Copper's the one to watch. Demand is falling so you may see a drop in volumes at some point. Copper is a speculative commodity and current prices are being supported by speculation on stimulus. As it becomes apparent that stimulus won't appear or have the desired affect copper could be exposed to a sudden price crash. The Chinese like to use copper as security for RE loans which is a worry. It's becoming apparent that some smelters/foundries have used commodities to secure financing for various operations not in line with demand. Commodities used for security have been rehypothecated in many cases and as financial ventures collapse this is causing a few problems to say the least.

The problem with copper in that context is that true stock levels, consumption etc aren't really known. As china unravels this could cause a few problems for miners to say the least.

Lead and zinc are reasonably stable by comparison. 

Modus Operandi (method of operation)

Jez I could write a PhD paper around that question.

All resource economies will take hit but to varying degrees. The problem for regional areas that have resource activities in their area is that their respective economies will depend to some extent or other on the resource sector. As a percentage of their economies that will vary but regardless any down turn will still impact these towns. A complicating factor is that many of the small town economies are interdependent for a range of services and activities. So problems in one town may spill over to another, schools for example. 

There are several problems with resources. Namely;

• by the time the committed infrastructure spend cycle completes they will have substantially over built their capacity. That means little if any future growth for decades
• production costs have grown to the point that coupled with over capitalisation many of these operations will become marginal at current (and probably declining) prices.
• compounding pricing woes will see demand side reductions in volumes. For plants to stay viable when prices are falling means higher volumes must be achieved to stay above break even. Unlikely given falling global consumption.
• central banks globally are devaluing their currencies which is pushing up local prices further suppressing demand.
• competition is increasing globally as production from emerging countries comes on line
• sovereign risk issues are causing problems for conglomerates trying to figure out how to match planning with future demand expectations. 
• stimulus programs in other countries are not likely to eventuate. As this become clearer markets that have held up based on market propaganda will invariably contract.

My immediate to long view on resources is that production levels will initially decline below demand levels considered to be a mean average for at least the next decade. Oil and gas will be the exception but it will also have its problems. I don't see any improvement in global demand for iron ore and coal for some time. 

China and India were the two countries originally haled as the drivers of a massive growth in coal demand. Both economies are basket cases but for differing reasons. 

A young switched on guy I worked with up there had managed to acquire 5 properties over several years. He had a paper profit of around 2 mil and leveraged at 60%. I suggested 2 years ago he should think about selling out and taking the CG. I tried to explain to him how things were likely to unfold over the coming years. Like many he couldn't see the trees for the forest. His weekly TO was around $10k/wk plus a nice income of around $6k. He was killing it and believed like many that the resource sector would simply roll on for decades.

It's the age old problem. When you're caught up in a bull market surge, when do you get off the wave before it crashes. Many I think will have made really good paper profits only to see them vaporise as the accommodation overbuild combined with construction contraction materialises before they can get out.

His $2mil paper profit will probably get wacked pretty hard and his leverage will end up closer to 100% if he marks to market. 

It'll be interesting to see how this goes over the next 12 months and what the extent of the correction will be. I know if I owned property in a resource town I'd be be having a few sleepless nights to say the least.

It's unlikely the US would affect the AU market on its own. If you took a holistic view you would have to look at the Euro area, the US and China collectively as major influences on the AU economy. The dominant influence will always be China so that's the one I watch in terms of how the AU economy might perform.

Personally I think China is a bigger basket case than the US. As a result of the ever accelerating global downturn I see the auto industry as the biggest threat to the AU economy. The auto industry consumes huge amounts of steel for manufacturing. In the US there's a kinda sub prime auto market evolving. 

China Has Become One Big "Stuffed Channel"

If you start digging around the auto industry's claimed production vs sales you quickly realise production is well ahead of actual retail sales and sales figures quoted by the likes of GM etc are actually delivery of units to bulging dealerships

• With 1,300 Chinese Carmakers 25% Of Them May Be Forced Into Bankruptcy By Government
• It is estimated “China’s 12 major automakers will surpass 30 million units, far exceeding market demand” according to the National Development and Reform Commission, and the overcapacity issue will worsen in the near future.

Given AU's dependence on resources especially iron ore and the recent turmoil around plummeting ore prices you would have to conclude a collapse in auto sales/production resembling the 2008 crises would throw the AU's economy into bit of a spin. I think we're likely to continue to see a continue weakening of steel demand over the next 12 months with ore prices settling below $90/dmt. If we see sub $100/dmt for around 12 months I think FMG's a gonner.

My gut feeling is that WA is going to get smacked really hard in about 12 – 18 months as we literally plunge off a cliff with the winding up of the infrastructure expansions. Qld is also in the same boat but to a much lessor extent due to it's larger and more diversified state economy but I think they'll still cop a bit of pain as we come off the resource boom. 

For me the AU RE market is too risky for the yield and CG potential on offer. Others may have a higher risk tolerance than me but I see much better options in other areas than RE at the moment. 

A bit of sarcasm me old mate

Like most gold rushes very few actually make a dollar. People such as you Jay, Alex, Cheeves etc were digging gold a long time ago and know how to find it efficiently. Some of you morph in to other gold related businesses like selling picks and shovels (a gold mine in its own right) to the endless stream of hopefuls thinking that the US market offers endless riches. The objective of the thread is to enlighten a few of these hopefuls that the US RE market is a honey trap if you don't know what your doing.

Being Amerikan isn't the question. Ask the guy living under the bridge who used to own a house and a small business that gave him and his family a comfortable middle class lifestyle if he likes being poor, homeless, unemployed, now unemployable and wonders how or if his kids will be able to escape the poverty trap.

It's called Australia

There's a few problems with that analysis Jay

Problem is it's o'seas investors and institutions doing the buying not average Joe 'merikan because he has either a low paying job or no job and too much debt plus a busted credit rating. The scary thing is that the percentage of down-and-outers is growing

Same in Oz and NZ. If it's life threatening you get admitted to hospital immediately and the problem treated. A few years ago I had food poisoning and was pretty much on my last legs. My wife took me to North Shore Hosp (Syd) where we were told it was at least a 4 hr wait. There was an old lady lying on a gurney who had been bought in by ambulance. She'd been there 4 hrs already and still not treated. I told the missus bugger this I'm going home. If I'm going to die it'll be at home. Next day I was pretty bad. Old girl took me to the local doc. She took one look at me and said hospital for you. Problem is she rang three hospitals before she found one that had a bed. 

Surveys show that when it comes to food or the mortgage most actually choose to pay the mortgage. That I believe is changing as strategic default becomes a more realistic option for those still hanging on. However ,food is still problematic for those on the breadline. For the family living in a car with little or no money access to cheap food, storage and preparation is a real problem. 

They already are. Street people are pretty good at urban survival however the numbers are growing at such a rate tent cities in out of the way spots are springing up in most states as the homeless accommodation providers struggle with the shear numbers looking for emergency accommodation. 

Tent Cities

S Cal (Ontario City) http://calocals.com/videos/news-politics/tent-city-usa/

ONE-THIRD OF AMERICANS POOR OR ‘NEAR POOR’

Tent City USA

Just a few Tent Cities

• Camp Quixote, Olympia, Washington State
• Camp Take Notice, Ann Arbor, Michigan
• Dignity Village, Portland, Oregon
• New Jack City and Little Tijuana, Fresno, California
• Nickelsville, located in Seattle
• River Haven,[5] Ventura County, California
• Safe Ground, Sacramento, California
• Temporary Homeless Service Area (THSA), Ontario, California
• Tent City, Lakewood, New Jersey
• Tent City, Avenue A and 13th Street, Lubbock, Texas
• Tent City, New Jersey forest
• Tent City, banks of the American River, Sacramento, California
• Tent City 3, Seattle
• Tent City 4, eastern King County outside of Seattle
• The Point, where the Gunnison River and Colorado River meet
• The Village of Hope and Community of Hope, Fresno, California
• Transition Park, Camden, New Jersey
• St. Vincent de Paul property, Fourth Avenue North, Saint Petersburg, Florida
• Downtown Reno, by some railroad tracks.

I believe the US government is trying to fix the problem by putting more people in prison.

Enrollment for disability income (SSDI) has skyrocketed since the recession ended in 2009.

…disability payments have been substituted for long-term unemployment benefits for some workers who struggle to find employment….

Dad..

Yes son

Why are so many 'merikans disabled.

Unemployed people tend to sit on couches for long periods of time and watch TV. After a while you become intellectually  disabled…. 'merikan TV will turn your brain to mush son.

Ohh