Prof Steven Keen.

[blaster]

Bugared if I know , it's all nagging me stupid , nothing adds up.
First of all he was talking over 10 yrs don't forget , we're only 12 mths into that and that's all been interfered with through stimulus anyway.
So now we have an artificial 9x av wage housing spike lower end right when things were winding down naturally - US and UK both tanked at 7x , yet they have a lot more people than us to house.
I did hear real 60% top end drops just the other day.
He was one of the few to call the worlds troubles.
Hardly anyone saw the stock market crash either but there were a few.
Then we have our own Gov' predicting an 81/2% unemployment by 2010-11.
Why are the banks even lending on these sort of prices at times like these then, nothing makes any sense.
One thing I would really like to know though is how long the Gov' can keep it up and what happens when that stops ?

 

[blaster]

One more point on a Keen theory though also is that he isn't actually as alone as people make out .
There are quite a few saying this latest artificially inflicted spike is going to cause 'major' problems over the next 5 yrs.
I know I've brought it up before but , Money morning for example , what do you guys think of their stuff ?
I know one thing, I'm as clear as mud, but I do think Australia's numbers now more than ever don't make any sustainable sense at all so anything could happen.

 

[evand]

At last a bit of sense in the debate. Good post.

Bugared if I know , it's all nagging me stupid , nothing adds up.
First of all he was talking over 10 yrs don't forget , we're only 12 mths into that and that's all been interfered with through stimulus anyway.
So now we have an artificial 9x av wage housing spike lower end right when things were winding down naturally - US and UK both tanked at 7x , yet they have a lot more people than us to house.
I did hear real 60% top end drops just the other day.
He was one of the few to call the worlds troubles.
Hardly anyone saw the stock market crash either but there were a few.
Then we have our own Gov' predicting an 81/2% unemployment by 2010-11.
Why are the banks even lending on these sort of prices at times like these then, nothing makes any sense.
One thing I would really like to know though is how long the Gov' can keep it up and what happens when that stops ?

 

[JBY]

I remain open to SK's view.

Anyone confident SK is wrong would have been out there manically adding to their portfolios over the last 12mths. And I haven't heard of one SSer who has been that bullish in that time.

Add no.1 to your list. Ive now bought 2 properties bought post-GFC, and I'll buy a third, fourth, etc asap.

 

[WinstonWolfe]

The probability the US will see a 40% fall is realistic.

In light of a repressed US consumer, Australia's property prices will be very dependent on how real and sustainable China's growth is. At least one sharp analyst and fund manager I follow, Hugh Hendry, believes it is flakey.
Hugh's recent videos 1 2 3

Though depending on one's particular brand of unbalance, or bias, some might be inclined to place more faith in Australian consumer sentiment, and ignore that Australia's growing NFD simultaneously grows susceptibility to external shock. But then, what % of Aussie consumers saw the GFC coming?

 

[evand]

Winston, stop shattering peoples illusions.

 

[willair]

The probability the US will see a 40% fall is realisti. But then, what % of Aussie consumers saw the GFC coming?

http://www.news.com.au/business/money/story/0,28323,25750335-5013951,00.html


CONTROVERSIAL economist "Mr S Keen"has refused to back down from his doomsday prediction that house prices in Australia will almost halve over a decade despite growing evidence to the contrary.
Nine months after his dire prediction that property prices will fall by 40 per cent over 10 years, fellow economists have pronounced Professor Keen - who was held up as one of the few commentators to see the global economic downturn coming - "spectacularly wrong" on his outlook for the housing market..

Time is on his side..

 

[boz]

The probability the US will see a 40% fall is realistic.

In light of a repressed US consumer, Australia's property prices will be very dependent on how real and sustainable China's growth is. At least one sharp analyst and fund manager I follow, Hugh Hendry, believes it is flakey.
Hugh's recent videos 1 2 3

Though depending on one's particular brand of unbalance, or bias, some might be inclined to place more faith in Australian consumer sentiment, and ignore that Australia's growing NFD simultaneously grows susceptibility to external shock. But then, what % of Aussie consumers saw the GFC coming?

good post WW, thanks for the link to Hugh Hendry.
First I can point out that if your chart would be in real term and not nominal probably the fall in US would be at 40% already.
About Hugh you have to have a god knowledge and know what other good view are on the matter he talks about. I agree with him specially when he point out you don't have to take position and take risk (pretty much there is not such a thing as missing out). I also did see a possible bubble on bonds back in june (the 19th of june on the other forum on a comment on this report), and I agree with Hugh that yield on bonds is great Most of member of this forum see great low yield on bonds and on taking on debt while it is not: on a 3-5 year mortgage you have a massive 4-5% above inflation interest rate, and on variable still a very high 4% above inflation, this is because lenders and borrowers expect high inflation in the future (but I would say 3 year term is not much in the future and variable rate is not the future), on the other hand Hugh see the end of a possible bond/debt bubble with a big bang and from a very low yield which means everyone is into bonds and everyone want to have bonds and everyone will get out at same time. I agree that it is possible but my opinion is that it is possible the other way as well with yield rising, rising and keep rising till the big bang, this happened in all the debt implosion we saw in the last 10 year with Russia, Argentina, Iceland, and all the one that got closed to (like east europe, Ireland, etc.). that is why I don't speculate on bonds and rather speculating on deflation scenario using currency or the S&P500 futures.
Also I like of Hugh when he look at past 300 years and not 30 years and I agree with him about the next 30 years been different then the past 30 years (not many forum member would agree with that). About gold I am not sure, Hugh seems not sure too, I lost a bit of money in the last few weeks, I am not sure shorting the S&P500 would compensate the lost in value of gold mining shares (translate=not sure gold mining shares will outperform the share market index)

 

[Aaron Sice]

fudge boz - that was harder to read than GRs posts....

 

[chilliaa]

boz i hear you, i just dont think you are right for this cycle (maybe the next one).

But one word of advice, dont try to apply justification theory into the real world. Economic and financial distortions work themselves out in the long term, but the long term can be just that, looooong.

Rather than speculating i always invest based on fundamentals with as much insurance on the downside that i can get.

For property this means buying for yield and fixing a good portion of the debt for 10years. This way i insure my downside, and the buy decision has to stack up on a yield vs long term debt rate.

For shares i go though the fundamentals and then try to buy low to give myself the 'margin of safety' in case im wrong. To provide further insurance, i tend to dollar average downwards, in case my analysis if faulty, or because i realise that just because i think the market should be valued at 'x' it can take a while for the market to realise that.

 

[boz]

boz i hear you, i just dont think you are right for this cycle (maybe the next one).

But one word of advice, dont try to apply justification theory into the real world. Economic and financial distortions work themselves out in the long term, but the long term can be just that, looooong.

Rather than speculating i always invest based on fundamentals with as much insurance on the downside that i can get.

For property this means buying for yield and fixing a good portion of the debt for 10years. This way i insure my downside, and the buy decision has to stack up on a yield vs long term debt rate.

For shares i go though the fundamentals and then try to buy low to give myself the 'margin of safety' in case im wrong. To provide further insurance, i tend to dollar average downwards, in case my analysis if faulty, or because i realise that just because i think the market should be valued at 'x' it can take a while for the market to realise that.

OK, this is an example of good thing to do basing on the last 30 years: investing for long term was working and wealth was created in many way. I see the future as wealth distruction more then wealth creation and the kind of investing and forget about it is probably not going to work, I can see a better way to make money in flipping money around and short term investing strategy (speculating), few will succed and most will loose money untill economys goes back to sustainable growth. It is probably that there is just too much money around that need to be lost somehow and that is not necessary with deflation, inflation or a combination of the 2.

 

[BayView]

OK, this is an example of good thing to do basing on the last 30 years: investing for long term was working and wealth was created in many way. I see the future as wealth distruction more then wealth creation and the kind of investing and forget about it is probably not going to work, I can see a better way to make money in flipping money around and short term investing strategy (speculating), few will succed and most will loose money untill economys goes back to sustainable growth. It is probably that there is just too much money around that need to be lost somehow and that is not necessary with deflation, inflation or a combination of the 2.

Looking at only the last 30 years is not a big enough window either, Boz, and if you see a future of losing money rather than making money, you will probably move subconsciously into that result. Think and grow rich as they say.

People have been making money from property for hundreds (if not thousands?) of years, and the share market since it began - whenever that was.

There is also the opportunity to do flipping and short term strategy stuff, but these are more often higher risk, and should be remembered as such, and don't bet the whole farm so to speak, on one deal.

My mate did that; sold his IP 8 years ago and made $150k profit, then put the whole lot into an internet start-up with 4 other donkeys. They were going to make several thousand % on this deal if it worked - IF it worked. He lost everything.

Me; I would have saddled up $50k for the start-up, and put the $100k left into another house or another IP.

The financial foundations and correct practices/habits are formed first, then the speculating should come after - but only in small bets.

I heard somewhere that only 10% of your capital is ever used on a specualtive deal. Good advice I reckon.

 

[chilliaa]

OK, this is an example of good thing to do basing on the last 30 years: investing for long term was working and wealth was created in many way. I see the future as wealth distruction more then wealth creation and the kind of investing and forget about it is probably not going to work, I can see a better way to make money in flipping money around and short term investing strategy (speculating), few will succed and most will loose money untill economys goes back to sustainable growth. It is probably that there is just too much money around that need to be lost somehow and that is not necessary with deflation, inflation or a combination of the 2.

You could be right in regards to future wealth distruction. We seem to be at a cross roads, with a quite possible change strategic change in world growth patterns.

I also agree with your view about too much money floating around that needs to be lost somehow. This relates to my own thinking, never in the history of mankind has the average person controlled so much wealth (mainly through their superannuation). Having access to wealth and being able to invest it intelligently are two different things.

Its also very interesting to see how things are playing out in the US markets. Everytime a bit of confidence returns, then bonds go down, interest rates go up, speculation in oil goes up, and then the markets turn down, then bonds go up interest rates go down, oil down etc.

To me this is implying that the market is very much aware of the global debt position, its artificial underpricing and the effect of current debt levels on the economy at large.

The only way to get past this is for consumers, businesses, and governments to reduce their debt levels to more sustainable levels. Consumers and businesses are doing just this, but it looks at this stage that part of the conumsers and business debt is being 'swapped' from consumers and businesses to the government at this stage.

However what must be remembered is that companies are organic, they adapt to their environment or perish. Hence the underlying share indexes are also organic (but on a lagging basis).

 

[Lukey75]

Short term speculation...hmmm

For those considering significantly altering their investment strategy based upon redistribution of wealth concepts ie; short term roll overs and/or speculation, what you are talking about is a function of derivitives or more commonly known as exotics. These are "derived" from an underlying commodity and utilised historically by producers and consumers of said commodity to offset price risk. Honestly if you are considering this as the new way as was implied earlier in the forum of generating wealth as opposed to being a fundamentalist and investing for the long term, then you will be the market makers that inevitably create "us" wealth.

Oil, Gas, Copper, Gold are all traded on the futers market and has been increasingly utilised by non core traders (speculators) for short term gain over the past 10 years. This is where financial markets and many quick round turners have come unstuck very quickly. Just my quick piece, first time poster, long time watcher!!!

If you are considering this approach to investing then I advise ALOT of reading and practical experience.

 

[blaster]

On China , now this is just a theory but , they ain't dumb.
Stockpiling, well BHP and Rio doubling their prices, of course China knew it and of course have been watching the US for yrs too, plenty of notice to prepare for varied scenarios. But they've also known for yrs that we've been heavily riding their wave and that now we're depending on it. But now they can hold out where no one else can. Heaps of cash, heaps of iron , they'll be in a position to call all sorts of shots and do what they damn well please and also really hurt bhp and rio . I reckon they've been rubbing their mitts together for yrs. Just a theory but I don't think their growth will hold up all that well at all and I don't think they'll give a **** because they've been planning much bigger fish to fry for quite awhile !

On that chart , there's some very serious 20- 30 yr stagnation periods there, yow.

 

[Lukey75]

China Posturing

I aggree, they have actually been dumping ore in harbour regions (Yep in the water) for the last 12 months. This is tatically very clever. If China can control the demand dynamics then they can to a degree control price, with or without Chinalco/Rio.

The current demand side from China is from internal SEZ (Special Economic Zone) infrastructure projects and NOT for international consumables. Very telling. With their incredible foreign cash reserves and their reluctance to float the Yuan, they are the Bully we dont want to be giving our lunch money to, but the one who will be wanting to stand in line at the canteen for!

 

[WinstonWolfe]

I agree Boz. China has the rest of the world over a barrel.
Who does BHP and Rio sell to if not China
For all intents and purposes, the rest of the world is still in recession.
China is now the buyer and consumer of resources and goods.

Their stockpiling is meant to give them negotiating leverage over resource economies.

And there is nothing subtle about their tactics. They will continue to secure global ownership and supply of commodities, then limit supply to the rest of the world. The European Union and the USA have both complained to the WTO about this recently. 1 2

The Chinese, have quite rightly, used the Wests self interested concern about environmental pollution, to argue against increasing production and supply of minerals to the West.

I just sit back and laugh at the arrogance of the West, who don't seem to have woken up yet to their economic impotence......we are still in denial about how our lifestyles are funded, and the pitfalls of our vendor financed economies clocking up ever greater CADs and net foreign debt.

Many don't seem to appreciate the significane of the Chinese earlier this year expressing concern about Obama's massive quant easing plan, or China's current strategy with Rio.

At dinner last night, was an ex Aussie trade commissioner, who voiced that Rudd and Rio were naive in the extreme to allow expensive negotations to go on as long as they did between Rio and Chinalco, knowing that Rudd had no intention of allowing Chinalco ownership of Rio. The Chinese are understandably pi$$ed off.....and you can count on them delivering Rudd and Rio a lesson in who has economic power and who is the better strategist.

 

[Lukey75]

Yep...but quiet ....

Mate, agree with you 100%, very lucky to have this forum without the censorship. A bit of a pickle which RUDD will be a strugle at best to emulate the focus of the PRC, now a face off. Ineptitude and or lack of face is what we are now dealing with and if the other forum observers do not understand the implications to their property portfolio or their holiday house, or share portfolio, then without sounding draconian, history teaches us the future.

 

[boz]

For those considering significantly altering their investment strategy based upon redistribution of wealth concepts ie; short term roll overs and/or speculation, what you are talking about is a function of derivitives or more commonly known as exotics. These are "derived" from an underlying commodity and utilised historically by producers and consumers of said commodity to offset price risk. Honestly if you are considering this as the new way as was implied earlier in the forum of generating wealth as opposed to being a fundamentalist and investing for the long term, then you will be the market makers that inevitably create "us" wealth.

Oil, Gas, Copper, Gold are all traded on the futers market and has been increasingly utilised by non core traders (speculators) for short term gain over the past 10 years. This is where financial markets and many quick round turners have come unstuck very quickly. Just my quick piece, first time poster, long time watcher!!!

If you are considering this approach to investing then I advise ALOT of reading and practical experience.

The view I have for the future is not positive as I said before (wealth reduction), when you don't have a positive view how can you succeed in long term investing? share market going down, home prices going nowhere, bond going up and down like a jo jo and with high risk of patatrack and implode weaker countrys (like it happen with Iceland and could happen to others like Argentina, eastern europe or if things get bad enough even NZ and Australia), even inflation can go higher getting you loosing money, and gold could go nowhere is bond yield stay high enough.
So my strategy now on top of forex trading would be to shorten the share market when you get clear bearish indicaton (like right now) and be ready to get out of it as soon as condition change, but I am not going to invest money in long term bond or long term share holding or home investing for the moment.

 

[steveadl]

when you don't have a positive view how can you succeed in long term investing?

Indeed....