this is a very good article :
https://www.gmo.com/NR/rdonlyres/E5E95346-EA7F-4583-9A8B-9939A9789615/460/JGLetter_1Q05_ALL.pdfI found it useful as I am currently invested in 2 bubbles (defined as a more than 2 standard deviation above a 20 year trend) namely oil stocks and property.
If you believe in reversion to the mean, real property prices in Sydney should decline by 50% just to fall back to trendline. This is an interesting scenario that is currently hard to imagine. Well try to imagine it anyway and see what your net worth would be.
Imagination is always a good thing i reckons. Imagine a property market where prices did not rise in real terms for 35 years. We call that market Germany, which may well be a good overseas property waddle in the near future.
Imagine also a property market where prices have been increasing at 50% clip year on year for the past 5 years. You could call that china/vietnam. Is that a bubble or a paradigm shift ? The world is more than Australia or Sydney, but what a microscosm it is.
Obi..your post reminded me of the visit my wifes Uncle from germany made to Oz a few years back. Im not stating this as fact but he told me that property rarely changes hands in Germany ..and I mean rarely – common apparently for generations to reside in the same residence and in addition he was saying that rents rarely go up. In fact my wifes aunty in Germany pays something silly like the equivelant of $25 per week for her apartment…has done for the last 30 years and can apparently pass this on to offspring at the same rent. Dont know if this is concrete fact but might explain the flat market in places like Germany as opposed to a booming China market which investing in would be paramount to playing russian roulette – might change in the future as China ‘opens’ but high risk isnt a big enough statement.
Its the ‘unknown’ that prevents many from investing in other worlds and many of the unknowns are not presented until you dig deep.
Off track a little but yesterday I got a call from my brother in law who moved to Japan a year ago….he just purchased a car and now finds out he can’t get car insurance because he doesent speak Japanese….why he asked …because he cant report any accident/theft to police effectively.
Makes you understand why our market moves differently to others overseas anyway
“love the deal – like the property”
obiwan, you mustn’t post that link, people might actually start believing this is a bubble [biggrin]
You are gotta be kidding!
There is some economic research that points to 27 out of 28 asset bubbles that occurred all went back to norm.
Now where is that link???
When it gets near the peak of a 2 sigma range, take the profits while you can.
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