The recession's over

[investor888]

Blue Card! - i refuse to sit my money in cash - i'llpark it any other way - RE, Art, gold - hell, even an offset to save some outgoings - but cash?

nope. not for me. ever.

Who said cash (except for super). On another thread I said an offset account, after selling off the gains from shares.

Cashed up (now on 25% LVR, equivalent) ready for the next stock market fall to pick up cheapies in Dec/Jan, or more properties next year when confidence turns.

 

[Aaron Sice]

just putting it out there - not accusing anyone of anything....

 

[cloudyday]

The downturn will happen when everyone thinks it's all rosy again. Didn't the huge crash happen when no one suspected it? Just 2 years ago, bank shares were through the roof, we were enjoying amazing growth and then, BAM!!! Banks started collapsing, governments started panicking. It all happened when no one suspected it, even smart people who worked for some of the world's biggest brands didn't even see it coming, e.g. Bear Sterns, Morgan Stanley, __ insert nearly every other bank here.

So, if even the smartest people couldn't even see it coming, then shouldn't it mean the same for us, for example, just when we think things are going smooth again, and people go back to their normal spending ways. We might actually get hit?

All around me, everything seems the same, people seem to be spending the same, I just know more people out of work, and they have bigger mortgages. Because of the low interest rates, some families I know actually spent their money on holidays, etc since it was "free money'. If people are spending their money on other things, which they should really be putting into their home loans, wouldn't' this be a worry. I hope this is just a rare case and many people out there aren't actually doing this.

 

[Ausprop]

sounds pretty depressing. things are stuffed but if that ever changes then it will become stuffed again anyway?

 

[Aaron Sice]

let's all curl up and die under a nice big rock.

then we won't have risked anything and can lead solitary, unproductive, peaceful lives until the unindexed pension kicks in at 55.

THAT'S depressing.

i'd rather risk geting somewhere. i can't say what will happen in 5 years' time. i can't say what will happen in 5 mins time.

all i can do is be sensible with non-deductible debt and hope for the best.

 

[willair]

But hey, we'll see who is richer in Dec/Jan won't we.


Nothing in common as well. We never saw such hugh stimulus packages in 80, 81, 87, 89, etc.




Dude, like others, I didn't loose 25% of my super on the last market down. Lost a less on the way down (~10%), gained on the way up in shares, now switching back to cash (ahead of the way down ahead).

But the fact is you lost money like everyone else,because if you were
to see the problems that have hit world markets over the past 2 years
you would have sold and waited till the start of this year and bought
back in,, it does not take to pay 5k to have some soap expert box speaker
tell you that little fact,but then again you may be playing a different game..imho willair

 

[chilliaa]

Hi all,

Investor888,

,

That would be the same Bob Prechter that predicted the all time super duper fifth wave ending super cycle, never to be repeated, DOW high of 3000 in the early '90's.

The real problem is that people believe these gurus/investment newsletter writers. Some get it correct for a while until they make a call or two that stuffs their credentials. It is called survivorship bias in the ones around now.

Every year, usually end Dec beginning of Jan, there is an article or two in some newspapers about what different 'experts' think the value of the dollar, stockmarket, interest rates etc will be in 12 months time. Most get it wrong but have really good reasons . Most of the predictions are 'mild' (ie 10% one way or the other). Those who guess a year or two correctly get to Guru status.
Here is the rub though, markets have fat tails, so if you get a couple of those predictions correct (it helps to make lots of predictions), then you will have the gullible falling all over themselves to pay for more.

If the best you can do is state that Schiff said this and Prechter said that, then you really don't have a clue.

If history was a guide at all, then because our market (Australia) fell about the same percentage over the same time period as the Great Depression (ie 50% over 14-16 months), then perhaps the 5-6 year rally that followed to major new highs should also be expected. In context, the all ords would be at
10140 by 2015.

Of course history could be bunk, and this time it's different, but then why would the letter writers version of history be any better??

bye

Great post bill (or maybe its great because its in accordance with my own beliefs)

 

[chilliaa]

I agree guys. As the Oracle from Omaha says:

"Wealth is transferred from the impatient to the patient"

I cant see the rush (beside self interest of course).

Or to interpret it another way, wealth is transferred from those that that are impatient by madly trying to time the markets to those who are patient, buy into companies with strong moats and economic brands at reasonable prices, and then hold the securities and let the magic of compounding do its work.

 

[evand]

You forgot the bit about if the company is not performing he sends his cronies in on the board and gets it performing. The average punter doesn't have that luxury.

But i was referring more to the property market.

Or to interpret it another way, wealth is transferred from those that that are impatient by madly trying to time the markets to those who are patient, buy into companies with strong moats and economic brands at reasonable prices, and then hold the securities and let the magic of compounding do its work.

 

[VYBerlinaV8]

let's all curl up and die under a nice big rock.

then we won't have risked anything and can lead solitary, unproductive, peaceful lives until the unindexed pension kicks in at 55.

THAT'S depressing.

i'd rather risk geting somewhere. i can't say what will happen in 5 years' time. i can't say what will happen in 5 mins time.

all i can do is be sensible with non-deductible debt and hope for the best.

We buy investments that we know have cyclic returns, including periods when they don't return, or return negative results. We hold them for many cycles, over which time debt becomes smaller and values larger. We get yield, which we reinvest and compound over the years.

We grit our teeth and stay in when others are panicking. We buy when others are fearful. We get laughed at, frowned at.

Many years later, we have a personal net worth well in excess of most other Australians, and don't require government support in retirement. To me, it's not that hard. You just have to keep the bigger picture in mind.

 

[Bill.L]

Hi all,

Investor888,

Maybe you should read up on your history. The 1st fall in the Great Depression was about 50%, then after a rally, it feel even more, then after another rally, it fell even more, for a total of about 87% off the peak.

Here is the interesting bit, I stated quite clearly OUR market, the Australian market, what you are referring to is the American market as shown by the DJIA.

I suggest you find and read about our market. Here is a good source for you to start with.............

http://www.wrenresearch.com.au/downloads/index.htm

After digesting a few statistics/gaining a few facts, come back and give me examples of where I was incorrect.

bye

 

[investor888]

Here is the interesting bit, I stated quite clearly OUR market, the Australian market, what you are referring to is the American market as shown by the DJIA.

Come-on Bill.L, Australia in 1929 was a pissy little back water island in the middle of nowhere. (and despite Kevin Rudd's grand global ambitions, we pretty much still are).

In 1929, Australia was also a lot more self sufficient, and manufacturing a lot for itself. We are now very dependent on products from overseas, so are far more impacted by global events than in 1929. Far more inter-twined with the global economy.

These days, apart from some local volatility, our markets pretty much match the trend of the global markets. Every dip, every rise, mirrored across most world markets. What happens in the US, will happen in our markets. Check a few graphs. Even the early July market dip was mirrored globally.

When the US falls back, you can be guaranteed we will as well.

 

[Bill.L]

Investor888,

Every dip, every rise, mirrored across most world markets. What happens in the US, will happen in our markets. Check a few graphs.

Ok, I did.
Between the 2000 high and the 2003 low our market fell ~20%, the US market (S&P500) fell ~50%. Between the 2003 low and the 2007 high our market rose ~150% and the US ~100%.
For some people those numbers are pretty much the same

For you, because both markets fell about the same amount 55-57% since the 2007 high, that means they always behave the same?? a statistical incidence of once.

Oh I forgot, "this time it's different".

bye

 

[WinstonWolfe]

Hi WW,

In the '70's we had high inflation with negative real interest rates, I see no reason why that cannot happen again.
bye

Something that is different this time Bill is the median house is 7x the median annual wage.

It will be a neat trick to see house price growth match high inflation, if wages and debt serviceability don't....and personally, I don't think the consumer currently has a lot of spare debt serviceability available at 7%+ interest rates, to stimulate demand pull inflation.....

it ain't clear in my mind when high inflation might arrive.....and it is hard to see how asset prices could be inflated any higher on average to high interest rates.

edit:
in fact, if we do enter a period of high inflation which compels the RBA to raise rates, without equal inflation of wages, the higher cost of goods and services will reduce the % of household income available for debt serviceability......this will adversely impact property growth......i.e. property deflation.

so the $64 question is, will wages be inflated at the same rate as goods and services, without erosion of aggregate hours worked pa?

 

[evand]

Bill,

If you overlaid a graph of the DOW on the AO over the past say 20 years, its almost identical. Just about every dip and every rise is almost the same.

The quantities are different sure, but to say we are not aligned and interconnected with world markets in general and the US in particular is plain wrong. We don't really have a stand alone Australian economy, its a world economy.

I think you are just being pedantic.

Investor888,
Ok, I did.
Between the 2000 high and the 2003 low our market fell ~20%, the US market (S&P500) fell ~50%. Between the 2003 low and the 2007 high our market rose ~150% and the US ~100%.
For some people those numbers are pretty much the same

For you, because both markets fell about the same amount 55-57% since the 2007 high, that means they always behave the same?? a statistical incidence of once.

Oh I forgot, "this time it's different".

bye

 

[keithj]

So if you want to compare the current market with the Great Depression, we are 1/3 of the way through (50% fall, and then a 45% rise). Next, big fall below March figures.

Do you have reasons for comparing Australia today with a period 100yrs ago, in a different country, with completely different drivers & completely different policy responses ?

 

[evand]

I believe Bill made the initial referral/comparison to the great depression.
Which by the way, started in the US but became a world wide depression.
Yes, even here.

Do you have reasons for comparing Australia today with a period 100yrs ago, in a different country, with completely different drivers & completely different policy responses ?

 

[WinstonWolfe]

The quantities are different sure, but to say we are not aligned and interconnected with world markets in general and the US in particular is plain wrong.

Even the quantities line up in a 2 year comparison.
It must be different this time....

 

[evand]

Good on you WW. Amazingly accurate.

Even the quantities line up in a 2 year comparison.

 

[Bill.L]

Hi all,

I think you are just being pedantic.

Thinking that a 20% fall is different to a 50% fall is being pedantic??? Good grief!!

Please highlight anywhere where I have stated that our market is completely different to the rest of the world. I thought I had highlighted where the magnitudes of rises and falls were different, especially in regard to the depression years.

WW,

Something that is different this time Bill is the median house is 7x the median annual wage.

Yes, but this has been covered in several threads before about dual incomes now/single income then, different "house" now 4x2/3x1 then, easier borrowing now/savings record being 'liked' by bank manager then.

it ain't clear in my mind when high inflation might arrive.

I thought this was the $64 question, or maybe it should be the $128 question

On the macro world wide scale, we have just had a massive amount of extra money created for much the same quantity of goods and services. That money, by finding a home has to lead to some things (or services) being more expensive.
Which ones and where is the $128 answer.

It will be a neat trick to see house price growth match high inflation, if wages and debt serviceability don't

Even if there was a 'real' fall in house prices during an inflationary period (say 7% increases in prices during 10% inflation) investors/home owners using borrowed funds would be better off.

bye