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February 27, 2014 - 8:46 am

Jpcashflow wrote:

Melbourne is in a recession 

And the contraction will continue for Vic (AU in general) for the foreseeable future. Globally we have over supply and over production. As demand decreases on global increases in both unemployment and underemployment (underemployment is rising in Australia faster than unemployment) the race to depreciate currencies and out-compete the next guy to hold or reduce losses in market share intensifies. 

The last 3 decades were marked by loose credit policy and consequently a credit bubble has grown to the point it either pops (crash) or deflates. Either way the next 3 decades are likely to be marked by contracting economies (real not nominal). We saw it in the first 50 years of the 1900's. The next 50 of this century could look remarkably similar.

PInvestors will need to get their head around the new normal and adapt their strategies to suit. Those who think the old methods will work are likely to fall by the wayside. 

Two things are holding up RE in AU (especially Syd & Melb) at the moment: foreign hot money and investors. I expect to see a surge in foreign money over the next 12 – 18 months as things turns south in an increasing number of countries but then it could very well simply dry up. At that point RE markets loose a leg under them and the other leg (investors) could quickly leave the market as well. Under that scenario I don't see how RE markets can hold up but I've been surprised before. 

Three and half years ago I suggested that things would go pear shaped given the crazy distortions in the market place. 12 months ago that prediction started to take shape. I see no sign yet that there is anything at all capable of stopping the decline in economic conditions either globally or nationally. On the contrary. Everything I see only suggests the downward forces are accelerating in both number and extent.

Not long now could mean next week or 10 years from now. In a lifetime neither is a long time but if I was a betting man I'd say the timing is closer to the next week end of the scale than the 10 years from now end.

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February 27, 2014 - 6:20 am

Your team is the foundation of a PI enterprise and you should be the keystone that locks all things together. Everything and anything can trip you up but it's almost impossible to be successful for very long without the foundation need to support your efforts. Just like a building if you put good foundations under it and aim for the best quality components you can afford then you are on the way to building a successful business.

In saying that though every structure is threatened by events beyond the control of the builder, eg;  earthquakes, tsunami's tornado's, fire etc. Surviving an event requires not only good insurance but reducing risks (fire extinguisher) and construction design.

Everything is important but prioritising all these components improves your chance of success. 

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February 26, 2014 - 7:46 pm

…and the European dimension to this saga continues on its not so merry way…

France is the second largest economy in Europe and 5th largest in the world. With Holland running things …what could possibly go wrong????

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February 25, 2014 - 8:24 pm

jmsrachel wrote:

Didn't your mother ever sing you Doris Day "que sera sera what ever will be will be".

The old girl was a good old girl but a hard tough taskmaster. One indelible memory I have as a youngster was her standing over me after giving me one hellova thrashing for some crime I can't recall and saying,  'I'll swing for you one day". 

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February 25, 2014 - 7:28 am

sciencesurf wrote:

I am far from understanding the complexities of investing.

You're in good company. I don't know anyone who is including the likes of so called Nobel prize winning economists.

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I guess only experience, exposure and a bucket load of reading will change that..

It helps. Until the GFC I only had a passing interest in macro economics. Most economic concepts are simple common sense. Academics like to complicate the hell out of it to justify their models.

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However, I could sit on the sidelines, like the majority do, or join the 'fools' and place myself strategically in a position to get lucky.

Experience is when you learn to differentiate when to move to the side lines and when to join the fools.

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It's usually ones greatest failures that drive people to succeed. Whatever happens I'm prepared.

No you're not… you're never completely prepared.

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I'll keep you updated on the progress of the portfolio over the coming 12 months (is that your current financial collapse prediction?).

I haven't put a time frame on it. You can't underestimate the lengths govt's and banks will go to to keep this thing afloat. The longer this goes on for the worse are the repercussions and longer the recovery. Nothing has improved at all since 08. Debt is magnitudes larger and the so called regulation and legislation has actually moved more towards a cowboy system.

The longer this takes the more I'm inclined to think this will end extremely badly. The arab spring was the catalyst that set off push-back by the average guy in the street. That push-back continues today in a growing number of countries.

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Maybe that China thing will kick in by then and you can really get stuck into it.

China is only one of many vectors for a crash. Ukraine is on the verge of default. Right now the Europeans are trying to figure out if that would send some banks over the edge. Meanwhile there's a debate brewing over saving an Austrian bank that was (in 1931) responsible for triggering the 30's depression. Everyone is paranoid that all it takes is one spark and the contagion effect gets out of control.

Me I'm sitting on the sidelines with my popcorn watching all the players do their thing and wondering how this is going to play out.

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February 25, 2014 - 4:34 am

This isn't helping things…

Late 2014 things will start to get much more interesting  as iron ore prices slide and especially if China drifts into crises mode.

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February 25, 2014 - 4:19 am

Jpcashflow wrote:

Hey My Freckle,

Long time no speak, I am not longer at my other company, here is my new email for you anyway [email protected]

Jump ship or pushed??

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On Thursday their is going to be some big news with Qantas and with any one saying that the Australian economy is looking good are not only lying to other but themselves.

Q's in big trouble and the govt's coffers are straining. Big layoffs are coming I hear. Another kick in the head for Melbourne. 

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February 25, 2014 - 2:59 am

The China story continues…

• …On the outskirts of Tangshan, a city of 7 million people that makes more steel a year than the whole of the United States, the hulking cranes and chimneys at the Qingquan Steel mill are frozen in inactivity. Workers unpaid for six months went on strike in October and haven’t returned.

• “In Tangshan and other parts of Hebei, the private mills are facing the most difficult time in their history,” said Xu. “Profits are poor and producers are all losing money – this has nothing to do with environmental measures: it is the economy.”

…housing price growth decelerating. This is not a major issue in itself however coupled with rapidly rising non performing loans, bankruptcies, defaults and bail-outs things look precarious at best. If this was a simple problem it would have been solved relatively quickly but as conditions go from bad to worse only the most pragmatic optimist with a severe case of cognitive dissonance and an intractable faith in command economy theory would believe this problem is nothing to worry about.

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February 24, 2014 - 8:47 pm

sciencesurf wrote:

So by dumb as chips muppets – you mean people that invest in property?? Get over yourself.

Again you show your lack of knowledge, comprehension or understanding. Investing is widely considered to be predicated on the the 'greater fool' theory. It requires someone more foolish than you to purchase your asset for more than you did. Property is an exceptionally good example of that theory although the share market is an equally good example.

Every asset that exists has to be held by someone or some entity. When the value of an asset falls you are either a fool for holding it or a fool for not finding a greater fool to buy it and absorb the losses for you. 90% of people have a zero to barely working understanding of investing and certainly the wider complexities of that art. 

I can't exclude myself from this group totally as I have been guilty of being the fool in earlier days and am not yet rid of the odd foolish impulse. 

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February 24, 2014 - 8:30 pm

sciencesurf wrote:

Economists are guys that know 100 ways to make love but don't know any women.

I knew there was a reason I never took economics at uni…

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February 22, 2014 - 12:55 am

Nigel Kibel wrote:

You will get used to Freckle he bashes everyone just check out my posts on America lol.

Everyone is somewhat of an exaggeration. I prefer to describe it as debunking group think and other mindless musings.

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February 21, 2014 - 8:22 pm

sciencesurf wrote:

Fantastic blogger, in my opinion

http://propertyupdate.com.au/harry-dent-on-australias-public-and-private-debt-true-or-false-pete-wargent/?inf_contact_key=30d20c5e9e7e064b4b14f7cf62cd63640d9e5385427d297d877a01df8de2fb48

The guys a tosser.

…Anyway, must log off, heading to Darling Harbour for a swanky Indian restaurant lunch* at Zaaffran. It’s what we do around here, y’know…

Tossers who know what they're talking about are barely tolerable but this guy is just another waffler. It's the kind of feel good drivel the MSM dishes out to make the masses feel good.

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February 21, 2014 - 8:03 pm

People usually try and justify their opinion right or wrong. First time I've ever seen someone justify waffling.

I'm often amused by people who offer an opinion and when asked why they say 'because'. 

sciencesurf wrote:

Working in the science field I understand the need for measured data to provide support for an observed event or process. But in terms of data supporting this Chinese rollercoaster everyone is on, I'm not biting.

I watched a doco some years ago that explored why some people survive disasters and others don't. Apparently the studies consistently show that survivors understood unfolding events and interpreted the potential threat long before others and took the requisite action to protect themselves or move out of harms way. 

In terms of financial disasters some dumb as chips muppet has to be holding the bag when things go south.

I'm as certain as one can be that things aren't going to work out for many and if things do go as I expect then its people like yourself that will say…'never saw that coming'. The worst that can happen to me is I'll just be wrong. The worst that could happen to you is you loose your shirt. I only have to be right once. You have to be right every day.

I'm sure everything's alright in China and the data is just a head fake..

Lehman's triggered the last GFC because they weren't bailed out. China has a 1000 Lehman's coming due over the next 12 months but I'm sure everything will sort itself out.

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February 20, 2014 - 2:40 am

Still on track to Armageddon…

With exports up 9% but imports up a massive 25% YoY, Japan's Trade balance pushed to its largest deficit on record. This is the 2nd largest drop in the trade balance on record – beaten only by March/April 2011 (the Tsunami and Fuskushima). The miracle of the J-Curve (the hoped for recovery in exports that will come any minute now from the devaluation of the currency) is simply non-existent!! We love the smell of GDP downward revisions in the morning… Foreigners sold Japanese stocks for the 4th week in a row for the first time in 16 months.

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February 20, 2014 - 2:19 am

..all looks perfectly normal to me…

…looks perfectly sustainable to me…

…nothing could possibly go wrong here..

…Banks!!!!…… rock solid of course!

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February 19, 2014 - 8:59 pm

The area is highly dependent on ag especially vineyards with a bit of upmarket BB and golf. It's a bit off the beaten track and I don't think mining has much of an impact on it over the years. I remember talking to a vineyard manager back in the late 90's who said the town fills up with all sorts of rif raf during the picking season. It's the type of town beneficiaries and drug addicts like. Relatively cheap to live get a bit of casual work and score a hit or two as needed.

I'm working from memory but I can't recall anything that leaps out at you and says 'buy me'. 

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February 19, 2014 - 7:59 pm

Yes the powers that be have everything under control. Absolutely nothing to worry about here. We're different downunder.

The Chinese on the other hand have a few problems….

China Folds On Reforms – Bails Out 2nd Shadow-Banking Default After "Last Drop Of Blood" Threats

…. but I'm sure it's nothing… 

What have we got to worry about. Aussie banks are rock solid… right?

Western Banks And China: "Interesting Times" Are Coming

• In other words, we now have additional evidence of the growing vulnerability of Australia specifically. As we already pointed out in our musings about how “financial contagion” might spread from China in spite of its closed capital account, Australia is a pivotal region. Australia's economy greatly depends on China's commodity imports, and its banks have financed an enormous real estate bubble on the back of the commodities boom.
• Moreover, Australia's banking system itself is highly dependent on foreign short term funding sources. Although the chart above doesn't tell us anything about the maturities of the claims on China, we would not be surprised if many or even most of the loans to China had much longer maturities than the foreign funding Australian banks get from (mainly) Europe. The main point is though that we have yet another source of potential trouble for Australia here – the exposure of Australian banks to China amounts to 9% of Australia's GDP at this point.

But never mind… I'm sure these guys have got it all wrong and things will be honky dory for a while yet.. after all can't China just keep building stuff until the cows come home???? Of course they can…

"Off The Charts" How China Fooled The World

• Here's the problem: one can't put the January lending surge aside, as it came at a time when for the second time in six months the PBOC tried to taper, only to be forced to not only bail out its money markets, but is on the verge of a bankruptcy tsunami involving its shadow banking products, the first of which it also bailed out despite repeated warnings this time it means business and would let it die.
• In this context, the January number is precisely what it appears: the bank's logical response to a liquidity crunch as the Chinese regime finds itself in the same spot that the Fed has been in for the past 5 years – it must keep the monetary spice flowing, or else the party is over. And just like the Fed, and now the BOJ, so too does China not want to deal with the fall out if all it takes to created yet another quarter of increasingly subpar economic growth is another record of funny money conceived out of thin air.
• The only problem is that it is becoming increasingly difficult to hide all the pieces of funny money, most of which result in bad and otherwise impaired loans, under the rug. And just to show the problem in its context, here is how China's banks created some 50% more in bank loans in January than the QE credit money created by both the Fed and the BOJ combined.

But even if China has a few little problems we can always bank on the US to hold things together…..after all over the last 5 years they've thrown a combined $30 trillion at the problem so it must be fixed and we're all gonna be alright.

5 Years Later – What Did The ARRA Achieve?

I'm so relieved that so many of you believe everything's going to be alright and the rumors of an impending crash are nothing but rumors spread by scaremongers with nothing better to do.

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February 19, 2014 - 1:10 am

It's fairly common approach. A see potential in B's land and thinks it can be developed but needs to confirm this before buying. Given the time and cost involved A looks for an option contract to protect his DD costs and time involved by offering to pay B compensation to wait provided the DD shows the deal is doable. A pays the option price plus purchase costs when the contracts are signed.

A better approach rather than paying deposits although the tangible exchange of money can strengthen the deal but I personally would rather see the deposit sit in escrow in this situation.

I have an old friend who is in the middle of something similar in that a Sth Korean has paid a 50% deposit so far to purchase a large land parcel (was a dairy farm) to develop into a golf course with private residential subdivision. The Korean is at risk of substantial losses given he has failed to complete this deal on time (having trouble raising the balance) but my friends family are not under any pressure so are letting this ride for the time being. Personally not what I would do but money isn't a problem for them and they're so laid back it's not funny.

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February 17, 2014 - 10:58 pm

Catalyst wrote:

I couldn't imagine any solicitor (for the seller) allowing this.

I wouldn't engage any solicitor that tried to give me business advice or told me what I could or couldn't do. They're there to advise on the legal aspects of a transaction not its business potential.

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February 17, 2014 - 7:32 am

Impossible to tell. It's highly dependent on the option seller. While options have similar structural qualities they are rarely identical. An option is simply a form of contract which requires an offer, an acceptance and a consideration. Deposits fill the consideration component in a tangible way and generally strengthen the contract obligations. It is unusual for deposits to be lost when conditions that are required to be met do not eventuate especially when there is no fault by either party. Placing a holding deposit does not automatically mean it is forfeit when a deal fails for whatever reason.

Deposits that are subject to forfeiture conditions are usually quite small and or have other conditions attached that allow the depositor to accomplish something in return for forfeiture. People who forfeit deposits for no good reason are usually amateurs or mugs.