Japan’s now firmly wedged itself between a rock and a hard place. Energy wise it’s barely meeting it’s day to day needs. That effectively hamstrings industry for the next decade or two if they start now with replacement energy production systems.

Japan’s GDP growth has gone negative again, however, its growth over the last 2 decades has been anemic to say the least.

Japan has kept inflation low for decades but with insane printing to keep the Yen competitive one has to ask how long they can hold this together.

Japans ToT have been on the decline for years. A sigh their economy is burdened with too much debt. They’ve now started to run trade deficits which is a bad sign.

The saving grace to trade deficits is their Current Account is still in surplus.

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Japan is considered to be one of the more fragile sovereigns struggling with astronomical debt loads far in excess of the PIIGS. Last count govt debt was around 200% GDP and total debt 512%. Mind boggling. So if you throw the nuclear power issue into the mix along with a GFC v2 just down the road things don’t look too rosey for the Land of the Rising Sun

Bardon I’m not sure if you’re willingly delusional or simply don’t know.

Total Housing Debt $1.2T

Owner Occupier Debt $840B

PI Debt $400B

In the last 10 years we’ve seen a surge in PI activity unseen previously. 80% are Joe Average (earn less than $80k/yr)

– According to the ATO, there were 1,751,679 property investors declared to the ATO in 2009-10 – representing one in seven taxpayers – an increase of 59,235 from the 2008-09 financial year.

– Of the 1,751,679 property investors recorded by the ATO in 2009-10, 63% or 1,110,922 were “negatively geared”

– Of these negatively geared investors, nearly three-quarters earned less than $80,000 in 2009-10, and the average loss was $9132 per negatively geared investor, or $176 per week.

– According to the 2009-10 Australian Bureau of Statistics (ABS) Household Wealth and Wealth Distribution, nearly three-quarters of Australia’s investment properties by value were held by individuals aged 45 and over, with Australia’s Baby Boomer generation (45 to 64 years-old in 2009-10) holding just over 55 per cent of these homes.

The idea that cash flow is getting better is a furfy. The problem with the majority of investors is that they are poorly skilled at investing. You have a large chunk of investors in the middle aged sub $80k/yr bracket. They tend to be skittish.

My guess is (and its only a guess – no data to back it up) is that a fair chunk of current selling pressure is investor driven. It won’t take much more pressure to push more into selling as they; fear for their retirement, struggle with delinquent tenants who loose jobs, run into income pressures of their own, worry about declining asset values etc.

If just 1/10 (170 000) PI’s start to panic she’s all over red rover. And if they start to go more will follow.

The Freckle

Not sure I’d agree with that. Our high net worth clients where time and cash poor. There’s a keep up with the Jones’ mentality in the upper markets of Sydney. People seem to live maxed out on credit. $200k cars in the drive but couldn’t pay us in cash. I doubt that the top of the market is doing all that well but Syd’s a large and diverse market. Something for everyone.

The underwater places tend to be out west. I recall the mad dash for McMansions by the FHOG’s. Thought they were getting a better deal but didn’t really factor in the cost to commute back into the city where they worked in. The mortgage saving just got eaten up in commute costs. A few years later we were moving some of them back after they either sold or rented their PPOR’s

The Freckle

From MB today

Something Just Snapped in the Economy (Link)

In short, this report is suggesting that we are headed into recession. Add in the R.P.Data Index of a resumption of house price falls in April and I’m getting the distinct impression that we’re going through some kind of freeze in aggregate demand.

If I had to pick a cause, I’d say that the bank’s shift to unilateral interest rate moves has dramatically undermined confidence in the RBA insurance policy. Folks are headed into their shells.

We might also speculate that this is why the RBA pushed the panic button, it may have picked this up in its industry liaison or one of its other proprietary data sources.… Houses and Holes

My gut feeling is we’re starting to see downward pressures starting to consolidate. Negative economic pressures are relatively small but are multiplying. This is sooner than I thought. I didn’t expect to see PSI pull back this fast nor to these levels until later in the year.

The hairs are starting to tingle on the back of my neck. I’m hoping I’m wrong because I was hoping to get at least another two years out of this economy before it starts to go pear shaped. I think that’s still possible as most of the pull back was in sales and orders and the most affected sector was finance and insurance (services).

The Freckle

Ian you’re a little ray of sunshine.

You’re on the money mostly for my part. As they say; hope for the best plan for the worst.

Where I would disagree is

Time to stop trying to figure out the world’s woes here

this is exactly the right place to discuss issues like this. Forums (and Blogs) are some of the best information and learning tools around. The diversity and depth of opinion is fascinating to me anyway.

One of the big conundrums for PI’s is how would any down turn affect me. For that you need to understand the problem and relate that to your local situation. So for example would a resource sector driven market like Perth be better than a govt driven sector like Canberra.

Does your demographic area offer protection or is it a potential threat.

I would suggest a full S.W.O.T. analysis of a portfolio to understand its potential to withstand global/national shocks.
http://rapidbi.com/swotanalysis/

A SWOT analysis may also reveal opportunities within a portfolio and opportunities on the recovery side of downturns.

It’s not all doom and gloom. Downturns and crashes are all part of market cycles even though I think this one will be a doozy. You don’t have to slash and burn but you need to understand the problem and figure out a way of dealing with it.

The Freckle

This Is the First Time In History that All Central Banks Have Printed Money at the Same Time … And They’re Failing Miserably 01/05/2012

http://www.zerohedge.com/contributed/2012-18-01/first-time-history-all-central-banks-have-printed-money-same-time-%E2%80%A6-and-they%E2%80%99

Four of the world’s largest central banks have gone absolutely berserk, running the money printing presses like never before in history:

Is this what the end game looks like? Print till we bust!

The Freckle

For Luke and other non believers with cognitive dissonance.

The exponential growth in debt and declining GDP is accelerating as the massive debt loads drag on growth. Debt loads are being managed by artificially (market manipulation) suppressing interest rates. A 1% rise in US treasuries would literally cripple The US overnight.

Govt figures are massaged and manipulated to give the sheeple the idea that their governments have things under control, however, the staggering rise in unemployment (and these are suppressed official figures – real world figures are magnitudes worse again) over the last 5 years is starting to manifest itself as social unrest (OWS movement)

Spain now the 12th nation in Europe to fall into recession – the dramatically bad changes in unemployment and GDP since the crisis began (especially among the youth) suggest more angst is to come as the political compact is pushed to its limits.

Debt Overhangs: Past and Present

Carmen M. Reinhart, Vincent R. Reinhart, Kenneth S. Rogoff
NBER Working Paper No. 18015
Issued in April 2012

We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang episodes are associated with growth over one percent lower than during other periods. Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we identify, 20 lasted more than a decade. Five of the six shorter episodes were immediately after World Wars I and II. Across all 26 cases, the average duration in years is about 23 years. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that cumulative shortfall in output from debt overhang is potentially massive. We find that growth effects are significant even in the many episodes where debtor countries were able to secure continual access to capital markets at relatively low real interest rates. That is, growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates.

Presenting Bridgewater’s Weimar Hyperinflationary Case Study

http://www.zerohedge.com/news/presenting-bridgewaters-weimar-hyperinflationary-case-study

Eurozone debt web: Who owes what to whom?
http://www.bbc.co.uk/news/business-15748696
An interactive debt graphic that reveals the interdependence of the financial system. All for one and one for all. Check out the USA and UK.. staggering.

Worse Than 2008
http://www.zerohedge.com/news/guest-post-worse-2008

The Freckle

The Freckle

IMF World Economic Outlook
January 24, 2012
http://www.imf.org/external/pubs/ft/weo/2012/update/01/pdf/0112.pdf

The updated WEO projections see global activity
decelerating but not collapsing. Most advanced
economies avoid falling back into a recession,
while activity in emerging and developing
economies slows from a high pace.

However, this
is predicated on the assumption that in the euro
area, policymakers intensify efforts to address the
crisis.

The plonkers in the EU have been trying to stabilise this crises for well over two years now. We now have Greece, Portugal and Spain not in a recession but a depression. ECB debt through shonky back door money printing to support insolvent banks has ballooned to over a trillion Euro with more printing to come. Germany and to a lesser degree France are on the hook for this debt. Ireland is lining up to have it’s debt forgiven as they struggle under austerity.

Go and do some digging on China, Russia and India. You’ll find things aren’t as rosey as they’re made out to be there either.

The smart guys accept the fact that a GFC of significant proportions is on the way. What they and we don’t know is when and where or how bad it’ll actually get. But they’re positioning themselves to take a hit and hopefully come out the other side stronger than the next guy. That might just give them an advantage to increase their wealth in leaps and bounds.

The cheer leader types who only see positive things and ignore anything remotely construed as negative (doesn’t fit the personality or peer group image) will wake up one morning and wonder how they lost everything.

The Freckle