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bennymac

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Posts posted by bennymac

  1. Inflation in stuff you need

    Deflation of stuff you want

    beautifully summarized! my personal view is similar, asset price deflation with day to day living expenses inflating. i think going forward asset speculation is going to be much less ingrained in the average persons psyche.

    obviously this is only a personal view and time will tell but my outlook is formed on the following macro trends:

    * government deficits in the western economies will result in significant public sector job cuts, whether this happens quickly or via natural attrition, we will no doubt face a future with far smaller governments. sure, the political environment may change as unions etc oppose the cuts, but over time the bond markets will force a structural change in the way governments run their finances.

    * demographics - an aging population and an extending living age will result in health care costs rising. the pressure of this in conjunction with longer pensions will put governments budgets further in strain.

    * the emergence of the chinese / indian middle class - these people work harder and longer than us, for less. as they become more affluent and educated their food / energy / shelter wants and needs will rise considerably.

    * decline of the US and the devaluation of their currency. i think its pretty clear that the US is structurally broken, whether they take the QE path and try and inflate their way out of trouble, or cop it on the chin and embrace tory style measures, its a lose lose. either they destroy the USD or we see 25% unemployment.

    i don`t envision a world were everyone will need a nuclear bunker and stockpiles of baked beans, i just think we are going to see a structural shift away from the dominance of the west.

    any criticisms / thoughts would be appreciated, alot of you guys on here are very much smarter / critical thinkers than I am

  2. thanks for the help infektd, i get the jist of what your saying and what i was missing.

    in regards to the inflation, yeah i think that may be it- the USD bounced because the market has faith in bernanke to raise rates to keep inflation down (as a result of the CPI jump)... but who knows, i read somewhere that hes more worried about asset devaluation then he is inflation?

    scary times, but anyway thanks again

    ben

  3. thanks for the feedback, its been helpful.

    'Unaffordable housing does not mean that rents must rise'

    Ok. But what happens when building starts collapse and supply of housing drops?

    In regards to the rent rises: what we have seen here in Australia is a massive increase in rents, but slight slips in actual house prices. Wage growth obviously hasnt been the prime driver of rental growth given its been running at about 5% and rental increases 25% p.a + for the last 24 months. Strong natural increase and migration have been the factors. People still need a roof over there heads.

    In regards to inflation, im obviously way off. But why is it though that when a countries CPI rises the dollar of that country tends to rise? i.e like the USD's bounce when the higher than expected CPI came out last week? Is it the market pricing into the USD future interest rate rises as a result of the CPI jump? But then going by what you said the USD's ******ed anyway, so who/whys it being bought.

    Cheers

  4. Hey guys, thought id make a post here because no doubt most of you are much more cluey than me when it comes to macro effects.

    Im trying to get my head around the consequences of a sustained rise in the U.S CPI.

    My personal belief is that the analysts have not given enough thought to rising rents in the states. the fed CPI weighs rent increases quite heavily, and like in Australia (which has just seem a massive boost in residential and commercial rents post boom due to a strong demographic situation but unaffordable house ownership) now that housing starts are appearing to fall and supply is dropping, i think rents might burst out of their seams.

    Obviously your all aware of last nights unexpected jump in CPI (due largely to a rise in rents) which has shaken the markets abit, but aside from the obvious what are the possible effects? Will a severe correction/collapse in the building market have any considerable impact on demand for commodities? Builders sentiment in the US is at a 10 year low.

    Rents increase ---> CPI increases ---> Bernanke gets jittery and U.S rates keep increasing ----> correction in the U.S market due to over-leveraging ---> an armchair economist like me gets abit lost here, aside from the obvious implications for U.S discretionary, building and banking stocks, will it have massive implications for the overseas financiers? And how will the U.S dollar fare in all of this, my basic teaching tells me that the U.S dollar rises with inflation but its already over-valued so really the only way its going is down?

    Any thoughts would be helpful guys

    Cheers, Ben

  5. http://blogs.theage.com.au/yoursay/archive...6/05/rates.html

    sample of opinions from melbourne based newspaper

    I work in the residential development industry up in Brisbane. Moved over from commercial valuations about 6 months back. This is really going to hurt, margins are already way too tight, added holding costs on our construction sites bleh we can wear that but the change in sentiment will be the real worry; were taking 90+ days to flog our stock and with this rate rise resales are going to get hurt.

    The only upside i see is maybe we are going to be able to source raw sites cheaper, but bleh.

    yuck

  6. Hey guys

    We get alot of data, reports, and opinions here on HPC. I love reading them and trying to gauge the feel of the market. What i'd like to start a thread on is something a little different... an outlook for where we all work. 90% of us here on HPC must have jobs, and what im interested in is how is the sentiment of your employers, workmates. is business roaring? plans for expansion/downsizing, hows trading... each individual story will be interesting in its own way and may offer a generalized leading indicator for business sentiment... ill start

    i work as a valuer for a multi-layered property agency. we do commercial and residential valuations, management, and sales. in the last 3 months ive had to start writing down residential deals... these writedowns havent been significant (5 to 10%) but nevertheless transactions are also down considerably, and the pressure on colleagues and i to 'play the game' for the lenders, the agents, the buyers, the sellers, is hotting up. Due to tightened lending rules, theres a real pressure on us in the residental market to magically come up with certain figures so buyers can be financed. As for commercial, the current market is hot. There was a quiet patch over a month or 2 but yields have been compressing (Grade A office buildings in the CBD have come from mid 9's to low 7's) and landlors arent offering any tenant incentives anymore... What ive noticed, and its been brought up in conversations with the salesman, theres a massive amount of 'old' 'smart' money thats looking to park itself somewhere, and commercial real estate, while historically risky, does not pose the current risk levels that residential offers. The agency where i work has put off 1 residential valuer, and hired 2 young salesman to work commercial leasing/sales.... I think the outlook for the sector is abit bearish, as history has shown us commercial sentiment is lagging from residential. Anyway, thats my 2 bits..

  7. australia has been lucky in the sense that we have had a commodities boom to support the housing downturn. NSW is in quite a bad shape, because it has no real mining sector, which means basically it has missed the boat.

    theres no pressure to cut rates over here basically because people still have wads of money in there pocket due to the mining boom (whether it be direct or indirect) and retailers are still doing ok...

    thats not to say things are rosy, just that we arent facing the consumption crisis you guys in the UK have right now.

    house prices will revert to their long term average when commodities demand from china/Asian slows.... then the chickens come home to roost.

  8. Edhutch,

    Your opinions are interesting. Earlier on in the the thread you mentioned that the MPC takes a 2 year stance when looking at any cash rate decisions. I'd argue that the MPC cant cut rates without causing much more serious problems in the medium term to long term. A rate cut will have a serious effect on the pound, regardless of how much pessimism is already priced in. The cost pressures on imports caused by a further weakening, in line with oil which is now at $60 a barrel (and not looking to go significantly up or down anytime soon), I just cant see where the inflationary pressures are levelling off in the next year or 2? (Aside from consumption etc retail). Its like a catch 22; as you said, if rates stay where they are then housing is in serious trouble from the flow on effects of a dead high st. But if the MPC cuts in the hope of spurning consumption and stopping a crash, then there will be no ease in the cost pressures. And if the cut doesnt spurn consumption, then their will be job cuts on the high st, so housing is screwed anyway.

    The bank is damned if they do, damned if they dont. What are your thoughts?

  9. hmmm

    U.S, as announced yesterday, is still on a strong tightening policy. Their interest rates have just risen and will continue to rise. The Bank of England cant afford to lower Interest Rates--> A lowering of the interest rate in England will cause a further, sharper, and much more brutal weakening of the Sterling, which will result in the cost of exports becoming much higher, which will add to inflation. This considered, with also the added inflationary measures of Oil (If it stays up at High $50's p.B) makes an interest rate cut impossible.

    VI's know that an interest rate cut isnt possible. By talking about it, consumer confidence is increased so consumers are willing to spend more and the whole discretionary spending economy doesnt burn. Its basically a cheap trick, and one that will work until the BOE comes out and raises/leaves rates at neutral. Then watch the highstreet shit itself even more.

    (99% unlikely) But if the BOE does cut rates, its better for FTB's anyway (imho). In the short term sure House Prices might be stabilised by massive consumer confidence, but when the Sterling gets savaged, which it will, and all imports cost 15 to 20% more (and the U.K doesnt produce shit anymore) inflation will blow out, and we will have a true multi-faceted crisis on our hands. Inflation vs housing debt vs retail spending

    Think thats it, i just wrote it out so i could try and get it clear in my head too.

  10. Is it any wonder that this debt fiasco ever happened in the first place? I mean, does it take Einstein to realise the economic implications of the 'buy now pay later' mindset? ...."Here, sonny, here's a cheap loan (so cheap, you'll never have to give it back) go on, sonny yeah that's good, you take it...whats that? you want some more?..No problem...I'm your friend..remember..you want some more?....ok.....there you go sonny...WHAT? YOU WANT MORE?...oh alright ....no problem...there you go.....SPEND,SPEND,SPEND.....

    Like a drug seller at a schoolyard gate......problem is with this Government acting as the biggest pimp of all, they'd probably act in the best interests of the junky house buyer/debtor

    Its a vicious cycle. Im a junior valuer in Australia, i think you poms call them surveyors?:) Even though we dont have the supply side problems of the London economy and we've been able to ride out credit/housing issues on the back of the commodities boom, our housing bubble is even more inflated (just not as advanced into the cycle as you Brits). It has come to an abrupt stop, as was always to be expected, particulary in Sydney and Melbourne where prices have come back. As im abit of a cynic its dissapointing in away because Queensland and W.A, 2 major commodities based economies have been able to ride through the last 18 months on the back of $$$$$$ made through soaring metals & minerals prices. Im rambling now so i better go back to work, off to the Gold Coast to value some overpriced p.o.s.

  11. but wont they all just go bankrupt and start the spending spree again once they are discharged! i heard that you are only bankrupt for 12 months now? :blink:

    the economic implications of even a tenth of these debt-burdened people declaring bankruptcy would probally spell an end to the western economies. the flow through effects on spending, cons confidence & financing would devastate. thats without mentioning how badly the banks bottom line would be put out.

    :D

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