Steve Keen finally admits he was wrong!

[boz]

The stimulus and rate cutting is exactly what I and others predicted would happen. For some reason Keen seemed to think it either wouldn't happen, or wouldn't work.

I always found Keen's position to be slightly bipolar. On one hand he said property would crash by 40%. On the other hand he said interest rates would be slashed to zero! Wrong on both counts, but regardless I could never understand how he thought property prices in Australia would crash 40% in a ZIRP environment. Considering we had mortgage rates almost at 10% in 2008, and prices still didn't crash, what did he think would happen when rates were slashed?

He seems to forget that Australia has one of the highest population growth rates in the world, along with a massive shortage of housing (as demonstrated by Chris Joye recently, and by myself many times in the past on this and another forum). The bears tend to overlook these factors while repeating their mindless mantra that 'property prices must crash'.

At the end of the day, Keen and the rest of the bears are wrong again. I myself have said that Australia may have a property crash sometime in the future, possibly in the next cycle. But it was never going to happen in this cycle. The fundamentals are just not aligned to a property crash right now.

The GFC was a minor blip in Australia's upward trajectory. A second boom is coming. It has already started. Most likely this will grow into a construction-led housing boom, one that will lift Australia's GDP to record levels once again.

Perhaps we will have a crash after this next boom, but only if the fundamentals line up to create the right environment for a crash.

Bit of a crappy post Shadow, stimulus and rate cutting is solving debt problems with taking on more debt. It is a real long lasting solution is it? So great that today current account release is at whoopping -13.3 bil$ for 2nd quarter (and we even still have high commodity prices). We are much closer to deflation and zero interst rates then most member of this forum think.
What is also this construction lead housing boom you are forecasting? number of home build is not as good as government was expecting, the housing industry is better off pushing up prices then risk of having too many unsold homes, i don't think new home inventory is going to rise any time soon. Also haveing GDP at record level is pointless as population is increasing, the GDP per capital and disposable income are more relevant for the australian standard of living. And if you or political class want GDP numbers at record level without a productivity increase to back it up you'll just have to repay it back with future generations standard of living

 

[Ausprop]

"But he is the first to admit that he was perhaps a bit out of his depth when it came to house prices..."

are you for real? this man has become surnonomous with house price forecasting. tens of thousands of people have probably sold up and lost a lot of money on the back of his dire projections and then pow - "duh, sorry folks I was a bit out of my depth with this stuff"

 

[evand]

Are you for real Ausprop. You wheel this one out every now and then and have for ages.

What about the endless stream of property spruikers, seminar presenters, forecasters, property report sellers, dodgy agents and their industry, REI's, HIA's, BA's, two tier sellers and anyone and everyone else with an interest in perpetuating the myth that property prices rise forever and people better buy NOW on that premise or miss out on the dream.

How much damage have they done for years and years on end?

are you for real? this man has become surnonomous with house price forecasting. tens of thousands of people have probably sold up and lost a lot of money on the back of his dire projections and then pow - "duh, sorry folks I was a bit out of my depth with this stuff"

 

[Ausprop]

it's a fair comment but if you make money you don;t complain. If youget 2 tiered spruiked you sue. So with Steven Keen now admitting his advice was dodgy and he doesnt reallyunderstand the subject matter (did he really say that as I find it incredible?) surely there would be an interesting class action there?

 

[evand]

My god, you cant be serious. He didn't encourage anyone to buy or sell. Gordon & Slater would laugh at it.

And i'm sure as a professor of economics he understands it a little bit.

Re making money and not complaining. How many buyers have realised the property dream isnt what its supposed to be after taking advice (and directly encouraged to buy) from anyone of the list i mentioned and sold at a loss. Plenty, plenty, plenty.

The difference is these people actually actively encourage buyers. The prof didn't encourage anyone. Just made public his thoughts on what might happen to property prices.

it's a fair comment but if you make money you don;t complain. If youget 2 tiered spruiked you sue. So with Steven Keen now admitting his advice was dodgy and he doesnt reallyunderstand the subject matter (did he really say that as I find it incredible?) surely there would be an interesting class action there?

 

[steveadl]

Let's hope he didn't have that much influence Ausprop. I do feel a bit sorry if anyone altered their decisions based on his advice, but hopefully it wouldn't have been many.

 

[Ausprop]

My god, you cant be serious. He didn't encourage anyone to buy or sell. Gordon & Slater would laugh at it.

so why the public spectacle and travelling circus? his face was mroe recognised than Paris Hilton for a while there

 

[Ausprop]

Let's hope he didn't have that much influence Ausprop. I do feel a bit sorry if anyone altered their decisions based on his advice, but hopefully it wouldn't have been many.

can gaurantee he had a big influence on many many people. Keen and his merry brigade of bears had me critically analysing my own situation constantly for a year or more.

 

[evand]

Well mate, i don't know. Not sure if it was calculated or accidental.

I suppose someone has to be larger than life. We all cant be struggling vanilla flavored property investors making fun at someone with the balls to have a go while doing diddly squat ourselves. That path is for perpetual losers in my book.

Anyway, I gotta change the fuel filter on my bike now. More entertainment in an hour.

so why the public spectacle and travelling circus? his face was mroe recognised than Paris Hilton for a while there

 

[evand]

I didn't bat an eyelid. Just like i don't blink an eye to the insidious influence of the list in my previous post.

Other people's opinion should not alter ones investing philosophy.

can gaurantee he had a big influence on many many people. Keen and his merry brigade of bears had me critically analysing my own situation constantly for a year or more.

 

[Ausprop]

I suppose someone has to be larger than life. We all cant be struggling vanilla flavored property investors making fun at someone with the balls to have a go while doing diddly squat ourselves. That path is for perpetual losers in my book.

who are all these characters? are you Vanilla flavoured and is Keen the guy having a go? am I the guy doing diddly squat or is that the forum?

doing diddly squat is a course of action tho. Wish I had done more of that 2 years ago.

 

[Ausprop]

I didn't bat an eyelid. Just like i don't blink an eye to the insidious influence of the list in my previous post.

Other people's opinion should not alter ones investing philosophy.

I don't understand this... surely economic forecasts etc form part of your decision making process?

 

[Shadow]

What about the endless stream of property spruikers, seminar presenters, forecasters, property report sellers, dodgy agents and their industry, REI's, HIA's, BA's, two tier sellers and anyone and everyone else with an interest in perpetuating the myth that property prices rise forever and people better buy NOW on that premise or miss out on the dream.

How much damage have they done for years and years on end?

So far none, because the spruikers have largely been correct. Aside from some minor blips in some submarkets, Australian property prices have maintained their upwards trajectory for a long time. Perhaps we will have a crash in the future, but until that happens, the dodgy spruikers have been spot on.

 

[Rockstar]

Other people's opinion should not alter ones investing philosophy.

When or how should one alter ones philosophy then Evan? Experience only?
Peoples opinion kick started my investing journey and has made me plenty of money. I still value those peoples opinion and they continue to affect my investing philosophy. I am sure I am not alone here.

 

[Shadow]

Bit of a crappy post Shadow

Hey, great way to begin your rebuttal Boz.

stimulus and rate cutting is solving debt problems with taking on more debt. It is a real long lasting solution is it?

I didn't say it was? I am on the record as saying we may have a property crash in the future. Just not as part of this cycle.

So great that today current account release is at whoopping -13.3 bil$ for 2nd quarter (and we even still have high commodity prices). We are much closer to deflation and zero interst rates then most member of this forum think.

Hmmm.... where have I heard that before. Boz, you bears are like a broken record... the massive deflation is always just round the corner, always next year, right?

What is also this construction lead housing boom you are forecasting? number of home build is not as good as government was expecting, the housing industry is better off pushing up prices then risk of having too many unsold homes, i don't think new home inventory is going to rise any time soon.

I expect it will happen within the next two years.

Also haveing GDP at record level is pointless as population is increasing, the GDP per capital and disposable income are more relevant for the australian standard of living.

Where did standard of living come into my argument? In any case the high population growth is contributing nicely to higher house prices and higher rents, thereby increasing the standard of living for people who invest in property.

And if you or political class want GDP numbers at record level without a productivity increase to back it up you'll just have to repay it back with future generations standard of living

Boz, you are arguing about what 'should' happen if the world was some socialist utopia where politicians and governments always act in the best interest of everybody. But they don't.

Politicians make the rules and despite their rhetoric, they don't much about future generations. They care about current voters (most of whom own property by the way).

Best to go with the flow Boz, rather than complain about how things should be in a some utopian world.

 

[Aaron Sice]

sorry what's the argument?

it's all irrelevant - keen admitted he was wrong.

seems economists are the people with lesser knowledge about the economy than everyone else.

i'm glad i stuck to my guns with NR. his posts were so apocalyptic is was borderline insanity. given, he had the smarts o back up his claims with data, but when the wiki links came out - i knew he was clutching at straws.

i wonder what he's doing now....?

 

[WinstonWolfe]

The GFC was a minor blip in Australia's upward trajectory. A second boom is coming. It has already started. Most likely this will grow into a construction-led housing boom, one that will lift Australia's GDP to record levels once again.

Perhaps we will have a crash after this next boom, but only if the fundamentals line up to create the right environment for a crash.

Shadow, I am interested in how you think AUstralia is going to finance a private construction led property boom.

What level of GDP growth do you think will provide the debt serviceability for private households to take on the additional debt of a construction led boom.

Where will the credit originate from? And let's not forget why lenders have been tightening credit for the last 6 mths, even before rates start to rise.

What interest rate level do you see threatening a construction led boom?

If Australia's population growth is the key to so much, then explain the GDP per capita trend for the last 4 qtrs.

What % of necessary credit will have to be sourced from foreign wholesale funding? and where will that take our net foreign debt?

And how much will the increase in foreign wholesale borrowing increase our current account deficit?

And finally Shadow.....how does Australia begin to repay the foreign debt it has used to bid up resi property prices......an investment that doesn't generate foreign cash flow (resi housing) to repay foreign debt (money borrowed to buy housing) has to end badly.

 

[natedog]

Now i know nothing about debt/foreign..GDP, blah blah...i will admit very uneducated and ignorant of such figures and the relevance of them to "what happens next"

All i can say is look out for the new home sales data for August in reference to Melbourne anyway...i know the July info just came out, but as a company the builder i work for in Melbourne had biggest month of new sales in history...not a small company either....

Is it a blip due to every new FHOG trying to get a contract signed by end of september...alot of them are...but what i have also noticed is that in the last couple weeks its the upgraders, the ones who sold thier first home to a new first home buyer who are out in force looking to build a new home.

These are people who have some cash in the bank,a little bit of equity to put into the next home, and they arent that dependant on finance.

If you made $100k selling your home, and you are looking at the next home of $400k, thats a decent deposit.

Construction of detatched homes is healthy in Melbourne anyway,

Cheers
Nathan

 

[sash]

Mate be careful what you say.....the Bears will tell you that the sky is black...they won't believe you even though you are on the ground and can see it at the coalface!

For the record....this is exactly what I am hearing...to top it off some of the developers have stopped releasing unregistered land with a 10% deposit. They think they will much more for it in 10-20%. These guys aren't dumb..if this is what they are doing....you can imagine what is going to happen from a demand perspective for the man on the street as they see prices rise and people jump in.

All i can say is look out for the new home sales data for August in reference to Melbourne anyway...i know the July info just came out, but as a company the builder i work for in Melbourne had biggest month of new sales in history...not a small company either....

 

[MichaelW]

Shadow, I am interested in how you think AUstralia is going to finance a private construction led property boom.

Our bulging banks

Whatever happened to Armageddon? Ever since the global financial crisis erupted, the big banks have been soaking up capital at every available opportunity in anticipation of the avalanche of bad debts that would pour through the system. Now they find themselves over-capitalised in an improving environment.

Unless there is another dimension to the crisis, however, by the end of the year all the majors will be starting to think, not of when and how to raise more capital, which has been their preoccupation over the past year, but when and how to give it back.

And finally Shadow.....how does Australia begin to repay the foreign debt it has used to bid up resi property prices......an investment that doesn't generate foreign cash flow (resi housing) to repay foreign debt (money borrowed to buy housing) has to end badly.

Australia in pole position

Which in turn means that Treasury’s ridiculed forecast of 4.5 per cent growth in fiscal 2012 is not only likely to be correct, but will probably happen earlier than even Treasury predicted.

What’s more, there seems to be almost no lasting damage to the Australian economy, apart from the federal budget. And despite the warnings from an increasingly desperate coalition, even that is not particularly serious.

QED

Cheers,
Michael