Steve Keen finally admits he was wrong!

[WinstonWolfe]

It is always the same story that many home investor just
look at what they like to look

So true Boz. You'd have to think many property investors let self interest as dictated by their particular time line and portfolio, bias what they think are meaningful fundamentals.

A young fella with a longer time horizon, who read their views, might be seriously led astray.

 

[Shadow]

Sure Shadow, but part of fundmentals is also NFD, like WW keep pointing out its importance, current account, inflation (and interest rates related to it), trade deficit, budget deficit (because of an unsustainable stimulus), home value related to income and gdp, commodity prices, etc.

Please explain how those factors are currently negatively impacting the property market?

But of course some look only to fundamental of minor importance like the unmeasurable housing shortage, banking funding guarantee, FHGrant, etc. It is always the same story that many home investor just look at what they like to look

Shortage of property is of minor importance?

Bank guarantee is of minor importance? (better tell YM, he thought it was pretty important).

 

[WinstonWolfe]

Please explain how those factors are currently negatively impacting the property market?

If you are only interested in current impacts Shadow, that's a pretty short timeline you have, and not of much benefit to investors trying to allocate their capital where it might be most needed for future requirements.

Futher Shadow, why not explain how these factors will positively impact the future property market.

 

[Shadow]

If you are only interested in current impacts Shadow, that's a pretty short timeline you have, and not of much benefit to investors trying to allocate their capital where it might be most needed for future requirements.

I have already said clearly that I don't expect a property crash in this cycle, and that we may have a property crash in the next cycle, but only if the fundamentals change.

I'll keep an eye on those fundamentals. Today they are looking positive for property prices. Tomorrow, who knows.

Prices are rising today based on the fundamentals today (population growth, shortage, low interest rates etc.)

Those fundamentals don't appear to be reversing significantly in the short to medium term.

 

[boz]

So true Boz. You'd have to think many property investors let self interest as dictated by their particular time line and portfolio, bias what they think are meaningful fundamentals.

A young fella with a longer time horizon, who read their views, might be seriously led astray.

Still, I agree with keithj:

those with a political/social agenda (or simply a negative bias) tend to concern themselves primarily with what should be.

so, on top of that you get investor and property owners that see what they want to see and you end up getting bubbles everywhere, volatility as high as you can get, specially with debit/credit at huge level a few % move in portfolio get huge imbalances, this couldn't happen 10-20-50 years ago when credit/debit level where much lower. This is just very risky times for any assets holder

 

[boz]

Please explain how those factors are currently negatively impacting the property market?

just look at USA and UK property developement, the primary fundamental in those cases was too much debt and too expensive home prices (in relation to debt and to income)

Shortage of property is of minor importance?
no it is important factor but not really measurable, if you have a bubble on gdp, consumer spending and debt like in US and UK and Australia you can't measure the house supply need, you have to measure any house need when you have a sustainable credit grow and sustainable consumer spending and budget balance
Bank guarantee is of minor importance? (better tell YM, he thought it was pretty important). yes, that is of minor/irrelevant importance during normal market condition like now, infact banks don't need government funding guarantee anymore

what is worrying me is that more and more expensive housing will just reduce developer availability of money to build new homes. So we risk into getting in a society with a ever expensive homes and a ever shortage of new home build. and that definetly is not a better society either for developer then for home owner

 

[Shadow]

what is worrying me is that more and more expensive housing will just reduce developer availability of money to build new homes. So we risk into getting in a society with a ever expensive homes and a ever shortage of new home build. and that definetly is not a better society either for developer then for home owner

Haha. Exactly Boz. You are coming round to my way of thinking.

We must base our financial decisions on what is happening, not what we feel 'should happen for the good of society'.

You and I can't really change society. We must play with the hand we are dealt.

I agree, more expensive homes, and a shortage of homes, is bad for society as a whole. But I am unable to change that. So should I place myself into a position where that situation benefits me, or one where it disadvantages me.

I choose the former.

 

[turk]

Quote:
Originally Posted by boz
It is always the same story that many home investor just
look at what they like to look


Originally Posted by Winston Wolfe
So true Boz. You'd have to think many property investors let self interest as dictated by their particular time line and portfolio, bias what they think are meaningful fundamentals.

A young fella with a longer time horizon, who read their views, might be seriously led astray.
__________________
OriginallyPosted by Winston Wolfe

I acknowledge some PIers prefer not to consider or study the downside at all, whether short, medium, or long term. Personally, I prefer to follow the advice of those who prioritize covering the downside and letting the upside look after itself.


It seems that home investors are not the only ones with personal bias.

Winnie,

-do you stop following the advice of a commentator when he switches from
a bearish to a bullish position?

-Weighing up charts, graphs and commentators opinions what was your opinion on the
direction Aust. property over the last 2 years and what do you feel is the short medium and long term future for Aust. property?

I've been bearish on Aust. stocks and property in the short term and remained bullish long term, I trade shares and am a trend follower so downside is covered and with property I make sure I have cover should the market collapse to the extent Keen forecast.

It appears to me that whether bullish or bearish it is wiser not to be blinkered.

Cheers

Pete

 

[boz]

Haha. Exactly Boz. You are coming round to my way of thinking.

We must base our financial decisions on what is happening, not what we feel 'should happen for the good of society'.

You and I can't really change society. We must play with the hand we are dealt.

I agree, more expensive homes, and a shortage of homes, is bad for society as a whole. But I am unable to change that. So should I place myself into a position where that situation benefits me, or one where it disadvantages me.

I choose the former.

you and me can't change it but politics and markets can change it. It did happen also in Japan 20 years ago when specially in Tokio home prices went absolutly crazy, and i guess everyone was pointing out at a shortage of property in tokio as the main cause of price rises. but that shortage was caused by economic growth out of control and too low interest rates for too long and a permanently high eployment rate, very few knew that at that time. I don't believe that today in prime location of tokio there are many more home build since then, but home prices did fell over the 20 year. in australia could happen the same, would be different if fundamental like saving and debt would be much lower in australia (like in mainland europe for example).

 

[Shadow]

you and me can't change it but politics and markets can change it. It did happen also in Japan 20 years ago when specially in Tokio home prices went absolutly crazy, and i guess everyone was pointing out at a shortage of property in tokio as the main cause of price rises. but that shortage was caused by economic growth out of control and too low interest rates for too long and a permanently high eployment rate, very few knew that at that time. I don't believe that today in prime location of tokio there are many more home build since then, but home prices did fell over the 20 year. in australia could happen the same, would be different if fundamental like saving and debt would be much lower in australia (like in mainland europe for example).

Yes, things could change in the future. We agree on that point.

We should always be on the lookout for a change in the fundamentals. Then we can adapt to deal with that change.

Since it is very hard to predict what changes might occur in five or ten years time, isn't it best to base our financial decisions on what is happening now, and what we can reasonably expect to happen over the short to medium term?

 

[Ausprop]

hence we come back to the same conclusion... make sure your cashlfow is neutral, then your downside (within reason) is limited, upside is not.

 

[boz]

isn't it best to base our financial decisions on what is happening now, and what we can reasonably expect to happen over the short to medium term?

yes, if you are a property speculator is a good way, probably many investor look also at the long term and at cash flow like Ausprop is pointing out.
I think you are better stay out from short/medium term property investment if you are not a developer or a very experienced speculator

 

[Player]

Work and invest with what we now have.

Whilst the following has no direct specific mention of fiscal policy and economic applicability, it may serve as a reminder to work with what we have at present, inclusive of considering one's own appetite for risk.


God/Universe (insert your own metaphor),

"Grant me the serenity to accept the things I cannot change; the courage to change the things I can and; the wisdom to know the difference."



This is called the serenity prayer. More relevant to behaviour change, however not entirely removed from accepting the situation (fundamentals) as they are now (here in Australia) and making our own informed decisions based upon that and, not upon what we wish to see in the fiscal environment or what should be.

 

[Shadow]

yes, if you are a property speculator is a good way, probably many investor look also at the long term and at cash flow like Ausprop is pointing out.

I think you are better stay out from short/medium term property investment if you are not a developer or a very experienced speculator

There is an element of speculation in everything.

By not buying property you are speculating that the current positive fundamentals will change before you could gain a financial benefit.

By buying property, the investor is speculating that those fundamentals will not change before they can gain a financial benefit.

 

[WinstonWolfe]

Winnie,

-do you stop following the advice of a commentator when he switches from
a bearish to a bullish position?

I try to take in ALL the fundamentals, not just those that support my capital as it is invested today. To do the latter is to passively outsource your future to organizations like the RBA, who aren't concerned first and foremost about your future....

Pre GFC, there were a lot of fundamental signs risk was growing....like an inverted yield curve, ted spread, libor trend. Soros, Faber, Shiller, Shilling, Gross, Roubini, Ritholz, etc, etc, etc.

-Weighing up charts, graphs and commentators opinions what was your opinion on the
direction Aust. property over the last 2 years and what do you feel is the short medium and long term future for Aust. property?

Since mid 2007, I've thought there'd be little to no growth in passive property investing, and any growth beyond that would come at additional risk. I chose to lower my exposure to property.

I've been bearish on Aust. stocks and property in the short term and remained bullish long term, I trade shares and am a trend follower so downside is covered and with property I make sure I have cover should the market collapse to the extent Keen forecast.

It appears to me that whether bullish or bearish it is wiser not to be blinkered.

Cheers

Pete

Definitely agree it is better not to be a permabull or permabear.

 

[yieldmatters]

They are rock solid. The bank guarantee is part of the fundamentals that make them so, along with the shortage, population growth, stimulus etc.

The assets (house values) supporting the debt is rock solid so we don't need a guarantee. The guarantee makes the assets rock solid. Something circular here ---- hhhhhmmmmmm

 

[turk]

Definitely agree it is better not to be a permabull or permabear.

Winnie, thanks for your reply.

I may be completely wrong here but it seems that you have a bit of an obsession with finding and posting bearish views which leads to some here seeing you as a uber-bear where as you may feel that at times a reality check is needed.

Are you our devils advocate?

Cheers

Pete

 

[Shadow]

The assets (house values) supporting the debt is rock solid so we don't need a guarantee. The guarantee makes the assets rock solid. Something circular here ---- hhhhhmmmmmm

We need the guarantee because other countries have one. When other countries remove theirs, we no longer need ours.

Simple. Nothing circular about it.

 

[chilliaa]

We need the guarantee because other countries have one. When other countries remove theirs, we no longer need ours.

Simple. Nothing circular about it.

Yes very true, when credit markets are not priced efficiently unfortunately these sought of things are a necessary evil.

However the markets are slowly opening up now, nothing like pre 2008, but they are thawing (spelling?)

 

[boz]

We need the guarantee because other countries have one. When other countries remove theirs, we no longer need ours.

Simple. Nothing circular about it.

Do you have some data shadow?
I don't have data on how much banks in major country used the government funding guarantee.
Australian banks needed badly the funding, overseas banks had very little need (if nothing), they needed capital to cover the losses on their assets.