Forum Replies Created
- sciencesurf wrote:
My opinion is that some of Freckles comments are heavily biased and do not give investors the full scope. There is no doubting he has a complex understanding of macro economics which is also needed to balance the hype. My feeling is the scales have been unnecessarily weighted in the opposing direction.
The bias is on the pro side and outnumbers my voice by a 1000:1. But let me correct your interpretation of my perspective. I've never said don't invest. What I do say is that the landscape is far more challenging and complex than what it was a year or two ago. If you're going to wet your feet by all means do. I do not advocate a sudden stop in commerce simply because debt piles are potentially catastrophic.
There are 2 types here on this forum. The small band of industry integrated pro investors who have a pecuniary interest in encouraging new investors and the wannabe's with a sprinkling of novice investors. I rarely see anyone warn the newbies of the risks inherent in the market place. That would go against the theme here that property is the key to wealth because it always go up.
Most Of my rhetoric is targeted at the dumb as chips novice who swallows the marketing hype hook line and sinker which is constantly reinforced by active players who are barely any more knowledgeable than the newbies or players with a industry interest and do nothing tangible to dampen the hype.
Quote:If everyone was to act on his comments, Australia would be lacking an arsenal needed to sustain economic growth into the proceeding years.The only thing that sustains Australia is China printing $200+billion per month and the property ponzi that the banks and govt sustain because they have no other bullets for their gun. 50% of AU's exports go to China, Sth Korea and Japan. They're all printing as fast as their printers will go to hold this baby together. When they run out of ink its game over.
Debt piles of this magnitude have never been seen before but every preceding pile ended in tears. There is no evidence that this time will be any different.
ten_burner wrote:The biggest risk is sitting on the sidelines in my opinion. I'm going to the US next month if you want to come Freckle.The US is the last market I would be buying RE. You're following the crowd TB. The party's over there. Has been for a while.
But good luck anyway.
SS you can argue the toss all you like but I don't know any top tier investor that is leveraging up. Every smart investor I know, know of or read about is deleveraging. That doesn't mean they're not active but they are far more judicious and conservative in their assessments and are reducing their gearing as they go. Most I know have been doing it for the last 2 years.
Your average leveraged to the gills Pi won't be able to re-gear when the proverbial hits the fan.
Qlds007 wrote:Only aware of 2 lenders that will:1) Allow a personal loan to be the source of deposit and good luck getting an approval above 90% thru them.
And not aware of any lender that will:
1) Approve a personal loan where the intended purpose is for house deposit. To state another reason and then use for deposit is of course fraud as the purpose clearly needs to be defined from the outset.
With the new Privacy Laws taking affect from today many a client will be caught on non disclosure going forward.
Cheers
Yours in Finance
Some years ago I applied to the CBA for a personal loan (40k). because I was self employed it became a paper war trying to get a simple loan across the line. After two weeks of shuffling papers I gave up. I then simply went on line and applied for the same loan under my wifes name. Walked down the bank and collected it 2 days later no questions asked.
The reality is banks don't give a flying fig what you use loans for. They have one priority and one priority only … sell credit. The terms and conditions are there to keep regulators happy and at least give the appearance they are responsible lenders. Your average front line banking staff is heavily incentivised to sell sell sell. I worked with a bank manager who got out of the game simply because the constant pressure to sell and cross sell to meet targets had simply worn him down over the years to the point his ethical compass was literally broken. He found himself working out side his comfort zone and pressuring his staff to do the same all to meet head office targets.
While banks down under are more responsible than their European and American cousins by a long shot they're definitely not the good guys many people think they are. Retail lending is a public duty for banks. They make their real money in the corporate world, HFT and dark pool trading and other questionable activities.
sciencesurf wrote:Freckle wrote:If the newbies here get their head out of their guru training manuals for a minute and take a look around they'll find that just about every top tier property investor is deleveraging as fast as they can
This is a MAJOR assumption and simply not true.. Get outside and take a breath of fresh air.
Well that's funny.. I must have a comprehension problem then. When leading investors on this board, some with multi million dollar portfolios, say they are paying down debt I must be be misinterpreting their intentions. Pray tell what the hell are they doing then when standard investing mantra is to use leveraged to the gills strategies to grow a portfolio based on the belief that home prices always go up
Quote:The other day you stated it could take 5-10 years, based on the lengths countries will go to cover up debt. 10 years is a long time to be sitting on the sidelines…The game of life is knowing when to join the game and when to take a spell on the sidelines however that is too simplistic. Many like yourself look at these things in black and white for the most part. I don't say don't invest or take risks. I've always said understand the risks and plan accordingly. For a newbie leveraging to the gills in a high risk environment is a risk I don't endorse.
The reality is we are already in the early stages of a crash. Most either don't recognise it or if they do then they choose to opt for cognitive dissonance and hope it all goes away. There are many out there in the game who understand the situation and are playing it for all it's worth. EG they're banking on govt's and CB's to hold economies up by printing, pushing the prices of assets up and then bailing when the this thing gets out of control. If they get their timing right they come back in and clean up the bankrupt players for pennies on the dollar.
I expect to see the AU property market get some protection from the Abbot govt. It's the only bubble they still have and they're milking it for everything it's worth while their deficits build and the economy tanks. But when they can't hold it together anymore the correction will hurt.
Get your timing right if you want to play in this game. If you need to take a more than 70% leveraged position to play in this game then your just fish food for the bigs guys.
Want to exit the market… better a day early then a year too late.
sciencesurf wrote:Freckle wrote:Honestly, I wish more 'top tier' investors, including Steve, would speak up and give some alternative opinions.
Steve's been ringing the warning bell for the last 18 months. He's even run a few freebie seminars on the subject… where've you been?
jimchap131 wrote:What I'd like to know is how you are so sure that you are correct when what you are discussing is so complex and multi-faceted?Simple logic. You can over complicate this thing but the reality is you can't grow debt faster than income indefinitely. China has been growing its debt at twice the rate of growth for a decade now. Its debt burden is twice its GDP and mostly held by corporations. In 5 years its banking sector grew to the same size as the US sector which took 100 years.
Debt is simply borrowing consumption from the future. To repay it you have to reduce consumption at somewhere on the timeline. When you reduce consumption you kill jobs and the economy. It's what you get when economies are predicated on continuous growth to survive.
If you look at historic native economies that lived on islands you can understand what a sustainable economy looks like. Growth in everything is miniscule. Population growth is near or at zero. The local resources (land & sea) are utilised in a sustainable way. Compare that to the Easter Is culture that destroyed itself by overpopulation and over utilisation of natural resources. Their economy and resource supply crashed and their population along with it. A realistic model of our own destiny if ever there was one.
Globally everything we do is unsustainable and the signs of an impending collapse are everywhere. People choose to not recognise it because as population growth continues we all have less on average so competition for more or to simply hold one's ground increases. You can't stop a starving man from eating his last bowl of corn seed to survive another day so he eats it and dies another day. That's the mentality we face as a civilization. You will never get everyone to collectively abstain from doing the things that will ultimately destroy us.
We are caught in a trap of our own making. Grow or die but ultimately we outgrow our resources and die anyway. The only difference is die today or die tomorrow. In order for the system to survive some must die for it to return to a sustainable state. The only problem there are no volunteers so a return to equilibrium will almost certainly be a catastrophic experience for many when it arrives.
At the end of the day its simple age old truism.. spend more than you earn and you go bust. No individual, entity or God is exempt from this rule.
So when you use debt to grow and you outpace your incomes ability to service that debt then there is only one conclusion.
Banks in general don't give a toss what you use a personal loan for. I've used them in the past and never disclose the real reason for the loan. Unless it's changed the CBA had no upper limit on personal loans. As long as you could service it they where happy to shell out the dosh.
Personally I wouldn't use a pers loan for a buy and hold property. I've only ever used them for short duration opportunities. Ideal for property reno's and flips, deposit bonds etc.
ten_burner wrote:Notice the date that this thread started, there were also some big calls during the GFC about the (supposed) impact on Australia, an here we are…The GFC woke me up and I started taking a lot more notice of what was going on. By 2010 I saw the writing was on the wall. I projected a timeline some years ago and made plans to make a dollar or two, sellup and hunker down. I tried to tell a few other the same thing. Most said, "no way…..China will run for 20 years". Those I told then are either under water, going broke or in receivership.
There is no escaping the correction that is coming. The winners will be those with low levels of leverage and enough capacity to take a hit and carry on. The recovery will take decades if ever (think Japan).
If the newbies here get their head out of their guru training manuals for a minute and take a look around they'll find that just about every top tier property investor is deleveraging as fast as they can. The smart money is getting ready for the next crash and they will be the investors who will clean up after the dust settles. All those newbies heading into the markets over the last few years are just cannon fodder and largely kidding themselves into believing they have a foot on the gravy train.
simple wrote:I would call this scenario you have painted 50/50 chance.No 50/50 about it. It's a 100% certainty. You can't beat the maths.
And heres an illustration of why.
A property developer (over 50% of debt in China is property) pledges the asset to a bank as collateral. He repledges it to multiple banks as security for more loans and then finally sells it while still holding the loans. This is common practice in China. They do the same thing with copper (that's recently been banned) and iron ore and any resource they can use as collateral that eventually is rehypothicated to the moon. That worked until recently because the cost was covered by increasing asset prices. Now that's stopped and assets are stalling or collapsing (copper, iron ore etc) this thing is starting to unwind.
A real example..
"Magic" Collateral: A Frank Look At The Sheer Credit Horror About To Be Unleashed In China
I feel for all the muppets out there who are leveraged to the gills or about to leverage themselves up in the belief that AU will somehow sail through any problems like it has in the past and that property always go up.
China built a sand castle and now it's starting to fall apart.
Not long now….
SuperZiyue wrote:H.How can I ensure that, at the end of the process, I will really be owner of what I've been told and I haven't got trapped by crooks?
You can't. Even if you lived here and dealt face to face with the individuals you may be none the wiser.
You go with recommendations by fellow buyers who have had successful experiences in the past.
A friends son (a tradesman) has dealt with a major contracting firm for years. It had a very good reputation for decades until the son took over a few years back. Sub contractors are going broke and he owes 100's of 1000's around the place but could still afford to buy a $200k SUV.
Bend over and grab your ankles… if things keep unraveling at their current rate (especially China) Australia can expect to be in a whole heap of pain in about 6 months. Ukraine may be the black swan that actually kicks this thing off. Sanctions and energy restrictions in Europe (by Russia) could see a few economies go over the edge and trigger wider financial system collapses.
This thing has the potential to go off the wall very quickly if either the two primary antagonists (US & Russia) do anything stupid. I can't see either of them backing down.
Chinese Exports Collapse Leading To 2nd Largest Trade Deficit On Record
Schplak wrote:what the typical property investing structure is.One negatively geared property is the typical property portfolio of the average (60%) Australian. The next 20% don't fair much better with only marginal profit at best. CG tends to be poor (around trend) in the 0-80% range.
The next 10 -15% tend to have multiple properties (3-10) buy well and manage fairly aggressively. The top 5% of which 1-3% constitute the Guru class are the multi million portfolio's and participate within the industry on a high profile professional basis.
A builder mate bought a PPR house for reno last year. He was redoing a bathroom (upstairs). Complete reskinning and modified layout. He told me he would need to charge $25k if he was dojng it for someone else. Nearly fell off my perch.
Stepstomillions wrote:I have been studying the US market for years
Studying's one thing learning's another. Listen to Jay. He's forgotten more than you'll ever know.
kylermrice wrote:Sure beats mining for precious metals.Mate gets around oz/day. His partner took out $44k for 6-8 weeks last year. They use the same system as these guys.. (click the pic for more).
They each have their own gear. Mate only goes for the big stuff. Reckons he lets go probably 55% of what passes over the screens as fine gold.
Currencies require 3 things;
- acceptance (internationally recognised as valuable on a wide scale and legitimised by authorities)
- integration (meshed in with other systems and legitimate currencies)
- security (protected from loss while in the system)
Crypto currencies are a long way from meeting any of these requirements at this stage. Until they do buying into them is simply shooting dice at the casino.
If they're good tenants who look after the place I wouldn't sweat it. I've had dogs inside for years…no smell no damage. They actually make more of a mess outside.
Rome Is On The Verge Of Detroit-Style Bankruptcy
On the first day of his premiership, Matteo Renzi had to withdraw a decree, promulgated by his predecessor, that would have helped the city of Rome fill an €816 million ($1.17 billion) budget gap, after filibustering by opposition lawmakers in the Parliament on Wednesday signaled the bill had little likelihood of passing.
Devising a new decree that provides aid to Rome will now cost Mr. Renzi time and political capital he intended to deploy in promoting sweeping electoral and labor overhauls during his first weeks in office.
For Rome's city fathers, though, the setback has more dire consequences. They must now face unpalatable choices—such as cutting public services, raising taxes or delaying payments to suppliers—to gain time as they search for ways to close a yawning budget gap. If it fails, the city could be placed under an administrator tasked with selling off city assets, such as its utilities.
"It's time to stop the accounting tricks and declare Rome's default," said Guido Guidesi, a parliamentarian from the Northern League, which opposed the measure.
….somebody pass the popcorn.
Yep CRE is bubbling away while RRE barely simmers. You and I both know it takes foreign money hot off the presses and BOJ bond buying to the moon and back to get the Japanese economy to show even small signs of life.
The hot speculative money will juice the market here and there until they think they've got all they can from it and when it goes away again as surely as it will then those holding the bag will wonder what happened.
We also know how this ends once the parties over. The hangover will be a doozy.
