Yes they do get over excited by a short term snapshot, no doubt about it. But there are some trends emerging such as us having the best performing economy in the developed world, having an abundance of resources that the emerging economies need, plenty of room left to move on interest rates, AAA bonds, rising yields and high employment. The big picture is looking good in my view.
bardon, while I agree with you on the trends and potential I am extremely cautious on outcome. Having best race car in the race do not guarantee a WIN, only improves your chances.
I lived thru 1990 in Poland, 1992 Russia and few other, and while those countries had enormous natural resources and stashed away gold and other assets, they failed miserably.
I hope our government will deliver better outcome, but so far I am not entirely convinced. They seem to do same all over again – take what you can, while you can and hide (move to US?).
All above keeps me alert to some degree. I do invest, I do take risks, but I only gamble what I can afford to loose.
It must have been interesting times in Russia back then when a major transfer of wealth took place.
As for the US, I used to live there before coming to Australia and I liked it a lot. The preference for me was Australia due to better opportunities and less social problems with respect to starting and raising a family. All of these hopes have been met and having a split family between the US, UK and Oz the last thing I want to do now is start this splitting process all over again so my anchor is now dropped here. In a selfish type of way I hope my sons do not eventually settle down in another country as I would like to keep close contact with them and their families as I grow older and wiser
The US has went through a correction and it may well be the right time for them, I see that Buffett is okaying property investment out there as well.
I guess one thing we do know is that there will be regime change next year in Oz. Meet the new boss, same s the old boss!
bardon wrote:I guess one thing we do know is that there will be regime change next year in Oz. Meet the new boss, same s the old boss!
And here we agree, however, the thought almost drives me to despair. The thought of Abbot and Hockey running the show makes me cringe. One thing the world is desperately short of is credible competent political leadership.
Talk about a choice between the devil or the deep blue sea.
I read an interesting article this morning. Interest rates stable, heading toward spring selling season, start of price hikes etc – all the usual blurb. They didn’t mention that rents in many parts of Sydney have dropped.
It was teamed up with comparisons of avg Interest rates: RBA, fixed 3 & 5 years and standard rates. After that five year period the fixed rates have only been lower than the variable rates. If fixed rates are meant to be seen as risk reduction strategy, it is not a debt reduction strategy. It reduces the banks risk of lower returns for their funds . All you get is certainty over what you are paying but you aren’t getting it cheaply.
There was only hand full of true dedicated leaders in the human history that done what was good to the country, not for personal interests.
I would not keep my hopes up that next political leader in Australian will be one of them once again. I think statistical chances are well below 1%.
We are all selfish, that is how we naturally born. I would not expect any different from any person I meet. Been different is anomaly.
Monthly Bump.
Still waiting for a crash, which now looks like more a soft landing in the swamp
As time goes by there is a lesser chance of a property bust. Now we have affordability back the same level as ten years ago. The bears are all giving each other high fives on commodities but that is merely a blip. Nope cant see any sings of a bust this month.
bardon wrote:As time goes by there is a lesser chance of a property bust.How do you figure that? The economies in every major market are in a worse state now than they were before. Underlying fundamentals haven't improved they've gotten worse.
Quote:Now we have affordability back the same level as ten years ago.Affordability has never driven markets. Affordability is still at all time lows but it never stopped the boom cycle of the last 20 years. If affordability had ever been an issue your property would be worth half it is today. Credit and the ability to leverage has been the driver over the last few decades. Credit has tightened and there is very little leverage available today. The market is now heavily inclined to deleverage and reduce risk as economies struggle
Quote:The bears are all giving each other high fives on commodities but that is merely a blip.Depends on which commodities you're talking about. Base metals like iron, alluminium, copper and their respective minor metals are for the chop big time and it's no blip. The idea that these resources will bounce back are a pipe dream to say the least. PM's will go higher as this story unfolds. Food especially cereals are set to skyrocket this season and continue an average upward trend as demand and production costs continue to rise. Energy (oil & gas) could go ballistic if the Iran thing turns to soup. If that happens a property crash would be the least of your worries. Energy simply isn't going to get any cheaper and that's going to crush some economies over the next 20 years. Coal especially steam coal is in for a hard time. Shale gas is crushing coal prices and that trend isn't going to end anytime soon. It'll be interesting to see if we get a price cut from coal powered generators. I somehow doubt it.
Quote:Nope cant see any sings of a bust this month.It's already happening. Your asleep at the wheel Bardon. Not every part of a market collapses at once. The top end of property has been smashed. Some regions are struggling others are on the cusp of a major down turn (resource areas). States like WA and Qld could take a serious hit if China doesn't stabilise its markets over the next 6 months. Darwin's seen a hefty jump this year but everywhere else has either gone sideways (if it's lucky) or down.
But like any market there will be areas and regions that will hold their own and if you're really lucky you might even see some growth.
Hello Freckle how are things on the darkside?
Freckle wrote:bardon wrote:As time goes by there is a lesser chance of a property bust.How do you figure that? The economies in every major market are in a worse state now than they were before. Underlying fundamentals haven't improved they've gotten worse.
Busts follow bubble, we haven't had a bubble for a very long time its been a complete fizzer for donkeys years now, there is nothing to bust anymore. The wealth of Australians will now start to grow again and its well known fact that 70% of a nations wealth is stored in residential housing.
Quote:Now we have affordability back the same level as ten years ago.Affordability has never driven markets. Affordability is still at all time lows but it never stopped the boom cycle of the last 20 years. If affordability had ever been an issue your property would be worth half it is today. Credit and the ability to leverage has been the driver over the last few decades. Credit has tightened and there is very little leverage available today. The market is now heavily inclined to deleverage and reduce risk as economies struggle
Your right affordability isn't a driver,sentiment is. Better affordability means less forced sales and guess what that means for the likelihood of a bust. As.for leverage (debt), if you would care to check the money supply (debt) has been increasing as it must do. I think you might be referring to dis-leverage, but I will let you figure that one out.
Quote:The bears are all giving each other high fives on commodities but that is merely a blip.Depends on which commodities you're talking about. Base metals like iron, alluminium, copper and their respective minor metals are for the chop big time and it's no blip. The idea that these resources will bounce back are a pipe dream to say the least. PM's will go higher as this story unfolds. Food especially cereals are set to skyrocket this season and continue an average upward trend as demand and production costs continue to rise. Energy (oil & gas) could go ballistic if the Iran thing turns to soup. If that happens a property crash would be the least of your worries. Energy simply isn't going to get any cheaper and that's going to crush some economies over the next 20 years. Coal especially steam coal is in for a hard time. Shale gas is crushing coal prices and that trend isn't going to end anytime soon. It'll be interesting to see if we get a price cut from coal powered generators. I somehow doubt it.
There is a saying that "hydrocarbons beget more hydrocarbons" (unless your a Peak Oiler god bless them) cheaper and more available energy is the very thing that will power the economy along and also produce even more cheaper and abundant energy. We are seeing the natural progression of energy sources from wood to coal to oil to gas towards the natural conclusion of an ultra efficient hydrogen based economy.
The worlds population is increasing rapidly and will continue to do so. This will increase the demand on all available resources, water, energy, food and minerals. We are a prime supplier of most of these. Not to mention what all these extra takes for housing means to us suppliers of such.
Quote:Nope cant see any sings of a bust this month.It's already happening. Your asleep at the wheel Bardon. Not every part of a market collapses at once. The top end of property has been smashed. Some regions are struggling others are on the cusp of a major down turn (resource areas). States like WA and Qld could take a serious hit if China doesn't stabilise its markets over the next 6 months. Darwin's seen a hefty jump this year but everywhere else has either gone sideways (if it's lucky) or down.
But like any market there will be areas and regions that will hold their own and if you're really lucky you might even see some growth.
Some big hitters getting haircuts on the top end a bust does not male. I don't know about being a sleep at the wheel as in the last few months I have been more active than normal and am selling two and am looking at some prospective purchases to live in.
Anyway one thing that you are 100% spot on about with your prediction of a bust is that just just like a broken clock you will be right at one stage of the cycle, so chin up and seize the moment when it comes.
bardon wrote:There is a saying that "hydrocarbons beget more hydrocarbons" (unless your a Peak Oiler god bless them) cheaper and more available energy is the very thing that will power the economy along and also produce even more cheaper and abundant energy. We are seeing the natural progression of energy sources from wood to coal to oil to gas towards the natural conclusion of an ultra efficient hydrogen based economy.
I was kinda with ya up until about here. I know you luv your straw man arguments but this one definitely gets you a Master of the Universe badge.
Freckle wrote:bardon wrote:There is a saying that "hydrocarbons beget more hydrocarbons" (unless your a Peak Oiler god bless them) cheaper and more available energy is the very thing that will power the economy along and also produce even more cheaper and abundant energy. We are seeing the natural progression of energy sources from wood to coal to oil to gas towards the natural conclusion of an ultra efficient hydrogen based economy.
I was kinda with ya up until about here. I know you luv your straw man arguments but this one definitely gets you a Master of the Universe badge.
Freckle, I know that you are a one eyed bear but you ought to do yourself a favour and just for once open the other eye, just consider for a moment that you may even increase your knowledge base.
As for hydrocarbons begetting hydrocarbons its a pretty well established fact if you were to look and to understand it you only need to look at the Jevons Paradox,
As for decarbonisation this is another established trend that has been going of for over two hundred years. The trend is not driven by some greenie desire to eliminate CO2 either, rather consumers demanding denser energy sources allowing them to get more power, its all about power.
-Wood C10H1
-Coal C2H1
-Oil C1H2
-Gas C1H4.
Can you guess what comes next?. The technological advances in producing hydrogen fromm methane are massive and proven, we now have the ability to handle, store and transport the small hydrogen particles as well. It is perfectly feasible for an existing gas pipeline to have a branch into a nuclear power plant (another carbonless energy source) and reform the gas to produce pure hydrogen, that's what you call value adding in a big way.
Yes it is amazing how adaptive and creative the human species are. This human dynamic is often not considered when projecting the end of the world.
Bardon you would make the consummate politician. Whenever we have our little chats I'm reminded of interviews in the past with John Howard and many an interviewer. He was the master at obfuscation and talking around the subject without ever addressing the points raised.
John would be proud of you.
Freckle wrote:Bardon you would make the consummate politician. Whenever we have our little chats I'm reminded of interviews in the past with John Howard and many an interviewer. He was the master at obfuscation and talking around the subject without ever addressing the points raised.John would be proud of you.
I though I was being more succinct than that, maybe I have came across as been evasive in my view on the property burst and not stating my opinion clearly.
So for the sake of clarity I am saying there hasn't been a property bust yet and there wont be.
Things seem to be playing out quite nicely for the housing market. All the RP Data is turning green for the first time since they published their daily index, with only Brisbane left as the recalcitrant on the daily index. Plenty of good gossip on IRs dropping further going around the place as well, the mind boggles as to what impact that any further IR drops would have on the residential market. Its got to be a good sign either way. Some guy on AFR is predicting 15% growth in joints by the end of next year, who knows, but the bears must be spewing at the moment, holed up in their caves waiting for some decent price drops, somewhere, anywhere, they will take anything that they can get right now..
Also check out this graph, its quite telling.
Clutching at straws again Bardon. The graph while very dramatic is an illusion. A tiny movement of 551.02 low to a high of 565.08. It's a nationally aggregated index so I'm not sure it's actually telling us anything
Their annualised capital city index tells a somewhat different story
The good news is the bust hasn't happened… yet!
Freckle wrote:The good news is the bust hasn't happened… yet!
and Steve Keen has been proved wrong, yet again,
and yields and cashflow are improving and looking even more promising with more IR drops to come,
and rental vacancies haven't shot up to the moon,
and the current Govt has one again said they wont touch negative gearing and we all know the next one wont either,
and the bust has been put off for the time being by the bears.
As the Guvnor has pointed out, this property bubble has been around for a very unbbublesque duration of time.
bardon wrote:As the Guvnor has pointed out, this property bubble has been around for a very unbbublesque duration of time.Agreed. The following graph illustrates that point. Previous bubbles were much shorter in duration and had relatively mild corrections. This one we're in is by contrast a humdinger. Invariably there will be a correction. The question is when and by how much. I would hope for an orderly correction. I believe we are in the early stages of that now. An orderly correction would enable the PI market to remain viable only shaking out the weakest which would leave opportunities for the more professional investor.
A crash type scenario is in no ones interest. I suspect though that this is going to unravel in unusual and unexpected ways. I have a strong feeling that property in resource intensive regions will take a pretty hard hit over the next 18 months and resource states like WA are vulnerable to a sudden downturn if panic creeps in to the market.
I was talking to the manager of a large building company here (Perth) and their order books are the weakest he's ever seen. The problem in WA is that the commercial construction area will suffer as resource infrastructure winds down or worse axed. Couple that with a drop in residential construction demand and suddenly you have a lot of trades and related businesses out of work or scratching to get by. Not one business owner I've spoken to over the last 2 months has said business is good. They're all working on small margins and fearful of any downturn in the local economy.
I'd like to think things will sort themselves out over time but nothing I see supports that.
Freckle, have you heard of something called confirmation bias?
Yes. We all experience it especially when it's something we desire. Your point Gazza?
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