Steve Keen finally admits he was wrong!

[Aaron Sice]

and if the world didn't have money, would the US still want to own it? what if gold didn't exist - would Caifornia and Kalgoorlie exist today?

seriously Bill....?! or am i missing sarcasm there?

sorry, but WA is a big dirty hole in the ground where lots of cool stuff comes out on the back of trucks and out of pipes from under the ocean, that is sold for a motza on the international stage. employment in WA is still low compared to Australia (and Ireland and Spain too...) and our median house prices have just passed the "boom" top.

there's no "what if" because without WA and QLD, this country grinds to a screaming halt, bursts into flames, dissolves the tarmacadam underneath and ends up a big gooey pile of plastic, cheap backbencher suits and cappucino cups.

 

[yieldmatters]

Wholesale bank funding guarantee

The RBA had an impact in saving the property market (lower rates) but the number 1 influence by far was the wholesale bank funding guarantee. It was not something I expected.

The whole property market is absolutely dependent on the flow of credit to keep the valuations at record highs. This credit comes from overseas (at the margin) as we simply don't save enough. If it wasn't for the wholesale funding guarantee that would have been the end of the game - no doubt.

So if you want to thank anybody for saving the market, thank Rudd. That was the key to it all. Now, how do they reverse that guarantee without causing any trouble? Sounds like a big challenge.

Because I actually "earn" my money I pay a lot of tax (no CG tax discount for me) so you can probably thank me as well for bankrolling the government's wholesale funding guarantee.

 

[Aaron Sice]

The RBA had an impact in saving the property market (lower rates) but the number 1 influence by far was the wholesale bank funding guarantee. It was not something I expected.

yeah that was left field - and they still bend us over withholding cuts and sneaking in 0.1% here and there...

The whole property market is absolutely dependent on the flow of credit to keep the valuations at record highs. This credit comes from overseas (at the margin) as we simply don't save enough. If it wasn't for the wholesale funding guarantee that would have been the end of the game - no doubt.

fo' shizzle it would have been worse - pretty sure it was put in place to avoid those fun times down in the line at IndyMac. dunno about "end game" but def. worse.

So if you want to thank anybody for saving the market, thank Rudd. That was the key to it all. Now, how do they reverse that guarantee without causing any trouble? Sounds like a big challenge.

that's the trouble with handout mentalities - take take take take take take take give complain take take take take take.....

Because I actually "earn" my money I pay a lot of tax (no CG tax discount for me) so you can probably thank me as well for bankrolling the government's wholesale funding guarantee.

remind me i owe you a pint next time i'm in mexico - sorry, i mean over east.

 

[boz]

The RBA had an impact in saving the property market (lower rates) but the number 1 influence by far was the wholesale bank funding guarantee. It was not something I expected.

The whole property market is absolutely dependent on the flow of credit to keep the valuations at record highs. This credit comes from overseas (at the margin) as we simply don't save enough. If it wasn't for the wholesale funding guarantee that would have been the end of the game - no doubt.

So if you want to thank anybody for saving the market, thank Rudd. That was the key to it all. Now, how do they reverse that guarantee without causing any trouble? Sounds like a big challenge.

Because I actually "earn" my money I pay a lot of tax (no CG tax discount for me) so you can probably thank me as well for bankrolling the government's wholesale funding guarantee.

Interesting post, I agree with that. Not sure what would have happen without the funding guarantee, probably RBA could have stepped in and would have lended more money in exchange of not prime quality assets for a longer term, but most probably australian banks would still have restricted lending more and more starting a chain that destroy value in property market and foreclosure increasing etc.
But, no doubt about that at the beginning in september/october last year the FED saved australia from imploding printing huge amount of US$ and stating the money swap with other major countries. Without that the investor would have pushed up the US$ so much that credit in australia (and many other countries) would have been destroied

 

[Shadow]

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

I wasn't very active on this forum at the time, and I still only have less than 900 posts on Somersoft. I was a lot more active on the other forum (3500 posts). But those posts were all deleted by the moderators when they turfed me out.

This is the only one I can find on SS...

http://www.somersoft.com/forums/showpost.php?p=302843&postcount=5

QUOTE Shadow Jun 22 2007

I don't think it's the right time to get into shares now, I'll wait for the big stock market crash... that's coming up within two years

 

[Shadow]

None? What a laugh. You lose credibility real quick with that stuff.

Yeah, if you say so.

I have read many posts just on here about people making bad buying decisions and having to sell the farm to survive. If it wasn't for their high wages (or their partners high wages) to survive they would be IP'less and possibly, worse case PPOR'less.

Quite a few prominent posters were struggling during the last rising interest rate cycle. And that's just on this forum. It happens everywhere.

And you blame the spruikers for all that? Your question was "how much damage have the spruikers done by perpetuating the myth that property always goes up". I said "none, so far, because the spruikers have been proved right so far".

Property prices have continued to rise. We haven't had a serious crash, just a normal cyclical correction.

People make mistakes all the time. It happens. Bad things happen. Seems silly to go round blaming 'spruikers' for this.

 

[topcropper]

This is the only one I can find on SS...

......."QUOTE Shadow Jun 22 2007

I don't think it's the right time to get into shares now, I'll wait for the big stock market crash... that's coming up within two years'........



Nice prediction.

Your prediction about the next property slump? That's about when Krudds emissions trading tax from hell will be having an effect on exports. You might be right there too.

See ya's.

 

[Shadow]

You have to blame the elites who got it so stupendously wrong for the over?attention Keen got. The RBA were wrong footed, and that added to fear, doubt, and uncertainty.

Australia is the only comparable country in the world to avoid recession.

Doesn't seem to me like they got anything stupendously wrong.

How would you have described their actions if we had ended up like UK, USA, Ireland or Spain?

 

[Shadow]

The RBA had an impact in saving the property market (lower rates) but the number 1 influence by far was the wholesale bank funding guarantee. It was not something I expected.

The whole property market is absolutely dependent on the flow of credit to keep the valuations at record highs. This credit comes from overseas (at the margin) as we simply don't save enough. If it wasn't for the wholesale funding guarantee that would have been the end of the game - no doubt.

The governments of most comparable countries around the world implemented bank guarantees. Rudd was forced to follow, to prevent a capital flight from Australia. You should have expected Rudd to do this, as soon as the other countries did.

 

[WinstonWolfe]

Australia is the only comparable country in the world to avoid recession.

Really? which other 'comparable country' was able to sell as many commodities to China throughout the GFC?

Why have we had 5 consecutive quarters of negative gdp per capita growth?

 

[boz]

The governments of most comparable countries around the world implemented bank guarantees. Rudd was forced to follow, to prevent a capital flight from Australia. You should have expected Rudd to do this, as soon as the other countries did.

Probably Australia's banks used the guarantee as much as all the other major countries put together
more then capital flight from australia was to prevent capital stopping to come in. If capital flight from australia is matter of weeks before australia implode like iceland

 

[yieldmatters]

The governments of most comparable countries around the world implemented bank guarantees. Rudd was forced to follow, to prevent a capital flight from Australia. You should have expected Rudd to do this, as soon as the other countries did.

Why did we need to do it though? I thought our housing assets were rock solid? Can't international investors see that? Isn't it obvious to them?

 

[WinstonWolfe]

Australia is the only comparable country in the world to avoid recession.

Doesn't seem to me like they got anything stupendously wrong.

How would you have described their actions if we had ended up like UK, USA, Ireland or Spain?

How much future tax revenue expenditure did we bring forward, compared to comparable countries?

How many FHBs will there be next year?

 

[boz]

How much future tax revenue expenditure did we bring forward, compared to comparable countries?

How many FHBs will there be next year?

I am sure shadow is counting on immigrant and population increase, after all, if you get 300k new immigrant/population increase and get an average of 100k debt shortly after they cross the border (to buy a home) that make a new 30 bil$ or 3% of gdp...

 

[Shadow]

Why did we need to do it though? I thought our housing assets were rock solid? Can't international investors see that? Isn't it obvious to them?

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

Of course you could come along and tell me that the housing market would not be so strong if there was no population growth, no shortage, interest rates were higher, stimulus was removed, unemployment 5 points higher and bank guarantees were lifted.

True, but irrelevant. Those things are all in place. They are the fundamentals.

 

[keithj]

True, but irrelevant. Those things are all in place. They are the fundamentals.

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

 

[Rockstar]

Absolutely...... Investors tend to deal with what is,

Timely reminder from MY just floated into my inbox.

Lately the economic news has been changing. There’s lots of talk about the next real estate boom and property is back in favour. Once again it is the favourite topic at dinner tables and barbeques.

At one of my seminars last week an attendee approached me during the break and said: “I hear what you are saying about how we have entered a new property cycle and that we are getting set for the next property wave, but…” and then he cited the names of a number of economists who had the opposite opinion. One said property values would still drop 30%. Another suggested property prices won’t increase for another 10 years and then there’s the IMF which still suggests our property values are up to 15% overvalued.
So who is right?

Those who suggest property values will once again boom, or those who say that property prices will stagnate or fall?
Obviously I am on the side of those who suggest we are entering a new property cycle and that values will increase significantly over the next few years. But I am not saying that based on hope or prayers. I’m suggesting this based on research and property fundamentals.

These are the same fundamentals that made me a lone voice earlier this year, when everyone else was talking doom and gloom. Remember I was explaining how we were getting set for the next property cycle? I suggested that we were in the perfect storm - a confluence of a number of factors that when combined, would set the stage for the next property boom. All we were waiting for was consumer confidence to rise once more. And since that has returned the price of the type of property I was suggesting you buy has in many cases gone up 10% to 15%.

In general you will find that the economists who are suggesting real estate values are currently overpriced are not “property people”, they are “share people”; they evaluate property like other commodities and it really doesn’t work that way in Australia.

“Yeah but what about affordability Michael?” I hear some of you asking. “How will people be able to afford houses when property values double over the next 7 years like you suggest?”

Property has always been unaffordable to some and will only become more so as our capital cities mature. When my parents bought their first home property values were unaffordable - they took out a 30 year loan to repay their $12,000 home loan. When I bought my first home $18,000 seemed an almost unattainable price.

In every generation, most first home owners have had difficulty buying capital city properties, but established home owners have not found property values unaffordable, otherwise they wouldn’t be paying so much for their properties – would they?

Think about it…. 70% of Australian’s own their own home and half of these have no debt against their homes. So as the value of properties keeps increasing, the equity in their homes also keeps increasing and as the value of their homes doubles every 7 to 10 years, many Australian families look to upgrade their accommodation by using this equity to renovate their homes or buy a new home. Rising property values are not a problem to them.

Yes…it’s a case of the rich getting richer

So why do property values keep rising?

Sure one part of it is inflation, the cost of everything goes up as the value of our dollar goes down, but there’s much more to it than that. Property values in our capital cities have risen much more than the rate of inflation.
It is because by and large we all want the same type of property and there is limited supply.
Around 21.5 million people currently live in Australia and our permanent population is expected to increase by 330,000 per annum for the foreseeable future. Today 7 out of 10 people live in or immediately around our capital cities and this trend is expected to increase in coming years with 80% of the projected population growth over the next 5 years likely to move to our capital cities and a few major regional areas.

Our population is projected to grow by 1.6 million or 8% within the next five years. Within 20 years, Australia’s population is expected to reach 28 million. Most of this growth is anticipated to continue taking place in and around our capital cities.
Where are we going to put them all?

It is this supply and demand equation that will underpin our property values. There will always be affordable properties around – there always have been. You can buy a cheap property today in many rural parts of Australia. These properties are cheap because no one wants to live there.
We all want to live where everyone else wants to live. And we won’t all be able to afford to buy a property in our capital cities.
Have you noticed that when people can’t afford to buy a property in the particular area where they would like to live, while some move to cheaper areas, many others are happy to rent in their preferred area. So property values will keep increasing in selected areas and so will rentals.

Yes the rich will keep getting richer.
Fortunately in Australia, almost everybody has the opportunity to become wealthy through property. The problem is most property investors never develop the financial freedom they deserve because they just don’t get it right.

And to be honest I’m not always right. Boy have I made my share of mistakes in both my business life and my personal life…but fortunately I seem to have got it right with property for the last few decades.

 

[boz]

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

Of course you could come along and tell me that the housing market would not be so strong if there was no population growth, no shortage, interest rates were higher, stimulus was removed, unemployment 5 points higher and bank guarantees were lifted.

True, but irrelevant. Those things are all in place. They are the fundamentals.

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.
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

 

[Ausprop]

the way I see this playing out is that restricted lending will restrict supply of housing and commercial premises in an environment of rising demand. There is plenty of funds to lend at 50% LVR... this will be the same as 100% LVR now once values double. The banks are the winners, the economy and general populice are the losers.

unfortunately the jaw boning from the RBA about rising house prices will actually be sunk by the actions of the banks themselves. Pretty obvious tho that if development funding is stifled then the repercussions will be higher prices. Once prices are higher it wil be easier to egt these developments across the line

 

[WinstonWolfe]

Absolutely...... Investors tend to deal with what is,

what about the ones that base whether they fix on the overnight cash rate futures.....which are projections about what might be.

and which investors are these that deal with what is? the ones with 0.5, 5, 20, or 40 year time horizons?

gee, even Shadow is allowing for a significant property correction (as early as the next cycle), based on......the fundamentals no less.

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

if you want to discuss bias Keith, start a new thread rather then try and hijack this one.