Steve Keen finally admits he was wrong!

[markpatric]

Keen was always shooting too high, in my opinion he was just trying to grab headlines with his bearish predictions, though do think he has done some great research.

My call around 12 months ago was that we would see 15-20% off the top of nominal prices over the next several years. I still think we'll see it.

This crisis is FAR from over.

I agree this crisis is far from over, it never ceases to amaze how quickly the hordes jump from one bandwagon to the next.
It has been how long since the whole world was in crisis?.
Where are the masses running now, right back to highly leveraged property!, paying top dollar, what does this tell you?, I know what it tells me.
Real estate has overall had the greatest gains over the last six years it has been almost impossible to lose, what does this tell us?.
If there is one piece of advise which generally sums up all investing it is to watch what the masses are doing and do the exact opposite!.
The market has simply been driven up recently by low interest rates and first home buyers, it is artificial in the extreme!, they buy from others and the others upgrade with huge loans on low interest rates.

Real estate is a tricky game and many investors are now barrelling in with the notion that they have a good buffer with 3 to 5 year fixed rates.
The scenario is not far from reality that many will owe big dollars on properties worth far less than they paid.
It is fine to be on a lower payment but not so fine if property prices plummet and stay low for a number of years, then you have the situation where many investors waiting for thier higher interest rates to kick in on thier property which is worth far less than they paid for it.
What if this happened with two, three or ten properties?, remember in Aussie you can`t just hand the keys back.
The ironic aspect of all this is that Steve Keen could still turn out to be correct.
I am sticking by my own predictions that by Christmas we will begin to see a very different scenario.

 

[pieman]

I am sticking by my own predictions that by Christmas we will begin to see a very different scenario.

I am sticking by my predictions that you've got no idea.

 

[yieldmatters]

Any other bears want to admit they got it wrong...?

yieldmatters, nonrecourse...

Nope. The fundamentals aren't there. The government can redirect wealth towards the housing market (by robbing me) and keep it alive for a long time but not forever. Eventually the whole country goes down with it.

By the way - in real terms (after CPI) house prices have gone nowhere. Haven't collapsed but I wouldn't get too excited and claim they are charging ahead. They're not.

 

[steveadl]

Nope. The fundamentals aren't there. The government can redirect wealth towards the housing market (by robbing me) and keep it alive for a long time but not forever. Eventually the whole country goes down with it.

But will you be alive to see it? Or could it continue for the next 50yrs before it all explodes allowing you to have lived a much wealthier life had you invested more now?

There's nothing wrong with a lot of the theories, but if it's not a reality now - why plan your financial life around it as if it is? Like a member here always says (I forget who), play the game the way it is, not the way you think it should be.

 

[Shadow]

Nope. The fundamentals aren't there. The government can redirect wealth towards the housing market (by robbing me) and keep it alive for a long time but not forever. Eventually the whole country goes down with it.

Eventually...

By the way - in real terms (after CPI) house prices have gone nowhere. Haven't collapsed but I wouldn't get too excited and claim they are charging ahead. They're not.

Hmmm... national house prices are up 6% in 2009 so far, and will probably be up 9 or 10 percent by the end of the year. That is clearly beating inflation.

 

[yieldmatters]

Hmmm... national house prices are up 6% in 2009 so far, and will probably be up 9 or 10 percent by the end of the year. That is clearly beating inflation.

From your own link ....

Australian home values are now 1.8 per cent above their previous peak...

 

[kum yin lau]

Hi, I learned in forex trading not to cling to a wrong decision & the sooner I made the U turn, the faster I corrected my position.

There's no advantage in maintaining that selling especially PPOR with the expectation that one could buy back in at a lower price was at all the right call.

We know for a certainty that Keen, NR and YM sold their homes. The point should be not I was right and you were wrong or vice versa but to see what can be done to salvage a wrong decision.

Now if I'd liquidated my assets, I'd plonk all of it back into the stock market and let time and the market do its thing.

Call me a fool but that's what I'd do.

KY

 

[Dazz]

The point should be not I was right and you were wrong

....should not but it certainly looks that way....

In plus or minus 24 hrs there has been 106 replies to this.....so kum the urge to be "right whilst predicting" is obviously pretty strong from alot of forum members....and they take great delight when they get it right.

Not sure there is a dime in any of it, but the satisfaction of "I told you so....nah nah ne nah na" appears alive and well ??

 

[kum yin lau]

Hi again, it's only human & we're equally guilty when it comes to wanting to be right.

The point I was trying to make is the stand we take is very impt as it determines our success or failure in making an investment decision.

2 points are now manifestly clear:
1) house prices are not going to crash anytime soon [they might, we dont know when]
2) selling shares in March/April, or waiting for Allords to reach 2500 was not very clever

So armed with this present knowledge, what can I do about my investment decisions?

BTW I'll be very human & say that I bought shares on 18 Apr & 12 May and if they crash, you can say Told you so!

KY

 

[BayView]

Full article by Chris Joye: http://www.businessspectator.com.au/bs.nsf/Article/Rory-Robertson-Hawkish-pd20090901-VFV9Q

Key paragraphs reproduced below...




Chris Joye is right. And Steve Keen is doing exactly what lots of bears are now doing. He is saying 'I would have been right, if it weren't for X, Y and Z'.

Well, sorry Steve (and bears), but you were wrong. Many sensible investors and economists rightly predicted that interest rates would be slashed and that the government would not stand by and simply watch the economy crash.

Don't bet against the house! As expected, the 'powers that be' stepped in to rescue the economy, avoiding a recession, and ensuring that a healthy housing market was maintained. Their intervention worked. House prices are surging across the board now, not just in the FHB market but also mid and upper end property values are rising. Auction clearance rates are very high, finance commitments (a leading indicator) are soaring, and housing credit growth is accelerating for the first time in several years.

Cheers,

Shadow.

Oh, my god; does this mean that if I dare to hold my properties indefinitely their values may just .....go up?

You've all heard me rabbit on about this before; I'm in the older age group here (48), so by virtue of this I've seen much under the sun.

One thing I've never seen happen over the longer term (10 years or more) is house prices go down.

Now, this may not mean that property is the best investment vehicle going around, but it certainly isn't the worst if you have the longer term view and can use leverage safely and effectively.

 

[Shadow]

From your own link ....

Yes, currently 1.8% above their previous peak, but that includes the period during 2008 where prices fall by about 4%. In 2009 those falls have been more than wiped out. Currently, and throughout 2009, house prices have been beating inflation.

Obviously they didn't beat inflation during the temporary blip in 2008 when prices fell.

 

[yieldmatters]

Yes, currently 1.8% above their previous peak, but that includes the period during 2008 where prices fall by about 4%. In 2009 those falls have been more than wiped out. Currently, and throughout 2009, house prices have been beating inflation.

Obviously they didn't beat inflation during the temporary blip in 2008 when prices fell.

So the performance depends on the time frame selected. Thanks for pointing that out.

How about this, "since early 2008 when many people thought residential property would collapse it hasn't collapsed but remains down slightly in real terms." Is that a fair statement?

 

[jingo]

....Not sure there is a dime in any of it, but the satisfaction of "I told you so....nah nah ne nah na" appears alive and well ??

So true TPFKAD,

The topic of residential house prices and their intrinsic value has been debated adnausium. Regardless of one's prefered asset class the real results are measured in $ not words and theories.

YM may have made a stack of cash from the share market and commodities over the past year or so. Real estate investors (RIP) have probably seen their investments rise in value too.

Each asset class has it's pro's and con's. All roads lead to Rome, how you get there is a matter of choice.

Personally, I have made some very bad choices with my superannuation. However, the bulk of my assets are in Real Estate and the gains in my portfolio have easily compensated for the mistakes that I made with my superannuation.

Good to see you back YM. Your comments on the recent activities in real estate make for an interesting read.

Regards Jason.

 

[Shadow]

How about this, "since early 2008 when many people thought residential property would collapse it hasn't collapsed but remains down slightly in real terms." Is that a fair statement?

Yes, 2008 was a minor temporary blip in Australia's upward house price growth trajectory, which has now resumed course.

By the way, I noticed you started a thread tonight on another forum where you basically agree with my prediction - that is, that Australia may experience a construction led property boom, potentially resulting in an oversupply situation, eventually followed by the big crash. Do you also agree that it may happen in the same time-frame as I expect - i.e. possible crash around 2015?

Are you finally agreeing with me, now that you have seen my other predictions come true (stock market crash, interest rates to be slashed from 2008, no Australia recession, US house prices rising by end of 2009 etc.)

Cheers,

Shadow.

 

[chilliaa]

....should not but it certainly looks that way....

In plus or minus 24 hrs there has been 106 replies to this.....so kum the urge to be "right whilst predicting" is obviously pretty strong from alot of forum members....and they take great delight when they get it right.

Not sure there is a dime in any of it, but the satisfaction of "I told you so....nah nah ne nah na" appears alive and well ??

Of course, because this is a forum of information sharing.
Many of the moderates on this forum were never arguing for boom time conditions (although they will be happy to receive them). They were stating that IN THIS CYCLE based on available evidence residential property might have fallen up to 15% accross the board, but the probability of 40% declines were negligable.
They were then stating why a person should hold even if such declines (up to 15) should eventuate.
But the D&G'ers were very admiment that its either liquidate and get LVR's down to 30% or face bankrupcy.

Now when you have skin in the game and you are being bombarded by extreme negative newsflow from the media, those posts by the moderates served a very useful function to those with investment exposure.

 

[joe jo jo]

my 2 cents. With the talk of construction led oversupply (i.e. like USA). I think we may have missed this by dumb luck. The oversupply was largly contributed by very lax lending and government intervention (in the US) from what I can tell.
I think that through dumb luck we missed the synergy of government intervention and lax lending. Aust lending was a bit behind USA in inovative products to draw equity above 100%, but we have been hit by the GFC before lending policy finally got to that destination.
Lending is tighter now and will be getting tighter after Jan most likely which may slow down the construction boom we are all predicting (unless the gov jump in and give more incentive).
There are still problems, but I dont see construction being the major contributor to the next expected crash (more like if China *****'s itself).

 

[yieldmatters]

Yes, 2008 was a minor temporary blip in Australia's upward house price growth trajectory, which has now resumed course.

Must save this one.

 

[evand]

I'm still waiting to see evidence of your predictions pre stimulus. I mean evidence from this forum.

Y

Are you finally agreeing with me, now that you have seen my other predictions come true (stock market crash, interest rates to be slashed from 2008, no Australia recession, US house prices rising by end of 2009 etc.)

Cheers,

Shadow.

 

[WinstonWolfe]

Yes, 2008 was a minor temporary blip in Australia's upward house price growth trajectory, which has now resumed course.

Which course is this Shadow, the one of sub 6% interest rates, or the one of above 8% interest rates?

 

[evand]

All these characters are all the anonymous posters who find it so easy to endlessly criticise someone for having ago.

So what if he was wrong. Why so much outrage and ridicule?

It all comes across as a bunch of insecure little investors taking much pleasure poking fun at someone because they had the kahunas to have a go.

At least he had the balls to state what he believed publicly. It is easy to bag someone from behind a monitor, safe at home with no risk whatsoever.

People might not realise it but that is the path (and mindset) to stay small and the road to Loserville.

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.