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  • Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488
    harb wrote:
    Where is the latest cut taking us back to, 5 years ago ? Wait another month and it 'll be back to 7 years ago.
    How is your landlord doing, could you say hello from me and ask him if he wouldn't mind passing that rate cut to you so your rent go back to what you were paying 5 years ago. I'm sure he'll agree to it.

    Quote:
    So I'm not excited by the rate reduction.

    No , I guess you wouldn't be. Probably even less excited next month after another rate cut if your TD expires soon and goes from 8.5% down to 4%.

    Just on that note; we got another rate cut last Tues, and one of our tenants just signed another lease today with an increase in the rent.

    Am I laughing like a fat spider or what?

    Profile photo of harbharb
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    foundation wrote:
    I think I've been very measured in response to the provocation, aggression and outright lies from yourself and your buddy harb?

    provocation, aggression and outright lies ? That's not a very nice thing to say about your buddies.
    I was looking forward to finding out the reason they kicked you out ,

    Quote:
    . was there any particular reason you've had to change your username there ?

    was it because you were too bullish for them ?

    Quote:
    How is the silver going by the way , has it made it back past the USD10 yet ?

    Wow, holding silver for 4 years with no returns, no tax advantage and very little if any CG. I guess it could have been much worst, you could have taken a loan to buy the silver.
    Shame about not putting your money to better use back in 2004-2005, like getting a loan to buy some some properties in SA or WA before the boom there. If only you asked someone in here at the time ….
    On a 5% deposit, you could have made a killing and received a regular return on your investment along the way. Now you'd be sitting on 2-300% capital gains and positively geared properties that your tenants would be paying off for you. Much better then having sleepless nights or nightmares about Jack Sparrow digging up your backyard in search of your treasure chest.

    cheers,

    Profile photo of YossarianYossarian
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    harb wrote:
    foundation wrote:
    I think I've been very measured in response to the provocation, aggression and outright lies from yourself and your buddy harb?

    provocation, aggression and outright lies ? That's not a very nice thing to say about your buddies.
    I was looking forward to finding out the reason they kicked you out ,

    Quote:
    . was there any particular reason you've had to change your username there ?

    was it because you were too bullish for them ?

    Quote:
    How is the silver going by the way , has it made it back past the USD10 yet ?

    Wow, holding silver for 4 years with no returns, no tax advantage and very little if any CG. I guess it could have been much worst, you could have taken a loan to buy the silver.
    Shame about not putting your money to better use back in 2004-2005, like getting a loan to buy some some properties in SA or WA before the boom there. If only you asked someone in here at the time ….
    On a 5% deposit, you could have made a killing and received a regular return on your investment along the way. Now you'd be sitting on 2-300% capital gains and positively geared properties that your tenants would be paying off for you. Much better then having sleepless nights or nightmares about Jack Sparrow digging up your backyard in search of your treasure chest.

    cheers,

    Harb,

    You're not covering yourself with glory here

    Profile photo of harbharb
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    Yossarian wrote:
    Harb,

    You're not covering yourself with glory here

    never tried to, I'll leave that for F.

    Profile photo of crashycrashy
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    Profile photo of C2C2
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    Thought I would drop in to see what was happening on this thread and what a debacle it has become.   What is going on between some of you long term members here?   I wonder what new members or those who haven't joined must think when reading the jibes being fired backward and forwards amongst members who ultimately have the same goal of getting ahead although in different ways.

    Without getting involved in any of the jibes I would like to say that references to Japans deflation shouldn't be use as examples of what can happen in OZ housing market.   The Japanese economic market/climate is a totally different ball game that doesn't follow any investment logic as we know it. ( I'm willing to explain further if needed but in another thread not this one)

    How low do some of you learned members think the rates will drop and how soon do you think it will happen?

    I was originally thinking 6% March but now that could easily be 5 or even 4.5 depending on expenditure over xmas.

    Profile photo of crashycrashy
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    we are in much worse shape than the previous 'recession' at the start of the decade, so rates will most likely go much lower than they did then.

    Im hearing a 1% drop in Dec.

    Profile photo of foundationfoundation
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    C2 wrote:
    Without getting involved in any of the jibes I would like to say that references to Japans deflation shouldn't be use as examples of what can happen in OZ housing market.

    I absolutely disagree. The dynamics of debt deflation are precisely the same. The overpriced asset market (the bubble) has a corresponding future obligation of precisely the same magnitude. It is the failure to deliver on the obligation that causes a cascading feedback loop between collateral and loans. The broader economy in both cases was/is reliant on credit growth for GDP growth, and the failure of credit growth results in contracting GDP.

    The upshot is – simultaneous monetary and productivity contraction.

    Cheers, F. [cowboy2]

    Profile photo of devo76devo76
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    foundation wrote:
    C2 wrote:
    Without getting involved in any of the jibes I would like to say that references to Japans deflation shouldn't be use as examples of what can happen in OZ housing market.

    I absolutely disagree. The dynamics of debt deflation are precisely the same. The overpriced asset market (the bubble) has a corresponding future obligation of precisely the same magnitude. It is the failure to deliver on the obligation that causes a cascading feedback loop between collateral and loans. The broader economy in both cases was/is reliant on credit growth for GDP growth, and the failure of credit growth results in contracting GDP.

    The upshot is – simultaneous monetary and productivity contraction.

    Cheers, F. [cowboy2]

    As much as i dont want to hear your comments sometimes. Its very hard to disagree.

    Profile photo of coalstarcoalstar
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    are australian banks short of capital at the moment, umm, I dont think so, is there going to be a mass influx of retirees next year? did the japanesse  have superannuation systems in place?? 

    Profile photo of devo76devo76
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    I was approved for a additional $580,000 ( No i am not taking it all)on top of my current $400,000 debt. Yeah its getting real hard.

    Profile photo of YossarianYossarian
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    alani wrote:
    are australian banks short of capital at the moment, umm, I dont think so 

    Sure…they're out there doing/planning capital raising purely for fun 

    Profile photo of crashycrashy
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    foundation wrote:
    I absolutely disagree. The dynamics of debt deflation are precisely the same. The overpriced asset market (the bubble) has a corresponding future obligation of precisely the same magnitude. It is the failure to deliver on the obligation that causes a cascading feedback loop between collateral and loans. The broader economy in both cases was/is reliant on credit growth for GDP growth, and the failure of credit growth results in contracting GDP.

    The upshot is – simultaneous monetary and productivity contraction.

    or you could have simply said:

    THE PENDULUM SWINGS BACK EQUALLY AS HARD THE OTHER WAY

    but why use a few simple words on a lay explanation with almost cliche status when you can use 4x as many bigger words in a cryptic mess laced with lingo only a few can understand………..oh now i remember why

    Profile photo of ummesterummester
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    alani wrote:
    is there going to be a mass influx of retirees next year? did the japanesse  have superannuation systems in place?? 

    when the public service starts sacking boomers so that the governement can get back some of its xmas spendings… yes, most definately.

    Profile photo of foundationfoundation
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    alani wrote:
    are australian banks short of capital at the moment, umm, I dont think so, is there going to be a mass influx of retirees next year? did the japanesse  have superannuation systems in place?? 

    Pfft! Are you saying the primary reason the Japanese have had 15 years of stagnation and mild deflation was because they had too many retirees with too little savings?

    To borrow a quote: "umm, I don't think so".

    It was the bursting of their share market and housing market bubbles that crippled the banks with bad debts. Because their economy then (just as does ours today) depended upon ever increasing credit for economic 'growth', the crippling of the credit creation machine meant that 'growth' did not occur.

    If you have better informed ideas, you might like to contribute to wikipedia here:
    http://en.wikipedia.org/wiki/Deflation

    The section on Japan fails to mention the causes of deflation you mentioned.

    Here's a paper I read recently on the topic:
    Japan’s deflation, problems in the financial system and monetary policy – BIS
    http://www.bis.org/publ/work188.pdf?noframes=1

    I notice that there is not one single mention of the word "superannuation" in their explanation. Nor "retiree", nor "retirement", nor "aging", nor "demographic".

    Here's another paper from the US Federal Reserve:
    Preventing Deflation: Lessons from Japan’s Experience in the 1990s
    http://www.federalreserve.gov/pubs/ifdp/2002/729/ifdp729.pdf

    Again, no mention of those words. It seems to be all about bubbles bursting in real estate and share markets, unsustainable debt to gdp, non-performing loans, ZIRP etcetera…

    Sure, Japan was and is different to Australia. They have Gojira, and we don't. (But then again we have Kevin Bloody Wilson and they don't!) We could all name a thousand differences if we set our minds to it. But the similarities in terms of bubbles, credit addiction, malinvestment and monetary policy effectiveness are the only important bits in that they are the driving force behind Japan's 'lost decade' (which is stretching now towards a 'lost generation').

    Don't forget that things in Japan aren't so bad. Their unemployment rate is lower than ours:

    Wages in Japan are pretty much in line with ours. Such stagnation an mild deflation of course would prove disasterous for the leveraged speculator community, and the banks would hate it like hell, but for ordinary people? Not so bad.

    I actually have a half-developed, half-arsed thesis that holds this kind of economic stagnation to be the final destination of all fiat-based economies. Far from being an abnormal state, it may just be that this is the mythical 'equilibrium', reached only after the powers of central banks to encourage eternal credit-money creation and inflation has collapsed (all CBs are on the path to ZIRP).

    Cheers, F. [cowboy2]

    Profile photo of crashycrashy
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    well you are getting better.

    still showing quite a bit of that "shut up, Im soooo much smarter than you" attitude though

    smartass words like "PFFFT" indicate conceit, arrogance & disrespect.

    It's ok to dissagree, but theres no need to make people feel like idiots when they post an OPINION.

    Profile photo of crashycrashy
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    Japan could take a few lessons from Singapore re super.

    Profile photo of foundationfoundation
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    Whoops, I forgot to respond to "are australian banks short of capital at the moment".

    What our banks are critically short of is liquid assets. Only seven tenths of one per cent (0.7%) of all bank assets are held in truly liquid assets – RBA deposits and government securities. The remainder of what they call liquid assets are actually just loans and obligations between the various banks. If we consider the banking system as a single entity, clearly these don't add to liquidity.


    http://rba.gov.au/PublicationsAndResearch/RDP/RDP2008-06.html

    Believe me, I have very grave concerns for Australian banks. Their exposure to the real estate and other sectors of the leveraged speculator community is almost enough to leave me wearing brown pants.

    Cheers, F. [cowboy2]

    Profile photo of C2C2
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    Foundation,

    I will only focus on the Japanese part of the discussion.

    The Japanese mindset is totally different to how we look at investments, borrowing and paying back debt and why our situation is different.

    Below is an example of how and to whom Japanese banks lend money and how they decide to buy and sell stocks.  The worst part of it all is that it is well documented and true but try finding it in official research papers on the collapse of the Japanese economy.

    One woman who is know as Madame Nui was a financially advisor to International Bank Japan, Japans J.P. Morgan, Yamaguchi Securities and approximately 30 other Japanese Banks and financial Institutions.  At one stage she had loans totalling 22 Billion USD making her the worlds largest individual bank borrower.  She was considered the single most important player in the Japanese stock market.  Banks and financial institutions would send their deptartment chiefs to get her advice and what to buy and sell.  Now for the ridicoulous but true part of this little story.  She owned a magic ceramic toad that these chief would part on the head after saying some prayers.  Madame Nui would then join them and go into a trance.  After the trance she would then tell them which stocks to buy and sell.  The end results of borrowing like this to Japanese borrowers saw Japanese banks in debt to 120 trillion yen or the equivilent of 23% of GNP.

    Part 2 how the govt helped cause the collapse.

    MOF or Ministry of Finance control and set the levels for stocks, bond and interests rates in Japan that everyone must follow.  They controlled interest rates so that companies could borrow at rates of 0.5% where other countries were charging anywhere between 5-20%.  Investors in other countries expect returns and dividends but in Japan this is not expected.  Companies didn't pay dividends but miracously stocks kept climbing through the 70' & 80's and thus the myth that stocks in Japan always rose.  To understand the consequences of this further you need to look at how stock is valued through the P/E or price to earnings ratio.  This tells you what you can expect the company to make in earnings from your investment.  Japan had P/E ratios of over 100 whereas companies on the Dow Jones were lucky to have 30 at the height of the 2000 era.  This situation was compounded further by the fact that little stock was available to the public but companies got around this by buying each others stock, and this stock was never sold.  This enabled the MOF to control mergers or takeovers and most of all the TSE Tokyo Stock Exchange.  After driving stocks upwards year after year the MOF created a thinking called 'magic of assets' through 'book value accounting' which is where owners of property, stock, or bonds do not need to assess their holdings at market value but at the priced purchased.  Items that may have been bought at 50 which now have a value of 100 still appear as 50 creating what is called latent profit, the difference between purchase value and current value and this means latent loss doesn't exist.  Investors have ignored dividends and looked at 'asset value' and 'latent profits'.  

    The 'magic of assets' gave a distorted view of Japans strength and economy.  At one stage Japan had the top ten banks in the world by assets with 29 banks in the top 100 but only 5 of these had assets in excess of debts. 

    The MOF overall created the share prices must go up thinking by (1) stocks that yielded no dividends, (2) debts that companies never needed to repay, (3) balance sheets that hid losses and liabilities.  In this market Japanese companies could never lose or go wrong.  Japan economy continued to grow at 4-6% and couldnt be maintained and eventually went down to 1%.  Japanese people believed that no bank could ever go bankrupt and investors always won on the stock market. 

    The factors above are main contributors to why the Japanese economy eventually collapsed as it couldn't be sustained.  The result of all this plus a few other reasons is why Japan has had 10 years of deflation and is a totally different scenario to the current world situation let alone here in OZ.  Even all through the 90's Japanese banks continued to lend money for assets that would return either none or little return not only in Japan but to other countries like Korea, Malaysia, Indonesia and 50% of foreign money lent to Thailand.  When these countries suffered in the 1997 crash Japans banks had losses 4 times that of US banks and had to write off tens of billions of dollars.  Japans crash didn't occur overnight like people think but was about 7 years in the making.  Japanese deflation has been controlled by MOF and some sources even think created and orchestrated by MOF as away to control the economy. 

    In regards to the realestate market and stock markets.   Japanese banks have continued to lend money to realestate companies that own land now at a 5th or 10th of the price paid a decade or two ago and when theses companies go under the banks put on the books the value at the original purchase price so it appears as if the money lent is less than the value of the property.  The problem is that no one will buy the properties at the price the banks are asking so little gets actually sold or bought creating a paralysis.  The same situation 'paralysis' occured on the stock market.  89 saw approximately 5.8 trillion yen raised by new stock offerrings but this had dropped to 4 billion or only 0.07% by 92 and only up to 284 billion in 98.  New companies being listed on the stock exchange during the 90's was non existent compared to NYSE which went up 45%.  The TSE controlls the stock market whichs purpose is to allow companies to sell equity to the public but this was virtually shut down for 10 years and can be seen when you compare the differences raised between NYSE $92 billion in the first 3 months of 2000 compared to less than 50 billion for 10 years by Tokyo and Osaka Exchanges. 

    The Japanese should have worked out that their practices of borrowing and lending where totally out the window but the last 10 years shows they still haven't learnt and continue to make the same mistakes today.

    When you buy a property in OZ you expect over time the value will go up but in Japan the mindset now is that as properties get older the value decreases although the land stays about the same.  The Japanese have convinced themselves that anything old is worthless and if you have something old then you must be poor.  No one wants to appear poor so they buy the latest of anything that comes out and second hand items are ridiculously cheap.  This particularly applies to cars and houses.   House reforms/renovations are a big market in Japan.  Houses will be completely reformed after 10, 20 or 30 years or totally destroyed and a new house built.  Home owners do not expect to make money on their properties when they sell and banks if they get a house through defaulted loan will value the house and try to sell it at the original purchase price and not the current value.  This is why some houses sit for sale for 10 or more years.  The same thinking applies to rental places and it is very common to see residential or commercial properties vacant for 10 years or more.  The reason is that properties are leased at a certain price per m2 and this price would most likely have been determined when the place was first built or before the bubble and is the price still expected today.  When it comes to real estate, Japan defies all logic and reasoning and thus a big reason for why so many foreign investors lose money in Japan and why Japan has deflation and can't be used as an example of what could happen in OZ.

    Unemployment figures in Japan are falsely exaggerated and included jobs that aren't jobs and workers that are paid to do nothing and also include age demographics not taken into account in other countries.  Wages go from ridiculously cheap to extravagant.  A girl working in a club can easily make in excess of 10K a month for just pouring drinks and smiling.  All paid for by business expenditure accounts and tax deductible.

    Japan does have pension plans but superannuation is virtually not heard of.  The pension fund is continually used to pop up banks and govt departments and has probably been all used.

    Profile photo of foundationfoundation
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    So in summary, Japan had massive credit-financed speculative bubbles which burst, leading to deflation. Seems the similarities are greater than the differences.

    Stories relating the differing attitudes towards shares and real estate are irrelevant on the basis that prior to their crashes, the Japanese people had the same beliefs as Australians during our bubbles – that prices only go up. It was only after the crashes that these differences (you describe them as cultural, I think they are merely psychological relics of the times in which they live) that our investing 'cultures' (attitudes) diverged.

    The expectation that prices of previously bought assets will fall is likewise a relic of deflation. The expectation exists because it is based on experience. Prior to the deflation, they too thought "the only way is up". Yazzorama!

    The dynamics of debt deflation, and the magnitude of the problems faced by Japan circa 1992 vs Australia circa 2010 is eerily similar.

    Cheers, F. [cowboy2]

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