Forums / Property Investing / General Property / what does a 1% drop in rates do for us?

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  • Profile photo of foundationfoundation
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    crashy wrote:

    the only thing that excites (F)wit is "oooo goody, another opportunity to make crashy look stoopid"

    Why would I need to? You seem so well adapted at achieving that outcome for yourself!

     

    Hint: Name-calling is childish.

     

    Cheers, F. [cowboy2]

     

    Harb: For what it's worth I expect the RBA to cut the OCR well below the record low of 4.25% it hit in 2001. Well below. However, this expectation is based on an outlook that features rather nasty economic conditions. My investments are structured to deal with these developments. And no, even if mortgage rates fell to 5%, I would not be borrowing money to buy real estate…

    Profile photo of L.A AussieL.A Aussie
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    foundation wrote:

    And no, even if mortgage rates fell to 5%, I would not be borrowing money to buy real estate…

    If the property was pos geared, and you were looking to buy  and hold long term, why wouldn't you?

    If you could snare 5 properties that return a nett rent after all expenses of  even a pathetic $25 per week RIGHT NOW that's a pretty good head start before things start to improve.

    The market will only go back up sooner or later, so will rents.

    The economic climate may be bad, and property (and shares) markets are down (could go down more), but I don't believe Aus property markets are going to drop too far or too fast – that's only reserved for the penguins in the share market.

    That doesn't mean it's not a good time to buy a good opportunity now – shares or property.

    If I can 5% mortgages, I'll be borrowing loads, and locking them in for as long as possible. Even if they go down more from there, 5% is below historical averages, so I'll be happy with that.

    What are you investing in F?

    And please don't say cash. That's for the level 2 investors.

    Profile photo of foundationfoundation
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    L.A Aussie wrote:
    foundation wrote:

    And no, even if mortgage rates fell to 5%, I would not be borrowing money to buy real estate…

    If the property was pos geared, and you were looking to buy  and hold long term, why wouldn't you?

    Because I fully expect a decade of deflation, ala Japan. And because of this, I have structured my investments to deal with this as the most likely outcome, but also to be flexible, liquid and able to respond to completely the opposite scenario.

    I expect property prices to fall and fall hard over coming years. No amount of positive gearing would make up for falling prices. I expect very few if any areas to be protected. Meanwhile, deflation will raise the absolute value of outstanding loans. That is why I said "I would not be borrowing money to buy real estate". Nothing wrong with buying outright, I just wouldn't do it with a loan.

    Now my cash (which is where my sharemarket dollars went after I sold all my direct shares in December 2007, plus savings since then, plus the cash which I already had saved) more than doubled in purchasing power over the last 12 months compared to the shares I'm now buying. Level 2 investor indeed! My superannuation went up almost 6% over the last 12 months because it was invested largely in cash! My remaining cash fund has increased its purchasing power relative to real estate in my area by over 20% in the last 3 months…

    Don't knock the cash. There is a time where cash truly is king.

    Other investments include gold and silver purchased in 2004-2006, two houses – fully paid off – plus an option arrangement on a bit of absolute beach-front land, shares bought in the last couple of months (bought at fantastic value, with recession-resistant earnings from a $10k purchase that make that $25/wk positively geared property you speak of look pretty lame).

    Quote:
    That doesn't mean it's not a good time to buy a good opportunity now – shares or property.

    Agreed! So which to buy? I'd choose a 10x P/E (after all expenses) over a 25x P/E (gross, before expenses) any day!

    I fully expect the average P/E on a 3br house to return to the 10x to 15x earnings range, and not through higher rents.

    Cheers, F. [cowboy2]

    Profile photo of harbharb
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    foundation wrote:
    I'm sure you have me confused with somebody else. I'm a (multiple) property owner, not a renter.
    [cowboy2]

    But of course you are.

    foundation wrote:
    Because I fully expect a decade of deflation, ala Japan. And because of this, I have structured my investments to deal with this as the most likely outcome, but also to be flexible, liquid and able to respond to completely the opposite scenario. I expect property prices to fall and fall hard over coming years.

    That would suggest that you either are not telling the truth in one of the above statements or you are not very bright . Since I don't know you personally I'll leave it up to you to decide which.

    Profile photo of crashycrashy
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    well spotted harb.

    F seems to a "multiple property owner" who "expects prices to fall hard", yet instead of selling he has "structured my investments to deal with this" (deflation) while simultaneously being "liquid" without being in cash. Obviously this means he is in shares but instead of simply saying that, he implies that he has designed some super complex, secretive, risk-free investment portfolio that the rest of us are just too darn stupid to think up. lets all kiss his feet.

    Not only that, but he tells us now he sold his shares in Dec 07 (why didnt he say anything at the time?) and managed to buy the bottom of the market recently (why didnt he say anything then either?) making him a fully qualified hindsight genius we should all adore.

    His statements show a fundamental misunderstanding of economics and investing, despite mesmerising us with facts & figures & charts that show us all how much smarter he is than anyone else.

    meeeee sooo stoopid! (by the way, quoting me here and responding with "you said it" or "Im glad we all agree" would NOT be considered intelligent wit.

    Profile photo of crashycrashy
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    "Other investments include gold and silver purchased in 2004-2006"

    again, said nothing at the time.

    Im curious though, if you are such an investing expert, why is it you hold precious metals in a period where you expect massive deflation?

    It does not matter what shares you bought, none of them are remotely immune from deflation.

    As the DOW has plunged the last few days, lets wait for F to come out and tell us he sold Weds at the top.

     

    Profile photo of foundationfoundation
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    crashy wrote:

    "Other investments include gold and silver purchased in 2004-2006"

    again, said nothing at the time.

    You're making a fool of yourself again crashy! Check this post (there are plenty of other examples here too) from July 7, 2006:

    foundation wrote:
    Flash, I bought a few dozen bullion-grade fine silver one ounce coins over 2004 & 2005. Also some Unc Australian Mint silver coins ranging from an ounce up to a couple of 10oz'ers. All bought when silver spot was less than US$7. None for more than AU$10.50. Currently up around 66%. I also bought gold coins during '04/'05. 1/10th, 1/4, 1/2th oz Maples mostly plus a couple of handfuls of Australian sovereigns, half sovereigns, a couple of 1/4oz Panda, and my fave – a mongolian 1oz decorated with cartoon-style chickens. My cheapest oz was IIRC AU$511, and my most expensive was $600. Currently up around 48%. So I'm hardly a stranger to such 'alternative' investments. If you searched for some of my older posts you'd find references to this. I'm happy to talk about what I'm doing, but you won't get anything out of me that could be considered investment advice.

    https://www.propertyinvesting.com/forum/topic/24432.html

    I still stand by my original thesis from that thread, "Australia's Debt Mountain – Why house prices cannot double by 2016"

    Quote:
    As the DOW has plunged the last few days, lets wait for F to come out and tell us he sold Weds at the top.

    That's absurd! You clearly don't understand investment!

    I hope prices do not rise. I would prefer they fall lower. I am an investor not a speculator! I would prefer to continue to accumulate assets at 15% to 20% net yields for the next ten or twenty years (or longer) than see the much smaller asset base I currently hold rise quickly. That would mean I couldn't buy more at the current very good values! I'll point out though, that I'm investing slowly into shares that are well managed, have little (preferably zero) debt, produce goods for which there is low demand elasticity etcetera, and currently hold the bulk of my investments in cash.

    Quote:
    Im curious though, if you are such an investing expert, why is it you hold precious metals in a period where you expect massive deflation?

    I'm not an investing expert. But to ignore the jibes and answer the question, it's because they're pretty. And shiny. And heavy. But mostly pretty.

    And because they are a store of real value, of real wealth (as they are the product of effort+energy and scarce) whereas paper money is intrinsically worthless. So my aim is to over the long term hold 10% of my assets in precious metals. As I said earlier, I'm all for holding real assets. Sure, in a general deflation their dollar value would fall and their income/yield would fall, but they would maintain their real value over time. But I wouldn't for a second consider borrowing money to buy real assets.

    I'll happily admit that there is a slim chance that the deflation will be temporary and not become entrenched as it did in Japan. In that case it would possibly be followed by a period of high inflation. If signs point to that outcome, I'll change tack. But if not, I'll keep doing what I do.

    Cheers, F. [cowboy2]

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    crashy wrote:
    well spotted harb.

    F seems to a "multiple property owner" who "expects prices to fall hard", yet instead of selling he has "structured my investments to deal with this" (deflation) while simultaneously being "liquid" without being in cash. Obviously this means he is in shares but instead of simply saying that, he implies that he has designed some super complex, secretive, risk-free investment portfolio that the rest of us are just too darn stupid to think up. lets all kiss his feet.

    Not only that, but he tells us now he sold his shares in Dec 07 (why didnt he say anything at the time?) and managed to buy the bottom of the market recently (why didnt he say anything then either?) making him a fully qualified hindsight genius we should all adore.

    Why didn't I say anything? Well, because… oh, yes, I did (note my earlier 2007 was a typo – I sold well before the market top, around 500pts early)!

    foundation wrote:
    L.A Aussie wrote:
    So Foundation,
    based on your posts before mine, does this mean you are not buying any property, or selling what you've got, or holding on, or buying more, liquidating and putting it into cash (everyone seems to be doing that). What about shares and/or businesses?
    What are you doing, man?

    I'll tell you but you wouldn't want to copy me! I sold off all my direct share investments in November last year (now cash) and adjusted my super to a very conservative stance – around 50% cash, 20% Aus shares, 10% global shares and the rest a grab-bag of fixed interest (oops) and property. I only have two houses, and yes, I did/do plan on selling one during the summer if I can get a price above the value I place on it as a holiday destination.

    https://www.propertyinvesting.com/forums/property-investing/help-needed/4321614

    And I post on globalhousepricecrash.com under the username Scary. You'll find I was perfectly open about my recent share purchases.

    As for my magical 'risk free investment portfolio', if you haven't worked it out yet, cash is practically completely risk free (guaranteed by government). It is also the best investment strategy during deflationary times. I currently hold a bit more than 10 years worth of living expenses in cash (I'm 32, and plan to increase this over time via a whole range of investing strategies until my estimated lifespan – years of safe investments = current age).

    How about you actually learn to google my old posts before you make any further claims about what I have or haven't said in the past? You really are making yourself look like a bit of a dill…

    Cheers, F. [cowboy2]

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    foundation wrote:
    Hint: Name-calling is childish.
    foundation wrote:
    You really are making yourself look like a bit of a dill…
    foundation wrote:
    Flash, I bought a few dozen bullion-grade fine silver one ounce coins over 2004 & 2005. Also some Unc Australian Mint silver coins ranging from an ounce up to a couple of 10oz'ers. All bought when silver spot was less than US$7. None for more than AU$10.50. Currently up around 66%

    Im confused here. you quote an old post that is supposed to prove that you DONT post late trades, but all you have done is provide another example of you doing just that. anyone can say "oh I did this back then and it's gone up, arent I clever?"

    hows that for googling your old posts?

    yet another example of an F contradiction.

    oops

    Profile photo of foundationfoundation
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    crashy wrote:
    Im confused here. you quote an old post that is supposed to prove that you DONT post late trades, but all you have done is provide another example of you doing just that. anyone can say "oh I did this back then and it's gone up, arent I clever?"

    hows that for googling your old posts?

    That's not an example of your google prowess. I merely showed that you were being wrong and making an arse of yourself. I wasn't trying to paint myself as anything, only to set the record straight after your multiple attempts to rewrite history and paint me as a liar. What is it with you? Are you naturally and unavoidably this aggressive?

    Shares
    I showed you that in August 2007 (prior to the November 1 2007 high of 6853), I'd already sold out all my direct share holdings. This was in response to your completely incorrect claim that I "didnt say anything at the time" and was therefore (sarcastic jibe) "a fully qualified hindsight genius". I'm sure I can come up with posts from the end of 2006 or early 2007 that confirm that I both sold all my shares and talked about it at the time. But by August 2007, plenty of people thought I had made a poor decision. I'm still happy knowing that I bought at good value then sold when it was clear that they were overvalued. Now I'm buying at the best value that's been available ever in my life. I'm not trying to time the market with precision, merely play off the natural tendency of people to irrationally price the bull market too high and irrationally price the bear market too low.

    Bullion

    I provided evidence that I bought my precious prior to July 2006. Regardless of whether you believe I'd bought my gold and silver before that date or merely on that date and back-dated my purchase to make me look clever (this seems to be what you are implying), gold is currently AU$1,100 at spot and silver at AU$15 spot. Both well up on prices from July 2006. I really don't care what you think about me. I'm pretty happy with my investment choices to date. But I think you really do discredit yourself by making patently false claims about me. Here's another quote from 2005 (when I was actively buying gold):

    Quote:
    why not stash your cash in a high interest account (alternatively buy a couple of gold sovereigns ;-)), and spend your spare time reading.

    https://www.propertyinvesting.com/forum/topic/19819.html

    Note the wink? I try very hard not to give investment advice. I've always said I'm happy to tell people what I'm investing in, but not to advise them. It's notable that nobody took me up on my offer:

    Quote:
    Come on down to my beach shack for a weekend, bring a slab of beer (preferably J.Squire or Coopers) and your $290 will get you two days of one-on-one econo-chat, market discussion and a healthy dose of logic thrown in for free.

    Cheers, F. [cowboy2]

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    foundation wrote:
    Flash, I bought a few dozen bullion-grade fine silver one ounce coins over 2004 & 2005. Also some Unc Australian Mint silver coins ranging from an ounce up to a couple of 10oz'ers. All bought when silver spot was less than US$7. None for more than AU$10.50. Currently up around 66%.

    Which I'm sure you've already sold back in March, none of it for less then $20. It was at that point that you foresaw the interest rates falling below 5% before Christmas and decided to move everything in a term deposit at 9% pa, or did you manage to get 10% ? You're a legend mate, I don't know how you do it.

    Profile photo of foundationfoundation
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    harb wrote:
    foundation wrote:
    Flash, I bought a few dozen bullion-grade fine silver one ounce coins over 2004 & 2005. Also some Unc Australian Mint silver coins ranging from an ounce up to a couple of 10oz'ers. All bought when silver spot was less than US$7. None for more than AU$10.50. Currently up around 66%.

    Which I'm sure you've already sold back in March, none of it for less then $20. It was at that point that you foresaw the interest rates falling below 5% before Christmas and decided to move everything in a term deposit at 9% pa, or did you manage to get 10% ? You're a legend mate, I don't know how you do it.

    Your sarcasm is noted. You are clearly (and flagrantly falsely) implying that the details I have given of my previous investment decisions are based on post-hoc fitting to best investments. I have provided plenty of evidence that your suggestion is false, that I did in fact make the investments when, and in what, I stated. I ask you politely to refrain from inferring otherwise.

    I haven't sold any precious metal. I don't intend to ever do so unless somebody offers me an insane amount of money. I intend to increase my holdings over time, but haven't bought anything since the beginning of 2006 (as per my earlier post). I certainly did buy in 2004 and 2005 though. Here's another bit of proof that I was long my preciousness in June 2005:

    foundation wrote:
    And people think I'm silly for hoarding precious metals instead of buying houses!
    <snip>
    Slightly on topic – how to benefit from high oil prices? In the short to medium term some oil exploration companies should do well, but the smaller ones will be a loser in years to come as oil reserves dwindle. For long term growth I'd expect the biggest oil/energy companies to be best placed to develop or embrace alternative fuel technology. Anyone with a stake in uranium reserves should be a winner, and of course biofuel and sugar will provide alternatives to petrol. (And don't forget that a bit of gold and silver will be nice to hold when the Americans are forced to face the reality of their excesses!)

    https://www.propertyinvesting.com/forums/property-investing/general-property/18228

    Cheers, F. [cowboy2]

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    Aha!

    I've just uncovered (through my magical google powers) why Harry Harb here is such a nasty sarcastic creature!

    Here's what he was up to in September 2006:

    harb wrote:
    My favorite pick is South Yunderup, the suburb is on a dead end street with direct access to the highway and industrial areas north of it, near the river, Peel Inlet and close enough to shopping in Mandurah. Also worth looking at are Ravenswood and Furnissdale. Cheers, Harry

    https://www.propertyinvesting.com/forums/property-investing/general-property/25273?#comment-141074

    Jeez, talk about bad timing! But I now understand the bitterness. And to make it worse:

    harb wrote:
    I have a Lowdoc with Rams and they WERE alright.
    Since they got in financial strife they've been putting the rates up monthly (currently over 10%) and the high exit fees just not makes it worth changing lenders. Not for a few more months yet when the exit fees drop to 1%

    https://www.propertyinvesting.com/forums/property-investing/help-needed/4325092?#comment-174431

    Youch! Mate, don't worry, I'll treat you with the kid gloves from now on. You must be hurting bad enough already. Incredibly bad timing, poor choice of loan, no idea about fundamental value… poor chap.

    Cheers, F. [cowboy2]

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    Wow. We have a good pissing contest going on here.

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    foundation wrote:
    Aha!

    I've just uncovered (through my magical google powers) why Harry Harb here is such a nasty sarcastic creature!

    Here's what he was up to in September 2006:

    harb wrote:
    My favorite pick is South Yunderup, the suburb is on a dead end street with direct access to the highway and industrial areas north of it, near the river, Peel Inlet and close enough to shopping in Mandurah.

    Ok, you've got me.
    Too bad your google powers are a bit limited or you'd have also seen this,
    http://reiwa.com/res/res-urban-profile.cfm?suburb_id=2475&census_code=SSC52326&geogroup_id=4044&geogroup_parent_id=17
    And the freeway extension is not even complete yet. LOL

    Quote:
    Jeez, talk about bad timing! But I now understand the bitterness. And to make it worse:

    harb wrote:
    I have a Lowdoc with Rams and they WERE alright.
    Since they got in financial strife they've been putting the rates up monthly (currently over 10%) and the high exit fees just not makes it worth changing lenders. Not for a few more months yet when the exit fees drop to 1%

    Yes it was a bit of bad timing, I should have gone with one of the big banks instead but its all fixed now. Bitter may not be the right word here, since its all part of the NG and tax deductibile you'd have more reason to be bitter then me. I hate to waste, specially when it comes to money coming out of the taxpayer's pockets and going into the lenders pocket. Lucky for you that with silver you don't have to worry about NG, returns or wasting the taxpayer's money. How is the silver going by the way , has it made it back past the USD10 yet ?

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    foundation wrote:

    And I post on globalhousepricecrash.com under the username Scary.

    You may be scary on ghpc but here you're just another Scamp.
    btw, was there any particular reason you've had to change your username there ?

    Quote:
    As for my magical 'risk free investment portfolio', if you haven't worked it out yet, cash is practically completely risk free (guaranteed by government).

    At the current rate the return on cash is going to be falling below the inflation rate before X-mas. Your 'risk free investment portfolio' is soon going to become a 'return free investment portfolio'

    cheers

    Profile photo of foundationfoundation
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    harb wrote:
    At the current rate the return on cash is going to be falling below the inflation rate before X-mas.

    You clearly haven't been keeping your eye on the inflation figures that are coming through.

    Quote:
    Your 'risk free investment portfolio' is soon going to become a 'return free investment portfolio'

    Return free in dollar terms is fine. It will continue rising in purchasing power compared to real estate.

    Cheers, F.[cowboy2]

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    foundation wrote:
    You clearly haven't been keeping your eye on the inflation figures that are coming through.

    it's this kind of arrogant, aggressive, argumentative know-it-all attitude that really pisses people off.

    give it a rest

    Profile photo of foundationfoundation
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    crashy wrote:
    foundation wrote:
    You clearly haven't been keeping your eye on the inflation figures that are coming through.

    it's this kind of arrogant, aggressive, argumentative know-it-all attitude that really pisses people off.

    give it a rest

    I think I've been very measured in response to the provocation, aggression and outright lies from yourself and your buddy harb?

    Did you see the TD Securities survey?

    I guess not.

    Cheers, F. [cowboy2]

    Profile photo of L.A AussieL.A Aussie
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    foundation wrote:

    I'm not an investing expert. But to ignore the jibes and answer the question, it's because they're pretty. And shiny. And heavy. But mostly pretty.

    And because they are a store of real value, of real wealth (as they are the product of effort+energy and scarce) whereas paper money is intrinsically worthless. So my aim is to over the long term hold 10% of my assets in precious metals. As I said earlier, I'm all for holding real assets. Sure, in a general deflation their dollar value would fall and their income/yield would fall, but they would maintain their real value over time. But I wouldn't for a second consider borrowing money to buy real assets.

    I'll happily admit that there is a slim chance that the deflation will be temporary and not become entrenched as it did in Japan. In that case it would possibly be followed by a period of high inflation. If signs point to that outcome, I'll change tack. But if not, I'll keep doing what I do.

    Cheers, F. [cowboy2]

    Can't see how this strategy will get you far and soon?

    It sounds like you are using cash, to buy silver coins?

    The cash is either earned, or it is the result of liquidating other assets. So now you have silver coins that have no income, using unleveraged funds to buy them, therefore your exposure to them would be lower, and with no income from them. That sounds painfully slow, albeit a very safe place to park money.

    What do you call a "real asset"?

    My interpretation of this is something that pays you an income, and increases in value, and has tax advantages as well.

    It doesn't necessarily need to have all three, but it needs to have two out of three – it needs to have income, and tax advantages.

    For example; a business can have income, tax advantages and not go up in value at all. If the income is good enough, then it is a solid asset that puts money in your pocket; it is a "real asset".

    We all know (if you've been alive long enough) that in the longer term property will always go up, it has an income, and it is tax advantaged.

    So, to me, this is a real asset, and even if the funds used to buy it are borrowed (as is the case with a business) then as long as the income is greater than the outgoings, it puts money in your pocket and is therefore a real asset, even though it's value might be stagnant for a few years.

    The excess funds, if reinvested back into the property or business in the short and medium term, will increase leverage, profit, nett returns and cashflow. This accelerates the process to do it all again, snowballing the result.

    Of course, the prudent investor monitors LVR's and cashflows constantly for safety.

    This surely has to be better than raiding the piggy bank to buy a few silver coins to stick in the drawer for 20 years, and budget priced shares, using very little leverage?

    Or are your precious metal stocks via some sort of share package? So, basically; you are pretty much only in shares, with no leverage at all?

    Not saying it's wrong, but jeez, it's a snail crawl and can be done much better and quite safely – even in this climate – with some borrowed funds.

    Your strategy sounds like that of a "saver" – level 2 investing. I think all of us here are a bit above this level by now F.

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