Comments on: The Collapse of Complex Asset Values http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/ An independent perspective on the Australian and global investment markets Sun, 21 Mar 2010 02:37:34 +0000 http://wordpress.org/?v=2.8 hourly 1 By: Greg Atkinson http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/comment-page-1/#comment-63503 Greg Atkinson Fri, 30 Jan 2009 05:37:27 +0000 http://www.dailyreckoning.com.au/?p=4926#comment-63503 Pete, Gerry..the residential housing market in Oz looks great from where I am sitting here in Japan. Here I can only hope that the value of my apartment might hold some reasonable value in the future. By the way let's not forget rental yields and interest rates. Many landlords in Sydney might not have done well in terms of capital gains, but rents in many areas have been rising and interest rates falling, so it isn't all bad news. P.S. I posted some views about gold on the shareswatch.com.au blog..if you get time have a look and please feel free to comment. Pete, Gerry..the residential housing market in Oz looks great from where I am sitting here in Japan. Here I can only hope that the value of my apartment might hold some reasonable value in the future. By the way let's not forget rental yields and interest rates. Many landlords in Sydney might not have done well in terms of capital gains, but rents in many areas have been rising and interest rates falling, so it isn't all bad news.

P.S. I posted some views about gold on the shareswatch.com.au blog..if you get time have a look and please feel free to comment.

]]> By: Pete http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/comment-page-1/#comment-63377 Pete Thu, 29 Jan 2009 11:40:44 +0000 http://www.dailyreckoning.com.au/?p=4926#comment-63377 I can see where you are coming from Gerry, just remember that house prices 'depreciate' over time, it is only the land prices that 'appreciate'. This is especially important for apartments. So that means 10 years of making no ground is actually losing ground on the housing/maintenance side, ignoring capital gains in land prices. Sorry, don't take that as me disputing what you have said because what you have said is quite reasonable, especially disregarding housing as a pure investment. I guess I cannot dislodge my own thinking that housing will always be an investment of sorts, regardless of how I use it. A well thought out real-estate purchase could work out better than gold if: - gold becomes illegal - confidence in fiat currency reaches a high level (then buy even more gold!) - government intervention becomes significantly beneficial - national crisis, we all get conscripted! - a huge rental squeeze squeezes you out of your area (unlikely) - you need a hardcore fortress to defend from gangs and rioting in Australia's civil war (...) I think gold would be better than real estate if: - you borrow and interest rates skyrocket - gold goes up significantly in value - you ever need food or consumables more than the need to own your own shelter - we have hyperinflation (see above) There are probably things that can be added or disputed there. Okay enough from me, I see my name up in the comments too much I can see where you are coming from Gerry, just remember that house prices 'depreciate' over time, it is only the land prices that 'appreciate'. This is especially important for apartments.
So that means 10 years of making no ground is actually losing ground on the housing/maintenance side, ignoring capital gains in land prices.

Sorry, don't take that as me disputing what you have said because what you have said is quite reasonable, especially disregarding housing as a pure investment. I guess I cannot dislodge my own thinking that housing will always be an investment of sorts, regardless of how I use it.

A well thought out real-estate purchase could work out better than gold if:
- gold becomes illegal
- confidence in fiat currency reaches a high level (then buy even more gold!)
- government intervention becomes significantly beneficial
- national crisis, we all get conscripted!
- a huge rental squeeze squeezes you out of your area (unlikely)
- you need a hardcore fortress to defend from gangs and rioting in Australia's civil war (...)

I think gold would be better than real estate if:
- you borrow and interest rates skyrocket
- gold goes up significantly in value
- you ever need food or consumables more than the need to own your own shelter
- we have hyperinflation (see above)

There are probably things that can be added or disputed there.

Okay enough from me, I see my name up in the comments too much

]]> By: Gerry http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/comment-page-1/#comment-63365 Gerry Thu, 29 Jan 2009 08:53:06 +0000 http://www.dailyreckoning.com.au/?p=4926#comment-63365 Yeah housing market in many parts of Australia is generally overpriced, and in some mining towns in particular was just ludicrous.There will be a downward trend, but the reserve did raise interest rates to slow down housing bubble some time ago and whilst difficult because of rising unemployment, the landing will be a bit softer in majority of australian housing markets, that parrot like following of other countries.There are a number of differences between countries and markets within those countries and you need a better analysis than talking down everything. Houses will fall and many with multiple leveraged investments will suffer third degree burns, but there is a very solid floor that will be there at reasonable values, but not basement prices. By the way you goldbugs if you think inflation is coming down the track even when asset values are falling (asset depression stage ) then don't dismiss housing as a safe haven (as distinct from "investment")even if house prices are falling a little still.They may not go up for 10 years but it is a solid asset. I dont think it will necessarily happen but if money starts to loose value why does a house not make sense even if asset values are falling with the real value of money. Sure it is not happening now with general deflation.People still need them to live in you know. Not sure about gold although it has intrinsic and highly regarded historical value as a safe haven. Mostly because it could move with you when fleeing from countries etc. You cant eat it or live in it, and if you dont have personal possession of it then ... well good luck in a real crises. There is an element of smugness emerging amongst the great humour and well appreciated cynacism on this site,but it is all good "fun". Anyway thats enough for me. Yeah housing market in many parts of Australia is generally overpriced, and in some mining towns in particular was just ludicrous.There will be a downward trend, but the reserve did raise interest rates to slow down housing bubble some time ago and whilst difficult because of rising unemployment, the landing will be a bit softer in majority of australian housing markets, that parrot like following of other countries.There are a number of differences between countries and markets within those countries and you need a better analysis than talking down everything. Houses will fall and many with multiple leveraged investments will suffer third degree burns, but there is a very solid floor that will be there at reasonable values, but not basement prices. By the way you goldbugs if you think inflation is coming down the track even when asset values are falling (asset depression stage ) then don't dismiss housing as a safe haven (as distinct from "investment")even if house prices are falling a little still.They may not go up for 10 years but it is a solid asset. I dont think it will necessarily happen but if money starts to loose value why does a house not make sense even if asset values are falling with the real value of money. Sure it is not happening now with general deflation.People still need them to live in you know. Not sure about gold although it has intrinsic and highly regarded historical value as a safe haven. Mostly because it could move with you when fleeing from countries etc. You cant eat it or live in it, and if you dont have personal possession of it then ... well good luck in a real crises.
There is an element of smugness emerging amongst the great humour and well appreciated cynacism on this site,but it is all good "fun".
Anyway thats enough for me.

]]> By: BlackSwans&Economics http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/comment-page-1/#comment-63358 BlackSwans&Economics Thu, 29 Jan 2009 07:40:00 +0000 http://www.dailyreckoning.com.au/?p=4926#comment-63358 Thanks for the laugh Pete, I hadnt thought about "its different here" as IDH. Gee thats perfect for I'm D&^% Head for thinking its different here.. It will make me laugh everytime I here the spuikers use it. Ah the old IDH excuse. :-) Mate with 20 years of currency and Ag commodity trading and risk management experience. I cant believe the level of ignorance that exists amongst our so called Economists. Glad you said just some degrees I think mine has been put to good use over the years. Thanks for the laugh Pete, I hadnt thought about "its different here" as IDH. Gee thats perfect for I'm D&^% Head for thinking its different here..

It will make me laugh everytime I here the spuikers use it.

Ah the old IDH excuse. :-)

Mate with 20 years of currency and Ag commodity trading and risk management experience. I cant believe the level of ignorance that exists amongst our so called Economists. Glad you said just some degrees I think mine has been put to good use over the years.

]]> By: Pete http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/comment-page-1/#comment-63354 Pete Thu, 29 Jan 2009 06:26:12 +0000 http://www.dailyreckoning.com.au/?p=4926#comment-63354 BS&E: I think that 'they' would rip the method apart with the "it's different here"("IDH") arguments :( You nailed most of the factors there, but I think another factor that contributes to the "IDH" arguments is that Australia's economy has not been affected in parallel with other global economies. For instance, only now are we starting to see the housing correction take hold, but it is well established in the US and UK. Only now are we seeing the investment banks and highly leveraged companies complain, whereas this happened earlier in the other countries. I think we are seriously naive to think "IDH", ESPECIALLY because we get the pre-warning that it will happen to us! We are in the BEST position to adjust to the tough times BEFORE they hit because we see them occurring overseas. So what do we do? "It's different here" I think some economics degrees should be revoked. BS&E: I think that 'they' would rip the method apart with the "it's different here"("IDH") arguments :(

You nailed most of the factors there, but I think another factor that contributes to the "IDH" arguments is that Australia's economy has not been affected in parallel with other global economies.

For instance, only now are we starting to see the housing correction take hold, but it is well established in the US and UK. Only now are we seeing the investment banks and highly leveraged companies complain, whereas this happened earlier in the other countries.

I think we are seriously naive to think "IDH", ESPECIALLY because we get the pre-warning that it will happen to us! We are in the BEST position to adjust to the tough times BEFORE they hit because we see them occurring overseas.

So what do we do?

"It's different here"

I think some economics degrees should be revoked.

]]> By: BlackSwans&Economics http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/comment-page-1/#comment-63353 BlackSwans&Economics Thu, 29 Jan 2009 06:06:32 +0000 http://www.dailyreckoning.com.au/?p=4926#comment-63353 Does anyone else think it would be a good idea to use an analytical method which can indentify the bubbles that we know existed in other countries to look at the Australian market.? Maybe thats too revealing for the industry to consider. Believe it or not when you do, our housing bubble is far larger than anything the world has seen so far, except Japan in the early 90's Does anyone else think it would be a good idea to use an analytical method which can indentify the bubbles that we know existed in other countries to look at the Australian market.? Maybe thats too revealing for the industry to consider. Believe it or not when you do, our housing bubble is far larger than anything the world has seen so far, except Japan in the early 90's

]]> By: BlackSwans&Economics http://www.dailyreckoning.com.au/the-collapse-of-complex-asset-values/2009/01/29/comment-page-1/#comment-63347 BlackSwans&Economics Thu, 29 Jan 2009 05:10:50 +0000 http://www.dailyreckoning.com.au/?p=4926#comment-63347 Great article as usual. My question has always been why cant Aussies see that the big run up in house prices is nothing but crowding out caused by easy credit. They seem to all agree thats what happen in the US and UK housing markets but it couldnt have possibly happened in Australia. Next time you are read some flashy technical analysis (or simple clap trap from REI) for Australian house prices simply ask does their analytical methodology if used in markets we know had huge bubbles show them. You will get some reply like oh there is no bubble here Australia its different here, but if they cant indentify a known bubble from another country then how do they know there isnt a bubble here in Oz. So what is their analysis really worth. There are a lot of Alan Greenspans in this country, what bubble there is no bubble. Great article as usual. My question has always been why cant Aussies see that the big run up in house prices is nothing but crowding out caused by easy credit. They seem to all agree thats what happen in the US and UK housing markets but it couldnt have possibly happened in Australia. Next time you are read some flashy technical analysis (or simple clap trap from REI) for Australian house prices simply ask does their analytical methodology if used in markets we know had huge bubbles show them. You will get some reply like oh there is no bubble here Australia its different here, but if they cant indentify a known bubble from another country then how do they know there isnt a bubble here in Oz. So what is their analysis really worth. There are a lot of Alan Greenspans in this country, what bubble there is no bubble.

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