predictions for 2012

[JWR]

Hi Nathan,

You don't think Australia's low unemployment, low interest rates and population growth will put upward pressure on property prices (in the lower end at least?)

I don't personally see the downside you are predicting (or much downside from here at all in the lower end) - but I am not as experienced as you so am praying you are right and I can buy some more cheap houses soon!

 

[topcropper]

IMO

GFC #2

Opportunities will be out there.

High risk for uneducated.

Shares will be hit very hard, along with top end property. ASX could go back around 3200 levels.

Interest rates will come down to around 5.5 - 6% variable and fixed rates will go between 5.2% - 5.5% RBA cash rate around 300BP's by end of fin yr 2012.

Cash would be good to have, along with strong cash-flow well purchased property.

Overall I reckon there will be opportunities to be had and will be personally purchasing actively in 2012 along same lines I have done every year for last 7+ years.

.

Wow, that's bearish!

But I think you might be correct.

Just got Alan Kohler's last email for the year from his report. Talk about bearish everything. If your cashed up and low debt in the years ahead, big opportunities coming up.


See ya's.

 

[Nathan]

Not bearish, just see there is a few things twirling around.

I dont believe lower end property will get hit. There will be cheapies in the market however.

Credit policies are already changing and valuers are being conservative.

I am optimistic for 2012, yet I see some major turbulence there swirling around.

 

[BayView]

My prediction:

Q1 further 25 -50 points interest cut from RBA.. Market starts to be picked up.

Was talking to my MB a few days ago regarding the banking climate and interest rate movements in the near future.

His statement to me was that the banks' cost of money (from OS) to fund loans they provide to us is going up currently and predicts this to continue in the near future..

Therefore, it will be very unlikely that they will continue to drop rates any further unless their cost of money goes back down again.

Or, they will make it very tough to borrow for most of the population should they drop the rates; in other words; less loans.

This would indicate a slow property market in the months ahead..

 

[yadreamin]

Wow, that's bearish!

But I think you might be correct.

Just got Alan Kohler's last email for the year from his report. Talk about bearish everything. If your cashed up and low debt in the years ahead, big opportunities coming up.


See ya's.

TC do you have a link to his email as l would really like to read his predictions.
cheers

 

[topcropper]

TC do you have a link to his email as l would really like to read his predictions.
cheers

I pay a subscription. Eureka report.

I wouldn't post it all because of copyright, but I tried to post a snippet, and it won't let me cut and paste.



He basically reckons the sharemarket will drop a lot. Reckons 75% of the time that Australia has started to drop interest rates there is a global recession. Europe is in recession, and the US to re-enter recession. Property bubble in China, and China to continue to slow, effecting mining in Australia. In Australia, households to continue to deleverage and reduce spending. House prices to continue to drop. Retail terrible and some companies to go bust.


I just don't remember a more bearish post from him before.


See ya's.

 

[marg4000]

I sadly agree with TopCropper.

Europe is in real trouble, and the slowdown will affect everyone. USA will stop buying so Asian growth will slow. The huge growth of recent years has all been put on the credit card, and now it is time to pay.

I think it is a case of batten down the hatches, ensure your debt and spending are totally under control. If you can keep your job or business you will be able to ride it out. Those who lose their jobs will be the ones to really suffer.

I read an absolutely frightening snippet recently. I probably have it a bit wrong, but it went along the lines: Imagine the USA is a person. This person earns $56K per year and spends $73K pa. He has maxed out his credit card to $350K. His (Obama's) solution? Income still $56K, cut spending to $72K and increase credit card limit to $380K.

????????????????????????
Marg

 

[redwing]

TC do you have a link to his email as l would really like to read his predictions.
cheers

You'd have to be a subscriber I'd guess, there is a video grab here though link

 

[Deltaberry]

Who knows what will happen, can only base predictions on what we know now (and everyday I find out something more). At the moment:


Macroeconomic

- Europe situation worsens and Euro rates experience further cuts as unemployment rises, US remains the same and unemployment will be steady. Rates will be on hold in US

- Asia begins to deteriorate in the short-term, especially China (which means whole of Asia deteriorates) and asset prices will take a significant dive if it hasn't already, leading to reduced high net worth interest in investing in overseas jurisdictions such as Australia

- Commodity prices to fall with thermal coal approaching $100, semi-soft approaching $120 and iron ore at 65% grading from Pilbara approaching $140 or $150. Gold price to approach $2000 and uranium price to continue to languish between $55 and $60 with a potential upturn in 2013

- Equity markets continue to languish and equity raisings will continue to be put on hold

- Debt capital will be harder to source and cost of US$ in Asia will rise significantly as most SOEs have already found

- Takeover activity in certain sectors will however remain strong (particularly in energy sectors such as thermal coal and uranium as China fights against the likes of Rio Tinto/Cameco/Peabody/ArcelorMittal etc to secure key assets)

- A$ peaks some time in first half (possibly at around 1.06) and begins to fall for good in second half 2012 as most of these negative factors play out in the market and will stay permanently below parity at around 95c, with downside risk of 55c if Europe deteriorates a lot quicker than what the market expects (eg if BNP Paribus is on the verge of bankruptcy, Deutsche Bank needs to be bailed out etc, AXA falls overnight)

Local Activity


- Unemployment will rise especially in financial centres of Sydney and Melbourne as institutions which overhired begin to lay off

- Manual labour industries (eg mining, manufacturing) will be hit again as commodity prices fall and marginal mines cease operations as we saw with Zinifex's (now OZ Minerals) Century

- Construction activity to remain subdued as banks put a lid on risky projects

- This provides a floor base for rent, but vacancies will increasingly become an issue in poorly-located properties as sites within 3km radius of a CBD drop rent to steal market share

- Real estate prices remain subdued and appetite for investment remains low

- Cash rate to fall one more time and we should see fixed rates at 5.5%

- ALP loses and a Turnbull-led Coalition wins promising some rubbish about bringing back the boom or something silly like that

 

[JWR]

Hi DB,

So what do you think is good buying for the Armageddon-like scenario you have portrayed? If this situation were to occur, you don't think multinationals would pull out of the CBD's and instead outsource their offices to cheaper/foreign countries or even cheaper locations (like Parramatta or Geelong?)

Also - Turnbull would be a great leader for Australia imo. He runs Wentworth very well (my council area) and has implemented fantastic changes to the area since his appointment. He always has a huge % of the vote on election day and is seen as a true inspiration to many people (including myself). He may even inspire other Australians as PM to strive for better things in their lives (unlike Gillard or Rudd) and would manage the country's finances very well due to his personal financial success. He came from humble beginnings so can relate to the 'battler' and is very down to earth and community driven - a perfect candidate for our next PM!

 

[Ed Barton]

Hi DB,

So what do you think is good buying for the Armageddon-like scenario you have portrayed? If this situation were to occur, you don't think multinationals would pull out of the CBD's and instead outsource their offices to cheaper/foreign countries or even cheaper locations (like Parramatta or Geelong?)

Also - Turnbull would be a great leader for Australia imo. He runs Wentworth very well (my council area) and has implemented fantastic changes to the area since his appointment. He always has a huge % of the vote on election day and is seen as a true inspiration to many people (including myself). He may even inspire other Australians as PM to strive for better things in their lives (unlike Gillard or Rudd) and would manage the country's finances very well due to his personal financial success. He came from humble beginnings so can relate to the 'battler' and is very down to earth and community driven - a perfect candidate for our next PM!

as a swinging, but mostly left voter i'd be happy with turdball as PM. far better than big ears.

 

[Deltaberry]

Hi DB,

So what do you think is good buying for the Armageddon-like scenario you have portrayed? If this situation were to occur, you don't think multinationals would pull out of the CBD's and instead outsource their offices to cheaper/foreign countries or even cheaper locations (like Parramatta or Geelong?)

Also - Turnbull would be a great leader for Australia imo. He runs Wentworth very well (my council area) and has implemented fantastic changes to the area since his appointment. He always has a huge % of the vote on election day and is seen as a true inspiration to many people (including myself). He may even inspire other Australians as PM to strive for better things in their lives (unlike Gillard or Rudd) and would manage the country's finances very well due to his personal financial success. He came from humble beginnings so can relate to the 'battler' and is very down to earth and community driven - a perfect candidate for our next PM!

I don't think it's necesarilly an Armageddon-like event that multinationals would pull out of a country as such... At the end of the day the likes of Xstrata, BMA, Shell, CITIC etc will still have whatever acreages and tenements they have here and continue to operate them. People will still buy Sony merchandise etc, and people will still go to Caltex (ie Chevron) to fill their petrol.

But even if things got very bleak, I doubt multinationals would relocate to Paramatta. If their existence came down to such a small overhead, things must be much bleaker. Even USA/Europe hasn't had that happened.

For the record, I like Turnbull.

 

[Ergophobia]

My prediction isn’t so bleak, but is totally resource focused as that is the industry I’m in.

The Australian economy will be fine, underpinned by LNG demand increasing as Japan moves away from Nuclear power generation. Brisbane wont fare as well as Perth and Darwin as coal seam gas will be put on hold (or at least slowed) until a sustainable solution can be found.

On top of this, resources projects cut off at the GFC currently coming back to life will overlap with projects originally planned for this period creating a period of construction activity greater than the last boom. The number of projects I can see that all have the same schedule (2012-2015) is jaw dropping.

This will cause massive labour shortages, and economic and political refugees (especially from Europe) will flood into Australia, driving up demand for rentals. Residential construction costs will also rise as the resource boom II sucks up skilled tradesmen.



In other news, the Ergophobia clan will (hopefully) increase by 1 (a girl this time), dad will keep dreaming of his 42 foot yacht, mum will keep telling him we can’t afford it, and the boy will continue to amaze us every day.

 

[Deltaberry]

I reckon the world will go back to nuclear very soon, especially China and India. Proven, significantly lower capex technology.

 

[Van Persie]

The Black Swan

Deltab,

Read 'The Black Swan' by Nassim Taleb and you'll get an opinion of why they get it wrong. Great read!

 

[buster]

Was talking to my MB a few days ago regarding the banking climate and interest rate movements in the near future.

His statement to me was that the banks' cost of money (from OS) to fund loans they provide to us is going up currently and predicts this to continue in the near future..

Therefore, it will be very unlikely that they will continue to drop rates any further unless their cost of money goes back down again.

Or, they will make it very tough to borrow for most of the population should they drop the rates; in other words; less loans.

This would indicate a slow property market in the months ahead..

My MB said the same thing on thursday when asked why chattel mortgage rates had gone up, my last ones were 5.5%, now 7.35, I asked if I should wait till they drop, he said no they will go up even if the reserve bank drops rates, as overseas there is no money to lend and more demand and it may be more difficult to get loans if I wait. Yet for RIP loans have found the banks more willing to lend than in 2008. Sounds like there maybe a credit crunch coming.

 

[Van Persie]

Hence Buster, be wary of shares in the major banks even though divs are high.

Great opportunity if you're not interested in short term capital growth.

 

[Lissica]

He basically reckons the sharemarket will drop a lot. Reckons 75% of the time that Australia has started to drop interest rates there is a global recession. Europe is in recession, and the US to re-enter recession. Property bubble in China, and China to continue to slow, effecting mining in Australia. In Australia, households to continue to deleverage and reduce spending. House prices to continue to drop. Retail terrible and some companies to go bust.


I just don't remember a more bearish post from him before.


See ya's.

That sounds like a pretty good buy signal to me

 

[knightm]

The number of projects I can see that all have the same schedule (2012-2015) is jaw dropping.

Ergo, do you mean Pilbarra, Darwin, Gladstone etc? Any others? I have seen this list, but it doesn't include relative size etc. A list like with $ amounts next to each project would be great.

 

[Ergophobia]

Ergo, do you mean Pilbarra, Darwin, Gladstone etc? Any others? I have seen this list, but it doesn't include relative size etc. A list like with $ amounts next to each project would be great.

I was refering to WA, and my assessment was just based on what I was seeing as a project planner in the WA resource sector.

Thanks for the link, I have been looking for data like that. The graph on page 3 says it all.

That publication led me to the BREE website, and the info you are after in terms of project size is available there under "data" http://bree.gov.au/data/resources/mining-major-projects2011.html