I am reading livermores book again today, (and the million and one interpretations of it) :
“Another lesson I learned early is that there is nothing new. There can’t be because speculation is as old as the hills. Whatever happens in the market to-day has happened before and will happen again. I’ve never forgotten that.â€
Booms, bubbles, bursts, and busts have been around for centuries and will continue into the future. Everything investors and speculators are witnessing in today’s markets has come to pass before. Even though population and technology relentlessly march forward, there is one ultimate driving force behind markets that never changes.
This force is the human heart. Every speculator is both blessed and burdened with one. A greedy or fearful speculator today behaves no differently than a greedy or fearful speculator 100 years ago or 100 years from now in the future.
“there is no new thing under the sun.†(Ecclesiastes)
One way around that.
Don’t let emotions get involved in your decision making process.
Again that is one reason I do not view the properties I am buying personally.
Byronent
Adelaide SABooms and busts are also controlled by demand and suppy. As the price of property increases less demand by buyers occurs. If the supply of sellers is greater than the demand of buyers then the market will adjust to reach equilibrium. This adjustment occurs via the price. When inflation rises RBA tries to control it by increasing the interest rate which causes people with loans to incurred more costs which leads to increased sellers. During a slowdown the RBA reduces the interest rate to increase the growth of the Economy which creates more buyers due to cheaper finance. Fiscal policy has an effect as well being the first home owners grant. In NSW the vendors tax has slowed down the property market and reduced the governements revenue from stamp duty (API Jan 2005)
Duckster I agree, however do you agree that market forces are greater than any emotion and the true value will always resurface at some point.
Pricing is a supply and demand issue and although we have booms and busts, the propert curve is and has been on the up for ever and a day.
If you are buying strictly for capital gains, I would be concerned with what the market is doing. If you are buying for CF+ then the moods of the market are onl important on purchase and sale of those properties.
Byronent
Adelaide SA“But not even a world war (or supposed supply-demand fundamentals) can keep the market from being a bull market when conditions are bullish, or a bear market when conditions are bearish. And all a man needs to know to make money is to appraise conditions.â€
According to Livermore, the single most important bit of information for any investor or speculator to know is the current primary trend affecting the markets at any given time. There is nothing that can stop a bull market before its time or a bear market before it fully runs its course.
Things do revert to mean valuations, but can deviate for a long period. I worry that this CF+ mantra is a stick your head in the sand proposition : things change, it may cease to be CF+, you may need to sell at some stage and if you need to wait for valuations to revert to the mean in a bust, you are in a weaker position as a speculator. It comes down to weighing up : transaction and taxation costs of selling, your risk and servicability profile, and the likelihood of continued capital losses in a bust.
“I worry that this CF+ mantra is a stick your head in the sand proposition”
yes a small surplus of cash on a weekly basis does seem to dazzle people. just because its CF+ doesn’t mean you should buy it. the investment needs to be considered overall. CF+ just means it helps you with the holding costs, but if you go to sell it and you lose money (when you add up your weekly cashflows and change in capital values) then it has quickly been confirmed as CF-
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
Having not followed the property market prior to the latest boom im seeking understanding as to where I can expect it to go in the near future.
To me, it appears as though previously property was purchased for capital gains and so regional areas were pretty much left alone. Some time during this most recent boom, a much larger bulk of people started looking for CF+ propertys. As a result of a greater understanding of property investment through the media and books like Steve’s.
Because of this increased education now more than ever there is a large group of people waiting patiently for prices to come down to snap up a bunch of CF+ properties.
I wonder whether there has been a permanent change in the market such that now property in regional areas will never again be so lowly valued compared to their rental income. Because people will do as Steve has done and snap several hundred properties. Steve has sold over 100,000 copies of his first book. Meaning 100k people know that should said market conditions return that they are gong out hunting for properties.
Simply put. I dont think the market will return to how it was prior to the current boom. Though, it will go down to a point where properties will be slightly CF+ for the current interest rate.
But, I do not have the luxury of knowing history as to whether this is valid.
Just because 100k people buy a book doesn’t mean they will all act. Also of those who act several will not buy more than one or two properties and several will sell what they purchased for a number of reasons and not reinvest in property. People will have trouble with tenants, agents, unexpected repairs etc etc.
There are a number of regional cities like Dubbowhere prices increased and will not fall to previous levels but there are smaller towns where prices seem to be falling.
Agree that human nature drives the economy. I think supply and demand is too simplistic.
A Russian economist, can’t remember his name came out with a theory in the 1920’s that there is a lifetime cycle (around 70 years for major crashes) and it has mini cycles within each macro cycle.
All cycles were based on human reaction to what people had done in the previous cycle.
Originally posted by gmh454:Agree that human nature drives the economy. I think supply and demand is too simplistic.
A Russian economist, can’t remember his name came out with a theory in the 1920’s that there is a lifetime cycle (around 70 years for major crashes) and it has mini cycles within each macro cycle.
All cycles were based on human reaction to what people had done in the previous cycle.
Yes that was Nikolai Kondratieff. Shortly after (late ’30s early ’40s) Ralph Nelson Elliot independantly observed the same phenominum and called it Elliot Wave.
Sentiment rules! OK!
FWIW, we are not seeing potential interest rate rises in the near future(5 yr fixed at 6.95%), this is normally the killing blow that causes the price drop. If the US hikes it’s rates that can cause pressure on our rates though via currency valuations. IMHO the price correction we see will be mainly driven by oversupply pushing rental yields down further and this may leed to a correction in prices.
In a nutshell, -ve geared for CG at the moment is far more speculative than +ve geared that can be sat on during a price fall, as long as your not following the pack into towns were everything is for rent, IMHO if your waiting for CG you’ll be waiting a while unless your not relying on the market growing to fund it and your creativity is driving it.“-ve geared for CG at the moment is far more speculative than +ve geared that can be sat on during a price fall”
I am for both CF+ and CF- property, but don’t understand why you would say serviceability would be variable for CF- as opposed to stable for CF+ ? CF+ investments yield higher because they are higher risk investments. I think now would be an excellent time to be looking for a property with CG potential i.e. don’t follow the herd and go against the trend.
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
John, reason I say that is IMHO the market has hit a point in the cycle where we will not see a continuing rise like we have, anyone no matter how ignorant could have made money in property in the last 5 yrs, I think we will see a downturn before another price boom, yields are still too low to support another price boom, so unless your being creative to make your CG I would prefer to ride out the lull/downturn with a property that is paying for itself. If you in for the long term then you will get CG eventually on just about anything, except a ghost town. Just my opinion. Personally I have just recently consolidated and been through a gratification stage;-), planning to get back in and go both positive and negative(later) for more CG, but I feel this is further away – say 5 yrs.
Hi All,
This is long… But you really only need to read the first third or quarter of it…
http://www.libertyforum.org/showflat.php?Cat=&Board=news_business&Number=293235913#Post293235913
Well though through and interesting.
Cheers, Nobleone. [guilty]
“Making mistakes is just another another tool for learning.”
someone is a little paranoid hey?
thankfully we live in an energy rich country, tho i doubt our ability to defend it in such circumstances. No wonder xtrata want their hands on the WMC uranium
Extensive list of ‘Off The Plan’ property available for sale in Perth.John – 0419 198 856
I have not read any of steves books, but have read kyosaki and jan sommer to mention a few. It seems that there are alot of speculators in the forums, people are talking about rate rises, propety prices diving ect… Am i the only person who does not care about 1 or 2 or 3 years down the track. Am I 1 of the few long term investors who looks to history to make me secure? I am not looking to sell but to unlock equity to buy more. Long term property has always been a very good debt. It is one of the few assets that banks will lend 95%plus against, if they are that sure it will appreciate over time then I am happy to trust my judgement that property will grow in value in most if not all capital cities with diverse economies. (eg not places with only 1 or 2 main industries).
Just my opinion.O NobleOne,
I totally agree for these reasons:
We complete a cycle every 7-14 years. We’re at year 10. (..1987,1994,..)
When was the All Ords this high? It’s breaking a new level just about every day.
Money has never been so easy to get from the lending institutions. They’re practically throwing it at you with ‘No interest for 2 years’ or ‘No deposit keystart loans’
Consumer spending is HUGE on plastic, and I’m sure someone here could tell you what the average household debt is. They’re spending more than they earn.
Also, there have been a number of high profile economists who have confirmed the future outlook bleak – including Johnny Howard.These are just a few and I’m tho not paranoid, I’m just aware of the cycles and am being cautious for the next 5 years to see what unfolds. But hey – hopefully I’m wrong!!
Lukasp, my point was that property is long term and I believe we wont see the gains sustained that we have seen in recent yrs, if your going to hold property over a tough period I would rather have it making you money(while it is not appreciating much) than funding a -ve geared place waiting several years to see any gains(ie next boom cycle).
ONobleone, seems a little like emotion from someone upset that Bush won the election rather than a basis in reality.
BTW – read Steve’s 2nd book – great read and a different twist on your existing reading.
Myoung,
Bush or Kerry… It makes no difference, as there is no difference between either candidate or party, you’ll get the same result. [baaa]
The point I was trying show was that the US$ is due to collapse based on real economics.[blink]
No paranoia. No emotions. No interest in US politics. Just looking at cold hard economic reality.
Cheers, Nobleone.
[biggrin]
“Making mistakes is just another another tool for learning.”
Nobleone, believe it if you like but I tend to dismiss articles that are so obviously politically motivated.
I personally believe the greenback will move upwards in the next couple of years, time will tell I suppose.
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