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Stimulating What?

Stimulating What?

Its official, “the economy is still on life support.”

“The economy grew 0.5 per cent in the March quarter, driven by a further 11.6 per cent rise in government construction spending, which accounted for more than all of the economic growth offsetting slides in business investment, private housing investment and exports.”

Peter Martin at The Age does quite a good job of outlining just how miserable things really are. His last line is rather out of place:

“Australia’s annual growth rate is still about 2.7 per cent.”

So it turns out stimulus spending works. Governments paying people to dig holes can make GDP jump. Who cares if the real economy is tanking?

Strangely enough, while the government was telling its employees (or contractors) to dig holes, it told the mining industry to stop digging them. More on that below. We’re sticking with the “digging holes for economic stimulus”, not the “digging holes to provide something of value to someone”.

The King of Stimulus was of course Lord John Maynard Keynes. And here is what he had to say about digging holes:

“If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is..”

The problem with all this is that it ruins the economy in the long run. Devoting capital, resources and employment to digging up a finite amount of money hidden in glass bottles can leave you suddenly empty handed and looking very stupid.

So the governments would have to bury more bottles.

Pretty soon, your economy would consist of filling glass bottles with paper (money), burying them, unburying them and paying your paper to the government in tax to be buried again.

Presto, full employment and a great GDP figure.

If the economy tries to revert back to providing something of value, it will notice that capital, resources and employment will have to be reallocated. This is not a fun process. It is called a depression. But if you don’t have the depression, you will continue to misallocate the capital into malinvestments, which turn out to be worthless to the economy in real terms.

To be fair to Keynes, he also mentioned to following:

“It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing”

So, the allocation of resources could be more sensible than digging up dollars. But the issues are the same. If houses aren’t being built by the private sector, it is because this would be a malinvestment; a misallocation of capital, resources and employment that would later be exposed as unsustainable, causing turmoil in that industry. So if the government builds houses anyway, you end up with that malinvestment and the resulting turmoil. A malinvestment remains a malinvestment.

The joyous part in all this is that Keynes advocates government stimulus just when the economy goes into a depression. In other words, just when the malinvestments from previous stimulus are being cleaned out of the system and capital, resources and employment are being allocated to a better cause.

Stimulus doesn’t save an economy. It bashes it back on track to ruin.

The Uncertainty Country

The other way to ruin an economy pretty quickly is to introduce uncertainty. It’s taken Kevin 07 several years to pick up on it, but better late than never. Strangely enough, announcing the Resources Super Profits Tax (RSPT) had a damaging effect, even before Kevin fully understood what it actually is.

So now the miners are reacting and it’s a bluffers game of Russian roulette with dice thrown in for good measure:

Monday: Top miners dig in against resource tax (The Australian)
Tuesday: KPMG predicts investment fallout over tax (ABC)
Wednesday: Miners turn down heat on resources tax (The Age)
Thursday: Rudd not intimidated by Xstrata deferring projects

So how will it end? Nobody knows – which is exactly the problem. Investment doesn’t like uncertainty and the government is giving it plenty. Mining investment is especially sensitive because of the delay in payoffs from the initial investment.

Sadly, political risk has been brought up and is likely to stay. So long, lucky country…

Debt Doom

The steady flow of debt rating downgrades continued last Friday with Spain as the latest victim. But what changed? How come the rating was downgraded after the austerity measures were announced? Surely being thrifty is good for your balance sheet?

Dan explained on Monday that “ratings agency Fitch said [the austerity] measures would damage Spanish growth prospects.”

Harvard’s economics historian Niall Ferguson has a good grasp on certain aspects of the crisis, but on this issue he seems to side with the ratings agency. He uses the sovereign debt racked up during World War 2 in his explanation of the three ways to get out of debt. You can grow out of it, decrease government spending, or raise taxes.

Which do you think is most politically viable?

But sadly, government driven growth gives you fake growth, as explained above. It leads to more of the same problems down the road. The strange thing is that Niall Ferguson is fully aware of this. He “would not be at all surprised to see another crisis in a relatively short time” because all the solutions to the crisis have only made the problems worse. He gives moral hazard as an example. And yet he supports government action to prevent a depression.

So, having a worse depression somewhere down the track is apparently better than having one now.

Ferguson is also a fan of Keynes, but it’s unlikely that the King of Stimulus would have approved of how his theories are interpreted. It seems the mainstream is advocating ruining the long run for the sake of the government statistic known as GDP.

But there may be more important things than GDP for governments to prop up. Themselves for example. If a government can’t borrow enough to keep GDP at the levels it deems appropriate, then the economy could really be in trouble. Even the legitimate services of government would suffer.

So what does Daily Reckoning Editor Dan Denning think about the implications of European nations struggling to fund themselves? He explained on Tuesday that the consequences of a sovereign debt crisis in Europe would hit banks holding that debt hard. And there aren’t many safe assets to sure up your capital base, so what do you do? Hold cash? Not while Bernanke and Trichet are behind the printing presses!

Degrading the Debt Downgraders

The EU has completely misinterpreted the Latin phrase “quis custodiet ipsos custodes?” (Who guards the guards?). Their latest plan is to “create a watchdog to curb credit rating agencies”. There will also be a “review of the way banks are managed”. So after basing bank capital adequacy laws on ratings given by companies paid to give good ratings, the government sees room for more meddling. Paul McCulley from PIMCO agrees with their analysis:

“[The breakdown of our financial system] was about the invisible hand having a party, a non-regulated drinking party, with rating agencies handing out the fake IDs.”

McCulley is right at the top of our least favourite people, so we will keep this short. The party got out of hand because the Federal Reserve was handing out free drinks. Holding the interest rates that bankers borrow at below the rate of inflation is like handing out cocaine at a rehab centre. Free thrills.

Supposedly “financial gain affects the same pleasure centres of the brain that are activated by certain narcotics,” so the metaphor is quite apt.

But of course nothing is free and the hangover had to come around. It didn’t last long, as interest rates went to 0 and the drinks began to flow again. Can you guess how this will end?

One noteworthy aspect of the EU plan to regulate credit ratings agencies is the timing of the announcement. Just as the sovereign debt crisis begins to spread and countries begin to see their bonds getting downgraded, they decide to extend their power over the rating agencies…

Going for Gold … going going gone

According to Zero Hedge, the US mint is out of gold and silver American Eagles (coins). Unprecedented demand happens to be the reasoning.

People all around the world are paying significantly over the spot price of gold for their coin investments, just to get their hands on something. Speaking of which, your editor has been reliably informed by an attractive local “expert” that Argyle Diamonds just happen to be good alternative to gold as an inflation hedge.

Some analysts believe that China is avoiding purchasing gold from the IMF, as this would give the gold price an unstable boost. Instead, their purchases are more covert, but still substantial.

Quotes of the week

Warren Buffet before Congress:

“The entire American public was caught up in a belief that housing prices could not fall dramatically… Rising prices became their own rational.”

Dan Denning, reading the Australian Financial Review, murmured the following:

“There are so many ads for government jobs in here. It’s really depressing.”

Until next week,

Nickolai Hubble.
The Daily Reckoning Week in Review

Nick Hubble
Nick Hubble is a feature editor of The Daily Reckoning and editor of The Money for Life Letter. Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like. He then brought his youthful enthusiasm and energy to Port Phillip Publishing, where, instead of telling everyone about The Daily Reckoning, he started writing for it. To follow Nick's financial world view more closely you can you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails.

44 Comments

  1. Stillgotshoeon says:

    Quotes of the week

    Warren Buffet before Congress:

    “The entire American public was caught up in a belief that housing prices could not fall dramatically… Rising prices became their own rational.”

    Luckily for us we live in Australia and it’s different…..

  2. Biker Pete says:

    “Luckily for us we live in Australia and it’s different… .”

    And Canada’s different too… . :)

  3. Realist says:

    Housing has been the catch cry of DR from day one, the general stance is one that is overvalued and going to fall dramatically. This hasn’t happened and in fact in the last 5 years it has grown exponentially to a point that a 3 bedroom 16sq home 43km from the city is $489per week (25 year principal interest loan at 7%) which is about 70% of the average take home wage per week.

    I can’t get my mind around how the average punter even affords this but with every weekend that passes hundreds of homes come up for sale and hundreds sell. The idea that Europe will cause a GFC II or a depression seems, like house prices falling, wishful thinking at best.

    I can’t get my head around how economies such as the UK and Germany who themselves are in financial turmoil, can bailout countries on the verge of faltering. It would be akin to barely paying my mortgagee every week but getting approved on a personal loan from the bank to help my neighbor’s pay their mortgages just so my house isn’t devalued by repossessions in close proximity and succession, I can’t see this to viable but it’s working for whole nations.

    On a side note, the biggest contagion they need to be concerned about is fear and panic, these two things can make a bad situation dire. This morning I went with a friend to have his Volkswagen serviced, and the experience put my mind at ease. Believe it or not the showroom was like a night club (it’s the biggest in OZ), people absolutely everywhere. The lady who sold him the car stopped to say hi and was saying that they had already sold 6 cars that day, keep in mind it was 10:20am. They can’t get enough staff or stock and are on track to sell about 200+ units this month which we worked out is roughly an $8-9 million turnover

    If there is doom and gloom in Europe it certainly doesn’t permeate the minds of the Australian audience, in fact by all accounts we feel we are invincible. This sort of mindset will either be down to naivety and we will crash and burn hard, or it will be a confidence (arrogance) that will see us through unscathed.

    Time will tell.

  4. Biker Pete says:

    “This sort of mindset will either be down to naivety and we will crash and burn hard, or it will be a confidence (arrogance) that will see us through unscathed.”

    Now _surely_ there are other realistic options? ;)

    Wish I had ten cents for every time I’ve read those last three little words.
    :)

  5. Ned S says:

    It’s pretty obvious some DR Australia readers would like to see house prices “crash” because they’d like to buy houses? Which seems a bit perverse – Hey you don’t see me hoping gold prices crash because I’d like to buy gold do you??? (And ditto for BHP and CBA shares for that matter!)

    Anyway, that aside, DRA’s game of let’s belittle the intelligence of all Aussies who own property by pretending they think statements like “ALL Oz house prices ALWAYS go up” are TRUE, has gotten tiresome. And detracts from the site’s credibility for mine. Which is unfortunate, because given what they do, the site IS a useful information source.

    Maybe there are a few morons who believe ALL Oz house prices ALWAYS go up??? But if so, I doubt they live in Sydney – Because if they did, they’d be UBER-morons!!! Just look at the ABS stats – Sydney (Oz’s largest market) was basically FLAT between Dec 2003 and Jun 2009. Then picked up maybe 16% – No big deal at all from what I can see? Unless one had a vested interest in seeing them remain flat/go down forever until it suited them personally to buy perhaps.

    Anyway, Sydney’s problems are Sydney’s problems – Providing they don’t want to nick too much loot off me to keep their tired old economy and some geegaws like their opera house functioning, I really DON’T think I care that much. :)

  6. Ned S says:

    Full credit to Sydney for not building a kangaroo shaped island in Botany Bay though! (I can only assume no-one thought of it? :) ) Mine dew (as Biker says), if it was Brissy, we’d probably have built a football shaped island in Moreton Bay; Along with some goalposts and an image of King Wal with his shorts hitched up above his hips! :)

  7. Biker says:

    “It’s pretty obvious some DR Australia readers would like to see house prices “crash” because they’d like to buy houses?”

    Ned, how could you think such a thing? It implies that inside every goldbug there’s a rampant property bull raging to get out. (The visual imagery makes even ‘Alien’ look tame… . ;) )

    But your main point is spot-on. I’ve never wasted a breath wishing gold would crash, so that I could pick up a few kilos for $600/oz. Hell, I don’t even care if it jumps to $6K per ounce! Think of the housing shortage _that_ would create!! Have to admit that if gold fever reaches those heights I’ll buy a Minelab GPX 4500 and spend my winters camping at Rothsay and Payne’s Find…!!~ :)

  8. Ned S says:

    In Pharaonic times, four things had value – Gold, ivory, property and slaves. Ivory has fallen from favour. Gold’s likely to go the same way – For mine; For much the same reasons. But property and “slaves” remain sound investments. With the trick being to keep the “slaves” from pinching one’s property!!! ;) DRA’s a hoot! :)

  9. Ned S says:

    “It implies that inside every goldbug there’s a rampant property bull raging to get out” – I wouldn’t necessarily think that of ALL bullion investors Biker. Some of them live in countries where houses are (comparatively) cheap? But yeh, in Oz, that statement certainly seems to have significant validity! :)

  10. Ned S says:

    Hey Biker, I’ve come up with some really good ideas – If we do away with neg gearing and CGT; And up stamp duty and bring in a REALLY BIG land tax, PLUS put a 40% Super Tax on all profit made by individuals and tradies and developers and retailers and banks on ALL profits made over the Oz bond rate, we could absolutely CRUSH ALL profit in the Oz housing game … Wat’cha reckon – Ned for PM? :)

  11. Biker says:

    Hey Ned, check this out. It appears share buyers actually get _better tax concessions_ than property investors:

    http://www.perthnow.com.au/money/investing/shares-ahead-of-property-in-tax-treatment/story-e6frg2v3-1225874372015

    Since rental homeowners are addressing the second most critical need of the population, tax benefits probably need to be increased… . :)

  12. roy says:

    US hedge funds dump Australian bank shares

    AUSTRALIA’S biggest banks have become the victims of aggressive international hedge funds, which are shorting the banks’ stocks after growing concern about the strength of the domestic property market.

    A New York hedge fund manager, who did not want to be named, said sentiment towards the Australian banks had soured because of doubts that the strength in the national property market would be sustained.
    “There’s a lot of scepticism in the US regarding the Australian property market,” the hedge fund manager said.

    “A lot of people have doubts about whether the strength of the market is going to be maintained.

    “I think it’s the case funds are shorting the banks. If you’re of the view that property is going to come off, then shorting the stocks is a very clean way to express that view. It’s an attractive trade.”

    Westpac is thought to have been targeted most heavily by hedge funds because of its large residential mortgage book, which has grown rapidly over the past two years.

    http://www.theaustralian.com.au/business/us-hedge-funds-dump-australian-bank-shares/story-e6frg8zx-1225875702144

  13. nv says:

    Oh no, not austraalia, puuuhleaaaze. Australians live in a spiritual crystalline abode faaaaar from the maddening crowd. There is no bubble of any sort here. Nope. No bubble here. Property always go’s up because it always go’s up here in the wonderful world of oz. True, ask anybody, anyone who’s ever bought a property to live – in. They will tell you that yep we bought back in 1988 and now it’s worth whatever but we’re not selling because want to actually live in it.

    Why let’s have a double negative gear I say, yep, double negative gearing. Why not? That’ll take care of the shorting hedgies. And who takes these short sellers seriously anyway? Nobody, nobody at all they count for nothing. Ban the shorties I say! Globalisation is a scam no need for it so ban the shorties. Protectionism is the key. Protect us all and ban short selling.

    Half is still half so when super funds lost half they still had half. Now surely property can’t halve can it? It doesn’t matter ‘cause you – still – get – half. Keep halving ad infinitum you still – have – half. Pocket change but nonetheless, half.

    Think I’ll gazump at the next auction and get me self a thirty year mortgage or some thingy just to partake and not be left out.

  14. Tar and Feathers says:

    1. Housing has been the mainstay of all western economies – we should treat building like any other manufacturing ie factory build to sell domestically and sell the surplus overseas alternatively wind back production – if your production is low labour intensive you reduce on the overtime of workers….the building industry is highly inefficient and is locked into the old craft system hung over from the middle ages. But you can see that building has a social impetus to it.
    2. Aus is heading south we currently borrow money to carry service industry economy we have very little manufacturing, DR “There are so many ads for government jobs in here. It’s really depressing.” This is a repercussion of the Lima agreement http://www.ja.olm.net/succeed/Pages/limadecview.htm ~ where “….The New Economic Order is mentioned no less than 21 times in The Lima Agreement,….” Aus have always snivelled to the World the 1900 Constitution Act bound us to a British conflict in 1913…..etc etc. Aus is an immature culture waiting to be swallowed up and the USA will betray us like our pollies have.
    3. If we had manufacturing using the super funds prior to them being ripped off and other domestic savings we would not be having the turmoil of the sovereign resource tax, because we would be like India and prevent resources leaving the country use them ourselves and build a defence arsenal and say to the rest of the World come get it if you dare….we are hopeless there too http://www.theaustralian.com.au/news/nation/military-not-ready-for-war/story-e6frg6nf-1225697610494
    4. HYPOTHESIS: Japan will never recover form its depressive process until it takes over sovereign owner ship of land, owning the resources is the first stage….enter China and the miners handing over our sovereign wealth….the stocks fall you say? poor mums and dads and investors in property banking in windfall mining towns
    5. NEW WORLD ECONOMIC ORDER – World Stimulus……..let’s just cut to the chase and do a deal with Japan and China we can’t develop Aus sensibly under the current World economic criteria, eg filling the place up with dumb immigrants and robbing the 3rd World of intellectual infrastructure is not going to work….let’s reset the 1900 Constitution, it was nice and friendly but pointless and establish a form of ‘Brisbane Line’ eg we relegate the Commonwealth to the confines of the borders around Qld, NSW, maybe Vic. China and Japan would need to make concessions to things like illicit arms dealing and whaling and the population of Aus limited to say a UN mandated ecological footprint (formulated to sustainability and Terra forming) which would translate into say a maximum of 150 million soles (total of Aus) with the whole world would HAVING to follow (eventual less than 3 billion in total world population)… a workable economic pact, defensible, sustainable (Terra forming of interior essential), prosperous.
    6. CONCLUSION: Aus cannot build itself up to be a credible nation we do not have the historical ethos, the will to be industrious…borrowing from the rest of the World so that dole recipients can go to the beach, get serious. You are worried about houses (and commercial) crashing that is blimp….because Australia needs to crash before we wake up to the New World Economic Order. The agenda has been set, go to the footie or pub, you can’t do a thing our leadership is weak and people weak minded. BTW its independence that is always the issue not the ownership of individual things, which will change too.

  15. Stillgotshoeson says:

    Melbourne Auction Clearance rates over the last 6 weeks… 85%, 83%, 81%, 75%, 73%, 70%

    There was a rumour going around that there was a shortage of properties and that is what has been driving prices.. REAL ESTATE INSTITUTE OF VICTORIA says there has been an unseasonaly high rate of properties available this Autumn.. so there IS plenty of supply… Demand is waning. 300 Auctions scheduled for this long weekend (traditionally a slow weekend for Auctions) the week end after there is 1000 scheduled for Auction.
    Depending on who’s figures you use the average price of a house in Melbourne is $524k or $545k.
    End of year should see it sub $500k

  16. Biker says:

    NV: “Property always go’s up because it always go’s up here in the wonderful world of oz.”

    Clearly a brilliant mind at work here… . You don’t have to wonder about his _Mathematics_ either:

    “Half is still half so when super funds lost half they still had half.”

    Stunning… . ;)

  17. Biker says:

    “End of year should see it sub $500k”

    Let me guess. You’ll walk from Melbourne to Mount Fuzzioscko if it’s not.
    Love it when a punter is so specific… . :)

  18. Ross says:

    Well the AUD was the signal that the hot money flow went negative but the XXJ has a long way to run. They are starting to leak now about their early 09 staring insolvency when they had no access to wholesale funding.

    http://www.bankingday.com/nl06_news_selected.php?act=2&stream=1&selkey=9951&hlc=2&hlw=

    Trouble is they are going into a bigger 12 month funding need as a total of their balance sheet right now than they had in Nov 08. Westpac has to role +45% of the wholesale bonds in the next year. The bond profile used to be an average of about 7 years. The € has kicked off deleveraging again back in the US, it is under 1.20 this weekend. Panic margin calls off hyper leveraged USD sero interest source terms and b/s derivatives underwriting risk quality, the currency swap, and what they all know as bad collateral in the € assets at the bottom of the ditch

  19. Steve says:

    Clearly a brilliant mind at work here… . You don’t have to wonder about his _Mathematics_ either:

    Yes Biker thats right you don’t have to worry about his mathematics because the residential property market of the commonwealth of Australia is above mathematics and is SPECIAL, didn’t you know that?
    Get with the times!!!

  20. Biker says:

    Yes, it _go’s_ without saying, Steven. ;)

    Mate, I’ve found you a location with cheap property _AND_ a job:

    http://www.maplandia.com/spain/airports/moron-airport/

  21. Lachlan says:

    Hey Ross and Shoes
    Great call on the USD rally Ross..you win :) …lucky for me gold is on the safety bus too as hoped for although silver looked a little unhappy at end Friday.
    The markets are hovering at/near important support levels. Sayce thinks we’ll get another liquidity rally. I dont know about that but I am hoping to play a bounce, or conversley a short set-up if things break down. What do you reckon? Is it possible for the PPT to save this sham?
    I’m looking forward to this week.

  22. Lachlan says:

    At least the DXY has plenty more to run from what I can see. Not sure if that necessarily bodes anything for the ASX200..or the dow.

  23. Stillgotshoeson says:

    Comment by Biker on 6 June 2010:

    “End of year should see it sub $500k”

    Let me guess. You’ll walk from Melbourne to Mount Fuzzioscko if it’s not.
    Love it when a punter is so specific… .

    I can see how it appeals to the 10 year old in you… I am sure you have cpoied and pasted the comment, URL and Thread Topic for future reference…

    Late Jan/Early Feb next year the December Quarter house prices are out and if I am wrong you will plaster the forum with “hey everyone rememeber when Shoe_son said this” (insert quote) ” I do”, ” He said on this date right here… here is the thread, here is his comment HAHA wasn’t shoes a fool HAHA”

    Here is our similarity… we both hope I am wrong… reasons are different though, you hope I am wrong for above.

    I am pessimistic for the short term future of the Australian (and world) economies.. just because I think it will happen does not mean I want it too happen..
    If I am wrong amd we do not see the decline that I think will occur (mind you less than 10% correction on those figures) that means all is still reasonably OK with the economy.. How is that a bad thing?
    I am quite happy to be wrong…
    MR Biker (addendum) Pete however can not…

    Property Property Blah Blah RA! Ra! Yeah Yeah Yeah… PROPERTEEEE!!!!!… then you say, Might offload one of our poore performing properties… Then it’s Property Property Ra ra ra again then the addendum.. might sell a few if interest rates go 10%.. Then it is attack the goldbugs.. goldbugs humbug goldbugs dumbugs then you put your little addendum in… Oh if gold goes up might sell a few ounces I have had floating around… then it is back to goldbug humbugs dumbugs then the addendum if gold goes $6000 going to buy me a fancy detector….
    No clear position… a forum full of Biker Pete posts that swing with the breeze..

  24. Stillgotshoeson says:

    Comment by Biker on 6 June 2010:

    NV: “Property always go’s up because it always go’s up here in the wonderful world of oz.”

    Clearly a brilliant mind at work here… . You don’t have to wonder about his _Mathematics_ either:

    “Half is still half so when super funds lost half they still had half.”

    Stunning..

    You must be short Biker Pete… his sarcasm went right over your head it seems..

  25. Stillgotshoeson says:

    Comment by Lachlan on 6 June 2010:

    Hey Ross and Shoes

    The markets are hovering at/near important support levels. Sayce thinks we’ll get another liquidity rally. I dont know about that but I am hoping to play a bounce, or conversley a short set-up if things break down. What do you reckon? Is it possible for the PPT to save this sham?
    I’m looking forward to this week.

    Still to early to call either way.. Fear and Greed are the drivers.. Capitulation is not on the horizon yet.. I expect thast to occur when Central Bank money runs out. That is not showing signs of stopping yet.
    Market this week is just as likely to go up 5 or 6 percent then back down 6 or 7 percent..
    A lot of fluctuation is to be expected at the moment.. Computerised set buy and sell levels are in play.. market sells down to a buy trigger and buying happens and the market turns again.. This is day trading heaven for those inclined to do that sort of thing…
    All this money put out by the central banks needs a home.. will it go to Mr Market and drive everything up or will capitulation by Mr Market occur first is still an open question.. If you can handle volatility and want to day trade the market is good, if you want to stay out till a definite trend develops that can be good too.. I am still heavy in Gold at the moment as I see that as the most promising for upside.. Have not capitulated all my non Gold shares.. inclined to keep whjat I have got in regards to them and ride it out.. Cashed up for opportunities that may present.. including just looked at 198 acres, an hour and a bit North of Melbourne…

  26. Lachlan says:

    .. I am still heavy in Gold at the moment as I see that as the most promising for upside..

    Couldn’t agree more Shoes.
    AUD gold is looking great too on the back of weakening AUD.. Hoping cattle prices do well too. A punt on the market index right now is risky as you say.. I’m guessing a liquidity bounce not so much a rally to higher highs but waiting for something to confirm.
    Are you an early bird for rural property Shoes or are you looking for discounts?

  27. Biker says:

    “You must be short Biker Pete… his sarcasm went right over your head it seems..”

    Coming from a bloke _who is_ still learning English I find that highly amusing, Shoes. No punctuation outside the English language, I know. :)

    And no, I hadn’t ‘cpoied’ your ‘poore’ post, but thanks for the hint.
    I’ll copy it now… . Looking forward to seeing your sub-$500K medians in Melbourne, son… and your $5K gold…. by the end of the year.
    And no, I won’t bother taunting you about it (much)*.

    “…if gold goes (to) $6000 going to buy me a fancy detector….”
    You must be horizontally-challenged yourself, Shoes… .
    My sarcasm went right over _your_ head… . ;)

    * Wouldn’t have bothered at all, but I see your anxiety results in multiple typos, so an occasional reference to your blather may help temper your wild online prophecies… . :)

  28. Stillgotshoeson says:

    Comment by Lachlan on 7 June 2010:

    Are you an early bird for rural property Shoes or are you looking for discounts?

    No.. Just had a look, saw it in the paper and thought I would have a look…

    Comment by Biker on 7 June 2010:
    Looking forward to seeing your sub-$500K medians in Melbourne, son… and your $5K gold…. by the end of the year.
    It is $3000AUD for my call on Gold BTW… and not years end.. best clarify that now hey ;)
    And no, I hadn’t ‘cpoied’ your ‘poore’ post, but thanks for the hint.

    True to form, some one touches a nerve in you and it is straight after the typos….

  29. Biker says:

    “some one touches a nerve in you and it is straight after the typos….”

    I imagine that with the current situation, you’re the nervous one, son.
    It certainly affects your accuracy when you’re in a swinging mood… . :)
    I let most of your ‘typos’ go past without comment, Shoes. It’s important to record your wild guesses for posterity, though. As per _your_ suggestion, I’ve now done that… . :)

  30. Stillgotshoeson says:

    Comment by Biker on 7 June 2010:

    Shoes. It’s important to record your wild guesses for posterity,

    Difference between you and me… I can handle being wrong… and being more pessimistic.. If I am wrong that’s a good thing ;)

    If the words of wisdom that you have spewed forth turn out to be wrong.. Well that will be a bad thing, won’t it? ;)

  31. Biker says:

    “If the words of wisdom that you have spewed forth turn out to be wrong.. ”

    This from a bloke who calls another man’s city a ‘sewer’. (Well after he’s left it, of course… and from the safety of the internet. ;) )

    Two of your comments did, however, raise a smile: 1.) “Here is our similarity… we both hope I am wrong… reasons are different though, you hope I am wrong for above.” 2.) “Difference between you and me… I can handle being wrong… and being more pessimistic.. ” :)

    Frankly, I don’t give a toss about our similarities… or our differences. Nor do I care if Melbourne medians fall or rise. If gold reaches the $5K you once (jokingly?) conjectured it might, I could not give a rats. But I do take exception to smart alecks who can’t stomach their own cesspool then gleefully predicting the same kind of sh*t for their adopted refuge.
    Yep, you’re a class act, Shoes, autographed hero tome and all.

    This could go on for days. I’m sure we’ll bore others spitless, if we haven’t already. You’ve made your predictions. I’m happy to let those ride ’til Christmas. So take a shot. I’m happy to let your crap flow by without comment, as I usually do… . :)

  32. Ned S says:

    If I was interested in buying rural property in Oz I think I’d ask Biker and Lachlan their thoughts … They both sound like they have a reasonable amount of knowledge/experience re same? :)

  33. Ant says:

    So is anyone wondering why everyone is deciding to sell their houses now. Cashing in their profit I presume and getting out of a sinking market? Given that lending to owner/occupiers is continuing to fall, if investors decide that it is not a good time to buy could there be an avalanche on the cards?

  34. Ned S says:

    Just saw another property over this way that might be reasonable value for money. Under $330K – For what appears to be a pretty respectable and reasonably new little home – In amongst all the other $380K, $480, $580 and higher asks in the Brissy boondocks. (With plenty of stock on the market.) Could be there’ll be a bit of a window of opportunity open up for a year or so like back in 2008?

  35. Ned S says:

    “If gold reaches the $5K” – I’ll be the fat grey bearded black hatted old b@stard lined up down on the Victorian “Go Line” with his metal detector and spade all ready to get at the underlying nuggets easy as the guv institutes their Burn the Bush and All Rural Housing to Get the Bullion Now policy! :)

  36. Biker says:

    “I’ll be the fat grey bearded black hatted old b@stard lined up down on the Victorian “Go Line”

    http://www.youtube.com/watch_popup?v=NINOxRxze9k

    Thought I recognised you _after_ the Gold Rush, Ned… .

  37. Steve says:

    So Ned is that bad news or good news?

  38. Ned S says:

    Gold at significantly higher multiples or lower fractions of where it is now in a relatively short period of time – The great majority probably wouldn’t be enjoying it although Bill Bonner would presumably be consoling himself with the thought that in theory this must be a good thing while Goldman Sachs would either be making squillions in profit or lining up for squillions in bailout booty.

  39. Stillgotshoeson says:

    Comment by Ned S on 7 June 2010:

    If I was interested in buying rural property in Oz I think I’d ask Biker and Lachlan their thoughts … They both sound like they have a reasonable amount of knowledge/experience re same?

    Property is not an investment decision for me.. Shelter and security.. I have shelter now, I have security now. My investments have out performed property in its run up… Property is going to go backwards or at best stagnate (go backwards due to inflation) Property does not correct and stagnates, I have 15% pay rise over 3 years.. property is 15% cheaper to me by default. I expect property to go backwards, some areas more than others, I still expect to outperform property market with investments. Early retirement is looking good, maybe 45 will be a good age to retire.. things don’t pan out quite as well then 50. I can live with that. Retirement with clear title on a house is appealing.. I live in the city because that’s where my work is.. when I am no longer working I intend to move away from the city, was always the plan.. just have not decided where out of the city/country.. might even go out Perth way, alot of UKr’s out there.. There is this bloke out that way too… might have a glass of red or a pint o ale and talk about the good ol days…

  40. Ned S says:

    I’ve been happy enough with early “retirement” to date – Although the Great Recession has certainly given me a few things to think about. Housing – I see it as shelter and security as well – Plus a hobby and an investment. (Albeit one that some reckon has overperformed of late and could underperform for a while.) Yeh, I know some blokes over Perth way – A Brit, an Indian and an Aussie especially come to mind – They all seem to enjoy a quiet tipple! :)

  41. Stillgotshoeson says:

    Comment by Biker on 7 June 2010:
    You’ve made your predictions. I’m happy to let those ride ’til Christmas.

    results probably won’t be in till Feb ;)

  42. Ned S says:

    Maybe the Blues felt miffed by that report? It would appear they have decided to stimulate their residential RE market a bit more:

    http://www.businessspectator.com.au/bs.nsf/Article/NSW-stamp-duty-cut-to-zero-for-some-6852Z?opendocument&src=rss

  43. stavros says:

    A bit late on this thread but i’m stunned the anti stimulus rants such as above still get a run in the modern era. Amazingly ignorant in both terms of capital allocation and understanding of economies not running at full capacity.

    I’m sure the author has never read anything by Keynes other than cherry picked quotes from other ideologically like minded sources.

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