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Squishy Ball Test for Banks

It’s an all-out attack on the greenback and everyone else is winning! The Aussie dollar has reached parity with the Canadian dollar (the Loonie) and is fast approaching its previous highs against America’s number one export (the U.S. dollar). So is this a turning point in the currency wars?

Well, like all wars, a sensible question to ask is, what are we fighting for?

Are we fighting for honest money that doesn’t lose purchasing power? Are we fighting for low deficits and strong growth? And who are we fighting anyway? The Chinese? The Europeans? Team America?

The point we’re trying to make is that metaphors are only useful if they reveal some insight into a problem that you can’t get in a straight forward way. Are nation’s using currencies as a weapon against each other? Well, maybe. But it’s more likely that each nation seeks to maximise its trading advantage by managing its currency in a certain way.

In the post World War Two era, for example, it’s been sensible to keep your currency cheap relative to the U.S. dollar. Americans were big spenders, even when they didn’t have money. And from the American perspective, what a great trade! You send paper to people…and they send you real goods and services in exchange. And you get to make as much paper as you want because the rest of the world can’t get enough of it!

It does seem like kind of a fraud. But then, money is a fraud, when it’s not backed by anything tangible. When money is backed by confidence (or a large economy, or the rule of law, or a blue water navy, or a large nuclear arsenal) people don’t ask a lot of questions until it’s too late and the currency is fatally compromised by massive debts incurred in it.

Is it too late for the U.S. dollar? The last time the Aussie neared parity, the whole world fell apart. Correlation is not causation. There’s no reason why the Aussie can’t smash through parity and go beyond. After all, Australia’s terms of trade remain high. And the Treasury expects the roaring commodity trade with Asia to deliver the Federal budget into surplus in just a few years.

Frankly, it all seems just a bit too neat. But over the last few years, we’ve found that our first week from a major overseas trip has been marked by a fuzzy brain. It’s probably something chemical. But you look at the markets right now and it just looks too good to be true. We realise that is an utterly superficial and shallow level of analysis. But it’s our first intuition, so we’re going to keep investigating.

One thing to watch for: the end of the quarter. With such a good month for stocks topping off a good quarter, it will be worth watching to see what the smart fund money does next. We use the word “smart” loosely. September surprised everyone with how good it was. You normally see a lot of “window dressing” by fund managers at the end of the month. They buy whatever went up so it looks like the owned it all along.

But getting ready for the next quarter may require less following and more leading. For example, yields on four-week T-Bills in the US have fallen by 45% in the last few days. They’re down by 60% since late August. This indicates a preference for near-cash, low-yield instruments that are not stocks. It’s an indication of risk aversion.

Will the risk trade go off the boil now? “The ASX is sinking like a stone this morning,” a colleague chimed in from across the room. “But all the gold stocks are up,” said another. “And BHP and Rio are down.” “So what’s falling?”

It must be the banks!

Not that there’s a banking crisis in Australia, at least not yet. There may not even be a problem. Heck, there may not even be any stress. But we’ll find out soon if there should be!

Wire services are reporting that ratings agency Fitch is ready to stress test Aussie banks for a 40% fall in house prices. Since Australian house prices never fall, Fitch probably won’t find anything. But it’s going to look anyway.

The agency is going to design something that tests, “different scenarios of varying property price decline.” What that means is it wants to see if falling house prices or rising mortgage default rates (that could never happen either, even if interest rates went up, which they never do) impact banks and insurers negatively (also probably impossible).

What prompted the stress test of an asset class/market that is immune to stress? Fitch says that, “Weighted average established house prices for Australia’s eight major cities rose by 18.4 per cent in the year to June 2010 according to the Australian Bureau of Statistics, and are now 41 per cent higher than they were in June 2006.”

Rising prices don’t always indicate a bubble. But sometimes they do. And since we’ve already established our position on this issue, we’re going to shut up about it now. Until tomorrow!

Dan Dennning
for The Daily Reckoning Australia

162 Comments

  1. Biker says:

    DD: “…established house prices for Australia’s eight major cities rose by 18.4 per cent in the year to June 2010 according to the Australian Bureau of Statistics, and are now 41 per cent higher than they were in June 2006.”

    Jeez, the exact _opposite_ of Keen’s prediction. Who’d have thunk it? ;)

  2. Steve says:

    Like some of the bloggers and your fellow countrymen said on that site
    Perth is the best performing capital city in the correction. West Australians might be smarter people than I first thought :D

  3. Biker says:

    “West Australians might be smarter people than I first thought ”

    _We_ learn how to use full stops by the time we’re six, Steven! :D

  4. Macca says:

    And_underscores_are_really_popular_out_west,_Biker.

  5. Ross says:

    DD: “what are ‘we’ fighting for?”

    ‘We’, and global savings based capital aren’t doing anything. USD near zero interest rate leverage created carry and “investment” (now the stupidest application of a word in history) is doing everything.

    When fear drives carry more than greed it will be all over.

    The banksters write the so-called risk trade narrative, like the BRIC one. They also call time on it when they taken enough suckers in and run up a big enough asset inflation bubble on someone else’s asset turf or currency. They trade their book until they decide to call time, and then they take their clip on the USD liquidity trap on the way back again.

    All ‘investment’ runs this way now in all asset classes. Backwards and forwards, up and down, as long as there is a clip and banksters get to call time on the suckers. Equity, commodities, UST’s, sovereign debt, carry trades – all the same. Backwards and forwards until it goes boom! The last thing that matters is fundamentals because we are in a post fundamental ‘extend and pretend’ balance sheet world.

  6. Steve says:

    When I go on Domain why am I seeing so many houses with “UPDATED” next to them?

  7. Stillgotshoeson says:

    Deliberately took a loss of $7100 on some shares today..

  8. Ross says:

    Can’t be your IMP SHoes because they’re still over 22.2% up after the redistribution from when you mentioned them to me. I bailed on CTX at a high ex dividend just recently. MGX is 2% down on what I sold them in March. Ag shares all doing fine.

    My GFC ASX bellweather below

    ASX sector Indexes current vs 7 May 08
    +/- percent
    XEJ energy -15.1
    XXJ financials x prop -8.4
    XHJ healthcare -13.2
    XNJ industrials -29.8
    XMJ materials -23.0
    XPJ property trusts -52.0
    XSJ consumer staples + 5.1

  9. Stillgotshoeson says:

    Still liking IMP… Might even get more.. Cold Winter in the New York State area this year I am thinking.. I see minimal risk on IMP at the moment and into the future

  10. Ross says:

    Another item for DD, the last quadrupal witching was done on the lowest turnover in history by a country mile until ….. post close trades. No volume with everything that does happen cooked up in the off hours. Crook as Rookwood we say in Sydney. Rookwood being the cemetary. There’s a little railway station just south of Central Station where they used to load up the coffins, maybe theres a place like that in NYC where they all meet up and decide what the computers are going to say for them today.

  11. Biker says:

    “When I go on Domain why am I seeing so many houses with “UPDATED” next to them?”

    Much better. For our American DReAders, our ‘full stops’ are your ‘periods’. In Australia, most six-year-olds have mastered simple punctuation (full stops, commas and capital letters) by the end of their sixth year.

    After twenty five years (with over two years’ _intensive_ tutoring) Steven has nearly mastered the art of writing a simple sentence.

    His mathematical skills remain at pre-school level.

    (No smileys, folks. It really isn’t all that funny… .)

  12. SteveNG says:

    “_We_ learn how to use full stops by the time we’re six, Steven! :D ”

    “For our American DReAders, our ‘full stops’ are your ‘periods’. In Australia, most six-year-olds have mastered simple punctuation (full stops, commas and capital letters) by the end of their sixth year.”

    But we’re never too old for juvenile behaviour. Call the cops! Someone didn’t use correct grammar on the Internet.

    Anyway, nice way to drag a conversation off-topic, Biker. Ad hominem attacks are the staple of the Internet troll and blowhard.

    House prices 5% down in 3 months in the middle of a boom, in Boomville. Nothing to see here.

  13. SteveNG says:

    Let me correct myself before the pedantry arrive. Property prices down 4.8%, not house prices (and not 5%). *sigh*

  14. Ned S says:

    I assume you saw this one Ross ? :

    http://www.zerohedge.com/article/introduction-road-through-2012-revolution-or-world-war-iii

    CGT for those who might harbor any thoughts of fleeing our land of abundance and plenty should it ever prove not to be quite so:

    http://smh.domain.com.au/real-estate-news/cgt-rules-have-devilish-details-20100930-15y5v.html

  15. Biker Pete says:

    “House prices 5% down in 3 months in the middle of a boom, in Boomville. Nothing to see here.”

    The boom hasn’t started, son.

    “But we’re never too old for juvenile behaviour.”

    As your mate proves, time and time again:

    “Biker Property is a NEED everyone VAULES it, just like I VALUE oxygen, just like I VALUE food, just like I VALUE water.”

    Classic stuff… . :D

  16. SteveNG says:

    “The boom hasn’t started, son.”

    If not now, when? When China re-doubles its ghost town building efforts?

    But seriously … when?

    “As your mate proves, time and time again:”

    I was referring to the bloke on here who condescendingly refers to strangers as “son”, yet behaves like a child. That guy.

  17. Ned S says:

    So what are you saying SteveNG? That Biker is a TROLL ??? – Because he points out spelling and grammatical errors? Or that you think some Oz house prices might go down someday?

    If the former, F orf ya creep. If the latter, then yep, you could well be correct. IMO.

    Just looked up the meaning of ‘Ad hominem’ – Ta muchly for pointing it out so clearly in the general body of your dialogue to us what’s obviously not so clever as you ‘edumacated’ types cuz! :D

  18. Biker Pete says:

    Well, I meant the kid who frequently uses F*#* and $#+t and ‘morons’, ranting like a petulant door-kicking child because FHBs aren’t selling him their homes for the 40% discount he was promised. That one. Your mate, Steve.

  19. SteveNG says:

    “So what are you saying SteveNG? That Biker is a TROLL ???”

    I wasn’t saying that, Ned. Although the last time I spoke with you, I accused you and Biker of being the same guy.

    Regardless of whether I’m right about that, you’ve just reinforced my thinking with your impeccable timing.

  20. Biker Pete says:

    HaHaHa… the old Biker-is-Ned theory. :D

    He hasn’t even caught the irony of our two simultaneous comments. ;)

  21. Ned S says:

    Steve’s young and just maybe hasn’t been able to bring himself to accept that Sydney might not be one of the best places in the world to get ahead at this time for him Biker? Ross and I seem to have both tried to patch the holes that history made in our opportunities by working overseas for a while? Shoes seems to have attempted to do so by coming to Oz? And you’ve done what you’ve done. While others have done what they’ve done.

  22. SteveNG says:

    You haven’t even heard the full theory yet!

  23. Biker Pete says:

    Place your bets, fellas.
    I think Ned put half-a-billion on the line.
    I haven’t got that much, but I’m ready to add several million in cash.
    Willing to put your money where your mouth is, SteveNG…
    or are you all yap, like The Other Steves?

  24. Ned S says:

    Am I missing something? Is SteveNG claiming to be Shoes who did for a little while incline to the thought that Biker was Ned? But SteveNG surely isn’t Steve who reckoned he’d known both us old baskets [Ned 'n Biker] for long enough to reckon it wasn’t likely we are the same bloke. Nope, my gut hunch is that SteveNG isn’t ‘Steve’ or ‘Shoes’. But by all means correct me if I am wrong please Steve or Shoes …

    But hey, same call as I made a while back – I’ve got half a mill that says Biker ‘n Ned are different beasts. Show me your money and I’ll take it off you if you REALLY feel so inclined?

  25. Stillgotshoeson says:

    I am me and no one else…

  26. Ned S says:

    “I think Ned put half-a-billion on the line.” – You beat me to it mate.

    Put up or shutup SteveNG?

  27. Biker Pete says:

    Ned, my chief objection to Steven’s rants is his belief that his fellow Sydneysiders must all be bankrupted, so that he can get a half-price house. We’ve been repeatedly told by Steve that anyone who disagrees is a moron.

    I’d be tempted to believe his generation is a totally lost cause, but for the fact that my sons and their friends (his age) don’t share Steven’s sick perception of personal achievement.

    The bleating here is something I expected to find on a site whose initial descriptors include ‘Australian House Prices are Severely….” The folly of those who still believe in Keen’s predictions is admittedly a surprise.
    I’ve added ‘SteveNG’ to that list of misled hopefuls. God bless ‘em!~ ;)

  28. SteveNG says:

    “Put up or shutup SteveNG?”

    Erm … put up what?

  29. Biker Pete says:

    Yep, I think you called it, Ned.
    I think you’ve also spotted _something else_ highly significant here. ;)

  30. Biker Pete says:

    Erm… ?!~ Holy Excreta… Look who’s back!!!!!~

  31. Biker Pete says:

    HaHa… ! Welcome back, Prozak. Where _have_ you been hiding?!~ :D

    Erm…!~ ;)

  32. SteveNG says:

    “HaHa… ! Welcome back, Prozak. Where _have_ you been hiding?”

    Are you trying to bully me, Biker? That’s pretty weak.

  33. Ned S says:

    “I am me and no one else” – And I certainly do believe you when you say that Shoes. As I also believe that ‘Steve’ is Steve and ‘Biker’ is ‘Biker and ‘Ross’ is Ross and ‘Lachlan’ is Lachlan and ‘Don’ is Don.

    Don’t start bouncing round the TROLL word here though SteveNG unless you have big balls and some real money to back your mouth. As the very minimum entry requirements to any ‘Let’s chat about Trolls’ game?

  34. SteveNG says:

    “Don’t start bouncing round the TROLL word here though SteveNG unless you have big balls and some real money to back your mouth. As the very minimum entry requirements to any ‘Let’s chat about Trolls’ game? ”

    The lady doth protest too much.

    All of a sudden it’s getting very noisy here. It’s like Biker Ned is trying to squash any other voices. Now that’s not the first time I’ve seem him do that!

  35. Ned S says:

    Prozak has been calling himself NV Biker. IMO?!?! But I couldn’t be bothered calling him on it as he was being pretty benign and hadn’t expressed an overt wish to EFF any regular blogger’s missus or mother. A harmless enough non-entity for mine.

  36. SteveNG says:

    And then it went quiet … ssssh.

    Anyway, anyone interested in my Biker Ned theory?

  37. Biker Pete says:

    Well, I think he’s been called on the SteveNG, Ned. NG? NV? (Envy? Probably.)

    “Now that’s not the first time I’ve seem him do that!”

    Bit of nervousness showing there. This is the bloke who bet his left testicle I was a Kiwi actor residing in Sydney, you’ll recall. Jeez, this is a fairly incomplete set of bears… . :D

  38. Biker Pete says:

    “Anyway, anyone interested in my Biker Ned theory?”

    Erm*… Who holds the cash, SteveNG, I mean Prozak, or Envy… ?
    Are you even employed? Do you own anything at all, apart from mouth parts?

    *ROFLMAO…!!~~

  39. SteveNG says:

    “This is the bloke who bet his left testicle I was a Kiwi actor residing in Sydney, you’ll recall.”

    Moi? I would love to see that post! Got a link?

  40. Davo says:

    I’m me too, or you can call me Dave, which is my real name.

  41. Davo says:

    Davo is what my better half calls me, but I’ll respond to either.

  42. Ned S says:

    “Anyway, anyone interested in my Biker Ned theory?”

    I’d Love to hear it Prozak! PLUS your degree of confidence in expressing same and how much money you’d be prepared to back it with???

    By all means DO proceed please …

  43. SteveNG says:

    Anyone besides Biker Ned, silly!

  44. Ned S says:

    “I’m me too, or you can call me Dave, which is my real name.”

    I figured that as well of course Dave. Both being Northside Brissy boys we could even arrange a BBQ one arvo to PROVE it without a huge amount of hassle I reckon! ;)

  45. Biker Pete says:

    “Moi?”

    Yep, it’s him all right. Honestly didn’t think we’d hear from Prozak again, Ned. ‘Envy’ is the kind of Freudian slip I’d expect from Pillman.

    Ahhh well, I’ve had the best laugh in years. Congrats on spotting him before I did. Should have, but he hasn’t ‘erm-ed’ or ‘moi-ed’ for a year or so. :)

    We’ll have to get together, old son. Can’t see any of his multiple identities paying up on the Biker Ned call, but I now paste-and-copy the best of these screamers for future laughs over a glass or few!!~ :D

  46. SteveNG says:

    Ah, well. I’ll wait until there’s some real posters on here to listen to my fabulous tale. See ya Biker Ned.

  47. Biker Pete says:

    G’day, Davo. Been out to the Bronx, yet? Nice little Irish bar right across the road from the Old Icecream Shoppe. Definitely worth a day trip. Don’t think there’d be any issues with kids (except in the bar… .)

    Great history recount. If you do the bus tour, ask the guide about the film ‘The Warriors’. Estimation of Aussies rose appreciably throughout the tour bus when we asked about it. They were stunned that we were fans of one of their cultural icons… . The driver himself became highly excited, punching the air…. . Had to laugh… . :D

    http://www.flixster.com/movie/the-warriors

  48. Biker Pete says:

    “See ya Biker Ned.”

    NVis has left the building… . ;)

  49. Ned S says:

    He’s been lurking as NV for ages I reckon mate? As NV he threw you a patently obvious bait a few weeks back when he said how much in favour of Death Duties he was. IMO. Then came back very quickly after no-one bit under his long lost ‘Pete’ persona to empathize with NV as to what pricks you and I are for cluttering DRA up with shite and not telling everyone how we reckon they could make lots of money … Poor silly prick! :D

    Anyway, the potentially most useful comment I’ve presumably made tonight was the following link addressed to Ross. I repeat it below on the off chance it’s of use to anyone else:

    http://www.zerohedge.com/article/introduction-road-through-2012-revolution-or-world-war-iii

  50. Ned S says:

    Another one of those Your comment is awaiting moderation.

    He’s been lurking as NV for ages I reckon mate? As NV he threw you a patently obvious bait a few weeks back when he said how much in favour of Death Duties he was. IMO. Then came back very quickly after no-one bit under his long lost ‘Pete’ persona to empathize with NV as to what pricks you and I are for cluttering DRA up with shite and not telling everyone how we reckon they could make lots of money … Poor silly prick! :D

    Anyway, the potentially most useful comment I’ve presumably made tonight was the following link addressed to Ross. I repeat it below on the off chance it’s of use to anyone else:

    See below for link I’ve [hopefully] destroyed to get past the DRA ‘Comment waiting Moderation’ thing:

    zerohedge.com/article/introduction-road-through-2012-revolution-or-world-war-iii

    Yes, sleep tight Prozak and PLEASE DO TRY TO STAY ON YOUR MEDS!

  51. Ned S says:

    Shute DRA can make it difficult to get a link through:

    Another one of those Your comment is awaiting moderation.

    He’s been lurking as NV for ages I reckon mate? As NV he threw you a patently obvious bait a few weeks back when he said how much in favour of Death Duties he was. IMO. Then came back very quickly after no-one bit under his long lost ‘Pete’ persona to empathize with NV as to what pricks you and I are for cluttering DRA up with shite and not telling everyone how we reckon they could make lots of money … Poor silly prick! :D

    Anyway, the potentially most useful comment I’ve presumably made tonight was the following link addressed to Ross. I repeat it below on the off chance it’s of use to anyone else:

    See below for link I’ve [hopefully] destroyed to get past the DRA ‘Comment waiting Moderation’ thing:

    zerohedge

    com/article/introduction-road-through-2012-revolution-or-world-war-iii

    Yes, sleep tight Prozak and PLEASE DO TRY TO STAY ON YOUR MEDS!

  52. Ned S says:

    Maybe it’s not the link?

    HECK DRA can make it difficult to get a link through:

    Another one of those Your comment is awaiting moderation.

    He’s been lurking as NV for ages I reckon mate? As NV he threw you a patently obvious bait a few weeks back when he said how much in favour of Death Duties he was. IMO. Then came back very quickly after no-one bit under his long lost ‘Pete’ persona to empathize with NV as to what NAUGHTY FELLOWS you and I are for cluttering DRA up with STUFF and not telling everyone how we reckon they could make lots of money … Poor silly FELLOW! :D

    Anyway, the potentially most useful comment I’ve presumably made tonight was the following link addressed to Ross. I repeat it below on the off chance it’s of use to anyone else:

    See below for link I’ve [hopefully] destroyed to get past the DRA ‘Comment waiting Moderation’ thing:

    H ‘n W stuff AS PER USUAL followed by:

    zerohedge.com/article/introduction-road-through-2012-revolution-or-world-war-iii

    Yes, sleep tight Prozak and PLEASE DO TRY TO STAY ON YOUR MEDS!

  53. Biker Pete says:

    Thanks for the link, Ned.

    Started reading the article and realised I need to give it more time, after I hit: “It was certainly not brought on by people who bought homes they couldn’t afford. To frame this crisis around a debate on economic theory misses the point entirely. To even blame it on greedy bankers, while essentially accurate, also misses the most vital point.”

    My problem at that point was that I believe the problem _was_ primarily brought about by those very two things; so I’ll need to study his argument carefully rather than simply dismiss it.

    Americans, who place their continent square-in-the-middle of every US map I’ve seen, seem at a major disadvantage analysing their current dilemma.
    I imagine Rome had the same biased perception, as the empire fell apart.
    Hard to see how they can extract themselves, although the little repossession cameos Shreve paints for the early 1990s offer a deja vu perspective. Looking back, I figure we picked up our main property due to spin-off from ’87. I think we’ve decoupled considerably since then.

    Looking at the chaos out there, I can’t imagine any country better placed to survive any turbulence than Australia. As more refugees flee from the PIIGS ties of the north, demand for housing will rise… along with rents and home prices. The NVious will just have to medicate themselves through it all… . ;)

  54. Ned S says:

    All Prozak really needs is a stable, secure and happy home life I reckon …

    Anyone want to adopt him? Anyone want to marry him and raise his kiddies? Anyone want to be his kiddies? ;)

    KEEP TAKING THOSE MEDS BRO!!! :D

  55. Biker Pete says:

    Davo, reading these posts, the missus noted that as usual I’d mixed up Brooklyn with the Bronx. It’s Brooklyn that’s worth a day trip. Just as well she’s our navigator… . :D

  56. Davo says:

    Thanks Biker,
    Looks like there is a cable car you can catch over to Brooklyn Heights area, for great views of Manhattan, and some famous ice cream shop. Just what I’ll need – ice cream in freezing conditions!
    This all from memory, affected by a couple of very healthy glasses of anti-oxidants at lunch time, so accuracy is questionable. Will be doing some more research over the weekend. Still praying to the currency gods to keep our dollar strong until Christmas. Not planning on going much past 88th street, but have been told we’re going to Hoboken to visit the bakery where the show Cake Boss is produced. Excited by the prospect of lining up to go to a bakery, as you can imagine.

  57. Biker Pete says:

    ‘Road Through 2012′: Interesting article, Ned. Found much to agree with, but the basic premise, of an extremely well-organised global conspiracy, tends to conflict with our perceptions of blatant US corporate opportunism gone wrong… the financial exploitation of a naive political idea: Get the poor into homes they can’t afford/won’t need to repay. Disinfect and gift-wrap the highest-risk excreta and on-sell it to less-cautious fund-managers world-wide… . Once one or two bankers flew it, initially ‘successfully’, more followed.

    Views only very lightly touched on the power of US lobby groups, one of the chief corrupting politico-economic forces in the US. While they correctly identify individual bankers as warring on US citizens, the very competitive nature of US businesses argues against any thesis that there was ever really any organised cooperation between (any of) them. It simply became business practice… . The extent to which (some) politicians cooperated could have been examined more. Perhaps it is, in the book… .

    Resource wars and military motivation: Probably the strongest argument. Tends to agree with our perception of China being used as a scapegoat, too.
    The abstract touched on the role of the printing press, but this might also be more fully developed in the book.

    IMF’s role in all this? Hard to know. We know so little about it. They seem to stating that the IMF is pushing the same hard line as DR(US):
    Let it all crash and burn… and rebuild, out of the rubble.

    One thing which troubled me, throughout, was the claim that all this is new… it’s without precedent. Perhaps the extremes to which the US is now exposed are greater than at any previous time; but the US government has previously quelled civil unrest of kinds similar to that Tyler describes. Very reminiscent of Baldwin’s ‘The Fire Next Time’, in places… without even considering the extremism of the muslim religious far right Malcolm X had to contend with… .

    Perhaps Brzezinski’s comment, p.3, re the unemployed and poverty-stricken is most illuminating here. Callous, but I felt like commenting “Well, welcome to the _real_ world, America.” We have to consider, however, that the rest of the ‘real world’ is less well-armed… .

    Politically very neo-Marxist perceptions, some accurate, some kites flown and perhaps mistaken for UFOs… but food for thought, anyway… . :)

  58. SteveNG says:

    Right …. so anyone (other than Biker Ned) interested in my Biker Ned theory?

  59. Steve says:

    Steve’s comment of the day

    “I am looking forward to the possibility of an interest rate rise with a top up from the banks next week”

  60. Steve says:

    I have zero empathy for those of you responsible for hiking the prices up – whether through foreign investment, negative gearing, or just plain old stupidity in paying prices for property that are clearly not sensible.

  61. Biker Pete says:

    Sounds good, Davo. That bar is adjacent the icecream shoppe. We had a very humid July in NY, but I imagine Fall is a little nippy. We were probably
    600 km north east of you by October, if I recall correctly. May have even been in Quebec… .

    Cherries are probably well and truly finished!~

  62. Biker says:

    Steven: “I am looking forward to the possibility of an interest rate rise with a top up from the banks next week”

    By December you’ll be in a new home, Steven!!~
    I’ll crack a Moet for you on the 25th. Christmas in your own home! ;)

    Seriously, with construction reduced, any bank which goes beyond the RBA’s recommendations will face a double-edged blade: no new custom… and folks like us may take large amounts of custom elsewhere. Our volume of business means we already get rates nearly one percent cheaper than most.

    We’ve looked at fixed rates, but with offset accounts, interest rates don’t really matter all that much. If rates go to 8.5%, we make 8.5% tax-free in all offset accounts.

    Hope you’ve taken our advice about the FHS accounts. Amounts and returns have just been adjusted… and conditions further relaxed.
    No need to thank us for this free ongoing mentoring. :D

  63. Biker says:

    Jeez, will you look at that…! He gave me five gold stars… .

  64. Biker says:

    Navigator says NY was August, Davo. We were in Scotland in July.
    Enjoy the autumn colours. Spectacular… . :D

  65. Biker says:

    “Best cheesecake in NY was Juniors,” says she-who-remembers-these-things.
    Don’t miss getting your picture taken with Julia Roberts at Mme. Tussauds.
    Worth the visit… .

  66. Steve says:

    It has been a good week Biker a very good week.

    It looks like the pendulum is starting to turn the right way.

    I haven’t been this excited since watching the K Rudd beat Howard at the 2007 election after 12 years of the coalition in power.

  67. Biker says:

    “I haven’t been this excited since watching the K Rudd beat Howard at the 2007 election after 12 years of the coalition in power.”

    But you _lambasted_ Rudd while he was in power, Steve.

    I’d be worried about a pendulum that turns. Most of ‘em swing!~

    (But I’m pleased to see you in a happier frame of mind. :D )

  68. Steve says:

    Yes I know that Biker, but he didn’t F*^# up before he started did he?

  69. Steve says:

    Most of ‘em swing!~
    You don’t swingers out your way do you biker,
    They all vote Liberal there and to a lesser extent up in pineapple land

  70. Biker says:

    I’m apolitical (look it up), Steve. Sometimes I vote for the people who will do me the most harm. Yes, we’re swingers; we change governments.

    I’ve always been a little amused that you and Pete both talked Rudd up a storm before the GFC; then F*^#ed and F*RTed after he was elected… .
    A little sad, really.

    Here’s a hint: Yap doesn’t change much. Look on the _bright_ side of life.
    Stop complaining (note I didn’t use whining/whingeing/bitching here.)
    When you have a major win, let us all know. We’d rather see you cheerful
    than wishing the coathanger crowd all nuked, so you can steal their homes.
    As I’ve commented before… it’s not a good look… !~ :)

  71. Steve says:

    “steal their homes”

    Who me?

    NO WAY

    I will just buy it off them at a price both I and they agree at.

  72. Steve says:

    I’ve always been a little amused that you and Pete both talked Rudd up a storm before the GFC; then F*^#ed and F*RTed after he was elected… .
    A little sad, really.

    When I was told housing was going to be made a more realistic price, then he went out of his way to make sure the complete opposite happened when he got in of course I wasn’t happy.

  73. Biker says:

    Lesser of two evils, I suppose.

    KRudd: Let’s see, do I try to steer the economy into safer water, using funds the Libs have accumulated (mainly through privatising); or do I let the economy founder on the rocks and save what can be rescued from the shipwreck?

    Swan: But Steven _needs_ a half-price home, Big Kev!

    KRudd: Yeah, you’re right. He voted for me. The hell with the economy!
    The rest of the world is stuffed, anyway. Let’s see if we can kill construction, get unemployment up to 10% and smash the banks… .

    Swan: That oughta do it. I know where we’ll pick up a couple of new votes,
    anyway, Kev. ;)

    ………………………………………………………………..

    Seriously, putting Garrett in charge of bed-burning might have been safer than letting him manage insulation; many schools got buildings they didn’t need, often where they didn’t need them; and thousands of rich punters got cheques they didn’t need, either.

    If you believe you’ll get a half-price home more quickly from Fr. Anthony,
    vote Liberal next time. (Good luck with that… !~ )

  74. Stillgotshoeson says:

    http://www.heraldsun.com.au/money/house-prices-dip-and-will-fall-further/story-e6frfh5f-1225932622360

    Perth dropped the most…

    “Still made a lot of money but not as much as I thought…”

    May be the catchcry of many sellers over the next few months… The months after that could be interesting…

  75. sandman says:

    could you guys all arrange a fishing trip and sort out your personal problems.
    it makes for pretty dull reading (scrolling)
    cheers

  76. Biker says:

    Look, give the guy a break! Missus took his house and he has to pay her $14K a year in hellomoney. He’s entitled to try to cheer others up and lift his own spirits in the process.

    If he sees pitfalls ahead for others, he’s just trying to warn us about how bad a situation can be. Baiting has little to do with it. :D

  77. Ned S says:

    A “fishing trip” to sort out our personal problems Sandman? Prozak would have to agree to coming along as the anchor I’m afraid. And given that he knows I’d incline to using him as the bait, I just don’t think it’s gunna happen? ;)

  78. Ned S says:

    Just curious Steve? :

    1) What sort of property in Sydney and where, do you hope to buy as your first home?

    2) How much do you think it would currently cost?

    3) How much do you think represents reasonable/fair value?

  79. Steve says:

    1.a unit, in an average suburb
    2.close to 300K
    3.3-4 time yearly income is the traditional method of Fair value.
    So seeing its a 1 bedroom unit obviously for it to be fair vale it would have to be less than that.
    They say 60K is about the average wage in Sydney (I thinks its probably less than that) but lets just say it is,
    For an average house in an average suburb it would be 3.5 x 60K = 210K
    for the house, but seeing it is only a 1 bed unit it obviously would be a lot less than that to be “FAIR VALUE”

  80. Ned S says:

    Righto. So you are basically looking for something around the level of Steve Keen’s 40% decrease then I guess. As I said – Just curious – Ta.

  81. Steve says:

    Well put it this way Ned, I am looking to buy something at both historical Australian and international prices

  82. Biker says:

    Irish, Dutch and German guests at present, Ned. The Irishwoman was discussing her housing situation while we were all feasting on Chili Calamari* one of the Dutch guys and I reefed in, in huge quantities, after taking Sandman’s recent advice.

    She’s moved here on a 457, rented the Belfast home, covering her repayments; and doesn’t see the housing values issues as a calamity. Someone else is paying the house off.

    * Wouldn’t be dead for squids…!~ :D

  83. Biker says:

    http://www.realestate.com.au/buy/property-apartment-in-sydney%2c+nsw+2000/list-3

    Check out 41/359 Pitt Street: $295K. Cheap-as-Chips*…

    A mate of mine in IT, who has just been transferred to Singapore by his company, says his Singapore apartment, subsidised by his company, would cost the average Singaporean a year’s wages for rent…!~

    * Wonder why…?!~

  84. Don says:

    @Steve “3.3-4 time yearly income is the traditional method of Fair value.”

    That is fine for single income Steve, but you are also competing against double income people as well – for say 100k total household, that makes it around 300-340k?

    Your thoughts?

  85. Biker says:

    We’ll probably hear from Steve later today, when the interest rate decision has been made. Your point seems valid, Don; but I suspect location (Sydney) is a major factor in competition, too. (Nice place to visit… etc… .)

  86. Don says:

    No doubt at all about the golden rule of real estate Biker (location….etc) however I was just thinking about his definition of base value for what would be considered an average house. These days double income households are more the norm than the exception and so based on the 3.0 – 3.5 multiplier you would expect that this would flow on to house values.

  87. Biker says:

    Agreed, Don. It would be interesting to see valid stats for Sydney incomes. I thought the figure you cited was conservative.

    But there’s another possibility in Sydney. In areas of high demand, Steve is really competing with investors. Many will have base incomes of $200K+ and will be buying anything representing ‘fair value’ for 1.5 X income, right now.

    Many investor couples in the market for the very ‘bargain’ Steve seeks will have annual incomes exceeding $400K. Bill Bonner referred to this kind of activity in the article on Ireland a week ago, noting that investors picked up the very best stuff first.

    Steve’s dilemma is this: Suppose Sydney realty _does_ fall 20%.
    His current position may convince him it will continue to fall another 20%, based on his own (perhaps outdated) perception of fair value… so he misses an opportunity. Investor demand (and FHBs) then pick up the goodies, the price moves up… and Steve’s left ‘homeless’ again.

    Many here could argue that Steve is enjoying the best of both worlds at the moment. He’s saving money, living at home, has all the home comforts… and can afford to gamble that, at some point, Sydney prices will fall appreciably. But if he’s right, he’ll still have to compete, even with out-of-staters, who see a chance to pick up rentals or holiday homes in The Big Smoke… .

  88. nv says:

    Boomers are Generation Tapeworm

    Currently in the US 77 million people collect social insecurity , over the next 18 years another 77 million of Generation Tapeworm will slither up to the trough.

    So seriously who thinks 154 million people all collecting social security at the same time is going to work ? Be even funnier when they try to cash out of their stocks and or downsize their housing to fund their retirement.

    Thats right folks in 18 years over 50 % of the population will be social security collectors.

    Like thats going to work, generation tapeworm are in for a real rude awakening.

    rofpmsl!

  89. Biker says:

    You’re rolling-on-floor-pulling-yourself-lazily, Prozak?

  90. denko says:

    Geez guys, this thread has so much pushing and shoving, pinching and squealing that it replicates the girly boyz game at an AFL grand final.

    There are real issues, thoughts and understandings cast under this thread.

    Respect this.

    Man up, or move on…

    Please.

  91. Biker says:

    It’s the young bull / old bull thing, Denko. Old as rock ‘n’ roll:

    “Hope I die before I get old…”
    – The Who

    “It’s a hard world to get a break in,
    all the good things have been taken…”
    – The Animals

    I enjoyed Bill Bonner’s most recent post, “A Market for Long-Term Investors” (5th Oct 2010) in DR (US), today:

    “What to do now… I really don’t know
    I really don’t know, what to do”
    – The Rolling Stones

    Bill says: “What to do now? Find solid businesses at bargain prices. Invest in real estate with good cash. Buy collectibles…jewelry…art – things you want to own no matter what the price.”

  92. Biker says:

    Cover your ears, folks!~

    That <$300K apartment is still worth a look, Steve… .

  93. Ned S says:

    There’s a few Gen X out there who seem to be concerned they’ll be a bit stressed paying for the Boomer retirement. And they do have a real problem as they are pretty much the lump on the rump of the boomers. So not only do they get to pay for the boomer retirement but the demographics of Gen Y getting to pay for Gen X retirements just aren’t very flash at all!

    So as Treasury recently said to the incoming Gillard government, whatever little fibs you told about immigration in the election, it definitely does seem necessary to bump the population up to about 35 mill by 2050.

    But some Gen X are squawking about that too. Because they figure the government will cherry pick the immigration applications and by and large bring in bright and hard working migrants. Which will make the competition pretty tough at home.

    So those same few Gen X who desperately wish things were different, sometimes seem to adopt the following viewpoints:

    1) Boomers who don’t save enough for their retirements are losers and deserve to starve, and

    2) Boomers who do save enough for their retirements should have their money taken off them so they can starve too.

    It’s all quite entertaining to watch of course. Albeit a pretty sorry show as well in many ways as well! :)

  94. Biker says:

    Hardly know which of the excellent points you’ve made, to comment on first, Ned.

    I’ll go for: “2) Boomers who do save enough for their retirements should have their money taken off them so they can starve too.”

    I figure my missus and I have saved Gen X around a million bucks in future pension payments, by having achieved savings over the last 32 – 42 years working, while paying as much as 48c tax on our dollars into the coffers (before we started _really_ analysing the tax and property systems).

    In terms of immigration, it’s interesting to note that exactly half our current tenants are Aussies, while half are either New Zealanders or South Africans. It hasn’t always been that way, but we believe that neither group will diminish, primarily because of Australia’s open-door policy to Kiwis… and the mining industry’s reliance on SA for mining engineers.
    Add to that the looming major shortage of nurses and teachers … and you have more ‘bright and hard-working’ migrants who will be at the sharp end of the rental and purchase end of the property markets.

    Your summary is also spot-on; but sometimes the most well-meant advice can be thrown back in a technicolour arc… . ;)

  95. Ned S says:

    It’s curious though Biker; For at least 20 years that I recall the government and financial types have gone out of their way to say Save your money and invest wisely if you want a half reasonable retirement. So if they now say Well it seems some don’t and given that we, by and large shaft those who do anyway, the plan now is to take yours’ off you who do give it some sort of a shot whom we haven’t yet succeeded in totally shafting, they won’t be getting much of a hearing off me! ;)

    Damn glad we’ve got minerals though. And that this is shaping up to be the BRIC’s century. The US and Europe certainly do seem as if they could be very deeply in the doggy do for donkey’s ages!!! Still, having ‘cultcha’ must count for something I suppose – Perhaps we can invite a few Pommy darts players and Yank wrestlers to visit occasionally to help prop up their home economies? :D

  96. Biker says:

    “…the government and financial types have gone out of their way to say save your money and invest wisely…”

    True. But disclosure rules marked the first meaningful commitment to this principle, Ned. For years we attempted to force this critical info from the b*stards, but until it became Law, we only had instinct to guide us…

    “The US and Europe certainly do seem as if they could be very deeply in the doggy do for donkey’s ages!”

    Yes, we should expect an increasing number of economic refugees from the PIIGS countries. Fortunately our immigration laws will siphon the best off for us, most of the time. (Now there’s a backhanded compliment to YKW!~)

    “…having ‘cultcha’ must count for something I suppose…” Yeah, but after months of ‘cultcha’ even the most elevated spirits among us tire of cathedrals, museums, art galleries, etc. There’s a great deal to be said for the clean, green (and red!~) of the great Aussie Outdoors (note free ad, guys!~) And our oceans are pristine compared to the NH.

    “….we can invite a few Pommy darts players and Yank wrestlers to visit occasionally to help prop up their home economies?”

    Nah… . We have to keep this place _quiet_ Ned. These days the economic refugees arrive in jumbos… often bitch relentlessly about Oz (I mean Uz), wish us as shat as their own abandoned nests, then s-t-a-y, f’rever… !~ ;)

    BTW, congratulations on us picking the no-interest-rate-rise-scenario.
    Old(er) Blokes Rock, OK?!~ :D

  97. Ned S says:

    rofpmsl – Really over for P’s mindlessly sad life????

    If the meds still aren’t working then maybe you could try having a holiday bro? :)

    Shute – It’s like trying to counsel ‘Gordon Bloody Gekko’! :D

  98. Biker says:

    Funny, I always think of Prozak as Gomer Pyle.

    http://en.wikipedia.org/wiki/Gomer_Pyle

    Not totally a lost cause, but a good reason for wondering if one should bother to send out a search party… .

  99. Biker says:

    Don’t think he liked your Michael Douglas reference, Ned. Not even the fantasy of Catherine Zeta-Jones could prevent him from zapping you with a Single Gold Star. I’m sure he’ll approve my more accurate perception…

  100. Biker says:

    BTW, any key questions you’d like us to add to The List we’re flying with our accountant in two days, Ned? He’s primarily a property guru, but we’re hoping he has some reliable information about retirement issues related specifically to property and a mix of asset classes… .

  101. Ned S says:

    Thanks Biker.

    The only one that comes immediately to mind is Just how does this stuff about taking an income stream from super but paying some of the income back into super, work if the compulsory age based draw down levels result in more income than one really wants to draw down. (I know that Noel Whittaker mentioned same in the past and think it was you who brought my attention to it at the time.)

    One other (but which I doubt will apply to you) is how a discretionary family trust gets handled for land lax purposes in QLD! I’m looking at using one to buy a house and thus move the rental income into my lady’s name so there is nil/minimal tax. But wouldn’t want to end up having land tax issues through me being the trustee.

    Cheers ‘n Ta!

  102. Biker says:

    Hmmm… the first seems easier than the second, but I’ll work on reframing both until there are no ambiguities. I take it the second query is really about income-splitting, or have I misunderstood?

    We have avoided family trusts, as in our view they’re good in the short term, but potential tax dynamite long-term. We know we could have taken advantage of numerous additional legal perks during the process, but suspected we could be decimated at CGT time… .

    Several of our queries are related to the systematic, orderly divestment of properties, in line with the current $900K per three-year-CGT-rules… .
    We may have really lucked-in with the 2012 changes. Can’t really say we planned that…! ;)

  103. Ned S says:

    Forget the second Biker – It is a QLD thing. But if you get further info on the first I’d love to know.

    “Several of our queries are related to the systematic, orderly divestment of properties” – I’m different there I guess. More a hold until I die type of bloke. To avoid CGT. Plus I hate paying RE agent fees and whatever else. Nope, I just buy/build something I want to rent out and let it sit after that.

    And if that means I don’t do any OS hols because I don’t try to tap into any of the principal, then that’s no hassle to me at all. As I’m simply not into travel. Or flat screen TVs. A bit of a minimalist in some ways I guess? While still being a risk averse ‘n hoarding ole Scrooge! :D

  104. Biker says:

    Yes, the second issue is very complex. I imagine there are ways to do it, but there are sure to be at least two downsides, one of them in taxation implications.

    “…the systematic, orderly divestment of properties…” Remember that
    a.) I’m older; b.) We probably have ‘too many’ properties (our 2000 financial assessment stated this… and we now have three times as many);
    c.)that you can’t take it with you; and d.) our kids don’t need it, having easily outshone our business acumen at half our age.

    Yes, travel is almost impossible to get out of my system. I really do suffer from the ‘travel bug'; but we’re both happiest when we can carry everything we need in a couple of panniers… and cover unfamiliar territory. So in that sense, we’re also minimalists. It also means that we can survive unfamiliar territory and conditions with just the basics (even if one of those is a platinum-coloured card! ;) )

  105. Ned S says:

    “even if one of those is a platinum-coloured card” – Handy things to have in a pinch! – Even for us ‘minimalists’ hey? Cheers mate – Ni nite! :)

  106. prozak says:

    Wow.

    I must say I am impressed with my own ability to make such an impact that I keep getting mentions when I haven’t visited this site in god knows how long.

    It seems I have scarred two old birds sufficiently that they just cannot let it go.

    Cheerio all, hope everyone is well.

    ps. Easy enough to prove who is who if you have the IP address.

  107. prozak says:

    BP & Ned,

    I am truly intrigued by your obsession with me.

    How often do you talk about me? Is it quite often or have I just come back at the right time?

    Do you talk about me to people not on the internet? (i know BP admitted as much a while back). How often do you do this?

    Do you stop people in the street and ask them if they are Prozak? Do you accuse people down the pub of being Prozak when they disagree with you?

    Have you thought about counselling or going cold turkey on DR?

  108. Ned S says:

    That’s the spirit and what I wanted to hear P!!! – Continue to look forward to your future happily me ole bean … As everyone else on this site does! :)

    “It’s a beautiful morning,
    It’s a beautiful day … ”

    :D

  109. prozak says:

    Ned,

    your obsession knows no bounds.

    you are posting on the DR at 0240

  110. Ned S says:

    “Easy enough to prove who is who if you have the IP address” – Neither Biker nor I have to prove squat ypsc. And as to giving out my IP address, I reckon I’d rather give my ex-missus my bank account details! ROF laughing uproariously at THAT insane suggestion .. ;)

    0240 hours? – Yep, I worked some pretty strange hours in my life in some pretty strange bits of the world. And am pretty much indifferent to just when I happen to be awake as opposed to asleep nowadays.

  111. Ned S says:

    It was actually about 0140 when you posted QLD time P. But given you haven’t responded yet and it is now past 0240 here and in between doing other things of interest including cooking myself up a nice little feed to bunk down on and eating same, I have gotten a bit tired, I’ll bid you toodle pip me ole bean! ;)

  112. prozak says:

    Not asking for your IP Ned. DR has it tracked though.

    Remember Ned. I’m everywhere and everyone….. apparently.

  113. Ned S says:

    I really do have to go ni nites now mate. (Was just still up picking my teeth after that top feed of bacon ‘n steak.)

    “Not asking for your IP Ned. DR has it tracked though.

    Remember Ned. I’m everywhere and everyone….. apparently.”

    Yep, I’ll have Oz’s top international taxman crashing out here for 4 days really, really, really soon mate. Anything you feel to ‘fess up to before he arrives? ;)

  114. Ned S says:

    Rest easy P. He doesn’t waste effort chasing something nothing slugs like you for a few mill or less. And as mates we’ve got WAY better things to do when we get together than discussing the likes of you. What exactly was that twaddle you suggested about DRA having our IPs again? You ARE the funniest of fellows! :D

  115. Biker says:

    Interesting posts, Ned. I reckon your supposition that he morphed into NV is spot-on. He’s not by nature a lurker, just a persistent noise in the background, like an angry little mozzie. The old IP issue is interesting, considering its last mention here… . ;)

    Whatever happened to Claytonator? His style was identical to Bearamundi’s, but I was never completely convinced.

    Interesting to see the Ozbuck going north again. Wonder if Japan’s new zero rate has helped push it… ?

  116. Ned S says:

    He’s always good for a laugh regardless of what he’s calling himself. Must admit I was kind of hoping he might have some more info for us on how a high income Aussie working in Britain can keep his tax rate as low as he reckons he does though. But sadly he seems to have vanished into smoke again? ;)

  117. Biker says:

    Probably not paying tax in either country is my guess.

    He evaporated pretty quickly once you mentioned tax issues, Ned.
    Probably figures the ATO can subpoena not only his IP address, but a lot more!~ ;)

  118. Stillgotshoeson says:

    What exactly was that twaddle you suggested about DRA having our IPs again? You ARE the funniest of fellows!

    Ned.. Every time a person vists this or any other site their IP address is logged at their ISP.
    Everytime you post on this or any other site.. Your IP addres is logged at that site.

  119. Biker says:

    I’m 100% sure that Ned knows this, Shoes.
    What he’s questioning is any run-of-the-mill blogger’s ability to access the IP address… .

  120. Ned S says:

    Thanks Shoes. If I read between the lines correctly on one of Mr P’s comments, he was having a bit of fun with me over that. And I subsequently had a bit of fun with him over it too. As we are both bits of humourists in our own ways perhaps? :)

    I see gold is moving along quite nicely! Shame about my bank deposit interest rate. But given my thoughts that things are still rather challenged in the economy, and that the RBA aren’t quite as committed to fighting inflation as they say, I would have been a bit surprised if they moved.

  121. Biker Pete says:

    Consider the offset idea, Ned. ANZ lets us have up to seven offset accounts _twice_ (ie., 14 accounts).
    These earn the going housing rate (we get almost 1% cheaper on loans, anyway); you can access any amount any time, without penalty (superior to redraw); and there are numerous other benefits, including free platinum and gold cards. Best of all, there’s no tax to pay.

    There’s far less concern re interest rate rises, taxes, etc., and you still have access to funds to take advantage of any bargains you may spot along the way. :D

  122. prozak says:

    No Ned, you were wrong and look foolish for pretending otherwise.

    I never suggested I had or could get anyone’s IP.

    My “everyone and everywhere” comment was regarding the Ned and Biker obsession with me and accusing people of bring me – usually when the poster does not agree with them.

  123. Ned S says:

    I’m used to looking foolish P.

    So how exactly does a high earning young Aussie in Britain keep his tax down around 5% pa again?

  124. prozak says:

    Your memory is.failing you Ned. It’s 10%.

    The how is none if your business.

    But as I have said before.

    You go to accountants who work strictly within the rules and think that’s the best that can be done, and to be fair a lot of the time that is the case, especially for employees.

    I first go to a barrister who uses and finds gaps in the legislation.

  125. Ned S says:

    10% is good for a young bloke. Give me three years to reach 55 and I’d hope to come in at somewhere between 0% and that. But without paying a barrister as I am both poor AND cheap! :D

    1845 hours and just had ‘lunch’ – Snooze time for this tired ole retiree – Might wake up for a while around witching hour or the early morn. Toodle pip! :)

  126. Biker says:

    What the DH said was: “ps. Easy enough to prove who is who if you have the IP address.”

    Typical flatulence from a serial pest.

    Can well believe he has a solicitor, Ned. ;)

  127. prozak says:

    Ned,

    completely understandable, I was concerned about spending that much money for advice, but I spoke to a few people who had done such things and am happy I took the plunge. I did a lot of research and got some free advice before I paid someone – because like I said for the majority of people not much can be done. My combination of work, citizenships and domicility make me a little unique.

    In the end I spend even more than I thought I would – but that is because I have a barrister who takes a percentage of everything I make. That is included in the 10% – actually maybe I told you this before – so it is my memory that is failing!! :)

  128. Biker says:

    Your key question for consideration needs some detail, Ned:

    “How does this stuff about taking an income stream from super but paying some of the income back into super, work if the compulsory age based draw down levels result in more income than one really wants to draw down?”

    Are the drawn down levels you mention from TTRs, or not? We’re pretty sure that these percentages range from 4 – 10% of moneys held in a tax-paid account. We currently collect 4% each monthly. We _could_ recycle that back into Super, but can do better currently outside Super, topping up offsets. (But this may not be what you mean, anyway… .)

    Missus says an example would help… . :)

    Seeing accountant tomorrow. Tuning each question, then sequencing them… .

  129. Ned S says:

    Thanks Biker. Yes, the draw downs would be through a TTR. I must admit that the concept of being able to draw down and then recontribute part of the draw down in a tax neutral manner seems to run so contrary to having a minimum % draw down requirement, that I ask myself What’s the catch?

  130. Biker says:

    The advantage of salpacking wages back into Super is that you’re using pre-tax dollars to reduce overall taxation. So if you earn $100K, it’s possible to reduce your taxable income down to 15% or so.* We did so for many years, but as tax threshholds rose, we contributed marginally less each year. New rules will limit Super to $50K p.a., for most age groups.
    Our existing higher annual limits start cutting out in two years.

    Remember that there’s a 15% contributions tax you pay on depositing, if you are using pre-tax dollars. If you’re using cash, there’s no contributions tax at all.

    Your situation is quite different to ours, Ned. You have to calculate the exact advantage(s) of depositing cash into Super. In our case this will primarily be (from July 1st, 2011) to reduce CGT, from sale(s) of properties. If you’re holding (rather than selling) there’s little advantage, other than having your TTR working in a tax-free environment, paying you a tax-free TTR pension on top of all other income… but… and here’s the ‘catch': the fund charges you 1% of ALL TTR funds, annually.

    Different folks have incredibly different financial circumstances, so, if this looks attractive to anyone here, have it checked out by your accountant. It works perfectly for us, but may not be ideal for you… .

    * Or, if you have sufficient property, far, far, far, _far_ less. :)

  131. Ross says:

    Question for Biker/Ned. How would your rate your debt clock growth/decay over this same period in the URL following? I am not assuminng anything here.

    http://www.economist.com/content/global_debt_clock

  132. Biker says:

    Interesting exercise, Ross. The figure cited for public debt per person in Australia is our monthly Visa bill, paid off monthly. Our actual debt is 210 times that figure. Assets more than treble that last amount. Annual income is nearly forty times the figure cited as public debt per person.

    We accept that we could do better by playing a more speculative and less defensive game, but it’s late(r) in the match; and we’ve gone for wealth preservation and predictable growth.

    As far as decay, we clear debt quickly. Paid off another property this week.
    Inflation helps over ten-year-periods, no doubt.

  133. Biker says:

    Off to see The Man, Ned. Will try to have some answers for you/us before the weekend is over… . Incommunicado for a while, although we have the laptop.

  134. Ned S says:

    Cheers Biker.

    Judging from that public debt link Ross, our debt per person is highish but as a % of GDP it is lowish. And that situation is much as it was a decade ago.

    Public debt is not so much the potential issue in Oz as private debt is my understanding though. In relation to that, I gather we barely rated a mention in the latest IMF forecasts except to say we face a “low-risk” threat of a housing crash.

    What’s your take on it all?

  135. Ross says:

    That’s my answer Biker. I sort of expected it from what you said earlier. All power to anybody in Australia that is clear of debt and owns property that can keep earning an income in tough times I reckon.

    Ned, I’m not much interested in public debt for Australia because we were still on the Clinton-Rubin-Summers public surplus-private binge consumer economy asset bubble right up until the GFC. If we use private debt to create false impetus in asset prices and domestic services trade it must end in an 1890’s external account bust whenever capital markets become stressed. That didn’t happen with US zero interest rate driven carry trade and QE. It isn’t happening now – look at the AUD. We’re blowing up our bubble again with fake carry trade global reserve dollar generated money. That’s why Watcher7 got it right. Don’t know why his waves are working and anticipating QE and carry etc but they seem to be on the money.

    Like my earlier post Britain and Ireland are cutting over to German opinion, and leaving the French and Spanish and Greeks and other latinos to the Americans and Mishkins and Stiglitz fantasy that bubble and deficit economies can keep getting cheap bonds no matter how irresponsible they are in order to finance public spending and bail outs.

    That kiwi-AUD has been in the zone, notice that every time things go awry up she shoots until the RBA and the banks can get their acts together.

    As for predictions – I have none other than short term AU assets prices, including property up. If I were the banks I would be trying to load up on 10 year AUD mortgage backed bonds while the carry trade and the mug punters buying in anything that has AUD on it still have legs. Short term can be very short in these currency war situations.

  136. Ned S says:

    “As for predictions – I have none other than short term AU assets prices, including property up” – I’m thinking in terms of Oz property down just now Ross.

    Currency wars – It should make for some interesting discussion between the G20 boffins when they get together next month I guess. Interesting to note the popularity of this book in China:

    http://en.wikipedia.org/wiki/Currency_Wars

  137. Stillgotshoeson says:

    Comment by Ross on 8 October 2010:
    As for predictions – I have none other than short term AU assets prices, including property up. If I were the banks I would be trying to load up on 10 year AUD mortgage backed bonds while the carry trade and the mug punters buying in anything that has AUD on it still have legs. Short term can be very short in these currency war situations.

    Comment by Ned S on 9 October 2010:

    I’m thinking in terms of Oz property down just now Ross.

    This is pretty much what I thought would be the scenario that we would be seeing when we had the inflation/defaltion thread earlier in the year Ross. I was leaning more towards an inflationary event and then a deflationary one.. I expect the deflationary event to be quite severe and will see the ASX and DOW touch new lows.

    As for the property market I expect Melbourne and Sydney to decline… Even during the “inflationary”. WA and parts of Queensland will still do OK with the mining and resource industries. Higher interest rates are already having a cooling effect on Melbourne and Sydney property markets.. A few more rises from the RBA and the banks throwing some in as well will be the catalyst for those two cities.

    If/when the world goes cold on resource economies, our dollar should drop like a stone.. WA property could well cop a hiding in that environment as well.. probably worse than Sydney and Melbourne.. Depends on how long “we” are on the outer. I am expecting a 25% drop in the Aussie against the USD at some point.. That is why I have called $3000AUD/Oz for Gold. ($2400USD/oz)

    I will be in the US next May through till September… Buying some USD now :)

  138. Biker says:

    Well, our trip to the accountant was an interesting exercise, Ned.
    It seems the questions we listed, then refined, were basically the wrong questions to begin the exercise.

    While the system we’ve been using for the last decade has worked well, it won’t deliver the same kind of results in retirement. We have been encouraged to start a SMSF, as you have done.

    The first question for us now appears to be purely mathematical. Is the hypothetical amount of tax we’d pay annually _outside_ a SMSF less than the amount of commission we’d pay an FA _inside_ a SMSF? It’s our suspicion that we’d be paying a FA 1% of ALL assets in the SMSF annually; as opposed to paying tax annually on just our _profits*_ if we don’t have a SMSF. Does that gel with your understanding?

    We now have appointments with an accountant whose _specialty_ is retirement; then a referral to an FA, if we decide to go the SMSF route.
    Frankly it seems a little ludicrous to pay an FA tens of thousands annually, when we intend to play our own game financially within the SMSF.
    Our belief that an FA would attempt to sell us on his own pet project(s), adding commissions to this initial major sum, was confirmed by our accountant.

    Back to the drawing board!~ :)

    * With a tax-free component on the first $44K; not $49K as we’d thought…

  139. Ned S says:

    “Does that gel with your understanding?” – If one is in a retail/industry fund (whatever they call them? I’m not at all flash on the details – Then I think one can fully expect to pay a % of the fund assets annually as the mgt fee is my understanding?) But in a SMSF one should be able to control (or at least ‘cap’) total costs far better if one specifically wishes to ‘self’ manage the fund. With that being a large part of what SMSFs are supposed to be about is my take on it?

  140. Ned S says:

    “Back to the drawing board” – Know the feeling – Tax regs have actually popped up in a recent yak or two with a mate – He advises that it could be wise to carefully re-consider some thoughts I’d previously had on discretionary/family trusts in light of the ‘Richstar’ case in 2006. We live in an apparently ever changing world I’m afraid. Keeps things interesting though I guess – What exactly did that old Chinese tongue in cheek curse say again? :)

  141. Biker Pete says:

    “…one can fully expect to pay a % of the fund assets annually…”

    Yes, that’s certainly the case with TTRs, Ned. As mentioned earlier, we now pay 1% annually on those two accounts, within an industry fund. But our TTRs represent just one third of our Super holdings. If all six holdings were amalgamated and then had 1% per annum levied, a FA could _live_ on the fees… and for _what_?!~

    So your comment: “…in a SMSF one should be able to control (or at least ‘cap’) total costs far better if one specifically wishes to ‘self’ manage the fund…” offers some comfort. The trick will be to find a FA who will a.) work with that ‘management’ restriction; b.) be very negotiable on annual fees. That appears to be the second step in the process.

    Never got to raising your question… sorry… or even most of ours.
    Few of ours fitted within the (new) context. We’d framed them within two alternative contexts (offsets vs annuities) and our accountant was so anti-annuities and pro SMSFs that our time remaining (after the main business of this year’s refunds) went entirely in that direction.
    He framed the exercise in terms of (leaning forward) “Now, what I’d do…” and considering his own bias towards property, his recommendations are interesting. The missus remains unconvinced… .

    So I guess the path forward must be running numerous hypotheticals comparing her offset plan to the SMSF plan. In the former, there’ll be some tax to pay; in the latter a FA to pay fees. We just have to choose the lesser of two evils! Confusion or Confucian Curse?!~ :D

  142. Ross says:

    Shoes, my backstop position saves me time and again. When the AUD says I’m wrong, then I’m wrong. Deflation will show in a lower AUD. A carry trade dollar off USD leverage and QE is more predictable and might underline your idea and watchers idea. My bet going the other way is in the intractible US consumer that is maxxed out on credit and upside down on the asset boomed services economy in anglo countries. I think everyone including the QE proponents and Bernanke underestimate the effects of the asset bubbles on the services economies on the way up and now on the way back. (ie: helicopter drops won’t work because they will always be too small short of hyper inflation). The pom with the double barrel name in the FT did the case on the London town houses and the effect of asset deflation and how it couldn’t be fixed with deficit spending. That remains my case. In between mister market and mr carry can change things in AU because we are at the whip end of money looking to escape USDville into commodities or commodity backed currency, and into “risk” narrative.

    So I stick to my guns for now but folliwng my line as an investor would see you slaughtered on short term positions. Thank God for the AUD back up and the NZD play to make the trading difference for the calendar year (if I get the same result again on this next wave). I’m still hanging long long on the ag positions and don’t plan to change soon. My short play back into energy services is negatively affected by USD contract/revenue pricing but has the carry to support the share prices. I’m not yet ready to invest into inflation as per your predictions but I am watching and respecting your view even if I still sit on the other side. We did see a pick up in the US 1st quarter based on stimulus more than QE I think and that is the threat to me (helicopter works without hyperinflation breaking out and only mild inflation – reflation).

  143. watcher7 says:

    Thanks Ross for the cue:

    The wave that I use, as I have mentioned before, ad nauseam, is the ‘Anglo-American Hegemonic Cycle’. I have just updated this part of the introduction to it:

    Stockmarket and the Future

    “Simply put, the socionomic hypothesis is that social mood generates social events, not the other way around. This is why the stock market – the primary historical database of collective optimism and pessimism – turns before pivot points in the economy and cultural expression. This is why major wars follow major bear markets. Social events occasionally give a clue to the character of social mood that lies ahead” (Editorial Staff, How Can You Use the Tax Revolt Indicator? elliottwave.com June 27, 2007).

    2000 and 2007 have been chosen for the peak of the American hegemonic cycle.

    2000 was the ‘valuation’ high for the Dow Jones Industrial Average stock market index. It was also the peak of the technological cycle corresponding to the high in the Nasdaq Composite stock market index – “It is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies” (Nasdaq Composite, Wikipedia).

    “… the Dow is among the most closely-watched benchmark indices tracking targeted stock market activity. Although [Charles] Dow compiled the index to gauge the performance of the industrial sector within the American economy, the index’s performance continues to be influenced by not only corporate and economic reports, but also by domestic and foreign political events such as war and terrorism, as well as by natural disasters that could potentially lead to economic harm” (Dow Jones Industrial Average, Wikipedia).

    “I consider the Dow to be the backbone of the U.S. economy,” said Richard Russell, editor and publisher since 1958 of Dow Theory Letters, a financial markets newsletter based in La Jolla, California. “It’s not a good sign when the Dow breaks down this way”” (Elizabeth Stanton and Jeff Kearns, VIX 26% Below 2008 High Points to U.S. Stocks Drop, bloomberg.com, June 27, 2008).

    The above observations and the one below is why the Dow is given preference.

    “Out of the big three US stock indexes, only the Dow 30 has been around long enough to chart sequential valuation waves through history. While the Dow was born in 1896, the S&P 500 didn’t arrive until 1957 and the NASDAQ Composite until 1971. So the Dow remains the king of ultra-long-term charts” (Adam Hamilton, Long Valuation Waves 3, zealllc.com, August 17, 2007).

    Trying to Prevent the Unpreventable

    “Household wealth in the U.S. fell 2.8 percent in the second quarter [of 2010] … leaving households 19 percent short of the $65.9 trillion peak in the second quarter of 2007, before the recession began. Net worth bottomed at $48.3 trillion in the first quarter of 2009, when the economy contracted at a 4.9 percent annual pace” (Bob Willis and Anthony Feld, Household Worth in U.S. Fell in Second Quarter, bloomberg.com, September 17, 2010).

    “… household net worth peaked in 1929 and didn’t hit a bottom until 1934” (The American Household Balance Sheet, bearmarketinvbestments.com, August 2, 2010).

    “… there at last is a dawning realisation among world leaders that the economic crisis has not passed; that it has simply been delayed by artificial stimulus and debt-shuffling from the private to the public sector on a frightening and previously unimaginable scale” (Ian Verrender, Global financial crisis not over yet, just delayed, smh.com.au, May 20, 2010).

    2007 was the ‘nominal’ high for the Dow Jones. The Great Recession began in December 2007. 2007 is the peak of the wealth-debt cycle; though debt peaked in 2008, this cycle is referred to as the ‘debt’ cycle.

    “For over 60 years after the second world war, household debt moved in only one direction: upwards. Then, in the second quarter of 2008, it started to fall – not just as a proportion of income, or after allowing for inflation, but in everyday dollars and cents. Between March 1st 2008 and June 30th 2010 households reduced their debts by $473 billion. Businesses and banks joined in later. Although the federal debt displayed on the Times Square clock is ticking remorselessly upwards, the true national debt, including households, banks and firms, is now lower than it was in the first quarter of 2009.

    “In 2008-09, for the first time since the 1930s Depression, consumer spending in real terms fell for two years in a row” (The Economist, Withdrawal Symptoms, economist.com, October 7, 2010).

    (The Dow ‘valuation’ and ‘nominal’ peaks coincided in 1929; in the last cycle, the ‘valuation’ high occurred in 1966 with the ‘nominal’ high coming in 1973. In the ‘major’ cycles 2000/2007 rhymes with 1825, 1873 and 1929).

    In the ‘valuation’ cycle – aka as the technological cycle – the boom after the 1920-21 recession, after the end of WW1, corresponds to the boom after the 1990-91 recession, after the end of Cold War. Cars and Radio in the former boom corresponds with Computers and Internet in the latter. (See James B. Stack’s, What’s Left of the New Era? (Radio vs Internet), prudentbear.com, May 19, 2000 for a primer).

    In the ‘debt’ cycle, the terror attack on September 16, 1920 in the heart of the financial district of New York, in a recession, when more than 30 people were killed and hundreds injured by a horse-drawn-wagon-bomb, corresponds to the terror attack of September 11, 2001 in the heart of the financial district of New York, in a recession, when more than 2,600 were killed by commercial-airline-bombs. Housing booms followed peaking in 1925 and 2005 respectively.

    The international crisis of 1927 has a ‘rhyme’ with the global crisis of 2007-2009 – a signal for a major sharemarket rally. But see point (3) below for the preference of the 1974-76 rally over 1927-29 for the chart above. While the duration of the 74-76 rally may rhyme with the duration of the present rally, the ending of the rally of 1980-81 followed closely by recession (81-82), may rhyme with the end of the present rally. The 1976 (1,014.79) and 1981 (1,024.05) rally highs were below the Dow nominal high of 1973 (1,051.70).

    A stockmarket crash leading to deflation and depression is the final act to correspond with 1929-33.

    (Total credit market debt was 176% of GDP at the stockmarket peak in 1929 and 287% in 1933 at the end of the Hoover recession; at end of 2Q 2010, it was 357% of GDP, double that of 1929).

    Not in introduction:

    Housing Booms

    1920s: “Furnishing another great stimulant to the economy in the 1920’s, was the expanding construction industry…The demand for new homes seemed almost insatiable following the wartime years when building had been greatly curtailed…” (Gilbert C. Fite & Jim E. Reese, An Economic History of the United States, (Boston: Houghton Mifflin, 1959), p.533).

    “From a peak of 900,000 new homes built in 1925, housing starts fell steadily during the last half of the 1920s, before plummeting to an all-time low of 90,000 in 1933. While construction did increase steadily over the remainder of the 1930s, the number of houses built in any one year never matched the annual increase in new families” (David L. Mason, From Building and Loans to Bail-Outs: A history, (Cambridge: CUP, 2004), p.129).

    “During the decade, developers and speculators opened up housing additions, and suburbs mushroomed around many American cities. In some instances, new real estate and housing ventures were characterized by rampant speculation. Promoters in the Florida land boom in 1925 sold lots in places which did not even exist!” (Gilbert C. Fite & Jim E. Reese, p.533).

    “A boom in Florida real estate drowned in a devasting hurricane in September 1926 [Compare the double hurricanes of 1926/28 and 2005/08]. Bank clearings in Miami sank from over a billion dollars in 1925 to $143 million in 1928, a chilling adumbration of the financial clotting that would soon choke the entire banking system…” (David Kennedy, Freedom from Fear, pp, 34-35).

    2000s: “The United States housing bubble is the economic bubble in many parts of the U.S. housing market that began roughly in 2001, especially in populous areas such as California, Florida, New York, the suburbs of Chicago in the Midwest, the BosWash megalopis, and the Southwest markets. It reached its peak in 2005 and then plateaued, and started deflating in 2006 and accelerated since…” (United States housing bubble, Wikipedia).

    “We have to consider the possibility that the housing price downturn will eventually be as big as that of the last truly big decline, from 1925 to 1933, when prices fell by a total of 30 percent” (Robert J. Shiller, A Time for Bold Thinking on Housing, nytimes.com, November 25, 2007).

  144. Stillgotshoeson says:

    @Ross

    My trailing stops prevent me from taking too big a hit.
    This current rise in the DOW and ASX is/will be short lived.. how short.. wish I had a crystal ball.. however I am expecting the defaltionary result that you are, I expect that, as last time, all this QE money is going to want to find a home short term.. US is still shy on property.. That is a good sign for Shares and Gold, at least in the short term for shares, Gold will get a longer run up.

    I respect your views also. Mr Carry and Mr Market WILL change things in AU.. I do not have a crystal ball but I am thinking less than 12 months for our dollar to take a dive.

  145. Biker Pete says:

    The two more analytical members of the family have just examined the major banks’ SMSF offerings, Ned. It appears that most offer a deal at half-a-percent on sums over a million. Reading the fine(r) print, there are per-hourly rates for any variations, eg., rolling property sales into the SMSF.

    The real catch _may_ be that you have to accept their less competitive rate(s) on cash(?) However, if true, this means that simply leaving it in Super means you’d be about $5K behind on each mil, due to Super funds’ ‘double’ fee of 1% on all funds.

    If we’ve got this right, there’s a real annual advantage in going into an SMSF, even if it’s with a bank… .

  146. Stillgotshoeson says:

    @Ned and Biker

    This will probably not effect you two. A financial report I subscribe too is talking about the government or a future government re introducing a Reasonable Benefit Limit to superannuation, including SMSF. Longer term tax receipts are going to be reduced and the government with the “tax free super after 60″ will losing large unsustainable amounts of revenue.
    A prominent mining identity has purchased a 15 storey office tower under his SMSF.. Geared of course under the borrowing for super rules.. and will receive the capital gains/rentals of this property tax free after 60.
    This has attracted the attention of the government. A change of rules will unlikely be retrospective but it is something that I and others may need to watch out for and adjust our investment plans.

  147. Stillgotshoeson says:

    @Ross

    “I’m not yet ready to invest into inflation as per your predictions but I am watching and respecting your view even if I still sit on the other side.”

    I don’t see a problem with sitting out either.. When it all falls over, and it will, having saved ones liquidity one would be in a prime position to ride the next rise. I have said previously that I am optimistic for the future.. still am. Even if I am convinced the market will turn down, it will eventually rise again.
    I have had some good returns this year by staying in the market.

  148. Biker Pete says:

    “A financial report I subscribe too is talking about the government or a future government re introducing a Reasonable Benefit Limit to superannuation, including SMSF.”

    Thanks, Shoes. I’d appreciate that link.

    We found your recent link on purchasing US property extremely helpful… as you may have noted from the star rating… and emailed it to the most likely affected family member.

  149. Stillgotshoeson says:

    It is a paid subscription Biker.. If I post it you won’t be able to access it.

  150. Stillgotshoeson says:

    They have a 21 day free trial…

    http://www.eurekareport.com.au/

  151. Ned S says:

    “The real catch _may_ be that you have to accept their less competitive rate(s) on cash(?)” – Have a chat to your bank about term deposits held in the name of a SMSF Biker. My pre-GFC recollection is that they weren’t penalized in any real way regarding lower rates. And if that’s correct, a bloke could simply spread his cash over multiple term deposits expiring maybe a month apart to ensure he always has reasonably ready access to funds.

  152. Ned S says:

    “A change of rules will unlikely be retrospective but it is something that I and others may need to watch out for and adjust our investment plans” – That’s my take on things too Shoes.

    If one of the concerns is a Reasonable Benefit Limit being introduced then it’s just possible they are looking at capping money going in more so than fiddling with what happens when one takes money out maybe? That would certainly sound more politically acceptable.

    But I fully agree that there are some pretty concerning potential legislative risks. And the younger one is the more likely they’ll get nailed by some unhappy legislative fiddle going forward.

  153. Ned S says:

    “It appears that most offer a deal at half-a-percent on sums over a million” – It’s still a fair whack of loot Biker given that my annual costs on a SMSF ex advice are maybe $2K max regardless of total assets and I’m pretty sure I could get that down a lot if I ‘shopped around’.

    In fact I feel pretty put out over the fact that I look like paying that much given the advice I got back in 2007 when I set the fund up was that the annual costs would be about $800 (or was it $700?). But anyway the guv in its wisdom has since forced SMSFs to be independently audited annually and that job creation scheme for the financial services industry is an additional and recurring cost. Plus another source of tax revenue for the guv of course!

  154. Biker Pete says:

    Ned: “….a bloke could simply spread his cash over multiple term deposits expiring maybe a month apart to ensure he always has reasonably ready access to funds.”

    Funnily enough, Son#1 advised us similarly, this morning, terming it the ‘ladder system'; but his recommendation was one year, two years, five years.

    We’d leave at least $100k in an offset, to provide cash as required, short term, if we adopt this approach. We’d still have numerous rents paid fortnightly, anyway.

    Ned: “…my annual costs on a SMSF ex advice are maybe $2K max regardless of total assets…”

    That looks very promising to us, Ned. As far as fees, we’d jump at any honest offer up to $5K per year or thereabouts. Our perception is that it’s essentially a rip-off; that the rip-off is unavoidable; and that the best plan is to minimise damage… . You appear to have achieved that happy situation!~ :D

  155. Stillgotshoeson says:

    omment by Ned S on 10 October 2010:

    “A change of rules will unlikely be retrospective but it is something that I and others may need to watch out for and adjust our investment plans” – That’s my take on things too Shoes.

    If one of the concerns is a Reasonable Benefit Limit being introduced then it’s just possible they are looking at capping money going in more so than fiddling with what happens when one takes money out maybe? That would certainly sound more politically acceptable.

    But I fully agree that there are some pretty concerning potential legislative risks. And the younger one is the more likely they’ll get nailed by some unhappy legislative fiddle going forward.

    That is basically what the writer says.. government will probably be putting limits on how much you can have in super and still get “tax free” and that any amounts over that amount will probably be subject to some taxation. RBL used to be around 1.3 million if I remember correctly.. When Costello introduced the tax free over 60 year old he probably did not evisage people buying office blocks under smsf’s for tax free purposes in retirement..

    The dollar question is how much will be “reasonable”? 3 million? 5 million?

  156. Stillgotshoeson says:

    @Ross

    The REIV expects around 1900 auctions over the next fortnight including 1170 in a fortnight, a number sure to test the level of underlying demand.

    I will be watching the Auctions in Melbourne the next few weeks…

  157. Steve says:

    The REIV expects around 1900 auctions over the next fortnight including 1170 in a fortnight, a number sure to test the level of underlying demand.

    This can NOT be correct stillgot, Australia has a housing shortage, things are different here and Australia is “SPECIAL” didn’t you know that?

  158. Ned S says:

    “we speak the same language as the Americans but” from your link Biker … As a Brit mate said to me once about Russians, Just because they look like us, don’t assume they are like us! (Or words to that effect.) :)

  159. Biker says:

    Giving credit where it’s due, it’s actually Shoes’ link, Ned. While we found it a little dramatic, it helps explain to novices some essential difference is property marketS, without beginning to touch on the critical differences between two disparate economies.

    Mine dew, we’ve caught agents out on some of the very lurks Rick describes. Back in the late sixties, my parents, who owned a beach cottage (rented when they weren’t using it) proved that the agents had continually let their holiday home during their absence, pocketing thousands themselves…

    The most important descriptions in this article, however, deal with the differences in construction and building standards. We’ve travelled continuously in North America since ’77… and because construction is so different, I’ve taken an active interest during every trip. Studying and working there for years at a time, I’ve been able to see homes built start-to-finish. Over a thirty-year period, I’ve been surprised to see the kind of shortcuts ‘allowed’. As you know, we were a little concerned when one of our kids flew his ‘buy-eight-apartments’ idea. We’re hoping Shoes’ link helps him understand why this project would be high-risk… .

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