Property bust not here yet … worse to come

Hi all,

I just thought i'd comment on the original topic of this conversation, which was created in 2006, and here we are in 2009.

Funny to see how mining shares were the hot thing to be tipping then, and how true alot of the comments have turned out to be.

Lets see what the next three years bring!

Who's keen to put a prediction in????

Cheers

Sambo

Predicting the downturn was a no brainer.  Lets see who is game to predict (guess) accurately what is going to happen in the next 12-24 months. 

I'm surely not going to, so it is business as usual for me (buy and hold).  I plan to continue to build assets now and when the market starts to recover.

Cheers,
JP.

You are very brave, I admire that

Hi, Wealth4life

Why do you say that the market will improve to July before taking a dive in August?

Another round of bad news from big business? End of the increased FHBG?

Regards
Daniel

I keep hearing this "rich people are selling…" claim.  Can you tell me what substantiates it as fact?  What are they selling?  Is there really a conclusive movement to sell amongst the most well off people?  Or are just some of them selling?  Are some buying?  What are they buying?  

See, I see rich peoples real estate on the market (ie top end housing and holiday homes), and I can put forward a couple of solid possible reasons for them to sell, despite any dire prediction for the RE market:

1:  Lending secured via the sharemarket.  Falls in their equity level might trigger a sell in order to improve the debt:equity ratio.  This may be voluntary or it may not.
2: Lower profits = less reason for tax deductible negatively geared investments like holiday homes, rural retreats and other tax dodges.  No need for a tax dodge if you're running a loss, hey?  Especially when consensus is that capital growth will return slowly, no ones expecting a RE rush or anything when the economy returns to stability.  Housing is still too unaffordable to accomodate much growth in RE value without any growth in wages. (inflation…..).
3: Well aknowledged economic principles that during times of down turn, elite products etc suffer more than bread and butter products.  IE Rich people probably don't just own their flash houses, but might also have a portfolio of base level renters.  They know they'll cop a greater cap loss at the top end of the market, so they sell that now to mitigate losses.

So my question is, how do you know rich people are selling now, what are they selling and what is there to suggest that this is proactive strategy rather than reactive damage control that any of us are capable of?
S

I absolutely agree, Devo76.  I also dispute that having wealth over a certain threshold qualifies a person as an expert judge of the economy, or even as an expert at acquiring wealth.  There is that old saying about wealth and dynasty.  One generation builds wealth, the next holds onto it and the third blows the lot.  Just because someone is "Rich" doesn't necessarily, on its own mean they are worth listening to or following.

I'm not really sure if this is directed at me.  It doesn't seem to address my question.  How do you know "rich" people are selling things, what are they selling, and what is there to suggest that they are selling as a part of a proactive plan, rather than just reacting to current market conditions?  I also made the point that net worth, or bank account, or any monetary measure of wealth does not necessarily measure a person's capability to make good financial decisions. If they built wealth themselves, then I'd like to know what they are doing and why.  If their family handed them a fortune, which they are in the processes of disintegrating, then I'll give their take on things a miss.  If their family handed them a fortune, which they have tripled, then I'd like to know what their thoughts are too.
S

well actually it is no more difficult than 2005, a no brainer actually.

lets see, a kabillion (trilion is too small and …well..a  zillion was what we used in infants, so can't go backwards can we) of liquidity has been lost out of the world markets.

Right now every bank, government major company is issuing new shares and raising funds, (been going on for a while – this is a game in which no one wants to be last cab in the rank) only problem is there will not be enough to go round. Recently in Germany they had two large raisings that could not be fully met. Now Germany is thought to be best off among the major Euro players, so it is concerning when they find the cupboard bare.

If there is not enough money to go round, then what will the boys do.

They have two choices.

1. raise rates to try to compete aggresively for the few Kabilion circulating,  raising rates will slow the recovery so we are in for a long hard grind (plenty of time to take on new values and find other ways to enjoy life)

2. print more money – now this usually leads to inflation and other trading partners need to make an adjustment otherwise one country could print enough money to buy up all the assets with it 's trade partners, so the trade partners will sell the currency down
– if they sell the currency down, you can print more money (see Zimbabwee) or you can raise your rates to counter the sell down.

one of the buffers to this in the past decade was the huge crossinvestment round the world. As the drop in our currency has shown a huge amount of these funds has been repatriated, in the first few months of the crunch.

So what am I predicting  – a long slow recovery, with increased rates significantly impacting on the hoped for quick recovery.

Now I could be wrong, as I don't know all the pieces to the puzzle, including when will China actually pursue economic reform so that the people paid $1 an hour can actually buy the things it produces and sells to the west. If that happened we might get out of this faster, but hey that may mean the new Madarins have to drive Mercs instead of Bentleys so I am betting that will not happen.

who is billabong Perin?