to be picky... the UK has resisted the euro
The soft depression that we had to have
- Thread starter nonrecourse
- Start date
to be picky... the UK has resisted the euro
canada probably will resist as well - but the UK is still required to show both amounts and take either currency.
Are you an expat Canadian too Boomie?
nonrecourse, if the reports eventuate of a US fund to deal with bad mortgage-related assets (similar to the Resolution Trust Corp that was used to clean up bad debts from the savings and loan crisis in the late 1980s) will this alter your view at all of a soft depression?
Combined with the ban on naked short selling of financials, I believe we may have seen the worst.
Combined with the ban on naked short selling of financials, I believe we may have seen the worst.
i don;t think we have seen the worst, but i do believe that banning naked short selling for a while may slow the process.
that said, if there's money to be made shorting stock AFTER borrowing it to do so, then i imagine funds will do this instead. you may find that one umbrella company with 2 "minuet" companies decides to do business with itself (ie 1 buys stock and lends it to 2 at deposit bond rates (it is a deposit bond after all, is it not?) then they've only lost a few percent.)
may work, may not. we will have to wait and see the rules affecting this odd piece of legislation.
that said, if there's money to be made shorting stock AFTER borrowing it to do so, then i imagine funds will do this instead. you may find that one umbrella company with 2 "minuet" companies decides to do business with itself (ie 1 buys stock and lends it to 2 at deposit bond rates (it is a deposit bond after all, is it not?) then they've only lost a few percent.)
may work, may not. we will have to wait and see the rules affecting this odd piece of legislation.
Although, i do agree the US is in recession and UK is not doing much good either. But I don't think that the bad times will last for a long time.
The reason I say this is unlike the long lasting recessions of the past this time around the two new Asian giants India and China each with over billion in population will come to the rescue.
Both countries have embarked on the path to economic development. Although, China is significantly ahead of India but it also started earlier. I don't see either of them going into a recession.
Yes, I know they both heavily rely on the US at the moment for their development, But sooner or later once their population becomes wealthy they will have a market way bigger then the US.
India recently got a nod from the NSG (Nuclear Supplier Group), which will give India access to the worlds Uranium to build nuclear power plants and meet it's energy demands. This should immensely help with the continued economic development.
Australia already has good ties with China, which is good and now if it can do the same thing with India (although I am sure China would have it's reservation against that) it would benefit Australia in the long run.
You get the idea of the potential each of these countries will have in future.
Cheers
Oracle.
The reason I say this is unlike the long lasting recessions of the past this time around the two new Asian giants India and China each with over billion in population will come to the rescue.
Both countries have embarked on the path to economic development. Although, China is significantly ahead of India but it also started earlier. I don't see either of them going into a recession.
Yes, I know they both heavily rely on the US at the moment for their development, But sooner or later once their population becomes wealthy they will have a market way bigger then the US.
India recently got a nod from the NSG (Nuclear Supplier Group), which will give India access to the worlds Uranium to build nuclear power plants and meet it's energy demands. This should immensely help with the continued economic development.
Australia already has good ties with China, which is good and now if it can do the same thing with India (although I am sure China would have it's reservation against that) it would benefit Australia in the long run.
You get the idea of the potential each of these countries will have in future.
Cheers
Oracle.
Bandits that now have the US taxpayer mortgaged for their sins
Hi cdremy; I think Warren Buffet said it best way back in the 1990's "Wall Street is an apple that is rotten to the core". As unpalatable as it would be the gang of seven investment banks that I mentioned in an early post which is now the gang of four all need to be wiped out so that the second tier investment banks would be left to pick up what's left. Because the U.S. reserve and the other big economies are stepping in to support all these bad debts it will more likely mean twenty years of listless under performance rather than ten years. If you dispute this have a look at how Japan has fared since the real estate and banking debacle they went through in the 1990's.
Hi cdremy; I think Warren Buffet said it best way back in the 1990's "Wall Street is an apple that is rotten to the core". As unpalatable as it would be the gang of seven investment banks that I mentioned in an early post which is now the gang of four all need to be wiped out so that the second tier investment banks would be left to pick up what's left. Because the U.S. reserve and the other big economies are stepping in to support all these bad debts it will more likely mean twenty years of listless under performance rather than ten years. If you dispute this have a look at how Japan has fared since the real estate and banking debacle they went through in the 1990's.
It's not in the hundreds of trillions BC, (not yet anyway!)
Last week about USD$250billion was pumped in, and this from NYT: "Treasury Secretary Henry M. Paulson Jr. said the upfront cost of a rescue proposal could easily be $500 billion, and outside experts predicted that the bill could reach $1 trillion."
The amounts are staggering and hard to comprehend.
"Million, billion, trillion ... whatever." Homer Simpson.
Short USD.
Im expat Canadian and expat New Zealand. Yes its confusing, particularly during the rugby world cup.
Kudos to you NR. I wasn't a GHPC permabear, but neither am I a pollyanna property permabull.
I discovered Steve Keen's writings at the beginning of last year and think he makes sound and sober analyses, that don't have as their first priority, "retaining confidence in the economy", as the RBA does, nor in maximizing shareholder returns, as the private banks do.
I think he calls things straight, in his analysis of why debt to gdp ratio now has to enter a period of 'negative growth' to revert back to a more sustainable relationship with income growth.
His surmise of how much more bad sub prime related paper has to be written off is disturbing.
Brilliant post Winston; The links I've added it to my favorites for future reference
I note today the US is now speaking of a 1 trillion dollar bail out. Now mind you that is only a thousand billion not the anglophile billion billion.The way the regulators are bailing out the sharks this soft depression could turn nasty. I have been saying for some time that the ASX may go as low as 3500 as more and more people wake up to the lies and nonsense being fed to the mum and dad investors by the financial press and the regulatory authorities.
If you remember pareto's principle see link;
http://en.wikipedia.org/wiki/Pareto_principle
I think you will see on Somersoft that rule apply in the next 10 years with property as well. I'll get flammed for this; "I can see a real danger that property prices could fall 50% in the next 3-5 years Australia wide". This collapse will be a direct result of a diminuation of asset values world wide.
The twenty percent of Somersoft investors who survive will be operating with low levels of debt. If my worse case scenario pans out we are going to witness banks approaching investors with a demand that they reduce their mortgage liabilities somewhat like a margin call that occurs with share traders who have geared shares.
For those somersoft speculators who have geared themselves up to 80% or more on their property porfolio it will be Kenny Rogers theme song The gambler that will be playing in the background as the banks move in and reposses anyone who cannot meet the call.
I pray that I'm wrong but if your a student of history you realise that life moves in cycles and the average punter has a short memory.
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I am a simple man who invests long term.
So can someone please explain to me when I have an affordable end IP, with ready supply of tenants, significant equity, rising rents, fixed rates and a secure income, how this affects me?
I mean lets say prices drop 50% ......surely if this happens then everyone is out of work and therefore cannot buy a home so my tenants stay. Also we have a halt in building so supply is zero. Banks dont care unless I default. I won my PPOR 100% so i can use more of that equity.
People still need some where to live? I amd at the affordable end so I may even see more demand?
I guess if I lose my income ok. If I wa sin retail ok, I would be neverous.
You cannot apply rest of World Real Estate to Aussie RE. Differnent construcitons, land costs, taxes, rates, population demographics, supply and demand. If Aussies all happy tolive in 4 storey apartment blocks and use public transport then ok. My IPs are stuffed. I dont see that changing.
Peter 14.7
So can someone please explain to me when I have an affordable end IP, with ready supply of tenants, significant equity, rising rents, fixed rates and a secure income, how this affects me?
I mean lets say prices drop 50% ......surely if this happens then everyone is out of work and therefore cannot buy a home so my tenants stay. Also we have a halt in building so supply is zero. Banks dont care unless I default. I won my PPOR 100% so i can use more of that equity.
People still need some where to live? I amd at the affordable end so I may even see more demand?
I guess if I lose my income ok. If I wa sin retail ok, I would be neverous.
You cannot apply rest of World Real Estate to Aussie RE. Differnent construcitons, land costs, taxes, rates, population demographics, supply and demand. If Aussies all happy tolive in 4 storey apartment blocks and use public transport then ok. My IPs are stuffed. I dont see that changing.
Peter 14.7
Peter, try this.
think about how much AUstralian consumption relies on debt. credit cards, housing loans, car loans whatever. Contract that credit and GDP contracts, cos our gdp is 60% domestic services. People start getting laid off (including your clients), many stop spending as much, vicious circle. Businesses fail. Wages go down (despite Rudd). Tax income goes down. Govt services are cut. Leverged businesses develop serious operational problems (who knows maybe Optus, your isp, your insurance company), security of supply of food is challenged (farmers don't get the same price at market cos the consumer can't afford to pay that, therefore farm income goes down but the banks still want interest (ability to buy fertilizer, diesel, pay interest is compromised heavily)
Property values decline heaps, are bought by those who have money, and turned into IPs. Percentage of IPs goes up significantly. Rents have downwards pressure.
So your income takes a hit. How big remains to be seen.
think about how much AUstralian consumption relies on debt. credit cards, housing loans, car loans whatever. Contract that credit and GDP contracts, cos our gdp is 60% domestic services. People start getting laid off (including your clients), many stop spending as much, vicious circle. Businesses fail. Wages go down (despite Rudd). Tax income goes down. Govt services are cut. Leverged businesses develop serious operational problems (who knows maybe Optus, your isp, your insurance company), security of supply of food is challenged (farmers don't get the same price at market cos the consumer can't afford to pay that, therefore farm income goes down but the banks still want interest (ability to buy fertilizer, diesel, pay interest is compromised heavily)
Property values decline heaps, are bought by those who have money, and turned into IPs. Percentage of IPs goes up significantly. Rents have downwards pressure.
So your income takes a hit. How big remains to be seen.
I haven't looked at any stats for this year but it was up around 20% last year. When GDP is under 5%, how is the other 15% accounted for?
Very good post and kudos sent.
You last sentence sums it up. How Big? Asian Crisis was quoted as the biggest chalenge since WWII. No impact.
GDP AND BALANCE OF TRADE On your arguement if we all stop spending, then doesnot inflation goes down and imports crash so balance of trade goes up?
EMPLOYMENT Jobs Go? Presently unemployment is very very low and argueably 0% because those unemployed want to be there. i.e. no willing to move, get training, unemployable, rorting the system with cash work, etc... So...Plenty of work still for those that want it.
BANKRUPTCIES Agree with companies going belly up like Optus etc.. could be an issue. Stick to the majors and dont invest on a folly. This will happen.
RENT INCOME My tenants are significantly on welfare as low income earners so unless Gov cuts benefits then income is gov guaranteed. OK here.
RETAIL TRADE I would not like to be selling cars, phones, TV, kitchens etc.. in the future world but that is the game. It culls out the weak and empowers the strong. Agree this is factor but IMHO we need to consume less.
SUMMARY Still along way to go and it appears if the US Gov guarantees, as they essentially are doing, the fear factor goes away.
BTW oil is dropping so that is good thing over the globe as and inflation helper. No good for Global warming but that is another matter.
MY EXPERIENCE I was retrenched twice in the 1990 recession and was shareholder in a very small company that went under. But I always able to find work. My skills are higher no and company structure secure. I have lots of belt tighteneing and secure long term contracts to Gov cleints.
SUMMARY To be back to 1990 recession we need rates at 17% (I note debt levels are higher but TV and cars are cheaper) and unemplyment at 11%+. Again a long way to go.
Peter
You last sentence sums it up. How Big? Asian Crisis was quoted as the biggest chalenge since WWII. No impact.
GDP AND BALANCE OF TRADE On your arguement if we all stop spending, then doesnot inflation goes down and imports crash so balance of trade goes up?
EMPLOYMENT Jobs Go? Presently unemployment is very very low and argueably 0% because those unemployed want to be there. i.e. no willing to move, get training, unemployable, rorting the system with cash work, etc... So...Plenty of work still for those that want it.
BANKRUPTCIES Agree with companies going belly up like Optus etc.. could be an issue. Stick to the majors and dont invest on a folly. This will happen.
RENT INCOME My tenants are significantly on welfare as low income earners so unless Gov cuts benefits then income is gov guaranteed. OK here.
RETAIL TRADE I would not like to be selling cars, phones, TV, kitchens etc.. in the future world but that is the game. It culls out the weak and empowers the strong. Agree this is factor but IMHO we need to consume less.
SUMMARY Still along way to go and it appears if the US Gov guarantees, as they essentially are doing, the fear factor goes away.
BTW oil is dropping so that is good thing over the globe as and inflation helper. No good for Global warming but that is another matter.
MY EXPERIENCE I was retrenched twice in the 1990 recession and was shareholder in a very small company that went under. But I always able to find work. My skills are higher no and company structure secure. I have lots of belt tighteneing and secure long term contracts to Gov cleints.
SUMMARY To be back to 1990 recession we need rates at 17% (I note debt levels are higher but TV and cars are cheaper) and unemplyment at 11%+. Again a long way to go.
Peter
...and given the bent of the residential tenancies act, in tough times, it will be difficult to evict tenants - so in the worst case scenario, your property may house non-rent paying tenants...
Cheers,
The Y-man
WW
You have not considered 1 very important factor.
Interest rates in the environment you are describing will be coming down big time. A drop of 2% is not unlikely and if this happens loan repayments will be the same as paying rent and many existing IP's will be cash flow +ve.
By the way, this thread started before the bailout of AIG.
The US have already started taking measures to address the problems so it won't be long before financial markets improve.
IMHO
You have not considered 1 very important factor.
Interest rates in the environment you are describing will be coming down big time. A drop of 2% is not unlikely and if this happens loan repayments will be the same as paying rent and many existing IP's will be cash flow +ve.
By the way, this thread started before the bailout of AIG.
The US have already started taking measures to address the problems so it won't be long before financial markets improve.
IMHO
