it going the other way: people in the last couple of years assumed property prices would go up forever. It won't because it never does. My own prediction is that we'll see a few years of stagnation. Actually at the end the market is already turning, but most people will still assume it's falling that they don't buy in.
We do have alternatives for oil. While it's dangerous to assume technology will save us, there is a lot of money going into solar power, for example. It's not very efficient now, but neither were the first cars. I don't think we're going to stop using oil, but I do think we'll have a shift towards more hybrids, diesel, etc.
Alex
I have noticed that the market is really good at pricing in known information, which is a wonderful self correcting mechanism sometimes.
I can't agree with you on the optimistic based on history view though Keith as I don't believe the precedent is that large for humanity, we really haven't faced that many serious energy problems and survived, you have the wood-coal-oil-oil transitions, but that's just not a reliable sample size, survivor bias is an issue
I'm thinking of an idea that the best cure for high oil prices will be high oil prices, if we are really forced to suffer for our energy then we might actually get some sense beaten into our collective skulls as there is precious little leadership coming from the top at the moment. In the 70's the US actually came out with some energy ideas that had some legs, they were soon chopped off by $10 gas through the 80's though, I'm thinking investment in alternates.
Witness the clueless leadership at the moment.
1) In the US the candidates are offering a removal of a small gasoline tax as a major campaign debate point.
2) Here the focus is on the 'greedy oil companies' and profiteering petrol vendors.
You hope it's just popular politics and someone in power actually has some idea, but you don't really know I guess.
It's not just the visible cost of Bush, Blair and Howard's war in the middle east (though that's a corker of a cost), it's the opportunity cost of what might have been if that 3 trillion or so had been used for an energy 'Manhattan project'.. Just staggering mismanagement of our planet.
It's an interesting subject PO, I think for a start the worlds needs some honesty from those with the big supplies, if we actually knew how much of the stuff Saudi Arabia had then maybe we would all know what we were up against, as it is we are flying blind.
Just how responsible would it be to our children if we were paying $120 a barrel for something that should be worth $2000 a barrel? Not very.
Interesting replies. It definitely helps me to bring a bit of perspective to the picture.
I expect that human ingenuity will find alternatives to oil quickly enough. Considering the change is likely to be gradual over decades, then alternatives should come up as they become economically viable. Our economy is dependent on oil in so many ways. It will take a while to reduce this dependency.
Why is it different? Mostly due to two key trends occurring concurrently.
1. Oil prices rising due to lower supply and strong demand.
2. Demand from India & China driving up commodity prices.
I believe this will drive up inflation and make it difficult to have the low interest rate / high growth scenario that we had from the mid 90's until now.
Cheers,
I expect that human ingenuity will find alternatives to oil quickly enough. Considering the change is likely to be gradual over decades, then alternatives should come up as they become economically viable. Our economy is dependent on oil in so many ways. It will take a while to reduce this dependency.
Why is it different? Mostly due to two key trends occurring concurrently.
1. Oil prices rising due to lower supply and strong demand.
2. Demand from India & China driving up commodity prices.
I believe this will drive up inflation and make it difficult to have the low interest rate / high growth scenario that we had from the mid 90's until now.
Cheers,
Hi topcropper
Could you please elaborate on this please....
G'day House Keeper.
I've gone on about the oil/food thing for ages.
This was a post I made to Les a long time ago,.....
http://www.somersoft.com/forums/showpost.php?p=287698&postcount=112
Sort of covers most of it.
[and what's happened to Les?]
The world was at a population peak 100 years ago due to the declining fertility of soil and the declining natural sorces of fertilizer. Oil based fertilizer allowed us to continue on and procreate. What should have happened, was we should have kept the population at 1.5 billion, and with the new found yield increase obtained by using oil, we could have left most of the land and forest and winderness as it was. But no, we are not as smart as we thought. The population is now headed for 9 billion, an increase of 80 million per year.
No oil, and the population will have to drop dramatically as we won't be able to feed everyone.
Something may come along I suppose. It won't be legumes though. Legumes have been around since agriculture. It won't be organic fertilizer, as organic fertilizer is made from oil anyway via manure, via grain. It could be genetically modified grasses that fix their own N.
It's not so much fuel that's the big problem. I could grow my own biodiesel for the machinery. It's fertilizer. Then, nearly all farm chemicals are made from oil. It just goes on and on, our dependance on oil.
Dunno.
Ask some more questions if you like.
See ya's.
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Hi topcropper
Could you please elaborate on this please....
Here is a good article I found,.....
http://www.earth-policy.org/Updates/2005/Update48.htm
Interesting that Zero-till and conservation farming gets a mention. Spraying instead of ploughing the soil has saved huge amounts of fuel, and it's getting more popular all the time. Modern farming methods are more energy efficient than ever. Of course, glyphosate, or commonly known as 'roundup' is made from fossil fuels.
The UN recently came out with a statement regarding the food crisis.
The amazing conclusion was that farmers must have to start to use less chemical fertilizer and more organic fertilizer, as this will be better for the environment. That is just ridiculous, and it is frightening that they are so nieve. Organic fertilizer originates from oil if you trace it back to the grain paddock. Someone has not done their home work.
See ya's.
hi all
the ask's for your mind set not your hatered and in some respects some have gone a bit off the arils but I must admit I am with alex as to how to invest as I don't let emotional about investing.
and as for the catch cry it will be the same used in the states for me.
if you have a read of a few articles with regards to my mind set you will see that it is very focused on the market and its on food at the moment.
the indians have stopped all grain sales out of india to stop inflation secure price and supply and the counties taht can I think will do the same.
for use we can't we do not have the power to do it nor for that matter do the americans and thats the rub.
we are a free state and a free economy and with that comes risk.
and we all know risk.
if you have a share system that allow people or entities to buy shares then you have to allow the guy with the most amount of money to buy the shares.no rocket science there.
but what if he is buying your shares and holding his share and his commodity.
like the kid in the play ground that goes round taking all the food and keep his in his lunch box.
yes you guessed it he has the monoply on food.
now take that thought and think of having two big guys
with lots of money.
lots of single males
and requiring lots of food.
and throw in there
lots of little guys
with no money
lots of debt that needs lots of money
and relatively 1 girls to every male.
oh and an ecomony that has a for sale on it thru its exchange.
now tell me that I have missed something here.
because I'm not good on maths.
the chinese and the indians have been buying up all the comodities the world can throw at them.
then are both moving farmers to the cities.
they are reducing there land masses thru both erosion and climate change.
and they both have bank accounts that have nearly run out of 000 and 15 digit cals won't work.
so tell me in your view with out any hatered fro any nation which you see as thetwo big boys and which are the little boys in this play ground.
and remember what happened at school when the big boys took the food and toys.
go to the top of the class if you said a fight broke out.
well get ready
you may have to take those hands out of your pockets because if you want a prodiction I think that, thats is exactly what will happen.
as these things become more and more of an issue and they will
this is a very very likely possiblity not nice true.
but then again alex has the view that he has no like or dislike for other he does not know and most people they may agree or not are the same,
well that human nature and the big boys arethe same and they would have the same I don't care about the american or australians we want the food simple as that.
or the control of the food at the least
the ask's for your mind set not your hatered and in some respects some have gone a bit off the arils but I must admit I am with alex as to how to invest as I don't let emotional about investing.
and as for the catch cry it will be the same used in the states for me.
if you have a read of a few articles with regards to my mind set you will see that it is very focused on the market and its on food at the moment.
the indians have stopped all grain sales out of india to stop inflation secure price and supply and the counties taht can I think will do the same.
for use we can't we do not have the power to do it nor for that matter do the americans and thats the rub.
we are a free state and a free economy and with that comes risk.
and we all know risk.
if you have a share system that allow people or entities to buy shares then you have to allow the guy with the most amount of money to buy the shares.no rocket science there.
but what if he is buying your shares and holding his share and his commodity.
like the kid in the play ground that goes round taking all the food and keep his in his lunch box.
yes you guessed it he has the monoply on food.
now take that thought and think of having two big guys
with lots of money.
lots of single males
and requiring lots of food.
and throw in there
lots of little guys
with no money
lots of debt that needs lots of money
and relatively 1 girls to every male.
oh and an ecomony that has a for sale on it thru its exchange.
now tell me that I have missed something here.
because I'm not good on maths.
the chinese and the indians have been buying up all the comodities the world can throw at them.
then are both moving farmers to the cities.
they are reducing there land masses thru both erosion and climate change.
and they both have bank accounts that have nearly run out of 000 and 15 digit cals won't work.
so tell me in your view with out any hatered fro any nation which you see as thetwo big boys and which are the little boys in this play ground.
and remember what happened at school when the big boys took the food and toys.
go to the top of the class if you said a fight broke out.
well get ready
you may have to take those hands out of your pockets because if you want a prodiction I think that, thats is exactly what will happen.
as these things become more and more of an issue and they will
this is a very very likely possiblity not nice true.
but then again alex has the view that he has no like or dislike for other he does not know and most people they may agree or not are the same,
well that human nature and the big boys arethe same and they would have the same I don't care about the american or australians we want the food simple as that.
or the control of the food at the least
Hi all,
Seeing as the world is going green, it is no surprise that the UN are calling for more use of organic fertilizers.
We have to remember that the organic farming movement and the green movement are pretty much one in the same.
Back when I was involved in the organic farming industry, the use of extra fuel to save the use of chemicals was encouraged (in fact mandatory).
In horticulture, 'flame weeding' was OK, but use of round-up was not.
Multiple ploughing of fields before grain planting was allowed, single pass round-up banned.
Transfer of huge amounts of compost, mulch etc over long distances OK. Use of bagged/bulk fertilizer with minimum transport cost, a definite no no.
Higher oil (or oils newer equivalents) prices mean higher food prices, or less food will be produced. As there is growing demand for food 'stuff', then the price of foods should accelerate faster than oil.
bye
Seeing as the world is going green, it is no surprise that the UN are calling for more use of organic fertilizers.
We have to remember that the organic farming movement and the green movement are pretty much one in the same.
Back when I was involved in the organic farming industry, the use of extra fuel to save the use of chemicals was encouraged (in fact mandatory).
In horticulture, 'flame weeding' was OK, but use of round-up was not.
Multiple ploughing of fields before grain planting was allowed, single pass round-up banned.
Transfer of huge amounts of compost, mulch etc over long distances OK. Use of bagged/bulk fertilizer with minimum transport cost, a definite no no.
Higher oil (or oils newer equivalents) prices mean higher food prices, or less food will be produced. As there is growing demand for food 'stuff', then the price of foods should accelerate faster than oil.
bye
