Bring Forward Demand, Push Back the Consequences

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It’s not May yet. But if you believe in the old Wall Street adage “Sell in May and go away,” you may want to consider getting into May early. From Greece, to valuations, to allegations of corruption at BHP, there would be more than a few reasons.

Speaking of Greece, it ain’t over yet. Dow Jones Newswires reports that, “Concerns over Greece were reignited after Moody’s Investors Service lowered its ratings on the country. The ratings firm noted significant risk that Greece’s debt may only stabilise at a higher and more costly level than previously estimated.”

That was enough to rain on Wall Street’s happy earning parade. But the storm clouds have been building for a while now. U.S. economist John Hussman says at current valuations, the S&P 500 is priced to return about 5.7% a year over the coming ten years. But Hussman thinks a correction is due that will lower that annual return to 2.97% – which is lower than bank interest but with a lot more risk.

In a note to investors Hussman wrote that, “Wholly on the basis of current valuations, stocks are priced to deliver unsatisfactory returns in the coming years – a situation that is worsened by strenuous overbought conditions and upward yield pressures here.”

By the way, the Austrians would have predicted this too. This is yet another example of “bringing forward demand” to try and solve one problem but creating a bigger one down the road. In this case, the rebound in global stocks has been led by financial and banks stocks. But their earnings were largely manufactured by policy.

That is, with low short-term interest rates, banks around the world have been able to borrow short at low rates and lend long at higher rates. The spread between the short – and long-term rates is what delivered fat bank profits in the last two quarters and sucked investors back into speculating on higher house prices.

But “bringing forward demand” for stocks to simulate a recovery in the economy is not the same things as a real recovery in the economy. It’s the opposite. The manipulation of interest rates incentivizes speculative behaviour and leads to false price signals in the market (buy banks stocks!). Real people lose real money when the policy failure is revealed as a sham.

Coming to a stock market near you: the sham revealed!

Hussman thinks the low return for stocks is set in stone. He writes that lower annual returns are, “not dependent on whether or not we observe a second set of credit strains, but is instead baked into the cake as a predictable result of prevailing valuations. The risk of further credit strains simply adds an additional layer of concern here.”

There are “further credit strains” coming down the pike. But one last note on risk chasing. Risk, as we noted earlier in the week, isn’t bad. It’s essential. As John Dickerson wrote in Slate this week, for some high-achieving individuals (in any number of disciplines and pursuits), “risk is the animating and organising principle that drives every day.”

The trouble isn’t failure. That’s also normal and essential in life. You just have to learn to fail quickly. The bad kind of failure is being led into taking a risk you aren’t aware of because of bad (or deliberately misleading) information – and then suffering the consequences. The consequences are so dreadful because they were not part of your calculation when you decided to take action. If you didn’t think it was risky, you’ll be surprised when you get punched in the face. And probably not pleased.

That is the essential problem (and indictment) against rigging interest rates or flooding certain markets with government money – it alters perceptions of risk and shifts time preferences. People end doing things they wouldn’t normally do. And those things end up costing them a lot of money. And it takes time to make back money you’ve lost, or pay back money you owe. It’s not just a financial cost here. It’s a lifetime and lifestyle cost.

Eric Johnston makes just this point in today’s Age, albeit indirectly. He writes that bigger loans and rising interest rates threaten to smash to pieces the personal finances of many new home buyers. “Over the past 18 months, first home owners have flooded the market, enticed by government grants and low mortgage rates. But a comprehensive snapshot of the mortgage market by brokerage JPMorgan and Fujitsu Consulting has shown first home owners are borrowing on average about $280,000. Remarkably, this is the same as established borrowers, who tend to earn more.”

Does getting free money (although government money is never free) cause you to take on bigger and more dangerous risks than if you were making decisions with your own money?

Probably so. JP Morgan analyst Scott Manning writes that “”The higher gearing tolerance of first owners results in greater sensitivity to rising interest rates.” He reckons that if interest rates reach pre-GFC levels, the first home-buyers could be spending as much as half their after-tax income to interest alone.

Ouch.

And speaking of rising interest rates, a research note from Morgan Stanley says you can bank on it. Morgan bond market strategist Jim Caron told the Wall Street Journal that the large supply of U.S. Treasury bonds hitting the market this year would push prices down and U.S. 10-year yields up to at least 5.5%. They’re 3.77% now.

The Treasury will issue US$2.4 trillion in bonds this year to pay for, among other things, this year’s annual deficit of $1.4 trillion. The rest comes from the huge amount of short-term debt the U.S. must roll over. It’s bad when you’re selling new debt to pay off old debt. Ponzi finance?

Now not everyone agrees that the increasing supply of Treasuries will drown demand and lead to spiking global yields. This is, at heart, an inflationary argument (and an argument for gold rising $500 by the end of the year). If you really believed it, you’d have a strong preference for non-paper money.

But what does it mean for Australia? Ten-year government bond yields in Australia are 5.82%. You might then, wonder what would happen to Australian bond yields if Treasury yields went up. Would the rising U.S. yields make the dollar more attractive on a yield basis and lead to a weaker currency?

Over a cup of coffee this morning, we reached the following conclusion: a dollar crisis doesn’t make the dollar more attractive. Yes, it’s a stunning conclusion. But what we mean is that Aussie bond yields might actually go lower in a dollar crisis. That would happen if central banks (other than the Fed) really do flee the Treasury market. They have to go somewhere, and higher yielding currencies like the Aussie might be that place.

But this is not how it played out last time. By “last time” we’re referring to the credit crisis. That drove up everyone’s borrowing costs, destroyed the asset securitisation market, and kicked of a wider credit depression. And if THAT is what happens in a U.S. dollar crisis, it will put a lot of pressure on Aussie banks that source their funding abroad (you know who you are!).

That brings us, finally, to the core of today’s Daily Reckoning: not much has changed since 2008. The core of the problem in the world’s financial system was that too much debt had been used to purchase assets (securities tied to U.S. houses) that fell in value, destroying bank collateral. What’s different today? Have those debts been written off? Or in Austrian terms, have the mal-investments been liquidated?

Not really. Most policy measures then have been polite fictions designed to disguise the ongoing deterioration in bank collateral. Mark to market rules have been suspended. Anecdotal evidence has it that many Americans have simply stopped paying their mortgages. This boosts consumption figures in the GDP accounts (not paying your mortgage is a huge boost to discretionary income). And if the government is modifying some home-owner contracts, surely it sends a signal to otherwise law-abiding home owners that they can ignore contract too?

On the part of U.S. banks, they’re happy to let a home slip well past foreclosure. What else is the option? Writing down the value of the asset and crystallising the loss? No thank you! It’s the old “extend and pretend” strategy…just give it more time and hope that somehow, some way, the housing market recovers and loan portfolios do too.

The result of this refusal to confront reality means that the financial system remains propped up by a handful of accounting tricks, according to Nomura analyst Richard Koo, via ZeroHedge. Koo writes that, “If US authorities were to require banks to mark their commercial real estate loans to market today, lending to this sector would be extinguished, triggering a chain of bankruptcies as borrowers became unable to roll over their debt.”

In a normal crisis, he writes, the banking sector is encouraged to write-off bad loans in order to clean up its balance sheet and unleash credit to fund the recovery. “But during a systemic crisis, when many banks face the same problems, forcing lenders to rush ahead with bad loan disposals (i.e., sales) can trigger a further decline in asset prices, creating more bad loans and sending the economy into a tailspin. I think the Fed’s shift in focus from conventional nonperforming loan disposals to credit crunch prevention is an attempt to avoid this scenario.”

All of this many seem like mostly an American problem. But that’s what it seemed like last time…until the credit tide went out and Australian investors found out just how many firms had business models and balance sheets that depended on cheap funding and the ability to roll it over in a short amount of time.

How much has that changed in the last two years? You’re about to find out. But in the meantime, most of our editors here are using trailing stops to lock in gains accumulated over the last year. And as for finding stocks that are actually undervalued? More on that on Monday.

The discouraging aspect of all this is that so much capital remains tied up in non-performing assets. To save the bankers, we have killed off the future prospects for entrepreneurs. An economy that does that retreats from the frontier, where new productive possibilities emerge, and doesn’t take wealth-creating risks anymore. That’s bad for investors. But it’s not the end of the story either.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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Comments

  1. It seems to me the USA and Europe now reward the failures and losers of society, the banks are a good example. If you are an entrepreneur you are better off moving to one of the dynamic emerging countries.

    Reply
  2. @Andrew – Of course they reward the failures and losers. Just look at their politicians. Then again, look at ours. At least Sarkozy packs some nice eye candy on the side and Berlusconi’s ongoing saga is amusing. Ours are just… lame.

    Reply
  3. Check out this video of some guy explaining that Australia is in a massive housing bubble:

    http://www.ft.com/cms/86a30e34-dfd5-11dc-8073-0000779fd2ac.html?_i_referralObject=15762261&_i_referrer=rss

    Reply
  4. I for one am sick of this whole property BS that I think is stuffing the country socially and economically. A good way to let Ruddy and Co. know how we feel is provided here:

    http://www.housingaffordabilitycrisis.com

    Reply
  5. Thanks for the link, Roy.

    Dear Tanya Plibersek, I am a goldbug and I resent your support for the Australian construction industry. How can my bullion appreciate, if you keep intervening to save Australian jobs, Australian banks and Australia’s third largest industry, construction? Yes, I realise the FHOGs took nearly 200,000 tenant families out of the rental pool, thus freeing up a fifth of a million rentals… and keeping rents low, but it also helped save fiat currencies.

    This is NOT good for gold investors!

    We _need_ this crash if we are to prosper, Tanya.

    Please act immediately to ensure the gold bubble does not deflate.

    Trigger

    Biker Pete
    April 27, 2010
    Reply
  6. Dear Tanya Plibersek

    I acknowledge the government had the best of intentions when implementing the increased FHOG’s at the start of the GFC crisis and acknowledge that due to the
    GFC the hundreds of thousands of mortgage holders that were straining under mortgage rates approaching 10%, and fuel bills for their cars at pocket emptying levels of $1.65 per litre.. well with lower interest rates giving people up to $1000 per month they did not have pre crisis levels due to higher interest rates and an average mortgage much lower than is required now due to the increased vendors boost.. oops, I mean FHOG’s, allowing an additional 200000 families to buy houses that have increased dramatically in value causing them to pay overinflated prices and now are struggling under a period of rising rates, well they can join the couple of hundred thousand that were in financial distress prior to the GFC, whom will once again be, so we can have 400000 families under financial stress in this period of rising interest rates and rising oil prices once again emptying the pockets of these suckers.. oops, first home buyers.

    All this has not been a problem yet because many have been able to fund their lifestyle through the increased equity in their homes. Balancing the monthly household budget on the credit cards as well. It is just as well China is a huge
    purchaser of our natural resources (and the companies that own them). I mean if China was to sneeze we would be in a right mess.. luckily this can never happen as China is the darling neighbour to our north keeping us prosperous for ever.. and even if things go a little bad on the east coast, the revenues from the resources are fattening up the government coffers for another handout and financial boot to the housing market, I mean the previous ones have worked so well.

    I remember Gerry Harvey on TV just before Christmas saying 2010 is going to be a bumper year. Harvey Norman Shares rose to $4.50+ on the upbeat prognosis. now back under $3.50 because the figures don’t look so good now. Retail consumption is down, the handouts long spent and less disposable income for people to spend, and getting less with each rate rise, with each dollar rise in a barrel of oil.

    The pain is about to stop though, the RBA have said rates are almost at a normal level. Just ignore that the global economic condition is far from normal and is yet to have imapct on the current local rate levels. That won’t change, the big four will stick to RBA moves as they never act outside of the reserve banks decisions.

    Yours truly,
    Not Concerned

    Stillgotshoeson
    April 27, 2010
    Reply
  7. Yep, calling FHOs ‘suckers’ should convince Tanya you have Australians ‘best intentions’ right at the top of your list, Shoes.

    Did you send it? Have you received your acknowledgement yet?~

    Biker Pete
    April 27, 2010
    Reply
  8. You sent Tanya Plibersek an email from Roy’s horse, BP? :)

    Biker Pete
    April 27, 2010
    Reply
  9. Why, yes, but her response was that he was a neighsayer…

    Biker Pete
    April 27, 2010
    Reply
  10. “All bubbles pop”

    Reply
  11. using averages doesn’t really tell much of a story

    Who here read:

    “…first home owners are borrowing on average about $280,000”

    And was shocked?

    I bet no one. 280k aint that much money.

    Reply
  12. Or, as the Americans would say: “All pop bubbles.”

    Biker Pete
    April 28, 2010
    Reply
  13. Dear Tanya Plibersek,

    Well yes we know that you had to keep the Australian housing market bubble going on forever, after all, as the media tell us constantly, Australia is LEADING the world out of this downturn. We are the champions my friends. Aint that amazing that a country where most of the people are in debt 150% of their incomes that we are still managing to lead the global charge out of this downturn.

    Anywho, you also managed to get all the headlines across Australian media to scream “interest rates are at RECORD LOWS!!!”” and then while the masses were basking in the prosperity of record low interest rates, fixed rates at the banks were being quietly jacked up behind the scenes. Of course, none of the headlines in the media ever said “Hey first home suckers, fix your rates now while you still can, because dear Tanya Plibersek is counting on the fact that none of you even know what a fixed rate is. You will find out soon enough though, whether you like it or not”

    As many poor first home buyers have now found out, if you do go to the bank now to fix your interest rate, you will right away pay heaps extra every week on your mortgage from day one. And even if you were smart enough to fix your rates, the bank has still got you covered. For they only let you fix your rates for a maximum of about 10 years you see, so since your home loan goes for 25 years, they still have 15 years left to get you later on with high interest rates. They are in no hurry.

    Not many first home buyers will read this though, because reading is so uncool and nerdy darling, we are too busy cruising around town in our brand new cars that cost about as much as a house deposit after all, you have to look cool and hip darling. And by the time we watch crime shows and cop shows on out plasma tv home thatres, and put on our fake tan and pump up our fakes boobs, and tease a few people about how stupid they are for not being financially savvy like we are with this brand new house we bought that is the size of an average hotel, with new tiles in the bathroom which we imported from Italy, and a new inground pool to swim in even though we’ve had massive water restrictions, and by the time we tease a few more people that they have missed out on buying a house forever because they were not smart like we were and now house prices are going up like forver, and they have missed out forever, and gee they must feel bad for missing out forver when they are about to become property millionaires because the tv said that house prices are going to go up like forever. Yes by the time we do all that darling there really isn’t much time left for reading financila colums

    Reply
  14. “…there really isn’t much time left for reading financila colums…”

    … or dictionaries, apparently… .

    Biker Pete
    April 28, 2010
    Reply
  15. “…we tease a few more people that they have missed out on buying a house forever…”

    Or we try to help prepare them for the next dip in prices, so they’re ready when it comes… . Yes, I’d definitely send that one to Tanya, Chris. She does answer them, you know. (Probably a staffer, but its her signature.)

    Will the bubble pop? All bubbles pop! What will it take to pop the property bubble? Oversupply. That exists in dozens of places around Australia, but most people need to be near their employment, their friends and families. No-one wants to be out of the comfort zone… .

    Discouraging investment in housing, in any way at all, simply means _less_ housing. That’s your Catch 22. Even the unknown possibilities (like the KHR) threaten supply. We’ve had another house ‘on hold’ for three months now, waiting to see which aspects of the KHR the government may introduce. It’s likely that tens of thousands of other private investors have also shelved their plans. The data supports that opinion.

    It’s all about assessing risk.

    Today’s news summed up some of the issues of supply in WA:

    http://www.watoday.com.au/wa-news/housing-shortage-getting-worse-20100428-tqhd.html

    Biker Pete
    April 28, 2010
    Reply
  16. Steve’s quote of the day

    “Never EVER be surprised by the sheer stupidity of the Australian mega mortgage mug”

    Reply
  17. Steve: “Steve’s quote of the day: ‘Never EVER be surprised by the sheer stupidity of the Australian mega mortgage mug’

    Hardly the quote of the day, Steve. ‘HaHa’ has been using it for nearly six years now.

    According to your criteria, Canadians are stupid and Aussies are ‘stupider’.
    But you’re brilliant, Steve. _You_ invent new words… .

    Biker Pete
    April 28, 2010
    Reply
  18. ‘stupider’ ! Classic. Ping me, Steve. Oh, I see you have…!~ :)

    Biker Pete
    April 28, 2010
    Reply
  19. HaHa as in I will get the last laugh

    Reply
  20. Well, you’ll certainly outlive me, Steve!~ ;)

    Biker Pete
    April 28, 2010
    Reply
  21. The sound of Steven’s laughter: Steve, 26 April 2010:

    “…those who have invested in property have knowingly made me and my fellow Australians WORRSE OFF thats why I dont give a Sh!t about them… thats why I hate them…”

    Yep, that’s laughter all right… .

    Biker Pete
    April 28, 2010
    Reply
  22. Meet the world’s largest landowner.
    Pure scum really.
    http://www.whoownstheworld.com/about-the-book/largest-landowner/

    Reply
  23. Nv,
    Yeah right.
    the queen ain’t even the largest land owner in the UK.
    pure and utter bollocks to try and sell a book and conspiracy theory.

    Reply
  24. by prozak;
    “the queen ain’t even the largest land owner in the UK.
    pure and utter bollocks to try and sell a book and conspiracy theory”.

    Oh reeaaally? Crown land? Have you not heard about it? Hmmm?
    Crown Land. That’s right, crown land. All freehold property is on crown land, you own nothing. You have a tenure to freehold land because all is on crown land.
    Dirty filthy murderous scum of a monarchy.

    Reply
  25. NV,

    The term still exists.

    George III handed over the crown estate to parliament in return for a civil list payment. The monarchy now owns the land and is managed independently. The ruling monarch cannot sell the land nor does the income belong to them. the estate reports to parliament.

    in Australia crown land is owned by each state or the commonwealth and makes up only 12.5% of all land. in addition there is allodial title that was not from crown grant.

    in short…. anyone who buys into this conspiracy theory is an idiot.

    Reply
  26. “Crown land is land that is owned and managed by State Government. It accounts for over half of all land in New South Wales”.
    “Crown lands managed by the LPMA should not be confused with other forms of Crown or State owned lands such as National Parks, State Forests, State Rail property etc”.
    http://www.lpma.nsw.gov.au/land_titles/land_ownership/crown_land

    TOTAL LANDS CATEGORY (1993 data)

    Public: 23%
    Private: 62.75% Please Note: Of 62.75% Private Land, 20.6% is ‘Freehold’ and 42.1% is CROWN LEASEHOLD.
    Aboriginal: 14.25%

    So we have 23+42 = 65% crown land + 14 aboriginal = 79% + say 21% private = 100.
    http://www.ga.gov.au/education/geoscience-basics/land-tenure.jsp

    Your comment “makes up only 12.5% of all land” is right out of wikipedia which makes you the idiot.

    Reply
  27. “Crown land is land that is owned and managed by State Government. It accounts for over half of all land in New South Wales”.
    “Crown lands managed by the LPMA should not be confused with other forms of Crown or State owned lands such as National Parks, State Forests, State Rail property etc”.
    http://www.lpma.nsw.gov.au/land_titles/land_ownership/crown_land

    Reply
  28. TOTAL LANDS CATEGORY (1993 data)

    Public: 23%
    Private: 62.75% Please Note: Of 62.75% Private Land, 20.6% is ‘Freehold’ and 42.1% is CROWN LEASEHOLD.
    Aboriginal: 14.25%

    So we have 23+42 = 65% crown land + 14 aboriginal = 79% + say 21% private = 100.
    http://www.ga.gov.au/education/geoscience-basics/land-tenure.jsp

    Your comment “makes up only 12.5% of all land” is right out of wikipedia which makes you the idiot.

    Reply
  29. And now to Oz, where it’s all bubbling happily away… .
    PerthNow, 29/04/2010:

    “Melbourne’s house prices jumped 27 per cent over the past 12 months, double that of Sydney, where house prices increased by 14.7 per cent.
    Brisbane …is… up 9.1 per cent for the year to a median of $451,388.
    In Perth, house prices rose 1.1 per cent for the quarter and 9.4 per cent for the year to a median of $519,526, according to APM. The rapid recovery of the top end of the residential market, which is less sensitive to interest rates, is dragging up median prices…”

    Hope you’ve acted on that 17% tax-free interest, mate. You’d need to, in Sydney. You can pick up another 3%+ taxed. Not a bad return these daze… .
    Jeez, Keen must be _spitting_ !!~ :)

    Biker Pete
    April 29, 2010
    Reply
  30. Wow didn’t someone get all wound up like a little toy….

    Regardless of the amount of crown land your own quotes prove your conspiracy wrong.

    I’m sure that won’t stop you believing the conspiracy though.

    Have a nice day, but be careful the queen is also leader of the illuminati and has eyes everywhere and will have you killed and fed to the giant squid on which our planet rests.

    Reply
  31. Some time back, someone here suggested at the rate Australian property is rising, that even if Keen is correct (that there will _eventually_ be a 40% crash) the price of Australian housing will have risen to such a level that it will easily exceed the ‘values’ he said would crash.

    At the time, I remember dismissing that comment as interesting, but a little irrelevant. Considering the annual figures for Sydney (14.7%) and Melbourne (27%) we’d have to concede that two more years of that ‘growth’ would render even a 50% crash of lesser consequence, unless one bought at the top of the market. For that reason, if you really believe there will be a 50% crash, you should stay put… and rent.

    The possibility of a crash in China offers potential for a cheap holiday home abroad, however. Some of the luxury apartments in Shanghai look pretty amazing. Think we’ll go have a butchers… .

    Biker Pete
    April 30, 2010
    Reply
  32. oh poor prozac, better go and bow to your queen to make you feel good who then bows to the danish queen who then bows to the jew banksters.
    history nor convoluted legalities are your forte so have a good life bowing.

    Reply
  33. That “27%” figure is a little distorted though BP. The real average growth for Melbourne is probably closer to 10 to 12 percent.
    Quite a few areas that were “expensive” suffered 30 or more percent drops at the height of the GFC. Mainly due to owners of these “million dollar + ” properties
    drawing on equity of the homes and purchasing a portfolio of shares.. then under the advice of advisors/friends/neighbours they then took out margin loans against their share portfolios, the share market crashed and they were forced to sell homes quickly.. Brighton, Kew, South Yarra, Toorak, Bulleen and Balwyn North, Glen Iris StKilda were all heavily reduced so the gains really have only put them back to the levels they were.. there has been quite a lot of activity in the $750K and above market (debatable how much overseas investors have played) as they did represent bargains from their highs. Having a lot of sales in the higher price range and less building/buying in the lower ranges has distorted the “median” sale price as it is biased by higher properties. The lower priced areas were supported/inflated by the FHOG but in figures closer to the 10% range.
    Next 6 months in the Melbourne Real Estate Market are going to be interesting I think.
    Friends of mine have just purchased a 2 Story 4 Bedroom House 3 living areas and 2 bathrooms and DBL Carport and DBL Garage in Greensborough on an 800m block for $465K
    She is a Podiatrist and he a plumber and the bank said the could borrow a million, they borrowed around 360k
    She asked me if I would have bought yet, and I said no, but my reasons are different to hers, she asked me if they have done the right thing, I replied if you like the house and are going to spend a long time there and raise a family then yes… If/when the house correction comes don’t concern yourself.. just keep paying the mortgage till it is your house because even if there is a correction they will go back up again. Treat it as a home/shelter/security and not as an “Investment” and the price is irrelevant.

    Stillgotshoeson
    April 30, 2010
    Reply
  34. Soon the wait will be over and we get an idea of what the government has in store for us – Sunday bloody Sunday :)

    Reply
  35. Further to above..

    http://www.theage.com.au/business/property/housing-bubble-to-burst-history-says-yes-20100430-txcc.html#poll

    The Poll results are interesting..
    Poll: Do you think the property bubble will burst, or are we really the lucky country?
    Poll form

    1. Please select an answer. Prices are sure to fall
    2. Prices will flatten out
    3. Prices will keep rising
    4. View results

    Prices are sure to fall

    42%
    Prices will flatten out

    42%
    Prices will keep rising

    16%

    Total votes: 1406.

    Means a large majority of those that voted think the growth is going to end in the near term..
    If they do not “correct” and merely stagnate for a number of years then they will
    have devalued by inflation. If average price is 6 times average wages now and property does not increase then in a few years is back to 4 or 5 times average wages then houses have devalued. I think most likely scenario is a combination of both.

    Stillgotshoeson
    April 30, 2010
    Reply
  36. Comment by Don on 30 April 2010:

    Soon the wait will be over and we get an idea of what the government has in store for us – Sunday bloody Sunday :)

    I can’t believe the news today
    Oh, I can’t close my eyes and make it go away
    How long, how long must we sing this song?


    And the battle’s just begun
    There’s many lost but tell me who has won
    The trench is dug within our hearts
    And mothers, children, brothers, sisters torn apart


    And it’s true we are immune when fact is fiction and TV reality
    And today the millions cry
    We eat and drink while tomorrow they die

    Stillgotshoeson
    April 30, 2010
    Reply
  37. Not sure where these median house price increases come from. I sold a house, 3 bedroom, 2 bathroom, double storey brick (typical 70’s house)in Stafford Heights last October. Stafford Heights is about 8kms to the Brisbane CBD. Sold it for $503K to a couple of first home buyers via an agent acquaintance of ours. My wife spoke to the agent yesterday, and she said we sold at the right time, as she would really struggle to get more than $450K for it today.
    A month before that, we sold our own house, and again she said we would be lucky to get $650K for it now (sold for $712K). This house was 22kms from the CBD, and the only people interested out there are investors, according to her.
    Looks more like a 9% drop for Brisbane than a 9% increase.

    Reply
  38. “And it’s true we are immune when fact is fiction and TV reality
    And today the millions cry
    We eat and drink while tomorrow they die ”

    And gold takes no prisoners(?)

    It’s a jungle out there… :)

    Biker Pete
    April 30, 2010
    Reply
  39. It’s wonderful that you have so much trust in realtors, Davo.
    Not everyone believes their pitch… .

    You should definitely stay with that one! ;)

    Biker Pete
    April 30, 2010
    Reply
  40. Since my dr email is not in yet this a nice read
    The Mogambo Guru
    http://dailyreckoning.com/the-bittersweet-memories-of-commercial-property-ownership/ is this like cdos again?

    Reply
  41. one more

    Rising Federal Debt Found to Cause Intestinal Alien Syndrome
    The Mogambo Guru

    Reply
  42. Steve’s quote of the day

    “The only way you can have affordable housing is if house prices correct”

    Reply
  43. “Steve’s quote of the day: “The only way you can have affordable housing is if house prices correct”

    Uh, let me guess. Steve Keen, 2006, right?!~

    Biker Pete
    April 30, 2010
    Reply
  44. Unless Kevin Rudd gets rid of Negative gearing in the tax review on Sunday
    I will not be voting for anyone in the house of reps next election

    Reply
  45. Different figures for the last 12 months property market in Melbourne…

    http://www.theage.com.au/national/hot-property-puts-melbourne-into-the-forefront-20100430-tzi9.html

    As bank lending to housing investors accelerated sharply in March, real estate monitor RP Data-Rismark says Melbourne prices have climbed 18.7 per cent in the past year. The median house price soared $71,000 to $452,000, leaving thousands of would-be home owners unable to compete.

    Stillgotshoeson
    May 1, 2010
    Reply

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