The soft depression has arrived

[keithj]

I thought my explanation about our fiat currency made it clear even if the properties drop 50% holding them provided your gearing is at 30% or less now is a better option. Again with out divulging too much most of our commercial properties are again in that same field that in a depression will survive.

At this late stage if your not at or below 30% if you have a blue chip property that would sell in our depressed market then you may be able to hold onto the rest of your portfolio. Rather than investing in something else why not pay down some of your mortgages so that even if you do have a period where your property is empty you have a reserve.

It sounds like you're saying that property is going to be the safest asset class if/when your forecasts prove correct - safer than cash ?

But you're expecting property to fall by 50-70%, relative to cash (our fiat currency) ?

And you think that all fiat currencies (inc A$) are (or will be) worthless within 12 months ?

Are you expecting inflation or deflation ?

 

[keithj]

..and no-one else does?

Well... maybe just a few posters spring to mind....

For example, "better than the US and Europe" could be 20% in real terms over the next 2 years, could it not? What they are clearly not saying is "it will be fine".

Recessions are not good things.

If I'd said 'just fine' in the context of the thread I quoted, then I'd agree with you. However, in the context of NR using an IMF study to tell us that we're headed for a world depression & property here will fall 50-70%, I feel the IMFs statement that it won't be nearly as bad as the UK & US who have done -40%, then a 'just fine' comment is reasonable.

 

[Aaron Sice]

NR said the IMF boss 'proved his point' that we're already in a depression. Two weeks earlier the IMF categorically said that Oz res IP would not be falling 40%. NR appears to seek confirmation of his biases from the IMF.

well then - it's clear why i dont agree with NR - everyone knows my stance on the IMF.

maybe NR IS the IMF....

 

[Aaron Sice]

Without giving too much personal detail away our business even in a depression would survive though with deflation would mean a significant drop in income. We have prepared for that by my wife going back to work part time that could be full time in a safe government job.

I thought my explanation about our fiat currency made it clear even if the properties drop 50% holding them provided your gearing is at 30% or less now is a better option. Again with out divulging too much most of our commercial properties are again in that same field that in a depression will survive.

At this late stage if your not at or below 30% if you have a blue chip property that would sell in our depressed market then you may be able to hold onto the rest of your portfolio. Rather than investing in something else why not pay down some of your mortgages so that even if you do have a period where your property is empty you have a reserve.

Are you a long term investor or a speculator?

how is a govt job "safe"? a whole department just got culled here in WA.

i would DEARLY love to know what your business is - purely for some sort of understanding as to where on earth you're coming from. i promise - i wont even dissect it's sustainability.

 

[Token Funder]

However, in the context of NR using an IMF study to tell us that we're headed for a world depression & property here will fall 50-70%......

Did NR say 50-70%? Perhaps in another thread?

OK... so that's a step forward. You think Oz res IP will fall 50% because the world is going into a depression.

If I held an asset that I was absolutely certain was about to lose 50-70% of it's value within 12 months I'd sell it.... wouldn't you ?

..... I feel the IMFs statement that it won't be nearly as bad as the UK & US who have done -40%, then a 'just fine' comment is reasonable.

However, in the context of what the IMF actually said...well...not so much

 

[nonrecourse]

NR said the IMF boss 'proved his point' that we're already in a depression. Two weeks earlier the IMF categorically said that Oz res IP would not be falling 40%. NR appears to seek confirmation of his biases from the IMF.

Keith for some time now on this board I have been cast as a nutter for calling a soft depression and now we have the IMF admitting what has been bleeding obvious for at least six months. The truth is since seeing Kevin 7 coming out of a meeting looking like a rabbit in front of headlights at the U.S. reserve shortly after becoming PM he and all the G20 leaders have been well aware what this is.

Way back in early January 2008? I posted a comment made by the head of the Royal Bank of Scotland to the effect that their wealthy clients knew a financial firestorm was upon them. Shortly after he was roundly criticised in the house of commons for scarmongering.

The five most powerful investment banks in the world that were on Wall Street folded, were absorbed or give up their investment banking license. Not even during the Great depression did this happen.

Last year I attended a seminar at the NTAA on asset protection and another on insolvency and trusts. I got nothing but snide remarks when I tried to run a thread on how to protect yourself and was eventually closed off by the moderators.

 

[Aaron Sice]

but you haven't offered ANY advice on how to weather the storm because you can't tell us WHY it's happening.

how does that saying go? those that can, do, those that can't, teach.....?

 

[Token Funder]

but you haven't offered ANY advice on how to weather the storm because you can't tell us WHY it's happening.

Does the acronym GFC mean anything to you?

 

[Shadow]

Does the acronym GFC mean anything to you?

Quoting 'GFC' does not automatically explain why residential house prices will fall by 50%. Even prices in the UK have started rising again, after only falling by around 20%, and the UK is in a much worse economic position than us, and with lower population growth too. It is a lot cheaper to buy than rent now in the UK, because interest rates have fallen so low. This is one area where the RBA is ahead of the game - we're already getting down to those stimulatory interest rates here long before any signifcant house price falls.

Cheers,

Shadow.

 

[chilliaa]

No Keith we wouldn't sell unless we had a better asset to exchange for it. The aussie dollar like most fiat currencies is worthless. At least with land, it doesn't disappear unlike the share market script that you can no longer use as toilet paper since the CHESS system was introduced.

I think the OZ residential property market is going to drop because of a severe world wide loss in confidence with the entire monatary system. The US reserve is bankrupt, the Europeans are in even worse shape. The entire world banking system using the fractional reserve banking template is nothing more than a ponzi scheme.

As outlined by someone else on this site the entire Chinese Shanghai stock market is backed by insolvent state enterprises for the benefit of the Communist thugs.

The so called free trade agreements have kept Europe, North America and parts of the Far East on top and have impoverished most of the 3rd world.

Most about we believe in with regard to value is an illusion. Your properties are only worth what someone is willing to pay for them. Gold is the only other alternative but you can't grow veggies on gold.

I wish none of this was true Keith and I have said it before and been sneered at on this site. Our modern financial system dates back to John Law and the Misissippi bubble.Problem is most people know nothing of our history especially financial history. That is why governments have regularly gone off the gold standard untill everything comes crashing down.

The same mistakes are made over and over. Don't you get tired of reading about people who park their brains when they go into a financial messiah and see their entire life savings disappear.

What I am on about is protecting your assets. You know a property crunch is coming and we are only arguing over the degree of the losses.

In every property asset class fundamental values are inflatted aided and abetted by our local, state and Federal governments. You only have to look at the obscene land tax imposts

Mate you are talking one thing and doing another: you dont want to offload your property, yet you are talking about australian residential property falling 50% (given its fallen maybe 5% so far thats another 45% to go).
Couple this with the decrease in the aussie dollar to 38c.
So with the currency at around 65c and your forecast of 38c thats another 41% drop
So if you are correct a $400,000 property would be worth
$400*0.5=$200,000
$200,000 * 0.58 (the inverse of 41%)= $82,000

So you are saying that you cant find an alternative asset class that prevents you from selling your $400,000 that will reach $82,000 if no action is taken.

Mate if i was so sure that residential property would fall 50% and the currency would also fall by 41% i would be disposing my property and looking for an overseas asset class given an 80% negative movement in australian property.

 

[chilliaa]

and you know the most funny thing of all, for all your yapping on this forum, if your predicitons are correct you will still be in the same boat as the rest of us with that 80% relative drop in asset value.

Talk about lost opportunties

 

[Token Funder]

Quoting 'GFC' does not automatically explain why residential house prices will fall by 50%. Even prices in the UK have started rising again, after only falling by around 20%, and the UK is in a much worse economic position than us, and with lower population growth too. It is a lot cheaper to buy than rent now in the UK, because interest rates have fallen so low. This is one area where the RBA is ahead of the game - we're already getting down to those stimulatory interest rates here long before any signifcant house price falls.

Cheers,

Shadow.

Don't get me wrong....I'm not calling a 50% drop...if I believed that I'd be doing something pretty radical with LVRs.

My general point is that BC seems to be saying NR hasn't explained why he believes a soft depression/50% drop is on the cards.

He has.

BC just doesn't accept the argument, which is his perogative.

Personally, I'm in the 10%ish camp (on top of the drop we've already seen) based on deleveraging plus a recession.

As an aside, if you want to get a feel what's really going on, try this:

• find a real estate agent (mates if you can)
• to avoid them salivating on your clothes, immediately point out you're not buying or selling, don't know anyone who is buying or selling nor will meet anyone over the next few weeks who might be buying or selling.
• ask them about properties they sold, say, 12 months ago.
• get them to specify a couple of individual properties they remember clearly
• look them in the eye and ask them how much they would expect to get for those same properties today.
• note with interest.
• if you're a lender, wonder about reducing LVRs

 

[chilliaa]

and further more if your AU$0.38 prediction is correct a number of my shares will be kicking someones backside.
Have you considered the profit translation effect for australian companies that either export or have high degrees of foreign subsidiaries. Especially those with unique products such as COH, and CSL.
Yippie show me the money

 

[nonrecourse]

Mate you are talking one thing and doing another: you dont want to offload your property, yet you are talking about australian residential property falling 50% (given its fallen maybe 5% so far thats another 45% to go).
Couple this with the decrease in the aussie dollar to 38c.
So with the currency at around 65c and your forecast of 38c thats another 41% drop
So if you are correct a $400,000 property would be worth
$400*0.5=$200,000
$200,000 * 0.58 (the inverse of 41%)= $82,000

So you are saying that you cant find an alternative asset class that prevents you from selling your $400,000 that will reach $82,000 if no action is taken.

Mate if i was so sure that residential property would fall 50% and the currency would also fall by 41% i would be disposing my property and looking for an overseas asset class given an 80% negative movement in australian property.

What your post demonstrates is that you are not an investor, like 80% of the population you cannot decipher a balance sheet, your assets are managed by managers who are nothing more than employees. You don't hold your poorly managed assets in trusts because like 98% of the population you will always be relying on someone else. Fair enough have a nice life on the pension

 

[chilliaa]

Don't get me wrong....I'm not calling a 50% drop...if I believed that I'd be doing something pretty radical with LVRs.

My general point is that BC seems to be saying NR hasn't explained why he believes a soft depression/50% drop is on the cards.

He has.

BC just doesn't accept the argument, which is his perogative.

Personally, I'm in the 10%ish camp (on top of the drop we've already seen) based on deleveraging plus a recession.

As an aside, if you want to get a feel what's really going on, try this:

• find a real estate agent (mates if you can)
• to avoid them salivating on your clothes, immediately point out you're not buying or selling, don't know anyone who is buying or selling nor will meet anyone over the next few weeks who might be buying or selling.
• ask them about properties they sold, say, 12 months ago.
• get them to specify a couple of individual properties they remember clearly
• look them in the eye and ask them how much they would expect to get for those same properties today.
• note with interest.
• if you're a lender, wonder about reducing LVRs

Sorry token funder, as i have said before, i respect your views because they are more moderate and you back up your views with logic rather than fear.

Non-recourse hasnt, he goes on about 3 forecasts:
ASX at 2200, AUD at 0.38 and residential property at -50%. He doesnt seem to understand that the economy is more intricate than that, he could well be right on one of those predictions, but a prediction in one might nullify a prediction in another.

For example if the AUD was depreciating towards 0.38 what would be the cause? maybe lower interest rates and high borrowers relative to the rest of the world (which is a bit hard with US at 0, and Europe 2%, UK at 1.5%), in this case the RBA would be forced to kick up interest rates, this would stimulate the AUD but may hit property.

Further more NR, doesnt explain why each of his 3 forecasts should reach his percieved target, he only goes on about a 'soft recession' triggering the forecasts. What are the factors are going to cause the AUD to reach 0.38?
What are the factors to cause the ASX to hit 2200? is it technical analysis? is it fundamental (in which case has he presented a case against those dominant companies in the ASX200 that cause most of the movement in the ASX200).

No, Non-recourse = 100% scare mongeror.
We dont even know who this guys is, except for some log-in id on sommersoft. In the event that he is wrong he will just 'disapear' and comeback with some new log-in identity, meanwhile those who listen to his scaremongering will have suffered real economic damage (especially as this guy is saying do what i say but not what i do).

And before i get flamed, dont get me wrong, i have been stating for many months that things are not going to come back to pre-credit crisis conditions for many years.
If you have been relying on negative gearing with property revaluations to cover your cash flow shortage, if you have been adopting a LOE on the assumption that property goes up x% a year, you could be finding yourself in real trouble.

However only each member here knows their personal circumstances. To be stating categorically that you should be offloading property, getting LVR ratio's down to less than 60% etc is not taking into account individual circumstances.
If i had a LVR ratio that was say 70% but was naturally cash flow positive before tax effect on averaged priced property with average rents in any of australia's capital cities and with a proportion of loans that was increasingly fixed as the cost of finance exceeds my cash flow from alternative sources (such as employment, business profit etc), i would be pretty much staying put.

Again i emphasise only you know your own personal circumstances, before you start blindly listening to Non-recourse, evaluate your own circumstances, speak to your lenders, and build risk mitigation strategies that are suitable for your own circumstances.

 

[chilliaa]

What your post demonstrates is that you are not an investor, like 80% of the population you cannot decipher a balance sheet, your assets are managed by managers who are nothing more than employees. You don't hold your poorly managed assets in trusts because like 98% of the population you will always be relying on someone else. Fair enough have a nice life on the pension

oooohhh yeah recourseee,
really i dont have have trusts?????, of course you would know better than myself the way i structure my assets.
I cannot deciper a balance sheet???? ohhh yea baby show me your ignorance, only you would know my background better than i would.

My assets are managed by managers??????
ohhh yeahhh baby again show me my ignorance, only you would know my personal circumstances better than me. Ohhh but thats it you are referring to my direct share investments, dam well on that account even Warren Buffet, Peter Lynch and others must be smucks because of course you know better than them.

Ah but i finally get it, put your assets in a trust account, and everything after that will be alice in wonderland, just swallow the blue pill......

It doesnt matter about the financial performance of the assets in the trust, just put them in a trust and everything will be hunkey dorey.

Yeah buddy, any more words of wisdom.

 

[nonrecourse]

Chilli
Warren Buffett through Berkshire Hathaway controls a huge number of companies. How many companies do you control Chilli?

Do you have any assets that are not accessable to your creditors or is your posterior waving in the wind ready for someone to kick

I can see I have got you worked up into a red hot Chilli lather with my reasoning but it is like this Chilli; The old Capitalists of the 19th century like J.P.Morgan a first class robber baron would be spinning in his grave because of the C.E.O.'s of all the publicly listed companies who own nothing but are the modern day carpet baggers.

An entire generation has been robbed of their retirement benifits because of these bandits. As the US financial system has so succinctly demonstrated there are no real capitalists left.

At least when Morgan was around in 1907 he knocked some bankers heads together and got the market working. But see Chilli your generation doesn't know "nuthin bout history" so your doomed to repeat it.... sad really.

As for buying shares on margin dumb dumb dumb dumb..... Did you have a margin loan too Chilli?

You don't own any companies Chilli and worse yet you don't control anything not even the CHESS documents that are held by your broker or bank if you trade online.

No point in having a trust if you don't actually control anything right Chilli ?

Never mind mate you can get online and "trade" and believe your actually an investor rather than a punter.

Flatulantly yours NR

 

[keithj]

Keith for some time now on this board I have been cast as a nutter for calling a soft depression and now we have the IMF admitting what has been bleeding obvious for at least six months.

You're not cast as a nutter because you're calling a soft depression...... you're viewed in that way by some because you've consistently been unable to tell us about the thought process behind your apparently contradictory forecasts.

I'm still confused about the relationship between cash and property ? You say cash will be worthless (a la Zimbabwe?) and property will fall by 50% (relative to cash) ?

 

[MichaelW]

Personally, I'm in the 10%ish camp (on top of the drop we've already seen) based on deleveraging plus a recession.

As an aside, if you want to get a feel what's really going on, try this:

• find a real estate agent (mates if you can)
• ask them about properties they sold, say, 12 months ago.
• note with interest.

Did that!

http://www.somersoft.com/forums/showpost.php?p=510910&postcount=13

And I agree, another 10% sounds about right. Not the end of the world, just giving back a year or so's gains before stabilising. In some markets 10% is well less than 12 months gains.

Its an asset category which requires confidence for prices to be sustained. Like any asset category it goes up and goes down. For the most part it goes up for a whole host of reasons, but right now a lot of confidence is absent as is funding (the oil), so prices are under pressure. The business cycle is far from dead and you've got to wear some bad with all the good.

2 years flat or up to 10% down, sounds about right. Accept it, get on with it.

Cheers,
Michael

 

[chilliaa]

Chilli
Warren Buffett through Berkshire Hathaway controls a huge number of companies. How many companies do you control Chilli? Berkshire now controls a number of companies, because of its size. In its early days however it very successfully participated in as a minority owner through direct share investments. Its the investment analysis framework that determines success, not whether you have control over the whole company. You can have complete control of commodity type business (this refers to the nature of the business, not the physical commodities industry) and receive very sub-standard returns.
Do you have any assets that are not accessable to your creditors or is your posterior waving in the wind ready for someone to kick

I can see I have got you worked up into a red hot Chilli lather with my reasoning but it is like this Chilli; The old Capitalists of the 19th century like J.P.Morgan a first class robber baron would be spinning in his grave because of the C.E.O.'s of all the publicly listed companies who own nothing but are the modern day carpet baggers.

An entire generation has been robbed of their retirement benifits because of these bandits. As the US financial system has so succinctly demonstrated there are no real capitalists left.Again you are just babling, have you done a study of each of the companies in the S&P500 to calculate the managment ownership % Even in australia the lowey family only have direct ownership of around 11% of Westfields, does that make them a non-capitalist because they dont have total control of their asset anymore. You fail to understand that it is more profitable to have a smaller stake in a company if the pie of profitablility is larger.

At least when Morgan was around in 1907 he knocked some bankers heads together and got the market working. But see Chilli your generation doesn't know "nuthin bout history" so your doomed to repeat it.... sad really. Ah of course so there is only non-recourse who understands the current market, everyone else is just naive

As for buying shares on margin dumb dumb dumb dumb..... Did you have a margin loan too Chilli?Yes of course i have a margin loan, the difference is that i am utilising it in an environment of fear, not when the market is bullish

You don't own any companies Chilli and worse yet you don't control anything not even the CHESS documents that are held by your broker or bank if you trade online.Again you ***-ume the financial structure i operate within

No point in having a trust if you don't actually control anything right Chilli ?

Never mind mate you can get online and "trade" and believe your actually an investor rather than a punter.

Flatulantly yours NR

The more you rant the more it becomes obvious that you are just scaremongering, so keep it up. My purpose has been achieved, to highlight you unstable mentality to others on this board that might be reading your posts.