it also exposes the entire world to the profit taking and short selling of the world's markets as well.
a gloablised currency would spell the end of financial security for anyone not at the top of the money pile.
The soft depression that we had to have
- Thread starter nonrecourse
- Start date
it also exposes the entire world to the profit taking and short selling of the world's markets as well.
a gloablised currency would spell the end of financial security for anyone not at the top of the money pile.
Definition of a soft depression
Sorry its many many posts back that I explained the term a soft depression. Unlike the dirty 1930's with millions of people out of work and bread lines, a soft depression is where the wheels of commerce grind to a crawl due to a lack of liquidity. The banks will not lend money to each other or to anyone other than those who don't need it.
What we are entering is a long and painful period (10 years) where credit contracts and simple financial transactions that are part of modern life is no longer going to be simple.
You'd think that would drive the cost of money up and it will in some countries like the US and the UK. where their fiscal ineptitude has brought on this whole mess.
In Australia because we are the exporter of raw materials to china I think you will see the Aussie interest rates pulled down by the reserve bank in a desperate attempt to keep those cogs squeeking along. That will mean that the spread in interst rates here and overseas will drive the dollar down to ... dare I say it 38 cents?:
Now I know your thinking what is this poor little sick puppy smoking. Both our solicitor and banker last November thought I was a nutter when I first started ranting about CDO's and adjustable rate mortgages. In recent months here in Melbourne a lot of people have started to take note of the syndicated articles called planet wall street that has been running in the age.
The information has been out there on the internet for well over a year but as my father who had a grade three education but a special ability to read people said. Common sense just isn't very common among educated people.
Most of the nonsense about things are improving, pumped out by the gang of seven from wall street; Merrill Lynch, Bear Stearns, Lehman Brothers, Morgan Stanley, Goldman Sachs, JP Morgan Chase and Citigroup, has been aided and abetted by the financial press. There is trillions of dollars in further losses coming as a consequence of hundreds of smaller banks failing throughout the western economies of North America and Europe. That is without counting the number of insurance companies that will also soon start to crash.
As far back as the mid 1990's Warren Buffet described Wall Street as an apple that is rotten to the core. Around 2003 he was quoted saying that derrivatives were financial instruments of mass destruction that one day would case untold suffering. Warren Buffet doesn't understand derrivatives and unfortunatly for the rest of the world neither did the gang of seven.
Which brings me to the Somersoft Property Investment Forum. There are a lot of posters who can't see the forest for the tree's. Many on this site think they are going to continue to make a killing in property. Like the product disclaimers on most investment sales literature. Past performances in property investing is no indication of future returns.
We are now entering a period of massive financial upheaval. You need to go back and read about businesses that thrived in the great depression. The days of easy money through mortgage originators like Aussie that used collateralized debt obligations are going. If you want to grow your property portfolio you are going to have to generate your income from your internal operations ,be it your properties, business income or salary.
The use of negative gearing and using your existing equity to gear up is going to become much more difficult. The more senior posters on Somersoft need to warn the newies that you can lose your savings investing in property just as easily as you can speculating in the share market.
I also think a lot of Somersoft posters should visit the global house price crash forum and just read without commenting. By accepting some criticsim you can become a better investor. There is far too much arrogance on this site.... and yes I also plead guilty
What IS a soft depression ?
According to wiki
Current thinking is that the US is probably in a recession already, Eurozone may enter recession with 2 quarters of v. slightly -ve growth. There's little talk of a recession here ATM.
Bring on the 2% IRs mentioned in a recent D&G post
Sorry its many many posts back that I explained the term a soft depression. Unlike the dirty 1930's with millions of people out of work and bread lines, a soft depression is where the wheels of commerce grind to a crawl due to a lack of liquidity. The banks will not lend money to each other or to anyone other than those who don't need it.
What we are entering is a long and painful period (10 years) where credit contracts and simple financial transactions that are part of modern life is no longer going to be simple.
You'd think that would drive the cost of money up and it will in some countries like the US and the UK. where their fiscal ineptitude has brought on this whole mess.
In Australia because we are the exporter of raw materials to china I think you will see the Aussie interest rates pulled down by the reserve bank in a desperate attempt to keep those cogs squeeking along. That will mean that the spread in interst rates here and overseas will drive the dollar down to ... dare I say it 38 cents?:
Now I know your thinking what is this poor little sick puppy smoking. Both our solicitor and banker last November thought I was a nutter when I first started ranting about CDO's and adjustable rate mortgages. In recent months here in Melbourne a lot of people have started to take note of the syndicated articles called planet wall street that has been running in the age.
The information has been out there on the internet for well over a year but as my father who had a grade three education but a special ability to read people said. Common sense just isn't very common among educated people.
Most of the nonsense about things are improving, pumped out by the gang of seven from wall street; Merrill Lynch, Bear Stearns, Lehman Brothers, Morgan Stanley, Goldman Sachs, JP Morgan Chase and Citigroup, has been aided and abetted by the financial press. There is trillions of dollars in further losses coming as a consequence of hundreds of smaller banks failing throughout the western economies of North America and Europe. That is without counting the number of insurance companies that will also soon start to crash.
As far back as the mid 1990's Warren Buffet described Wall Street as an apple that is rotten to the core. Around 2003 he was quoted saying that derrivatives were financial instruments of mass destruction that one day would case untold suffering. Warren Buffet doesn't understand derrivatives and unfortunatly for the rest of the world neither did the gang of seven.
Which brings me to the Somersoft Property Investment Forum. There are a lot of posters who can't see the forest for the tree's. Many on this site think they are going to continue to make a killing in property. Like the product disclaimers on most investment sales literature. Past performances in property investing is no indication of future returns.
We are now entering a period of massive financial upheaval. You need to go back and read about businesses that thrived in the great depression. The days of easy money through mortgage originators like Aussie that used collateralized debt obligations are going. If you want to grow your property portfolio you are going to have to generate your income from your internal operations ,be it your properties, business income or salary.
The use of negative gearing and using your existing equity to gear up is going to become much more difficult. The more senior posters on Somersoft need to warn the newies that you can lose your savings investing in property just as easily as you can speculating in the share market.
I also think a lot of Somersoft posters should visit the global house price crash forum and just read without commenting. By accepting some criticsim you can become a better investor. There is far too much arrogance on this site.... and yes I also plead guilty
We're probably going to copy all of the elderly folk who bought property back in the 50's.
I reckon they are just going to sit and do absolutely nothing. That's also our plan whilst everyone else gets into a tizz.
- They never read this forum.
- They never log onto the internet.
- They wouldn't know what Wall St is, or where it is.
- They wouldn't know any of the dirty 7 you just listed.
I reckon they are just going to sit and do absolutely nothing. That's also our plan whilst everyone else gets into a tizz.
Don't know how you arrive at 10 years, and if so it will be interrupted by upmarket. Alan Greenspan mentioned that the crisis is not over yet. The AMP (Dr Oliver) mentioned the crisis is 85% through. Mark Mobius of Templeton mentioned this few days of market abandonment will spark the bounce from October to Spring in the Northern Hemisphere.
You'd think that would drive the cost of money up and it will in some countries like the US and the UK. where their fiscal ineptitude has brought on this whole mess.
In Australia because we are the exporter of raw materials to china I think you will see the Aussie interest rates pulled down by the reserve bank in a desperate attempt to keep those cogs squeeking along. That will mean that the spread in interst rates here and overseas will drive the dollar down to ... dare I say it 38 cents?:
The spread of interest rates between US and Aust is about 2% cf 7.25%. At a frugal monetary loosening rate, it will take quite some time to bring them closer together. It would be too inflationary in the mind of the likes of RBA before it reaches there.
Now I know your thinking what is this poor little sick puppy smoking. Both our solicitor and banker last November thought I was a nutter when I first started ranting about CDO's and adjustable rate mortgages. In recent months here in Melbourne a lot of people have started to take note of the syndicated articles called planet wall street that has been running in the age.
The information has been out there on the internet for well over a year but as my father who had a grade three education but a special ability to read people said. Common sense just isn't very common among educated people.
Most of the nonsense about things are improving, pumped out by the gang of seven from wall street; Merrill Lynch, Bear Stearns, Lehman Brothers, Morgan Stanley, Goldman Sachs, JP Morgan Chase and Citigroup, has been aided and abetted by the financial press. There is trillions of dollars in further losses coming as a consequence of hundreds of smaller banks failing throughout the western economies of North America and Europe. That is without counting the number of insurance companies that will also soon start to crash.
As far back as the mid 1990's Warren Buffet described Wall Street as an apple that is rotten to the core. Around 2003 he was quoted saying that derrivatives were financial instruments of mass destruction that one day would case untold suffering. Warren Buffet doesn't understand derrivatives and unfortunatly for the rest of the world neither did the gang of seven.
Which brings me to the Somersoft Property Investment Forum. There are a lot of posters who can't see the forest for the tree's. Many on this site think they are going to continue to make a killing in property. Like the product disclaimers on most investment sales literature. Past performances in property investing is no indication of future returns.
We are now entering a period of massive financial upheaval. You need to go back and read about businesses that thrived in the great depression. The days of easy money through mortgage originators like Aussie that used collateralized debt obligations are going. If you want to grow your property portfolio you are going to have to generate your income from your internal operations ,be it your properties, business income or salary.
The use of negative gearing and using your existing equity to gear up is going to become much more difficult. The more senior posters on Somersoft need to warn the newies that you can lose your savings investing in property just as easily as you can speculating in the share market.
I also think a lot of Somersoft posters should visit the global house price crash forum and just read without commenting. By accepting some criticsim you can become a better investor. There is far too much arrogance on this site.... and yes I also plead guilty
I gather most SS forumers with properties have worked out that they will weather your scenario using the highlighted low interest rate scenario (because the RBA has the monetary leeway, plus the govt has the surplus to rein in unemployment) and manage profitable rental business (not acquire more but raise rent progressively in a low interest rate environment) because of S-D situation.
The IP business for rent would be feasible in your scenario of soft depression where people have employment (income) but getting loans to acquire big assets will be a problem, ie proportion of tenants will rise.
I don't think you and the mrs want to stick your heads in the sand Dazz with your derriere's waving in the air. If the stock market crashes in the next six weeks those shirts in Sydney won't wait til next year to drive their interest home
I also think a lot of Somersoft posters should visit the global house price crash forum and just read without commenting. By accepting some criticsim you can become a better investor. There is far too much arrogance on this site.... and yes I also plead guilty
There are far too many Socialists on GHPC to make it worth the effort. There are occasional useful bits of data shown but most is well into the public domain by more experienced commentators than the GHPC crew. The whole CDO debacle was in the public domain by authors such as Peter Schiff and Michael Panzner ( both beginning of 2007) in book form and Warren Buffet in his annual newsletter in 2002.
Planning for possible effects of macro economic changes is important. Most of the experienced investors here have been positioning their portfolios according to their interpretation of the markets for the last few years. The steadily rising interest rates indicated a change in the market fundamentals for money even if they hadn't read the authors predicting a collapse.
Unfortunately educating someone who is a novice is difficult as they are often at different stages of life and financial understanding. This forum is a wealth of knowledge and opinion unlike some others who promote D&G. Property is a business like any other. Like most businesses, a lot fail but some who learn their lessons well or get very lucky grow their business and become very successful.
Francesco's post is a classic understanding and interpretation of some of the issues that may present and what may happen.I must remember to give kudos to Francesco for that post. You won't see that sort of useful info presented at GHPC because it doesn't suit their Socialist mentality. A lot of the members there are just disaffected youth who want their ilife given to them on a platter. I read GHPC regularly but you have to have your BS filters up otherwise it will mess with your mindset and affect your investing.
Good luck with your investing.
Cheers
Shane
Not the case typically. They are exposed to price movements. If not, the latest rise in prices would not have helped their profits!!
See this article from today.
http://business.theage.com.au/business/china-slowdown-to-hit-returns-bhp-20080916-4hyc.html
That explanation sounds more like a credit crisis than a depression (soft or otherwise). As you say it's unlike the 30's. We already know it's a credit crisis - I feel that using the term soft depression is something the tabloids would use.
Agreed. Many on this site will adapt to the prevailing conditions. If IRs hit 2% (as you've posted before), then 95% of investors will be v. c/f +ve. Sounds like you're saying existing IP owners will receive a huge free kick ?
Doesn't this contradict the 2% IRs you're expecting ?
You've given us a fair bit of D&G opinion with an end result (of 2% IRs & a 38c A$) - can you back it up with the path we'll take to get there with some causes & effects - maybe tell us about wages, inflation, GDP, exports, IRs, liquidity, lending criteria tightening, renters reactions to 2% IRs, house prices, movement of the Aussie $, and anything else you think might be relevant....for Oz, China & the rest of the world. And also the likely hood of each of these events occurring.....
Thanks in advance.......
bring it on - massively cf+
thanks for the discussion guys - very interesting and helps one understand what needs to be done personally in the near future.
i think anyone in the coal, steel, uranium etc export jobs will be secure for the foreseeable future - those in tourism and sales will struggle.
I don't think you and the mrs want to stick your heads in the sand Dazz with your derriere's waving in the air. If the stock market crashes in the next six weeks those shirts in Sydney won't wait til next year to drive their interest home
I guess we'll just have to wait and see nonrecourse. You might be right...and you might be wrong. Even if your prediction comes true, I'm not sure that'll automatically translate into any action. Why they'd move on a customer who has never defaulted is a bit of a mystery. They'd certainly have a jolly good battle on their hands in a court of law before anything was finalised. That'd buy me at least 2 years of time.
I'm still a bit miffed as to the direct connection between the shenanigans in New York merchant banking land and my industrial holdings in Perth - but anyway. Apparently you understand the connection alot better. Looking at the news last night, all big four Banks in Oz declared their exposure to this nonsense. My Lender's exposure was very small, less than 150M....a drop in their bucket.
We don't have any exposure to any shares. We are quietly hoping that the funds exodus from the sharemarket runs over to prime property. The markets we invest in are still going up, there is no downturn as yet....and given the lack of supply, both rents and prices are still screaming up. Perhaps we are all deluding ourselves over here. Dunno.
Don't waste your effort and time fretting about the Mrs and I....we're big enough and ugly enough to take care of ourselves.
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well - we know you're big enough and ugly enough for both of you
but the mrs is neither big nor ugly!anyhow - after the disclosure last night (i think stg had no exposure) i was wondering if this is the true sum of their exposure to the lehmans situation. with so much interlending between banks both here and overseas, i wondered if the figures were just their "direct" exposure, or their total including all the convaluted avenues that seem to be showing up recently.
If only IR were 2%....you beauty!!!
Seriously, if rates were that low, building commencements continue to plummet, and rents continue upwards...this would be bliss!!! I would be cashflow positive to over 50k per annum! But I plan to acquire more assets...so won't have this much CF+.
Job or no job...I would be okay!
Now the reality.....I personally don't think we are going into a soft depression. I see it as a structural adjustment as economic power moves from the US to Asia and Europe. The US currently has 20% of the world's GDP...over time this will whittle away to probably less than 10%.
So long as we maintain good relations with Europe, Asia and increasingly Africa and Latin America...we should be okay.
The other day I heard the only country laughing in the current environemtn in Europe was France! ...were not the basket case only a few years ago! Welcome to the information age!
Seriously, if rates were that low, building commencements continue to plummet, and rents continue upwards...this would be bliss!!! I would be cashflow positive to over 50k per annum! But I plan to acquire more assets...so won't have this much CF+.
Job or no job...I would be okay!
Now the reality.....I personally don't think we are going into a soft depression. I see it as a structural adjustment as economic power moves from the US to Asia and Europe. The US currently has 20% of the world's GDP...over time this will whittle away to probably less than 10%.
So long as we maintain good relations with Europe, Asia and increasingly Africa and Latin America...we should be okay.
The other day I heard the only country laughing in the current environemtn in Europe was France! ...were not the basket case only a few years ago! Welcome to the information age!
keithj; Agreed. Many on this site will adapt to the prevailing conditions. If IRs hit 2% (as you've posted before) said:opinion[/U] with an end result (of 2% IRs & a 38c A$) - can you back it up with the path we'll take to get there with some causes & effects - maybe tell us about wages, inflation, GDP, exports, IRs, liquidity, lending criteria tightening, renters reactions to 2% IRs, house prices, movement of the Aussie $, and anything else you think might be relevant....for Oz, China & the rest of the world. And also the likely hood of each of these events occurring.....
Thanks in advance.......
http://business.smh.com.au/business/worrying-only-makes-things-worse-20080916-4hwu.html?page=1
Great Article above by Ross Gittens, as usual. Compares D&G to 1930's and we come out OK.
FYI Peter 14.7
Great Article above by Ross Gittens, as usual. Compares D&G to 1930's and we come out OK.
FYI Peter 14.7
I guess we'll just have to wait and see nonrecourse. You might be right...and you might be wrong. Even if your prediction comes true, I'm not sure that'll automatically translate into any action. Why they'd move on a customer who has never defaulted is a bit of a mystery. They'd certainly have a jolly good battle on their hands in a court of law before anything was finalised. That'd buy me at least 2 years of time.
I'm still a bit miffed as to the direct connection between the shenanigans in New York merchant banking land and my industrial holdings in Perth - but anyway. Apparently you understand the connection alot better. Looking at the news last night, all big four Banks in Oz declared their exposure to this nonsense. My Lender's exposure was very small, less than 150M....a drop in their bucket.
We don't have any exposure to any shares. We are quietly hoping that the funds exodus from the sharemarket runs over to prime property. The markets we invest in are still going up, there is no downturn as yet....and given the lack of supply, both rents and prices are still screaming up. Perhaps we are all deluding ourselves over here. Dunno.
Don't waste your effort and time fretting about the Mrs and I....we're big enough and ugly enough to take care of ourselves.
Hi Dazz I wasn't having a go at you and the mrs. Like you we have all our assets in property spread across three trusts including super. We have never had much time for the share market or financial advisors. As for taking on the banks through the courts.....
Believing that the banks have limited exposure to all those toxic derrivatives.... ya pull the other leg
. It was finally reported in the financial review? today that there is one Australian bank unnamed that has a cool 1 trillion exposure... yep you read that correctly. The world wide share market has lost 11 trillion to date, mate those are STD numbers.... Funny how governments can massage numbers so there is no recession in some parts of the world but 11 trillion just doesn't count. How many economists do we have to liquidate before we have a depression
Over the years we have significantly reduced our direct exposure through asset protection via our trusts. We were not quite as aggressive in our borrowings as you but then your younger and can pick yourself up and start again.
I'm keeping my fingers crossed til the 3rd of October as we have a property settlement which the purchaser has borrowed 95%. Those funds will extinguish a significant portion of the debt that is in our personal names.
Unfortunately or maybe fortunately the jewell in our crown didn't sell and although its still on the market we won't be paniced into selling and are resigned to a roller coaster ride. That would have made us bullet proof. Trying to protect ourselves has been like being on a large passanger liner it takes a lot of time to turn the ship.
Our real estate investments could drop 50% and we would still be comfortably within the banks LVR. If we go down then there won't be many shirts left standing either.
Good luck
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It's a term used by the Bonner/Wiggin team. In the title of their book 'Financial Reckoning Day' for one. I'm not aware if they invented it or not.
Extreme sentiment levels don't make for good continuation plays generally.
On a different tack/thought I am pleased that we/the world is going through this financial crisis, emotional turmoil and credit crisis now.
WHY...because I am learning, (personally enjoy reading 4 online newspapers and SS forum threads each day as I find them stimulating = they make me think and reflect on my money and risk management of our assets) we plan to retire in 2-3 years, so would rather start our retirement at the bottom of a share bear market, property market correction than at the top etc.
Action Plan in progress...
1. Super in cash
2. Build a property each year (can be duplex or house to rent)
3. If we find a great block of land at a good price build new PPOR but have it as IP for at least 12 months & revalue before moving into new PPOR.
4. Salary sacrifice a good portion of my wage and then commence SMSF when a reasonable amount has been built up in super cotributions.
5. Visit Financial Advisor (first visit free) and ask these 2 questions can employees who contribute to TelstraSuper and First State have their contributions paid into a SMSF? Don't need Financial Advisors' bleep on their charges & commission as I only need answer to Question 5.
Interesting times - gees I must have been asleep prior to 2000.
Kind Regards
Sheryn
WHY...because I am learning, (personally enjoy reading 4 online newspapers and SS forum threads each day as I find them stimulating = they make me think and reflect on my money and risk management of our assets) we plan to retire in 2-3 years, so would rather start our retirement at the bottom of a share bear market, property market correction than at the top etc.
Action Plan in progress...
1. Super in cash
2. Build a property each year (can be duplex or house to rent)
3. If we find a great block of land at a good price build new PPOR but have it as IP for at least 12 months & revalue before moving into new PPOR.
4. Salary sacrifice a good portion of my wage and then commence SMSF when a reasonable amount has been built up in super cotributions.
5. Visit Financial Advisor (first visit free) and ask these 2 questions can employees who contribute to TelstraSuper and First State have their contributions paid into a SMSF? Don't need Financial Advisors' bleep on their charges & commission as I only need answer to Question 5.
Interesting times - gees I must have been asleep prior to 2000.
Kind Regards
Sheryn
