The soft depression that we had to have

Hi GP, thanks for that clarification. I'm thinking of buying the shares in SMSF so income is not bad cos I can't sell until I'm 60+ I can however draw a pension tax free so income is good.

Still don't quite know how franking credits work.

My thinking for whatever it's worth is this:

if dividend = interest rate then holding cost is nil

I'll be buying TIME

Trickiest problem is buying those that won't fall further. Tips anyone?

KY
 
House_Keeper said:
This figure of 13 trillion is a bit misleading. Most of the derivatives are foreign exchange futures or interest rates swaps that do not expose the banks to excessive risk. "Only" 169 billions is in credit derivatives. Not all dodgy mortgages. Some of it is corporate debt. How much of it is in dodgy mortgages is everybody guess, but it's nowhere near 13 trillions.



I don't believe that CDOs have anything to do with the house price growth in Australia in the last 10 years. Could you please explain the relationship.

Cheers,
Click to expand...

If I accepted your premise on the 13 trillion, "Only 169 billion is in credit derivatives, not all dodgy mortgages" Gee that really gives me a warm and fuzzy feeling. What does that mean the big four lose all their profits over the last 50 years?:rolleyes:

Because of CDO's my friend you enjoyed 16 years of cheap competitive interest rates that saw the aussie home loan crowds take 30% of the market and made the big four compete. I remember in the 1980's the banks charged you an extra 2-3% if it was an investment property;)

Paul Keating has been using some very colourful language about what is going to happen check out this post.

http://www.smh.com.au/articles/2008/11/14/1226318923455.html

Paul K is an optimist he thinks the world economy is @###** for the next 8 years.
 
Just a follow up. In the early 1990's a lot of money was made by supplying second tier groups like Aussie and Rams with funds. Yes I know this wasn't sub prime. The Wall Streetgang of five who were always bandits dressed up as merchant bankers got involved and added the toxic sludge (NiNJA loans no income no job)

This was mixed with a variety of other safer housing loans. The Aussie banks also liked to sell off of the mortgages to clean up their balance sheets.

At one stage I had a commercial loan on a property in Brighton with the nab which was managed by their US arm called homeside. For a year they accepted my repayments but did not deduct any interest:p

I phoned my manager and suggested he switch all my loans over to homeside and then explained why..... There was a pregnant pause at the other end.

Anyway below is a link that explains some of the CDO nonsense which believe it or not is linked to AAA paper

http://www.speculativebubble.com/housing/subprime-derivatives-explained.php
 
I noticed in todays news articles regarding the G20 summit you have both George Bush and Kevin Rudd using the word 'depression' quite deliberatley for the first time. This imo is a worrying sign because leaders words are always carefully chosen. No longer talk of recessions or even soft depressions, but sentences like 'could be worse than the great depression'.
 
aussierogue said:
I noticed in todays news articles regarding the G20 summit you have both George Bush and Kevin Rudd using the word 'depression' quite deliberatley for the first time. This imo is a worrying sign because leaders words are always carefully chosen. No longer talk of recessions or even soft depressions, but sentences like 'could be worse than the great depression'.
Click to expand...

Uses of the phrases like "worse than the Great Depression" are sensationalist and an absolute over reaction to what is happening. Any reasonable person who believes what we are going through today bears any resemblence to the Great Depression or depression, is on crack :(

If this is rhetoric amongst the G20's to ensure that every country directs fiscal and monteray policy to preventing the downturn from lasting any longer than it needs to, then do it (amongst themselves) However any public statements are going to obviously have an impact on consumer confidence, which is likely to have the opposite effect from what the politicians want to engender. Spastics :mad:
 
nonrecourse said:
If I accepted your premise on the 13 trillion
Click to expand...

You don't need to accept anything. You just need to read the RBA tables you are sourcing as a reference. Check table B4 in here. http://www.rba.gov.au/Statistics/Bulletin/index.html Selective use of statistics doesn't help your arguments. :rolleyes:

Because of CDO's my friend you enjoyed 16 years of cheap competitive interest rates that saw the aussie home loan crowds take 30% of the market and made the big four compete. I remember in the 1980's the banks charged you an extra 2-3% if it was an investment property;)
Click to expand...
You are confusing CDOs with mortgage securitization.

Anyway below is a link that explains some of the CDO nonsense which believe it or not is linked to AAA paper

http://www.speculativebubble.com/hou...-explained.php
Click to expand...

The link on CDO is invalid.

I hear a lot of rhetoric but I don't see much of a solid foundation based on facts. Despite many requests, we are still waiting for the expected scenario that would cause the forced sales that would bring down residential prices by 40%.

Cheers,
 
Last edited:
so prices will be deflated for the next 8 years according to Keating...?

for anyone tooking to dollar cost average their properties they bought in the boom that's good news, i would have thought.

or for those accumulating now, i would have thought that would also be good news.
 
take a typical villa of $300k renting at $300pw. if that halved in value to $150k and rents went up to $450pw, then would be a yield of about 16%. conceivably in this doomsday scenario there could be resi yields of 20%. it wouldn't take long to get actually pay your mortgage off. finally some return for resi property owners!

rising rents could be the grey cloud for spoilt workers ATM - with falling taxes, falling interest rates, falling house prices, cheap cars everywhere, falling petrol prices, furniture deals galore, retail sales... gees life (at least materially) doesn't get much better than this
 
Ausprop said:
rising rents could be the grey cloud for spoilt workers ATM - with falling taxes, falling interest rates, falling house prices, cheap cars everywhere, falling petrol prices, furniture deals galore, retail sales... gees life (at least materially) doesn't get much better than this
Click to expand...

Yes, fantastic :rolleyes: and how cheap are new cars, new furniture, new computer equipment going to be in a few months with our dollar languishing in the low 60's ?

Be prepared for large price rises to flow through in 2009 on all major imports, and it will be surprising. Retailers are either going to have to take a large hit on their own bottom line, or guess what, price those rises onto our "lucky" consumers.
 
House_Keeper said:
You don't need to accept anything. You just need to read the RBA tables you are sourcing as a reference. Check table B4 in here. http://www.rba.gov.au/Statistics/Bulletin/index.html Selective use of statistics doesn't help your arguments. :rolleyes:


You are confusing CDOs with mortgage securitization.



The link on CDO is invalid.

I hear a lot of rhetoric but I don't see much of a solid foundation based on facts. Despite many requests, we are still waiting for the expected scenario that would cause the forced sales that would bring down residential prices by 40%.

Cheers,
Click to expand...

:( Unfortunately you won't have to wait too long on the 40% drop. In Brighton there is a severe shortage of houses on the market and most of those are being passed in. House Keeper I have put my money where my my mouth is, we have protected ourselves as best we can. Are you prepared to gear up to 80% in the next two years and if not why not if things are so honky dory as you imply?

As for CDO's they were the still birth of the mortgage securitization and the link was working last night so don't understand what happened as I tested it before I posted it.
 
gman65 said:
Yes, fantastic :rolleyes: and how cheap are new cars, new furniture, new computer equipment going to be in a few months with our dollar languishing in the low 60's ?

Be prepared for large price rises to flow through in 2009 on all major imports, and it will be surprising. Retailers are either going to have to take a large hit on their own bottom line, or guess what, price those rises onto our "lucky" consumers.
Click to expand...

I'm a USD bear, so see this as a transitionary stage only. Also currency depreciation of the AUD has not been consistent across our trading partners. new cars and furniture can be sourced domestically. in a slowing economy it is hard to se ehow a retailer could pass on significant price increases
 
gman65 said:
Yes, fantastic :rolleyes: and how cheap are new cars,
Click to expand...

My work van doesn't have 100,000 ks on it yet but I'm thinking of buying a newie post-xmas. A Mitsi van is $19,990 drive away with air, same as I paid for this one years ago and the one before that. I kept that one 8 years. I think a lot of these cars today would have been paid for when our $ was much higher. The importers will have trouble replacing stock because they don't have the cash in the tin and floor plan finance is becoming hard to get.

Wouldn't want to be a car dealer in the next couple of years, but the dealers in my town are a mafia mob anyway, so I won't weep for them.
 
BV said:
NR
How do you know what he said when it's not written in the article?
Is this another 1 of your assumptions to justify your forever negative position?
Click to expand...

Keating was interviewed on 774 abc radio about four weeks a go. I was not an admirer of him but he was sharp as a treasurer. He was scathing of the credit rating agencies and he believes this is not a recession
 
boomtown said:
Well if house prices drop 1% per day starting tomorrow that should be about right.
Click to expand...

I see...
I think I should go ahead and buy because waiting for NR's prediction to eventuate will be like waiting for my bald spot to grow hairs again.
It will never happen...:D
 
just dollar cost average your position if you're in for the long term, flippers may need to find an alternative source of income.

that said - i still see prices stagnant or dropping. i think the area i am building in now has seen about a 10% correction for completed homes - but then, most of those homes were finished in late 2007. land isnt selling for less than what was asking.
 
Here is another link that has a different view to what is really occurring as the financial tragedy continues to unfold. Citibank also announced this morning that they are sacking 50,000 employees world wide.

My 19 year old son who is employed as an accounting cadet came home last night looking shaken. He is the only first year cadet left standing in his firm. They sacked all the other cadets and many of the recent new grads as well as some of the more senior well paid accountants. Welcome to the real world son.:(

http://www.globalresearch.ca/index.php?context=va&aid=10589
 

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