Share your "but this time it's different" stories

[jerrybee]

During the GFC I had a friend that was "educating" himself by watching doomsdayer vids on YouTube. He was talking about how "but this time it's different" because people had more credit cards and therefore debt than in any other time in history. He talked about how we would regress to a fiat currency and began stocking up on silver (why silver and not gold I'm not sure), which he still holds and has gone to halve in value.

History has proven things are extremely cyclical. Not because of some mystical force, but simply because economics is not a perfect science and we always over and under shoot. That's just the way it is. But time and time again some people insist on rejecting hundreds of years of evidence - I thought it would be interesting to share stories of these "history deniers".

 

[BayView]

The history deniers are usually (but not exclusively) the younger folks.

Old pr!cks like me then come on here and argue against that.

Only because we have seen it before, and the old adage of "there is nothing new under the Sun" gets trotted out.

The current catastrophe is the affordability issue.

I have seen it fluctuate a few times - all to do with wages versus prices at that point in time, plus or minus interest rates, plus or minus employment climate, plus or minus availability of credit and so on.

The biggest change to affordability - which is a forever change - is the double-income household.

In past generations this was a minority scenario. Nowadays it is pretty much a given.

The impact of this on the FHB is no doubt greater, so the focus for them has to change.

All of what you say has happened before, and will happen again - Stockmarket crash for eg.

 

[Deltaberry]

Yea when I was 20 I used to deny history. At 29, I know all things mean revert.

It's the same every time. Buy at the bottom, cash in some at the top. Rinse and repeat.

To be honest I don't know any deniers. I think most people are pretty level headed about these things, which is why in the downturn, it'll only fall 10-15% and stagnate 2-5 years, rather than crash 30%.

Not enough people are invested to crash the market heavily.

 

[TMNT]

'but this time its different, shes different'

from a friend of mine who goes to thailand and visits the girly bars

oh are we talking about economics or something else

 

[Ausprop]

it's never different until it is different. I understand the GFC was not just a bump in the road but rather the precipice of a cliff that we luckily pulled back from. Only yesterday I saw a mainstream news article saying we aren't yet out of the woods.

If nothing ever changed we would still be paid in salt. Change is inevitable... change is what should be expected. I would say we should expect a complete collapse of the financial system at some point.

 

[jerrybee]

I would say we should expect a complete collapse of the financial system at some point.

A collapse that we never, ever, ever recover from? Because this is what it means not to follow a cycle.

 

[JohnMichael]

An article with some great general points about investing IMO

http://www.smh.com.au/business/motley-fool/what-ive-learned-about-investing-20140617-3aazp.html

Not really disagreeing with the points above, but a different slant on it:

I've learned that what looks like tomorrow's biggest threat almost never is. Most of what people worried about over the last five years - inflation, rising interest rates, a double-dip recession, stagnant markets, Greece leaving the euro, a government default -never occurred. The biggest actual risk for most of us was something few talked about: excessive pessimism.

...

I've learned that people are twice as biased as they think they are, which is precisely why biases are dangerous.

I've learned that unsustainable things can last years, even decades, longer than people think.

I've learned that those who think "it's different this time" are the four most dangerous words are wrong. It is always different this time, as no two recessions, recoveries, or market cycles are alike. What's dangerous is assuming the future will perfectly resemble the past.

 

[hobo-jo]

Not enough people are invested to crash the market heavily.

The stats show there are record breaking numbers of investors buying in Sydney at the moment (relative to owner occupiers, nominal lending, etc)... of course the records only go back so far, but what exactly would you need to see in the data to think a crash is possible?

 

[Deltaberry]

When you buy I know a big crash is around the corner

 

[hobo-jo]

The old 'humour to deflect a legitimate question' eh?! You should be in politics.

 

[see_change]

The old 'humour to deflect a legitimate question' eh?! You should be in politics.

But it's true

Cliff

 

[see_change]

The stats show there are record breaking numbers of investors buying in Sydney at the moment (relative to owner occupiers, nominal lending, etc)... of course the records only go back so far, but what exactly would you need to see in the data to think a crash is possible?

Seriously though , a crash is always possible , and if it did happen it would probably come from something unexpected .

A black swan event .

If it's predictable , I believe it would be preventable ( though that might be nieve )

Having said that I don't believe any too drastic is about to happen otherwise I wouldn't be buying as many ip's as I can organise at the moment .

Cliff

 

[Shadow]

The stats show there are record breaking numbers of investors buying in Sydney at the moment (relative to owner occupiers, nominal lending, etc)... of course the records only go back so far, but what exactly would you need to see in the data to think a crash is possible?

When the last Sydney boom died, Sydney rental vacancy rates were at 4.5%, interest rates were rising, the NSW govt had introduced vendor duty, and there was a lot of stock on the market.

Today, vacancy rates are around 2%, interest rates are much lower (and not going up any time soon), and stock levels in Sydney are lower than in Melbourne, Brisbane and Perth!

Also, I suspect much of this talk in the media about unaffordability has been manufactured by the government so they can pass new laws allowing FHBs to access their Super for a deposit... the govt will then be seen to be addressing the 'affordability crisis'.

We're a long way from the peak of this boom in Sydney.

 

[keithj]

The stats show there are record breaking numbers of investors buying in Sydney at the moment (relative to owner occupiers, nominal lending, etc)... of course the records only go back so far, but what exactly would you need to see in the data to think a crash is possible?

A few things that may cause a crash -

• IRs rising to 7% - however current thinking is that low IRs is the 'new normal' - (especially in Oz for the medium term IMO)
• Unemployment continuing to rise q/q - however todays (surprise) was an improvement to 6.0% (but could easily change)
• GDP -ve for more than just a couple of quarters - not looking likely ATM, but could easily change
• Median Wage/Median Price ratio exceeding all other major cities (NY, London etc)
• 0% Popln growth - however, govt will ensure it will increase by 50% within ~25 yrs.
• ... there's probably others
• However, IMO sentiment is the most likely cause for the boom to finish & the usual stagnation/dip to happen while wages take a few years to catch up.
• The other more likely possibility is some black swan event - it really will be different next time.

 

[natedog]

What isn't different this time and never will be is that people need and want shelter.

The value we put on a shelter in $$$ terms will forever be at the mercy of more factors at any different point in time than one can ever put into a simple formula....although in hindsight it "always" seems obvious

I beleive (feel free to disagree) that the purchase of a property is driven 100% of the time by emotion, rather than logical numbers.

Owner occupiers- emotion.

Investors fear of missing out- emotion.

I don't invest in property for the fun of it, I invest in property because I am emotionally driven to get to a goal of financial independence and providing more choices for my family-emotion.

It's because of all this emotion that it might forever be a case of "same same, but different".

 

[Beelzebub]

This documentary is relevant.

It's all about the history of money and goes through all the boom and busts since the tulip bubble in the 17th century. Well worth the five hours

Definitely helped me with my macro understanding of how economies and how money works.

https://www.youtube.com/watch?v=fsrtB5lp60s

Cheers
Beelzebub

 

[Nick Valsamis]

When the last Sydney boom died, Sydney rental vacancy rates were at 4.5%, interest rates were rising, the NSW govt had introduced vendor duty, and there was a lot of stock on the market.

Today, vacancy rates are around 2%, interest rates are much lower (and not going up any time soon), and stock levels in Sydney are lower than in Melbourne, Brisbane and Perth!

Also, I suspect much of this talk in the media about unaffordability has been manufactured by the government so they can pass new laws allowing FHBs to access their Super for a deposit... the govt will then be seen to be addressing the 'affordability crisis'.

We're a long way from the peak of this boom in Sydney.

I don't think the government has anything to do with the media. You know the media just report on what will get the most interest and get the general public talking. Real news barely hits the media.

Anything is possible. The boom will last as long as people keep buying and paying higher prices. Either way it's not slowing down so no one can really determine how long and how much.

 

[BayView]

The stats show there are record breaking numbers of investors buying in Sydney at the moment (relative to owner occupiers, nominal lending, etc)... of course the records only go back so far, but what exactly would you need to see in the data to think a crash is possible?

To me, a crash would have to be a "perfect storm" of factors (in Aus)...

1. Sudden or rapidly dramatic increase of interest rates making serviceability difficult.
2. Higher than usual unemployment, and high (media) profile of mass job losses in the community..
3. Weak economic outlook and/or recession
4. Community sentiment of D&G - see points 2&3
5. Restrictions on lending and/or availability of credit.
6. Other catastrophic event such as war, and/or world-wide Stockmarket crash or another GFC, etc.

The likelihood of all these events occurring together in Aus are slim I suspect, but I guess it could happen.

Lots of folks come out with the "but it's different this time", but from my observation, so far in Aus we have been insulated to a large degree from the possible crashes.

From my memory; the only real "crash" was when the interest rates hit 18% back at the end of thew '80's and folks had to offload their PPoR's etc because they couldn't afford to pay their loan repayment.

My parents still managed to hold onto their house; but it was in the lower percentile of price range.

 

[BayView]

Also, I suspect much of this talk in the media about unaffordability has been manufactured by the government so they can pass new laws allowing FHBs to access their Super for a deposit... the govt will then be seen to be addressing the 'affordability crisis'.

That's ridiculous.

Conspiracy theorist...

The media report on affordability partly because of talk around the communities by a noisy minority - on social media, no doubt, (and partly because half of the media are the ones who it is affecting and it's their chance to sook) and a comparison of stats from places like the ABS on average wage medians versus house medians, etc..

Of course; we all know that a median in each of those two camps is not representative of true reality.

 

[HomePage]

But time and time again some people insist on rejecting hundreds of years of evidence

Indeed. House prices consistently exceeding wage growth must have been happening for centuries for people to keep buying up for investment the way they do.