I’ve seen a few like these. Seems like a mandatory promo production these days for investment houses. I agree with the underlying theory but I think the conclusions are extreme to say the least. Then again the political instability from an economy going over a cliff is not more self evident than Greece.

I’ve seen persuasive counter arguments to the $US reserve currency debate. At the moment I don’t see any plausible interloper for a global reserve currency at this point. I think it could take decades before such a thing happens if ever.

I don’t really see Arab Spring type revolts against govt either, at least not something that would truly destabilise a govt like the US. Some LA style riots maybe but it’s still a democratic country and while that persists we’ll see more radical politicians and maybe elections will see more ethically balanced citizens stand for office… who knows.

I think things will go snap fairly quickly but the rebuild could (probably will) takes decades. I doubt I’ll be around to see the result.

I see the next decade as the precursor to a watershed moment in human history. We have a confluence of global factors colliding at the same time, Financial, demographic (populations – growing and aging), environmental and energy. As a species we’re transitioning through some extremely tough challenges and if the GFC is anything to go by I don’t like our chances

NGH. You have to remember that the majority of landlords are as the ATO infers around the middle age and older. The property I rented in Artarmon in the early 00’s was owned by an elderly lady who was interested more in stability. Another $20/wk was less important than lost rent and additional agent costs to get a new tenant who would be an unknown quantity. The next place we rented in Willoughby North. Same thing. We dealt direct with the owner who has a tool servicing business just around the corner. We paid around $100/wk less than ppl across the road who had a smaller place.

Prior to moving to Artarmon we lived at Umina on the Central NSW Coast. We moved back to the North Shore because rents dropped around $50/wk after the Olympic frenzy. Without that drop we wouldn’t have moved.

I ran a removals business on the North Shore for 8 yrs. Areas went up areas went down.

You need high demand and competition to push rents up. When there’s a swing up it’s not uncommon for rents to overshoot the market. You then get a correction. Sydney is seeing a mean drop in unit rentals of 2.2%. That suggests there is increasing competition between suburbs for renters. If the mean drop is 2.2% then if only 10% of the market is adjusting then rents in those areas could be dropping by 10% or more.

I’ve been a renter for years and will be for many more. Even though I make a truck load of money in resources that hasn’t always been the case. I still see anything over $300/wk as expensive. There are lots of people like me who see no value in paying top dollar for places simply to live in something flash. We accept less (quality, location etc) to spend our doa on more interesting things.

There’s a fine line between how much you can get for a place and how efficient that rental is. The majority of landlords are conservative and tend to undershoot maximum rental potential to ensure regular tenants.

Not sure the share thing is good timing just yet. The AS200 (15 years) below shows just how much of correction you get when things snap. With the sheer amount of QE and LTRO easing happening globally markets are juiced with funny money. Opinion out there suggests this won’t stop anytime soon but if you look at past rounds of QE then the affect on markets is less with each round. Much like a drug addict. The more you take the more you need just to stay normal.

The question is will things snap again like 07/08 or unwind gradually? I tend to think thinks are more likely to snap then lookout. The idea that stocks are undervalued will go out the window. Everything will go down then you’ll see the better quality shares recover first and fairly quickly as punters get over the initial panic and start to settle down.

Problem with markets at the moment is that investors have left in droves so volumes are down leaving the algo’s and HFT’s to their own devices. I dabble with small caps because of the upside potential but they are volatile little suckers.

The main thrust of investing regardless of class is capital preservation first profit/growth second. Timings going to be tricky. I like PM’s and I wish we had inverse ultrashort ETF’s here so I could hedge better. I’m staying largely cash while inflation is low with PM’s as a hedge if things go pear shaped. The rest I push directly into business ventures with concomitant high returns.

If I was a PI I would do a SWOT analysis on my portfolio and figure out where value is likely to be retained in terms of income and equity preservation. If a crunch comes then theoretically we’re likely to see a low interest rate environment to provide stimulus provided inflation isn’t a problem. The inflation thing’s a big if at the moment. The other thing is tenants capacity to absorb the shock. PI’s should be looking at their areas in terms of how well employment will cope with a down turn. Inner cities could get thumped if they’re largely service based. I don’t think any area will be immune but what would get hit the least?

The big thing at the moment is that going long now probably isn’t good timing.

I’ll stay liquid for the time being and when things go bang I’ll come back in when things have near enough bottomed out and we can clearly see some upside potential. It’ll be a crap shoot for a while but hey you can’t take it with you.

Wouldn’t bank on that too much. Heading down to Mandurah in a few weeks to set up shop. Strange kinda place from a PI point of view. More places for sale than you can poke a stick but jeez is it pain trying to rent down there yet plenty of rentals.

Andrew and I bat a few balls every now and then but I never really connected him to the other twit simply because our Andy is such a pro Qld supporter.

 

Even though I'm a Kiwi I still bowl for NWS I think the other woofters from Vic isn't he. They play the other game down there. You know the one. If ping pong's is too hard you play AFL 

Bardon you make wild claims with nothing to back them up other than we should take your word or something.

It’s patently clear to the dottiest of people that rents go both up and down. Rents in fact don’t track inflation they track income specific to their area on average.

During the 30’s rent dropped 40% to come into line with incomes – fact of life. You can’t rent something to anybody unless they have the capacity to pay for it. So if we see a decline in living standards and an increase in competition for renters expect to see rents drift down. Sydney on average is experiencing that now.

I expect to see a growing demand for rentals as investors exit the market in growing numbers. While rental vacancy rates may be squeezed I don’t necessarily expect rents to rise. In fact if unemployment trends up I expect to see rents decrease as PI’s try to hold onto their tenants. Remember 63% are negatively geared and (PI’s) over 45.

What will change is yields. As property values decline provided rents remain about the same yields will increase for new entrants. Something akin to the current US market.

Bardon are you a successful PI or is it just blind luck.

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