Logic Police Thread - the really DIFFICULT questions ...

GSJ said:
This is part of the normal property cycle.

But what about the 10-40% or so property crash you were talking about before???

Are you finally acknowledging that, broadly speaking, residential property is not so volatile an asset class as to be prone to such large, widespread, prolonged and catastrophic price falls...??? :D

YM, either you're just being polite so people won't ignore you, or, you're slowly starting to form a less distorted view of residential property investing...!

GSJ
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I feel like I've entered a cult - you know you are being influenced but you grow to like it .... :p

I agree there is a cycle. Clearly the wrong time in the cycle though to enter - look at the yields!

But putting the cycle aside and look deeper and we have a debt crisis. So I stand by the 10-40% property crash claims. The cycle will just occur around a lower average number in the future. Check out the charts in the deputy governor of the RBA's presentation!

Pendo - that is exactly my concern. The entire banking system is underpinned by the growth in property and I fear the entire banking system is heading towards collapse.
 
So what are you going to do?

So what are you going to do yieldmatters? I'm assuming you wont invest because why would you if you think there will be a 10-40% drop in prices. I sincerely hope you enjoy your day job...

Are you predictions for the stockmarket equally doom and gloom - considering we are 4 years into a bull market, you are probably predicting massive drops in that asset class to?

Apologies for the tone, but I fear you are suffering from paralysis of the analysis, and this will always hold you back.

I think you need to read a Richard Branson book - screw it, let's just do it!!

I read a saying here once which I really love: Life's Short - Invest Hard!!
 
Land said:
So what are you going to do yieldmatters? I'm assuming you wont invest because why would you if you think there will be a 10-40% drop in prices. I sincerely hope you enjoy your day job...

Are you predictions for the stockmarket equally doom and gloom - considering we are 4 years into a bull market, you are probably predicting massive drops in that asset class to?

Apologies for the tone, but I fear you are suffering from paralysis of the analysis, and this will always hold you back.

I think you need to read a Richard Branson book - screw it, let's just do it!!

I read a saying here once which I really love: Life's Short - Invest Hard!!
Click to expand...
Don't worry about the tone - I get used to it!

This thread is more of an intellectual thread - i.e. "what the hell is going on" - the numbers point to something unsustainable yet almost everybody believes it is sustainable - it's a call for explanations. The positive "just do it" messages are fine but not really what I am after.
 
yieldmatters said:
So I stand by the 10-40% property crash claims.
Click to expand...

Sorry, but I think you've contradicted yourself!

Pendo - that is exactly my concern. The entire banking system is underpinned by the growth in property and I fear the entire banking system is heading towards collapse.
Click to expand...

This extremely conservative, textbook, intellectualisd, zero risk tolerance, fatalistic perspective that you have indoctrinated yourself into is hardly going to make you wealthy...

GSJ
 
Yes but don't you think historically the economies of the world, including ourselves are much more dynamic than in the 30's when we had a major depression. There is so much diversity out there, that even if confidence was lost, it would only be relatively short term.
 
yieldmatters said:
This thread is more of an intellectual thread - i.e. "what the hell is going on" - the numbers point to something unsustainable yet almost everybody believes it is sustainable - it's a call for explanations. The positive "just do it" messages are fine but not really what I am after.
Click to expand...

PhD, PhD, PhD!

GSJ
 
pendo said:
Yes but don't you think historically the economies of the world, including ourselves are much more dynamic than in the 30's when we had a major depression. There is so much diversity out there, that even if confidence was lost, it would only be relatively short term.
Click to expand...
That is a good argument - I've heard of it before. Much more sophisticated financing products, financial markets etc so we can carry more debt than we used to. But even so the debt still can't grow forever - it can hit a higher point where it maxes out but can't indefinetly grow. The RBA deputy governor acknowledged that in his speech.
 
If we were to suffer a major loss of confidence, collapse, whatever you want to call it, then everyone of us will be in the same boat. More or less, makes no difference. I have been an owner occupier/investor for nearly 30 years. Seriously, if we lost everything we have worked for, then we would be amongst many millions of others. I wouldn't like it, but as sure as night follows day, I would never give up trying to improve, get ahead, or enjoy our life. And I think a great many on here would agree.
 
yieldmatters said:
It's not so much about not wanting to pay the premium. I think there will always be a premium - owning just 'feels' better.
Click to expand...

When I bought my first property (a regular, suburban 10 year old 3 bedroom with ensuite) there was no premium. In fact, owning was cheaper than renting. This wasn't in the 80's either, it was 2001.
 
pendo said:
Yes but don't you think historically the economies of the world, including ourselves are much more dynamic than in the 30's when we had a major depression. There is so much diversity out there, that even if confidence was lost, it would only be relatively short term.
Click to expand...

I have YM on ignore so I have no idea what he said.

My own reading of the 29 depression is that the govt made it worse. A number of policies (trade protection, austerity, a general negativity towards businesspeople and strengthening of unions) arguably made what would have been a bad recession much longer.

The current Fed builds on the experiences of the 1929 and 1970s (stagflation) recessions. While booms and busts are, I believe, inevitable, part of the reason why I don't believe there will be another 1929 type bust is that Bernanke will do everything in his power to prevent, and that's a lot.

On the other hand, if Bernanke doesn't succeed in yanking the economy back up, we're in a situation where it'll be SO bad that those who own property will go bankrupt and those who do NOT own property will also go bankrupt.
Alex
 
alexlee said:
I have YM on ignore so I have no idea what he said.
Click to expand...
You join my thread and ignore me. Bizarre. Will someone reply to this so alexlee can see it? The bitterness has taken him / her to new levels of strange behaviour.

I'm not talking about 1929 - I am talking about the limits on debt that we are approaching NOW. 85% of the $770B or so in new debt taken over the last 10 years has gone into property. And the growth in debt has a hard limit. So it's clearly a relevant topic to property valuations moving forward.

If people don't want to talk about this (too hard) then join another thread.
 
pendo said:
YM;How does that $770 billion over 10 years stack up against income/equity?
Click to expand...
All the graphs are in the RBA link so well worth looking through (I think you might have looked already actually). Here are some figures just by me eyeballing the charts:

Household credit as a percentage of GDP (income) - it has moved from about 40% in 1995 to over 90% today.

Debt servicability ratios are not so bad. Gone from about 19% of income in 1996 to 22% of income today. The reason debt levels can rise so dramatically relative to income but debt servicability not as much is lower interest rates. Hence the small interest rate movements sting so much (they work off a higher base principle).

Debt to assets 12% in 1995 to 18% today. This is the one I think is circular as the asset values depend on the high debt - but anway - these are the figures.

Is this situation sustainable / managble? Yes - maybe. Can it keep growing indefinetly? No - definetly not. When is the limit? I don't know.
 
If you all simply stop replying to his/her posts, he/she will go away.

Obviously no-one at his work will talk to him/her anymore, so he/she has found a whole new crop of bunnies to argue with.
 
I think most would agree, that it all depends on what happens not so much here, as in the fallout from the sub prime crisis in the US. Given the incestuous and uncontrolled way lending has gone internationally, confidence will not doubt take a thrashing, everywhere. The question is how long and how sustained will it be? I guess it's something that I have been in denial about, mainly because the popular media know sh1t all, when it come to reporting anyway.
And, as an investor, one can easily say 'what crisis'?
Greenspan has a lot to answer for.
The greatest expansion of speculative finance in history". That says it all.
 

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