I said I stood corrected learning that all banks gave a cut last time the RBA did. When are you going to admit that the only way globalized banks with a lot of dangerous debt can make good in a dire economy is by raising rates? What would you preffer, Australia to be like America, or 15% mortgage rates? I know which one I'd go for.
As for ANZ… what does that word 'May' mean to you? Besides, I am 75% certain that NAB and ANZ won't survive the brewing depression. Safe loans are going to be with Commonwealth or Westpac and, no, i don't work for either. Don't even like them, let alone have a vested interest. It's just that they have more local investments and, though exports are slowing with China's economy, they will pick up again in the next 5 years or so.
Anyways, if you are a clever investor and have not over-leveraged yourself, you should be fully prepared for rate rises of up to 20%. That's around the highest they have hit in Oz before. Of course, investing in property, you would have done your homework and realise that 8-9% is the countries long term average rate, right? 4-5% was an extremely low point. Surely you wouldn't have been too greedy and bitten off more than you can chew?
We will sit back and enjoy the show, it is all we can really do.
ummester wrote:When are you going to admit that the only way globalized banks with a lot of dangerous debt can make good in a dire economy is by raising rates?How would they make good if by raising rates they can only end up with a higher default rate ?
Quote:What would you preffer, Australia to be like America, or 15% mortgage rates? I know which one I'd go for.USA all the way ?
What's with that 15% stuff , you've kept all your savings in cash and now hope to make up for missing the property boom ?Quote:As for ANZ… what does that word 'May' mean to you?is it the same as the word "could" from your link ?
Quote:Besides, I am 75% certain that NAB and ANZ won't survive the brewing depression. Safe loans are going to be with Commonwealth or Westpac and, no, i don't work for either. Don't even like them, let alone have a vested interest. It's just that they have more local investments and, though exports are slowing with China's economy, they will pick up again in the next 5 years or so.Do you think that writing down a couple of hundred mill is going to make so much difference to the bottom line that they'll go under when they make a yearly 4 billion+ profit ? Just because they cry poor doesn't mean its true or you should believe them, the return on the dollar they make is higher then Telstra's in the 1990's and they invented legalized robbery.
Quote:Anyways, if you are a clever investor and have not over-leveraged yourself, you should be fully prepared for rate rises of up to 20%. That's around the highest they have hit in Oz before.Hahaha , only 20% ? Why not 30% or 50% ? Screw that, maybe I'll just buy a shotgun, lots of baked beans and go hide in the hills until the depression is over.
We have no Zimbabwe like inflation, the economy has slowed down faster then expected so the obvious move for the RBA will be to lower the rates. Oh yeah I know, the banks will not pass them on. Stop dreaming of 20% rate, the times when you could put 1 million in the bank and live like a king on the interest earned are over. These days you either make your money work or get used to a 5%-6% return , which after you paid tax on and allow for inflation is more like 0%.Quote:Of course, investing in property, you would have done your homework and realise that 8-9% is the countries long term average rate, right? 4-5% was an extremely low point. Surely you wouldn't have been too greedy and bitten off more than you can chew?You'd be surprised how much I can chew.
"Bite off more than you can chew and then chew like hell." – — Peter Brock
Loan defaults, bank sells property and mortgagee still owes bank difference. Loan was only future money anyway, so bank is better off with real money from property and debt sales. Defaulters are better for liquidity than mortgages.
15% is a reasonable figure during recessions and economic corrections. 20% is extreme but not impossible.
Banks use credit and invest. All banks have credit lines tied up in the US. NAB and ANZ also have bad debt with America (amongst other things). Commonwealth or Westpac will manouveer into a purchase positon before either goes under.
Banks are paying over 8% on fixed deposits now. 300K in the bank will be worth more in a year than a 300k property will (so long as the bank doesn't get into trouble:)) Times change…
Peter Brock died.
ummester wrote:As for ANZ… what does that word 'May' mean to you? Besides, I am 75% certain that NAB and ANZ won't survive the brewing depression. Safe loans are going to be with Commonwealth or Westpac and, no, i don't work for either. Don't even like them, let alone have a vested interest. It's just that they have more local investments and, though exports are slowing with China's economy, they will pick up again in the next 5 years or so.
Ummester, with all due respoect if ANZ and NAB fail in the great depression of 08/09 then I hope you have a shotgun, as thats what you'll be protecting your home with.
If any of the big 4 go, I'd expect a complete breakdown of the australian social-economic system and any dreams of buying a bargain will lost in thought while we all line up for food stamps.
Good Luck in the BRAVE NEW WORLD !
Cheers
Why does a bank folding or take over have to be the end of the world? America is still functioning and will do with or without the bailout. Wall street folding does not mean people won't trade with other people for needed items.
There were only 30% unemployed in the Great Depression in Australia (one of the highest rates in the world). Not everyone was lining up for food stamps and the ones who were only did so for a few years.
Get a shotgun if you want, you will still get arrested if you use it on another human being. Governments still function through depressions. Finances just don't. Pointless, speculative forms of employment fall by the wayside and everyone goes back to doing something useful. They are shake ups, re-arrangements of the social hierarchy, not un-doings.
The best defense against a financial depression is gainful employment.
ummester wrote:The best defense against a financial depression is gainful employment.THAT I agree with.
But I dont think we can easily go back to that without an enormous change. I don't think that change will be nice.
The change process will hurt as it occurs but the outcome will be an improvement.
Think of a bushfire. Dangerous while its burning but makes way for new flora and fauna to flourish. The new life makes the decrepid memory of the burnt past seem like it deserved it.
ummester wrote:The change process will hurt as it occurs but the outcome will be an improvement.
Think of a bushfire. Dangerous while its burning but makes way for new flora and fauna to flourish. The new life makes the decrepid memory of the burnt past seem like it deserved it.
perhaps.
I do agree that propping up the credit binged western world will only see a GREATER crash later. But I simply can't see the financial markets BEING allowed to do so by goverments.
Ah well time will tell.
There are some things the government can't stop and some things, if it is forward thinking enough, that it will allow to happen.
Like letting assets devalue, for instance. Federal governement can't come out and say, "I have the solution and it is a 30% devaluation of all material assets across the board." State governements make too much in fees on those assets and the biggest demographic in the country would be furious, standing to loose 30% of what they aquired under Howards reign. KRudd and Swan can't say it but they can let it happen… kind of like Mr Bush let some planes hit some places they shouldn't have. Complicity doesn't amount to responsibility, Howard made this country aware of that.
KRudd and his mob are already talking about a federal credit reform – legistating all lending practices from mid 2009. It is a bit socialistic, I know and not really in line with the capitalistic values of the 'free' market but it is a better option then creating more future debt aka America.ummester wrote:There are some things the government can't stop and some things, if it is forward thinking enough, that it will allow to happen.Like letting assets devalue, for instance. Federal governement can't come out and say, "I have the solution and it is a 30% devaluation of all material assets across the board."
.No, of course not. But they can devalue our dollar by 30% when compared with foreign currency and increase wages by 30%. Instant defacto devaluation by 30% and everyone is kept happy.
Regarding your previous comment on keeping 300k in the banks,
"No need to be worried: your bank deposits are as safe as, well, houses"
Devaluing the dollar will leave internal problems here with wages vs asset values and, via fuel and food, inflation.
Interesting article. I never claimed a fixed deposit was 'safer' than a mortgage, just that the returns would be greater over the course of the next year. Safeness depends on the liquidity of the bank.
Hi, interesting but largely speculative. Only time will tell. My tenants are relatively stable, with half of them doing a roaring business. Not a hint of a downturn there as yet.
Property has definitely slowed but rental vacancies are still very low. People with or without money still live in houses, no convenient caves or trees to shelter them. Rent in real terms has gone up 90% [in rental belt conventional homes] from 2003 to 2008.
We can only do these things with money: spend it; hold it as cash; buy shares or buy property.
Like Harb, when everyone was predicting rate rises last year, [some red faces now, i'd think], I privately took the stand that rates would go down, not up. My reasoning was that there couldn't be such a big gap differential between USD & AUD
I placed $50000 in FD @8.5% one year while maintaining 80%LVR on IPs @8.77% which has since come down by 0.25%
Sure the banks can fold & i may lose all my money but how does that make my situation any worse than Unmester's or Scamp's or Harb's or anyone else's?
Other points: money is finite. it doesn't vaporise. like water or blood, it circulates. there's trillions of dollars out there, just a question of who has it. someone lost it, someone has pocketed it.
And Steve had been suggesting caution in property investment for quite sime time already.
KY
kim yin lau,
There isn't as much money/asset value out there as what has been speculated/given credit for since 2001 or so. There isn't even as much future money. This is the problem the world is currently facing.
So long as you have a regualar/sustainable cash flow that is enough to cover reasonable (5% or so) rate rises on any of your debts, you will be fine.
Interests rates did go up over the course of last year and our dollar is currently worth 25% less than the septic one.
Hi Ummester, AUD came off the high of 95/96 cents to USD. How can that be bad? Parity [it came really close] was never sustainable at that point in time.
In 2002, AUD was 0.5 USD. At one point, I actually bought AUD/USD @ 47.5cents
We're now around 80 cents. It's a natural adjustment .
I do like your sense of humour though. Septic is such a graphic description of the situation & US of A is building up for a huge fall if they continue borrowing as will Ozzieland of course. Someone said the other day that it'll soon be US of C if they keep on floating their junk bonds!
Have fun,
KY
kum yin lau wrote:Hi Ummester, AUD came off the high of 95/96 cents to USD. How can that be bad? Parity [it came really close] was never sustainable at that point in time.We're now around 80 cents. It's a natural adjustment .
But heres the thing – when we were almost at parity the US economy was in decline (about 6 months into the subprime thing). Now, the US is even deeper in financial poop and our dollar is worth less compare to theirs. So what does that say about our dollar and the global markets confidence in Australia?
Hi, from my very limited knowledge of thr forex markets, I'd say it's not that the rest of the world have suddenly lost confidence in the Aust economy.
Investors chase value. AUD rose to the heights with everyone expecting the rates to spiral upwards and rise some more. Even as late as May when I refinanced my loan, the broker tried to talk me into fixing the rate. EVERYONE expected more rate rises. When that didn't happen, AUD had to come down.
Nerissa said it's no mean hapiness to be sitting in the mean. To me, the mean for the AUD IS 60-75 CENTS. Obviously can change. I don't see the Aust economy in collapse, not yet.
Imagine what scorn would greet the brave soul who 2 months ago said RBA would cut rates by 1%?
KY
Yes and hello KY
An old but true saying … the definition of an economist is some body who can read the past …
Kevin Rudd has now guaranteed saying for the next 3 THREE years … if you read into that are they saying we are in for 3 more hard years ?????????
D
wealth4life.com wrote:Kevin Rudd has now guaranteed saying for the next 3 THREE years …Of course the government will now take a fee for said guarantee, sort of a tax on savings really. The only question is how much because unlike the rate cuts I'm pretty sure the banks will pass this one in full.
[/quote]
if you read into that are they saying we are in for 3 more hard years ?????????
[/quote]Is that how you read it ? Maybe I'm more cynical but to me it looked more like "you want safe money you better vote for me again"
You must be logged in to reply to this topic. If you don't have an account, you can register here.
