Bank of America, National City, and American International are all at 52-week lows. Countrywide Financial and Wachovia are almost there, too.

Oh and those home builders? The ones Wall Street experts fell all over themselves to re-recommend earlier this year? Don't look now but they're faltering again:

 Condo and single-family home builder WCI Communities recently plunged as low as $1.45. The company is losing money hand over fist and Standard & Poor's just downgraded its corporate credit rating deeper into junk territory, citing concerns over the firm's liquidity. A bankruptcy filing can't be ruled out.

 Standard Pacific — a California-based builder — went for $6.50 as recently as early April. It's worth a bit over $2 now. No wonder: The company lost $216.4 million in the most recent quarter thanks to a steep sales decline and hefty impairment charges.

Home Depot, which recently reported its first annual sales decline, will fire 1300 workers and close 15 underperforming U.S. stores.

 Larger builder Centex is getting close to setting a fresh 52-week low, while shares of home improvement retailers Home Depot and Lowe's are hitting the skids again. The problem? Home Depot's same store sales are falling at a greater-than-6% rate, while Lowe's reported an 18% year-over-year drop in first-quarter profits.

Frankly, this should not come as a surprise to you. I have repeatedly warned you that many of these stocks were "value traps." That's financial jargon for stocks that look cheap … but that will probably get even cheaper — and in some instances, disappear entirely.

So what's going on? Why are many financial stocks and home builders faltering again? How did Wall Street get these sectors wrong … again?

I blame it all on …

A Toxic Cocktail of Higher Interest Rates,
A "Hands Off" Fed, And Endless Capital Raising

I think these threats are rather straightforward — a toxic cocktail of bearish developments that underscore why I've been warning you not to buy the B.S. Wall Street has been selling …

Higher long-term interest rates: I don't know if you've been shopping for a mortgage recently, or if you've been following the price action in long-term bonds. If you have been, you've probably noticed something: Long-term rates haven't been falling along with the Fed cuts. They've been rising. And naturally, since bond prices move in the opposite direction of interest rates, bond prices have generally been declining.

U.S. long bond futures topped out at around 121 earlier this year. They're going for 116 and change now. Thirty-year fixed mortgage rates bottomed out at 5.48% in mid-January, according to Freddie Mac. They were recently up to 6.01%.

And what about all those Fed rate cuts? Have they helped? Well, a 30-year fixed loan went for 6.38% in September when the Fed started slashing the funds rates willy-nilly. So that means 325 basis points of Fed cuts have bought you essentially 37 basis points in long-term, fixed rate mortgage relief.

How could this happen? Why haven't fixed rates plunged? Because the Fed cuts have helped underwrite a dramatic bout of commodity inflation!

Just consider a simple example: The price of a barrel of crude was $80.57 on September 17, the day before the Fed first cut the funds rate. It topped $135 a barrel this week — a gain of 67.5%. Import prices are now rising at a 15.4% rate, the highest in history. The Consumer Price Index is now climbing by just under 4%, and even that figure is likely understated.

Bottom line: The Fed's "Let's throw easy money and rate cuts at every problem" approach to monetary policy has cemented in the minds of bond traders and consumers that the Fed could care less about fighting inflation.

A recent University of Michigan survey found that consumers expect inflation to run at 5.2% over the next year, the highest 1-year expected inflation rate since 1982. A separate measure of the difference between yields on nominal 10-year Treasury Note yields and yields on 10-year Treasury Inflation Protected Securities (TIPS) is now running around 256 basis points. That's the highest since August 2006, a red alert warning from the bond market that investors think the Fed is losing control.

Naturally, none of this is good news for potential home shoppers. They've gotten little bang from the Fed's rate-cutting buck, and now, long-term rates are starting to climb. Meanwhile …

The Fed is shifting into "neutral." We've established that long-term rates are not going down due to concerns about inflation. But what about short-term rates, the ones the Fed controls more directly? The news has been better there.

The Fed's cuts in the federal funds rate have helped bring down the London Interbank Offered Rate (LIBOR) and the prime rates quoted by major banks. That has helped lessen the magnitude of rate and payment adjustments for many adjustable rate mortgage holders. It has also lowered the rates on things like home equity lines of credit, which usually track the prime rate.

But even here, the news is getting grimmer. The Fed is belatedly realizing that it has helped turn smoldering inflation into a five-alarm fire that is burning out of control. So policymakers are signaling that they're ready to abandon their policy of rate cuts and shift into "neutral."

For instance, Fed Vice Chairman Donald Kohn said this week:

"With the information now in hand, it is my judgment that monetary policy appears to be appropriately calibrated for now to promote both rising employment and moderating inflation over the medium term."

Another Fed governor, Kevin Warsh was even more strident in his anti-inflation speak, saying:

"The inflation news since last summer offers little solace. Oil prices are near record levels, food prices have risen rapidly, prices for a wide range of commodities are up, and dollar depreciation is among the causes pushing up import prices. Some indicators of expected long-run inflation have also risen."

The message coming through loud and clear? Don't count on us for more rate cuts. If anything, the focus is now shifting to when the Fed will start HIKING rates.

Financial firms can't stop "Dialing for Dollars." If you think political fund raising is out of control this election year, you should see what's happening in the financial markets. It seems like every few days another bank, broker, or insurance firm passes the hat around, seeking billions of dollars to shore up its capital base.

The credit market damage is so severe that some of the largest U.S. banks on the NYSE are raising billions of dollars in an attempt to stave off insolvency.

Sovereign Bancorp just raised $1.9 billion through the sale of stock and debt. National City raised $7 billion by selling common and preferred shares. UBS is raising $15.5 billion by selling rights to purchase shares. And AIG is topping them all, raising a whopping $20 billion via various stock and debt offerings.

The problem? These financial firms are being forced to offer exorbitant yields to attract investors. They're selling shares at sharp discounts to current values. And they're dramatically increasing their share counts. Result: They're massively diluting the value of the stakes that current shareholders own and raising their cost of capital. That, in turn, will pressure future profitability.

As if that weren't bad enough, every new capital raise seems to be accompanied by a "This one is the last, we swear!" pledge. And then a few months later, another dilutive deal gets announced. It's a total joke!

The fact is that many financial firms — even NOW — continue to underestimate the depth and scope of the housing and credit market downturns.

So the next time your broker tries to serve you up a heaping platter of home builder or financial shares, tell him to take a hike. There are very few true bargains out there (unless you're looking overseas), and the big picture trend still looks down for these mangy dogs.

what size of land and type of hosue is this ie floor pla nsize number of bedrooms etc

If you can secure it on 1K and dont have to buy the land and get a construction contract and avoid all interest then it might be a good deal.  Its easy to check the value of the land and compare the building costs by m2. 

So tell me how much for both components and how much is the rent ?

Also would pay to get a Residex projection as the area might be a dud.

I see that the Gunns Pulp Mill is looking iffy, did anyone on here invest in Georgetown on the punt that the mill would go ?  I know  many did not knocking them but I am genuinely interetsted in any feedback

Yes I would also recomend a lease even only for the simple demonstration of a commercial agreement for taxation purposes.

The reason why most property owners, for thousands of years, believe a mortgage is a liability is because we are too close to it (in time).  If we observe a mortgage in a distant future, it is very easy to see that your mortgage is actually an asset, not a liability.

The fact that we are paying the mortgage payment every month, we are pretty sure our mortgage is a liability.  But didn’t we walk on a flat surface every day and the earth is still round?

So if you believe that the earth is round, you almost have to agree with me that your mortgage is an asset before I even give you my explanation!

OK, I know I am being cheeky.

Let me use a few examples to demonstrate here.

Example 1:
If you bought an average home 40 years ago, you probably had to pay $8k for it at the time, and say you took on a 100% mortgage (without using any of your money). 
 
Over the next 40 years, you didn’t pay anything back (neither interest nor principle), you may end up with roughly $120k debt and a property valued at roughly $360k, so you will create a net worth of about $240k.

It is not hard to see that the principle of the mortgage $8k you borrowed 40 years ago has lost its significance compared to today's money.  This is the magic of inflation, which allows your debt to drop in value in real term over the years.

While your debt is dropping in value through inflation, your property is going up in value beating inflation; the gap between the two has created serious wealth for you.

Example 2:
If you think the value of properties (from $8k to $360k over the last 40 years) is a good indication for what has really happened in Australia in general.  How about using the same formula moving forward for 40 years?

 
The diagram shows a property will go from $360k to $16Million in the next 40 years, and if you borrow the whole lot (a mortgage again), without paying any interest or principle over next 40 years, you will end up having a $11Million net worth.

Remember the interest you didn’t pay will generate more interest, so it is interest on interest compounding for 40 years!  But it is still no big deal in the whole scheme of things.
Money loses value over time through inflation, it includes the money you borrow, and the interest you have to pay.

You only need to wait another 2 years and the price will have doubled.

Good Post Don

There is certainly some major stuff going on right now and we would be mad to think that we live in a vacum most people are quite indifferent to what is happening in the world economy a major bank in the UK had a run, HBOS had a scare last week and Bear Steins was an inside job for the boys.

The one bit of advise that should be heeded is work out your defensive position and make sure you take it in the short term as the domino effect has already started and no one knows where it will end.

The Us is not technically in recession yet which will be classified by the US statisticians only after it happens.

Yes the FED we keep hearing about them the Fed this the FEd that and unfortuantely they do control our destiny.  I think they will keep printing money and we will see stagflation I dont think they have any intetion of saving the US $.  Many many strong arguments either way some say that as lending is freezing up then defaltion like Japan.  Some contrarians saying that the recent commodity correction is a sign of the return of the strong dollar I personnaly dont think so.  Gold would need to be $2400 an ounce in todays money to equal its historic high.

There is also the question of socialing debt many in the Uk unhappy that the governemt bailed out a failed bank with taxpayers money effectively penalsing tax payers that did not speculate.. Moral hazard is all the buzz the FED and BOE very keen to further ensalve the tax paying populations in repaying the endless debt, the big boys are already out and have the takings.

expect to see more shocks, shorts etc this is manipulation watch out if we have an oil shock. 

The Uk is about to cop what the US is going through and Europe is next.

I think for us in oz we will have a -ve impact but not as severe with our commodity and energy rich nation and new found alignment to the BRIC economies. Here is some stuff on it light reading for the Easter weekend.

Earth 2050: Population unknowable?

How many people will inhabit the planet before population growth finally levels off? The figure most commonly used is 9 billion by 2050, up from 6.7 billion today — an extraordinary number, considering that there were only 1 billion humans in 1830. (Right now there are a billion people just between the ages of 10 and 19.)

China's economy forecast to be world's largest in 2015 – regaining position it lost in 1890

Instead of using the exchange rate to measure the level of Chinese performance, which greatly understates China’s role in the world economy, Maddison uses purchasing power parity (PPP) to convert yuan into US dollars and finds that China accounted for 5 per cent of world GDP in 1978, 15 per cent in 2003 and that this is likely to rise to 23 per cent in 2030. -see detail on PPP in World Bank and OECD articles at bottom of page.

Prior to 1890, China was the world’s largest economy. Chinese Economic Performance in the Long Run: 960-2030 AD uses a comparative approach to explain why China’s role in the world economy has changed so dramatically in the last thousand years. It concludes that China is likely to resume its role as the world’s largest economy by the year 2015, thus regaining the position it had held until 1890.

China to double its coal consumption

China is opening the equivalent of two coal-fired plants a week, and within ten years it will double its coal consumption to three billion tons annually. To put that into perspective, the U.S. uses slightly more than a billion tons of coal a year.

Rio sees China, not U.S., paved with profits

SYDNEY (Reuters) – Global miner Rio Tinto Ltd. downplayed the impact of mounting U.S. economic turmoil on its businesses, forecasting strong demand for its main revenue earners led by a commodities boom in China..Rio, the world’s biggest aluminum maker and a top supplier of iron ore, copper and other industrial staples, said it was premature to say the price cycle for its products had peaked, though it was mindful of short term risks of an expected slowdown in the U.S. economy. “However, the U.S. is now somewhat less important in world commodity demand than it was five years ago,” Rio’s chairman, Paul Skinner, said in the report. But a sharp slowdown in the U.S. would have only a modest impact on growth in China and India, which are key growth markets, Skinner predicted. “Projections for Rio Tinto’s main product groups, iron ore, aluminum and copper, suggest that demand could potentially triple over the next 25 years,” Skinner said. “In the short term, with low commodity stocks and a likely continuation of supply side challenges, we expect solid global economic growth, led by China, to support strong increases in demand for most metals and minerals during 2008 and 2009,” Skinner said.

Steel demand to remain firm, despite Us banking problems

Global steel consumption is likely to continue to grow, in spite of the current difficulties facing the US financial sector. The strength of the steel markets in Asia and the Middle East, especially for new infrastructure and construction seem set to more than offset any weakness in the USA, and possibly Europe. China and the rest of Asian now account for some 60% of global steel consumption. It also said that Qatar may break the link between its currency and the weakening US dollar, as Kuwait recently did.

Middle East demand to suge on boom in construction

Steel consumption in the Persian Gulf region is rising sharply as strong oil prices fuel a construction boom, and demand could almost quadruple by 2012. The Gulf Investement Corp expects that the Gulf Co-Operation Council countries will be consuming 72m tonnes/year of steel by 2012. They used 19m t in 2006, according to International Iron & Steel Institute figures.

Oil Imports to Quadruple to India and China

Energy developments in China and India are transforming the global energy system as a result of their sheer size and their growing importance in international energy markets. “Rapid economic development will undoubtedly continue to drive up energy demand in China and India, and will contribute to a real improvement in the quality of life for more than two billion people. This is a legitimate aspiration that needs to be accommodated and supported by the rest of the world”, said Mr. Tanaka. “China and India together account for 45% of the increase in global primary energy demand in this scenario. Both countries’ energy use is set to more than double between 2005 and 2030. Worldwide, fossil fuels – oil, gas and coal – continue to dominate the fuel mix. Among them, coal is set to grow most rapidly, driven largely by power-sector demand in China and India.

Consuming countries will increasingly rely on imports of oil and gas – much of them from the Middle East and Russia. In the Reference Scenario, net oil imports in China and India combined jump from 5.4 mb/d in 2006 to 19.1 mb/d in 2030 – this is more than the combined imports of the United States and Japan today. World oil output is expected to become more concentrated in a few Middle Eastern countries – if necessary investment is forthcoming. Although production capacity at new fields is expected to increase over the next five years, it is very uncertain whether it will be sufficient to compensate for the decline in output at existing fields and meet the projected increase in demand. A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out.

Iran, Switzerland ink key gas deal

TEHRAN — A Swiss company has signed a natural gas purchase contract with Iran, Swiss Foreign Minister Micheline Calmy-Rey announced here on Monday in a news conference with her Iranian counterpart Manuchehr Mottaki. Switzerland’s Elektrizitaetsgesellschaft Laufenburg (EGL) sighed a 25-year deal with the National Iranian Gas Export Company for the delivery of 5.5 billion cubic meters of gas per year.

“We have a strategic interest to secure our gas supplies and diversify our gas suppliers,” Reuters quoted the Swiss minister as saying. “We have to import all our gas and oil,” she added. She said the deal was “important in a long-term perspective” for both sides. She said in Geneva on Sunday, before traveling to Tehran that the agreement could help ease Europe’s dependence on Russian gas. The gas will be pumped to one of EGL's power stations in Italy

China: "To Get Rich is Glorious"

When Chinese Premiere Deng Xiaoping spoke these words back in 1993, that's when China unleashed an economic force unprecedented in modern history. That single, but pivotal, change in philosophy marked the beginning of China's relentless march to prosperity. And along the way, we are seeing a series of largely untold economic miracles:

Chinese consumer spending has jumped from virtually zero to nearly $1 trillion. There are now over 100 cities in China with a population over 1 million. The U.S. has only nine. China currently boasts 1.3 billion consumers. Plus, to stimulate foreign investments, Beijing is pulling out all the stops.
China plans to boost natural gas consumption by as much as 500 percent … invest nearly $4 billion in information technology and infrastructure … expand fiber optic networks … beef up mobile communications capacity … establish digital capable HDTV transmission … and use GPS technology for traffic control.China is building massive skyscrapers, highways, city expressways, subway lines, and an intra-city light rail. It's expanding the Beijing airport, improving water, electric, gas, and heating facilities. All across China, the equivalent of a city the size of San Francisco is being built every two weeks. This year alone, Shanghai (with 17 million people) will complete towers with more square footage than all the available space in Manhattan combined.

Even more significant is that China just launched a rural initiative for over 800 million citizens. It plans to spend over $11 billion a year on rural education, irrigation, and medical services. And it's investing tens of billions to build 112,000 miles of rural roads — enough to circle the globe four times over. magine, just imagine, the raw materials and natural resources like cement, asphalt, tar and steel required to feed that kind of growth. That's why consumption of just about every imaginable resource is flying off the charts!

The Relentless Rise of India:
"It's Like China 15 or 20 Years Ago."

Those are the words of a renowned emerging-markets investor that appeared in a recent issue of Time magazine. But that's just a tiny glimpse of India's almost unlimited potential:

India is currently home to more than 1 billion people and projected to surpass China as the most populous country on Earth by 2015. India's economy is growing 8 percent a year — the second fastest rate in the world. The Indian stock market has tripled in three years — creating a record number of billionaires. One reason: Foreign investors have poured $30 billion into India's stock market in 36 months. Just like China, India needs massive amounts of natural resources and commodities to feed its booming economy. And this is not just a passing trend. It's an economic appetite that could last for a long time.

But where will China and India find the commodities, natural resources, and consumer products to feed their unbridled expansion?

A "Back Door" to Asia: Brazil!

Elisabeth's mother, who lives in Brazil, recently turned 90. At the reservoir on our farm, her grandchildren and even their dog joined us in celebrating.Ever since Luiz Inácio Lula da Silva ("Lula") was elected Brazil's president five years ago, she's been saying he'd wreck the economy. Lula has done precisely the opposite. He's implemented the most disciplined fiscal and monetary policy the country has seen in half a century. He has boosted Brazil's currency by 69% since he took office in January 2003. He has increased the trade surplus by 225% from $14.1 billion to $45.8 billion. And he has paid off 100% of Brazil's debts to the International Monetary Fund.

To achieve all that, however, Lula had to pay a stiff price: Spartan government spending, sky-high interest rates … and, consequently, a relatively slow economy last year. So it's only now, in his second term, that he feels he's got a firm enough financial foundation in place to go for the real prize: Big growth. With that goal in mind, the Bank of Brazil has already slashed its benchmark interest rate 14 times, to the lowest level in recent history. And sure enough, the economy is responding:

Retail sales have jumped 8.5%. Capital goods production jumped 18%. And Brazil's key stock index, the Bovespa, which rose 32.9% last year, has gone on to new highs in 2007. In just four years, Brazil's president, Luiz Inácio Lula da Silva, has transformed the Brazilian economy and forged monumental deals with China. Brazil's trade balance has gone from an $8 billion deficit to a $46 billion surplus. Just recently, Brazil's state-owned oil company inked a deal to sell China 12 million barrels of crude oil.

How do you get all that oil out of Brazil when its infrastructure is not up to par? No problem for China. They've offered many billions to improve Brazil's port and railway infrastructure — so they can extract natural resources more efficiently. China is also building the world's second largest dam in the Brazilian Amazon. And energy from that dam will power mines that send raw material to … China. Brazil's natural resources are equivalent to those of the U.S. and Canada combined. But even those resources alone can't feed the needs of China, India, and all of Asia.

So these resource-gobbling giants are looking elsewhere too.

China wants 40 pct of oil/gas imports from Africa

China wants up to 40 percent of its oil and gas imports to come from Africa in the next 5-10 years, a Chinese industry official said on Monday. ""We wish to increase the imports, the oil and gas from Africa from 35 to 40 percent in the next five to 10 years,"" Zhiming Zhao, executive president of China Petroleum and Petro-Chemical Industry Association told reporters at an energy conference in Cape Town. China has embarked on a relentless investment drive in Africa to feed its economy, particularly in mining, oil, and gas. Despite objections to China's human rights record and talk of a colonialist agenda from critics, there have been a steady flow of big deals since President Hu Jintao announced a drive to boost relations with Africa in 2004.

China imported more than 30 million tons of oil from Africa in 2005, about 30 percent of its total oil imports. ""We have a very good relationship with Africa and in future we wish to find more places to put our investments,"" Zhao said of increased Chinese-African cooperation. Zhao said China had invested some 30 billion dollars in Africa's oil and gas industries. Among the Chinese investments in Africa's oil and gas sectors, Zhao mentioned Egypt, where China Honghua set up a joint venture with the Egyptian Ministry of Oil to produce drilling rigs. China National Petroleum Corp. (CNPC) has also invested in its first overseas deep-water exploration project off the coast of Equitorial Guinea, and was continuing its decade-long relationship with Sudan.

Three major Chinese oil companies CNPC, Sinopec, and CNOOC Ltd. are operating in Nigeria, Africa's biggest oil producer.

Vietnam's second oil refinery to have more Japanese business involvement

HANOI — Japan's Mitsui Chemical is expected to become the fourth partner of a joint venture to develop Vietnam's second oil refinery in central Thanh Hoa province. The Nghi Son oil refinery has been the subject of long negotiations between state-owned Vietnam National Oil and Gas Group (PetroVietnam) and its two existing partners, Japan's Idemitsui and Kuwait's Petroleum International, local newspaper Vietnam Investment Review reported Monday.PetroVietnam said last week that it expected a joint venture contract to be signed in early April. The Vietnamese group will hold a 25-percent stake with the three foreign partners dividing up the rest. The joint venture is expected to officially receive an investment license by June, and construction will start in 2010. The refinery with annual processing capacity of some 10 million tons is slated for completion within 60 months.

The project will include the oil refinery, refined and material factories, energy facilities, pipeline and storage systems, and an informatics system. In addition to LPG, unleaded gasoline, kerosene, jet fuel, diesel, and FO, the refinery is projected to produce bitumen, propylene and BTX as a raw material for the domestic petrochemical industry. Crude oil may come from the Su Tu Den (Black Lion) oilfield off Vietnam's southern coast, and imports from the Middle East. The Nghi Son refinery and the Dung Quat oil refinery, Vietnam's first refinery under construction in central Quang Ngai province, will contribute 70 percent of the country's demand for petroleum products by the time they are fully operational in 2015.

PetroVietnam is working on another plan to develop the country's third oil refinery in Long Son Island off the coast of southern Ba Ria Vung Tau province.
According to PetroVietnam, by 2010 the country's demand would be about 18 million tons of refined products, while Dung Quat refinery being able to refine six million tons of crude oil.

Therefore, the three refineries must be completed by 2015 to meet the demand of about 20 million tons of products.

emu1208 wrote:

Am I allowed to advertise my property for sale here?

Yes if it is a good deal

More to the point prices will continue to rise if people can get the credit to buy them at increased prices and afford the repayments.