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blue skies

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Posts posted by blue skies

  1. I think this bubble may keep going as long as there is cheep credit.

    The property market dosnt need first home buyers to prop it up, Investers or should I say speculators will do that.

    High interst rates and high unemployment thats what will crash things.

    Government bonds are getting harder to sell.

    the true state of the bad debts is just starting to become known.

    Wages are under control as the workers are flooding in from countries feeling the GFC

    My best gess is that it will be a death of a thousand cuts

  2. Did I miss the bit where he identified the bubble in the housing market as I couldn't see him saying that in the quote ?

    KOCH: When you look at things at the moment, is there anything that we should be thinking about, concerned about?

    STEVENS: I think it is a mistake to assume that a, you know, riskless, easy, guaranteed way to prosperity is just to be leveraged up into property. You know, it isn't going to be that easy. And I think if we think about property prices as parents - you're a parent, as am I - I've got kids that within not too many more years are going to want somewhere of their own to live and you wonder, you know, how is that going to be afforded because the prices are getting quite high

    Yep Bardon you missed that bit

  3. SuitablyIronicMoniker SuitablyIronicMoniker is online now

    Community Team

    Join Date: Feb 2010

    Location: Australia

    Posts: 333

    Default Glen Steven's Interview

    Is there any precedent for a Reserve Bank Governor appearing on a TV chat show to discuss interest rates and housing prices?

    Quote:

    It’s not wise to leave interest rates right down at rock bottom any longer than you need and you shouldn’t assume they’ll stay that low, because that assumption will prove to be, you know, unfortunate.

    I think it is a mistake to assume that, um, a riskless, easy, guaranteed way to prosperity is just to be leveraged up into property. It isn’t going to be that easy.

    End of Quote

    You wonder, how is that going to be afforded, because these prices are getting quite high.

    Wow! Interest rates are on the way up and investors may become, um, unfortunate.

    Remember, if prices merely plateau, more than 2/3 of property investors who lose money (negatively gear) their investment will no longer make their expected capital gains.

    If there is no capital gain on a leveraged, money losing investment, they will try to sell.

    If a large number of investors try to sell, prices may no longer be merely stable, they may fall.

    Hmmmmmmmmmmmmmmmmmmmmmmm Blue skys reconds even Stevens is starting to get a grip on what is going on

  4. Peak debt' approaching as house prices outstrip incomes

    By economics correspondent Stephen Long

    Updated Thu Mar 25, 2010 5:44pm AEDT

    House roofs in Australian suburbia

    Michael Rennie says surging house prices are driving debt levels through the roof (ABC News: Giulio Saggin, file photo)

    The growth in household debt and house prices in Australia is unsustainable and the nation must at some stage hit "peak debt', according to a senior partner in one of the world's biggest management consultancies.

    "In the past ten years our household debt has grown much faster and to a much higher level than it is in places like the the UK and the US where we tend to look at them and say, 'my goodness, look at that incredibly high level of household debt'," Michael Rennie, managing partner of McKinsey and Co for Australia and New Zealand, told ABC Radio's PM program.

    "You have to ask yourself, 'when does it become a problem?'"

    Asked about predictions that house prices would double this decade, he said:

    "They're saying they are going to double in the next ten years because of supply and demand: that there's a lack of supply, and demand is going to increase because of the increase in population in the cities, etcetera.

    "But you have to ask yourself, if you look at the research that's been done over the past couple of years by APRA and others on the percentage of households paying more than 30 per cent [of gross household income on mortgage repayments] which is the comfort level for their mortgages, and incomes aren't going to double, you've got to say somewhere along the line that is all not going to add up.

    "We hit peak debt at some point. We hit a level that is well above people's sustainability."

    A global study by McKinsey and Co is also predicting that the world faces at least five more years of constrained growth as economies "deleverage", or unwind excessive levels of debt.

    Although China will partially insulate Australia, we will not be immune, and it will hit exports.

    "About 21 per cent of our goods exports and about 27 per cent of our services exports in the past five years have gone to countries that are going to go through this deleveraging in the next five years," Michael Rennie says.

    His comments come as new estimates from the ABS show a surge in Australia's population.

    More than 450,000 people were added to the population, which grew by 2.1 per cent last year to almost 23 million.

    Economists say the rapid population growth will underpin growth in GDP and bolster house prices.

    But Michael Rennie argues that, even with the population growth, it is impossible for house prices to keep outstripping incomes.

    The growth in population will also add to overall demand and could encourage the RBA to lift interest rates.

    "We can imagine this scenario where there is tightening monetary policy ....meaning that people are going to pay more for their mortgages; interest rates are going to go up," he explained.

    "At the same time, you have a supply and demand issue with housing which means the price of houses is going to go up.

    "A the same time, incomes are not going to go up at the same level and, at some time, all those three are going to come together and it is not going to be sustainable."

  5. http://www.smh.com.au/business/poms-go-home-lured-by-cheap-pound-20100325-qykw.html

    Looking on Rightmove, there are two apartments for sale in the block where I sold in 2007. Between the price drop and the GBP:AUD exchange rate, I could (almost) buy both of them with the proceeds of my 2007 sale (I would have to have a 10% mortgage on one of the properties). And I'd have a garage this time too.

    This notwithstanding, I bought pounds this week... the exchange rate is ridiculous. Shopping on eBay.co.uk is cheap as, bro.

    Yes I too have thought about buying but in Ireland, the exchange rate is good and may reverse in the future, the problem I have is when will the investment show profit? and property is some what hard to rent out just now and hard to sell .

  6. How does Australia keep house prices high?

    My Walk to Mt Kosciuszko is no longer a solitary affair: at last count, I will have a dozen companions for the entire distance, and another 16 joining me for at least one day.

    One of those coming for the entire trip is the Commentary Editor here on Business Spectator, Rob Burgess. Rob will report from and on the Walk on a daily basis, covering it both as a news story, and as the basis for a discussion of the wider issues facing business and economics in the uncharted terrain of the supposedly 'post-GFC' world.

    The others joining me on the trek are doing so not just for the scenery, but because they too believe that Australia’s economic policy has become beholden to maintaining house prices at unsustainable levels. Despite government rhetoric (and some action) about improving home affordability, the First Home Vendors Boost did far more to make houses more unaffordable than the government’s minor actions in the opposite direction. The other walkers are joining me to bring attention to the absurdity of managing the Australian economy by making it impossible for people to afford houses in their own country.

    But though The Walk will have a political protest at its core, it is not party partisan: our call here is “A Plague on Both Your Houses”. Whatever else might change if Tony replaces Kevin, one thing that won’t change is a sky-high house price policy, since both sides of politics in Canberra (not to mention the commercial Banks and their economists) have become convinced that the major reason the GFC occurred was that house prices fell.

    This is true in the same sense that jumping off a cliff is painless – it’s hitting the ground at its bottom that hurts. The real cause of the GFC wasn’t falling house prices per se, but the mortgage debt that drove them higher as households took part in a speculative bubble. The rising debt level was, in effect, climbing the mountain in the first place: deleveraging was jumping off it.

    The only way to prevent a financial crisis is not to climb the mountain in the first place: to stop debt being taken on for speculative reasons. But instead politicians the world over encouraged households to do precisely that, in the misguided belief that financial engineering was a road to wealth. Instead, it was the road to debt penury.

    Once that debt has been accumulated, trying to stop house prices falling is like keeping Wily Coyote stationary in midair after he’s fallen off a cliff with an anvil attached to his legs: he’ll stay there for a moment, but after a while, it’s “Hello Terra Firma”.

    House prices rose in America and the rest of the OECD because households took on bucketloads of mortgage debt, and they fell because households stopped taking on more debt. The fall in house prices was a symptom of households ending the leveraging game: it was coincident with the crisis, it made it worse because the collapse in house prices and the rise in insolvencies made banks insolvent, but the real problem was that households had got into too much debt.

    So how does Australia keep house prices high? By encouraging households to get into yet more debt. The next chart shows what happened to the household debt ratios (both to disposable income and to GDP) before and after the First Home Vendors Boost.

    [Click to enlarge the image]

    click the image to enlarge

    The rise against GDP is far more dramatic than against household disposable income because other government policies – the stimulus package itself and the RBA’s 4 per cent cut in interest rates – boosted disposable income dramatically last year (but even so, mortgage debt is now a higher proportion of household disposable income than before the GFC). The Boost-inspired house price bubble was financed by households adding another 6 per cent of GDP to their already unprecedented debt burden, when prior to The Boost they were on track to reduce mortgage debt by about 3 per cent of GDP in 2009.

    We’ve avoided hitting the ground of deleveraging by climbing to a higher cliff.

  7. I think you have pushed his button becasue his

    Father Was Incompetent Wreck.

    This is the kind of personel attack I expect from you Bardon Hmmmmmm A bit of pay back from you for my posting of your bosts of criminal activities.

    The thing you dont understand is cause and effect. People are reading you posts and from them will come to the conclusion that you are of low level, able to craw under the belly of a snake.

  8. View PostBardon, on 06 March 2010 - 04:18 AM, said:

    I don’t think much can or will be done about this provided the auctioneer declared his bid as a vendor bid. It depends on state law and I am not familiar with auction rules in SA. The most important thing is that the successful; bidder did not have a gun to her head when she made the winning bid and that she did this on her own volition which from your explanation is the case.

    I love auctions all the emotion and anxiety and the heat of the moment decisions the auctioneer extracting more money for his vendor great spectacle indeed they are in but only in a rising market. I wouldn't dream of buying at auction though.

    Auctions are notorious for funny business, I bid my friends house up at auction not so long ago and ended up having the highest bid. My friend did not accept this price but used it post auction as a basis for negotiating a good price for the eventual sale. There was nothing illegal about that and that fact that we were best friends and I had no intentions of actually buying his house does not have to be disclosed either.

    Hmmmmmmmmmm the quote is word for dumb word that come from you mind. It is you who regulary miss quote people do I need to look in Australia faces its demonds? yes bardon sitting behind his computor shaking his fist, producing more bile than a caged bear in China.

    Hmmmmmmmmmmm your words come back to bite you, well if Australia follows the rest of the developed countries you may have more egg on your face

  9. Posted Yesterday, 11:12 AM

    View Posthotairmail, on 19 March 2010 - 12:50 AM, said:

    I am not happy for you to attribute quotes to me that I never made.

    I would never have misspelt 'earth' for a start. And I don't worship anyone.

    Clearly logic fails you and you have to resort to anger.

    Please excuse my licence it was done in jest, and I know that you have a sense of humour.

    Anyway why would I be angry whilst house prices are still rising ?

    Hmmmmmmmmmm more lies Bardon? I think you like amusing us with you crass remarks and behavour

  10. Hey Blue Skies I know your Father suffered from deformed feet because of his upbringing, he hated debt and this and his tyrant approach to you has worn off on your good self. Even though English is your second language there is a couple of things you haven’t yet quite grasped so near to your expiry.

    It is the job of the vendor to extract the highest price possible for a sale.

    It is the job of the buyer to smell a rat and get it at the cheapest price.

    All of this goes on within a legal environment.

    One correction to my statement that you quoted is that I have actually bought property at auction. I bought four houses on on line auction in the US, my mistake apologise for the statement. Done my ass on them as well if that helps with you affliction and doesn't deform your toes.

    View PostBardon, on 06 March 2010 - 04:18 AM, said:

    I don’t think much can or will be done about this provided the auctioneer declared his bid as a vendor bid. It depends on state law and I am not familiar with auction rules in SA. The most important thing is that the successful; bidder did not have a gun to her head when she made the winning bid and that she did this on her own volition which from your explanation is the case.

    I love auctions all the emotion and anxiety and the heat of the moment decisions the auctioneer extracting more money for his vendor great spectacle indeed they are in but only in a rising market. I wouldn't dream of buying at auction though.

    Auctions are notorious for funny business, I bid my friends house up at auction not so long ago and ended up having the highest bid. My friend did not accept this price but used it post auction as a basis for negotiating a good price for the eventual sale. There was nothing illegal about that and that fact that we were best friends and I had no intentions of actually buying his house does not have to be disclosed either.

    Hmmmmmmmmmm the quote is word for dumb word that come from you mind. It is you who regulary miss quote people do I need to look in Australia faces its demonds? yes bardon sitting behind his computor shaking his fist, producing more bile than a caged bear in China.

  11. Posted Today, 07:34 AM

    View PostBardon, on 06 March 2010 - 04:18 AM, said:

    I don’t think much can or will be done about this provided the auctioneer declared his bid as a vendor bid. It depends on state law and I am not familiar with auction rules in SA. The most important thing is that the successful; bidder did not have a gun to her head when she made the winning bid and that she did this on her own volition which from your explanation is the case.

    I love auctions all the emotion and anxiety and the heat of the moment decisions the auctioneer extracting more money for his vendor great spectacle indeed they are in but only in a rising market. I wouldn't dream of buying at auction though.

    Auctions are notorious for funny business, I bid my friends house up at auction not so long ago and ended up having the highest bid. My friend did not accept this price but used it post auction as a basis for negotiating a good price for the eventual sale. There was nothing illegal about that and that fact that we were best friends and I had no intentions of actually buying his house does not have to be disclosed either.

    For your entertaiment here is a post.

    I for one have a low opinion of this sort scaming and the mentality of those who contribute to the fraud.

  12. I don’t think much can or will be done about this provided the auctioneer declared his bid as a vendor bid. It depends on state law and I am not familiar with auction rules in SA. The most important thing is that the successful; bidder did not have a gun to her head when she made the winning bid and that she did this on her own volition which from your explanation is the case.

    I love auctions all the emotion and anxiety and the heat of the moment decisions the auctioneer extracting more money for his vendor great spectacle indeed they are in but only in a rising market. I wouldn't dream of buying at auction though.

    Auctions are notorious for funny business, I bid my friends house up at auction not so long ago and ended up having the highest bid. My friend did not accept this price but used it post auction as a basis for negotiating a good price for the eventual sale. There was nothing illegal about that and that fact that we were best friends and I had no intentions of actually buying his house does not have to be disclosed either.

    For your entertaiment here is a post.

    I for one have a low opinion of this sort scaming and the mentality of those who contribute to the fraud.

  13. Not sure what your point is, TBH. There is a crash? There's going to be a crash? This auction was a fake?

    This auction was a fake?

    Well I think that there were questions razed about how geninue the bidders and realestate agents were.

    Is it possibe? Just ask Bardon he has bosted recently about his part in a auction scam!

    There's going to be a crash?

    Looks like it to me.

    There is a crash?

    On just the opposite the sucker money is pooring in to property like there is no tomorow.

  14. And an even stronger possibility that they wont

    SuitablyIronicMoniker

    Default California Dreaming

    Australia is, as we know, nothing like the rest of the world. But it is interesting how common the language is between current pronouncements and those of the US before its bubble popped;

    Quote:

    High housing prices, low vacancy rates, and low levels of new construction have convinced many observers that California is experiencing a critical housing shortage,

    Quote:

    Although housing shortfalls in the Bay Area, coastal Los Angeles, and San Diego are cause for concern, the authors note that these areas are the least receptive to new construction, and other research has indicated that restrictive land-use policies in these regions exacerbated the shortages.

    Quote:

    The The Department of Housing and Community Development estimates that California must build an excess of 200,000 homes each year through the year 2020 in order to accommodate the population growth and remain "reasonably affordable."

    Quote:

    The California Building Industry Association estimates the state's housing deficit total to be nearing 1 million homes and apartments in 2003.

    In the UK, HM government commissioned a learned report;

    Quote:

    Over the last 30 years, UK house prices went up by 2.4% a year in real terms

    Which was true, but the reason wasn't;

    Quote:

    The main constraint identified by the Review is land supply

    The solution to reducing house prices (or slowing the increase in price);

    Quote:

    Reducing the price trend in real house prices to 1.8% would require an additional 70,000 private sector homes per annum; and More ambitiously, reducing the trend in real house prices to 1.1% would require an additional 120,000 private sector homes per annum.

    Of course, the bubble popped before this. Building houses may very well be a good thing, but it is neither the cause, nor the solution of massive price inflation in housing.

  15. You are to shallow to understand but if yo think you can compare a chart of house prices like that form different countries and try and get some meaning from it then good for you but I will give you a couple of hints

    oz has -ve gearing

    Japan has had population decline for a long time and will continue to do so

    Us well that is a very interesting market and you would need to have some experience in it to understand it.

    my net worth is going fine I thank you for your advice, Grasshopper

    I understand the charts, not rocket science.

    We followed the world in the house price increases.

    But we have not had the crash......................................yet?

    Geee Bardon is it possible you are over playing your hand?

    There is a strong possibility price will take a dive,

    What will you say than?

  16. China’s Economy is the Greatest Bubble on Earth

    By Dan Denning

    Australia didn't miss out on the first part of the Global Financial Crisis and it's not going to miss out on the second part. The second part is coming. And it could be worse than the first. That, in a nutshell, is the message of today's Daily Reckoning.

    For proof of the first claim - that excessive leverage and too much debt cost Australian investors billion of dollars - read today's essay "Pigs at the Trough" by guest essayist Adam Schwab. Adam's got a new book out by the same name. And he makes a great point: Australia may not have learned much from the first round of the GFC.

    But is there really going to be a round two? Well, if the first incorrect assumption was that Australia didn't have a bad debt problem, the second assumption is probably even more dangerous. It's more dangerous because it's the single most unexamined assumption behind much of Australia's economic prosperity. The assumption is that we'll always have China.

    A growing number of professional investors are betting against China. It's true that all of these investors - short-seller Jim Chanos, our friend Dr. Marc Faber, Harvard Professor Ken Rogoff - are all talking their book to some extent. We all do that all the time. But that doesn't invalidate our arguments.

    And the argument is simple: China's economy is the Greatest Bubble on Earth. James Rickards, the former General Counsel for the famously-failed hedge fund Long-Term Capital Management, told Bloomberg that China is in the midst of "the greatest bubble in history." He said the Chinese central bank's balance sheet, "resembles that of a hedge fund buying dollars and short-selling the yuan." "As I see it, it is the greatest bubble in history with the most massive misallocation of wealth," he told the Asset Allocation Summit Asia 2010.

    Students of the Austrian School of Economics would identify with the comment. Credit bubbles - and the world has arguably been in one long once since the U.S. dollar could no longer be redeemed for gold internationally in 1971 - know that credit creates excess demand. It gives producers a false impression of the consumer appetite for goods and services. Real resources are poured into providing people with products they buy with debt-based money.

    When the bubble bursts, the demand goes too. This is why Australia's government, slavishly obeying Keynesian dogma, has tried to "bring demand forward" or "support aggregate demand"

    by giving away the nation's surplus. And once it was finished doing that, it borrowed (stole) from the future in order to support demand.

    But this just perpetuates the misallocation of resources (in this case, stealing tomorrow's savings to support today's consumption.) In China's case, however, the misallocation of resources is even more impressive. There is massive over-capacity in commercial real estate with millions of square meters of vacancies. Whole cities lie empty.

    These cities and office buildings were made with Australian iron ore and coking coal. If China's miracle economy (regularly achieving politically mandated 8% GDP growth to support employment) is really the world's largest collection of misallocated resources ever, then what do you think will happen to Australia's economy?

    On the verge of another big increase in contract iron ore prices, it may seem like a strange time to ask the question. But it's probably the most important question Australian investors could ask themselves this year. "What can I do to protect myself against a crash in China?"

    The possibility may seem remote. But remember, no one in the mainstream media or economics profession warned you of the GFC either, did they? Even if you think it's unlikely or absurd, it's probably something you should think about a bit. We've thought about it and we think the best answer is to retire now.

    But what does that really mean? It means you should own a lot fewer stocks. But yes, that does contradict the rosy projections for Australia's super annuation system. Australia's super system is projected to have nearly $5 trillion in assets by 2025 according to an article in today's Australian.

    Chris Bowen, the Minister of Financial Services, spoke by video to a conference in Brisbane. He didn't say where all the super money would go specifically. But he did say, "This might mean greater investment in infrastructure assets, provided a stable pipeline of opportunities was available."

    Now you may want your money to go into infrastructure assets. And if you do, more power to you. After all, they are tangible assets. But you can't put a bridge in your refrigerator. Portable tangibility - wealth you can wear, store, or trade - is the name of the game as you reduce your allocation to deflating financial assets ahead of the hyperinflation. More on that Big Crash two-step in Friday's letter.

    Dan Denning

    for The Daily Reckoning Australia

  17. Mainstream economists and mainstream financial media tell us that the worst is over...that the 'recession' has passed...and that things are getting back to normal.

    Nope, we reply. Not a chance. The old economy that existed since the end of WWII is dead. No way could it recover; you can't revive a corpse.

    It was beginning to look as though we would have to eat our words: the cadaver was sitting up in bed and watching TV.

    Everything was beginning to look eerily normal, after all. A year after the stock market hit bottom, it still has not resumed its downward slope. Businesses that should have gone bust are still in business. Politicians who should have been run out of town on a rail are still putting their earmarks on everything. Bankers who should now be parking cars are still making loans.

    The government is still misleading... Economists are still mis- interpreting... Investors are still mis-understanding...

    ..it sure seems like things are back to normal!

    But something important has changed. And here comes the proof from the good ol' FT.

    The FT, by the way, has the same dim economists as everyone else. While we wouldn't trust a government employee to manage a coffee shop, the FT's leading economist, Martin Wolf, thinks they can manage the whole world's economy. It's just a matter of getting the balance right, he thinks.

    But beneath the surface of the flow of silly opinions and distracting noise, there is a powerful tide...an undertow that is sweeping everything out to sea. For the first time since 1946, household debt in the US is actually going down.

    This is what de-leveraging is all about. The credit expansion is over. The tide has turned. Credit flowed for 61 years. Now it ebbs. No more increases in household credit. No more increases in consumer spending, over and above wage gains. No more extra sales. No more 'growth' at the expense of private sector debt.

    It's over.

    Regards,

    Bill Bonner

    for The Daily Reckoning Australia

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