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The Great Correction: Awaiting Bailouts that Will Never Come

We’re going to rename our theory. This is more than a depression; it’s more than a financial and economic phenomenon. It includes a shift of power…a return to normal after 4 centuries of aberration…and the failure of a whole line of Nobel Prizing-winning economic claptrap, including the Efficient Market Hypothesis and Modern Portfolio Theory. Let’s call this phase “The Great Correction”…and wait for events to prove we’re right.

In the meantime…we await clarification…

When will this bounce end? What will happen when it does?

Yesterday was another inconclusive, information-free day. The Dow rose 17 points. Gold went up $5. Oil fell to $79 a barrel.

But the deep trends continue. The government grows…and heads towards bankruptcy. Most developed nations are running huge deficits in their public accounts. The one that has been most in the news is Greece. The Hellenes promised to cut their spending, rioted in the streets, and now hope for some back-up plan from Europe. The rest of the PIGS (peripheral European states, with good food and wine, but bad finances) watch carefully. What Greece gets now they’re likely to get later.

But the problem is hardly limited to the small states of Europe.

Barron’s reports that the states face “massive shortfalls” in their pension programs. This is in addition to the other massive shortfalls faced by governments all over the planet.

“US ratings threat,” is the headline on today’s Financial Times:

“Moody’s Investor Service will warn the US today that unless it gets its public finances into better shape than the Obama administration projects there would be ‘downward pressure’ on its triple A credit rating.”

Moody’s learned a lesson last year. You take money from the ratee. You give a good rating to junk. Then, people point their fingers at you and sue when the junk goes bad. The raters don’t want every Treasury bond holder in the world at their throats.

The US is going broke; no doubt about it. Of course, it may take years…

What the hell? We can wait…

Some Treasury buyers aren’t waiting until the last minute. “China continues selling US Debt in January,” comes a report from The Wall Street Journal.

Japan too, adds Bloomberg.

Japan, of course, faces a financial crisis of its own. It already has government debt greater than 200% of GDP…and its aging citizens are saving less money each year. Pretty soon, it will be unable to finance its deficits. Then what?

Then, yields will rise and Japan will face a crisis similar to that of Greece.

And what about China? Even countries with sound budgets can take huge financial hits.

“China may face massive bank bailouts,” Bloomberg reports.

Yes, dear reader…China has a solid budget…and industries that make money. The trouble is, it has too many of them. And now it’s made the mistake of stimulating them to increase production – as well as increasing infrastructure – at the worst possible moment, just as their major customer goes into a funk.

So, while China’s state finances are in good shape – at least on the surface – its private sector finances are a mess. They are such a huge potential mess that one analyst refers to China as the ‘mother of black swans.’

Who’s going to bail out China’s banking sector? Who’s going to bail out Greece? Who’s going to bail out Japan? Who’s going to bail out the US?

Day by day, the lumbering, clumbering wheels roll on…towards bigger governments with greater debts… One government looks to another one to help it out. The other looks to yet another. One nation depends on its central bank…and its central bank depends on the US Federal Reserve, the capo di tutti capi of all the world’s central banks.

Regards,

Bill Bonner
for The Daily Reckoning Australia

79 Comments

  1. wtf says:

    “Japan … will be unable to finance its deficits” and “Japan will face a crisis similar to that of Greece”
    Did I read that correctly? Are you comparing Greece, who surrendered it sovereignty to the European Central Bank, to Japan who is the *sole* creator of Yen? Do you really think the only people who create Yen will not be able to pay debt in Yen? Come on…

  2. Glen says:

    Who is holding all of the credit if the public and governments have all of the debt? Who owns the planet when the whole economic system collapses? Im sure some people will claim that they do because they have the piece of paper that says so.

  3. prozak says:

    wtf,

    not many people (including our pundits on DR) understand that a country creating debt in a sovereign currency cannot go broke.

    Zimbabwe are yet to default.

    I realised long ago that the DR is not going to let facts get in the way of a good story.

  4. Ron says:

    The world that we created is built simply on illusions (with all of its perceptions). When the veil finally drops the illusions ends and reality sets in. The economy is only a symptom of the world we crated, including all of its social/economic components. Sorry to get all transcendental but if your looking for real root causes, beyond economic formulas and analysis then you need to simply consider human nature. More is better at any cost. The way nature handles itself (the natural order of things) so should we allow free markets to handle themselves. A big wolf eats a little rabbit, and so should a stronger company consumes a weaker company (a tree dies another grows). Playing with the natural order of things (i.e. stimulus spending, bailouts, and manipulations of all sorts) will always prove to be a loosing game in the long run.

  5. GrassRanger says:

    Prozak: “Zimbabwe are yet to default.”

    No, Zim did not default formally, it just printed itself into oblivion and its citizens into penury. The effect on the country was approximately the same: poverty for its people.

  6. 89peterg says:

    ron, do you think that the aboriginal australians traditionally allowed their fellows to starve? everyone had a part to play. sure, bludging was not an option, but rampant individualism was inthinkable too. more was not better at any cost eg fireburning was limited, hunting grounds were allowed to renew. though you could argue that these limitations were imposed through natural and social selection by nature (contra – easter islanders demise) – but youre right with modern, abstract, life. it knows no bounds (yet).
    to assume that nature is dog eat dog and that we should emulate it is to argue for business as usual, even more so. just half way through reading Cormac McCarthy’s “the road”.. now theres some harsh reality for you.

  7. John says:

    Within the tribe those rules applied, Peter, but our indigenous people often raided each others’ camps for gain, including taking women from them. I agree that the nomadic life, including summer and winter camps, did allow rejuvenation, but it’s likely that some sources of food were depleted, forcing walkabout, anyway.

    Survival in a harsh world, whether past or present, introduces all kinds of ethical dilemmas. Knowing that there were skin-group taboos in place, was it wrong for raiders to steal women (protecting their tribe’s genes)? Is it wrong for corporate raiders to consume smaller companies, to preserve their own continuity?

    No right or wrong answers here… . I’ll look out for the book.

  8. dan says:

    prozack,
    so zimbabwae have not defaulted – thats ok then?
    The fact is that the economy and the nation have regressed into being some bongo shithole due to inflation, money printing and a complete economic and social collapse is OK?

    Default happens by either non-payment, partial non-payment and inflation.
    When are you and wtf moving to zimbabwae?

  9. Ross says:

    All 7 responses above have merit for mine. On sovereign debt, the sound of the alarm bell is most often a political device as wtf and prozac say.

    The trade account and capital account do however in the end matter as evidenced by ZIM.

    Of all the factors ZIM was most emasculated by the CAP (it got no special provisions like NZ because it was a bigger threat on broadacre farming and it had even hastened the UK’s abandonment of Smith). Then the transition money /reparations money agreed to be paid by the Brits in negotiations under Chatham House Rules was never fronted.

    And then the economic sanctions regime that was progressively tightened over 2 decades. If you has imposed those same sanctions on Australia we wouldn’t have had the CAD problem but we would have had a frightening basket case economy too.

    That Brit promised cash was conceived as the capital for creating enterprise that would induce poor rural workers to leave farm jobs that were not feasible except under apartheid second class citizen and CAP export market access terms and urbanise them in a newly industrialised economy. It was never going to be a walk in the park but the Brits just didn’t do the right thing and let the EU & US do the same thing as they did to the agriculture sector in Australia (we were saved by 2 resources booms). ZIM farmers, like Australia’s, had to face up to cutting labour heads and income expectations and negotiate in good faith that the best of black farmers using low labour inputs should be able to access capital to acquire the worst performing of white farms (not smallest but worst performing), yet they didn’t and remained aggrieved colonials who thought they could lose a war that threw off black subjugation without personal cost.

    The ZIM side was worse because the farmers were stuck with bipolar black locals, those that won and who were promised a better life by Zanu PF, those that knew that any income from a white farmer was better than jumping off into a ghetto, and an expanded middle class of unionised black public servants in the cities, who like all their other public service kin around the world wouldn’t have a clue about national income and tried to seize power. Throw Mugabe and his regime into the pot, one who descended like everyone else who has power too long and you have the Zim outcome. Mugabe eventually had to throw in his lot behind the Zanu PF poor who would have destroyed he and his cronies, and who then preceeeded to seize farms and overpopulate them with local headkickers rather than those off the farm who knew anything about farming. And then you get little liberal fascist Australia headed up by Malcolm Fraser going tch tch at Mugabe who they made an honorary white man for a while. Such voices still survive as policy leaders in the undemocratic swill that makes up our Foreign Affairs Dept up to this day. They have remained racist from inception supporting Zim as some bastardised version of Australia through their paternalism and when the opportunity to call the rulers of the mob a disgrace they tie up with black school teacher unionists who have no hope of doing anything positive. The only real friend Zim has is South Africa.

    On capitalism versus socialism versus objectivism, they each share the singular failure of the isms, that being the inability to capture sustainable incentive structures that sit naturally with the species.

    The pride versus the herd if you will. If each has its day then we get sustainable incentive bases for both regeneration and nurturing, but when you create political systems under the pretense of taking a partisan side you get an imbalance that can only feed upon itself until destruction. In any case that is the basis of my political view. The lion that destroys the sustainability of the herd must be culled, the herd must nurture but not subsidise the weak to such extent that it threatens the herd.

    Both sides need to be fierce by weight of force, but in number the lions need to be a small minority that remain individually more at risk from their peers and lack of opportunity than they themselves are a risk to any individual in the herd.

  10. 89peterg says:

    yes john, I was doing a bit of the noble savage thing there.read the book then see the new movie. something about end of world movies for a good section of the US audience these days i reckon.
    also just finished watching a BBC series on the Romans (2004 I think) got a bit boring towards the end… rape and pillage, rape and pillage. many scenes grabbing a woman over the shoulder to take. no wonder our genes are more bad monkey than good. still, made me wonder how anything constructive got done in between wars, time and life goes on I guess. and the role of sex in corporate behaviour… worth a thesis somewhere. then again as life gets too expensive, hedonistic, choice driven and stressful, not so much baby making.

  11. prozak says:

    very interesting responses.

    wtf & I were referring to the article comparing Japan to Greece and the other inaccurate statements made by DR for the purpose of writing an article with some doom-mongering in it.

    I raised Zimmer as the extreme example. Never did I imply that zimmer is a great example of an economic model.

  12. wtf says:

    Yeah, I wasn’t planning on rushing to Zim in a hurry either, merely pointing out that Greece and Japan are in completely different financial situations.

    You may (or may not) like to read this post in respect to Hyperinflation in Zim:
    http://bilbo.economicoutlook.net/blog/?p=3773

    As Ross pointed out, there is more to its root cause than simply ‘printing money’.

  13. Ross says:

    WTF’s link takes another interesting path with Weimar and the consideration that must be given to sovereign debt (& liabilities).

    It is worth reading on Billy Hughes and his particular contribution to Weimar as he hung around Europe making an idiot of himself. He didn’t sit with US calls for reason on WWI war debt. But if you read of his attitude to Japan and opposition to Britain’s handing German protectorates to their Pacific Imperial ally post WWI you start to see our part in backing the Americans in the Pacific war slugfest.

    However on the issue of govt filling demand you can look no further than the extension to creationist banking where reserve banks backfill commercial banks with whatever assets are required to meet that bank’s liabilities (after the event) to see how this short term fixes or stabilisers lead to wrong incentives and end game decline.

  14. wtf says:

    Ross,
    But isn’t that just ‘propping up the banks’, rather than filling demand? i.e. the money isn’t going to those who actually create demand.

  15. Ross says:

    wtf, my view is that the answer is yes as it applies in the real economy, and yet a sharp no as it applies to the asset inflating and trickle down services economy.

  16. Biker Pete says:

    Also noted that item, John. Did you see the Property Insert (p.2) in the Sunday Times, yesterday? Showed that back in 1990, Aussies shelled out 34.4% of income to mortgages. Two decades later, it’s down to 29%. What’s interesting is that homes are now ‘bigger and better’, yet we have 5.4% more in disposable income today. Food for thought… .

  17. Stillgotshoeson says:

    @BP Nit picking “specific dates” is pointless…

    also depends the figures you want to use the % ranges from <30 to over 50 depending on the source of the information you read…

    1991 we had a recessionary period…..;-)

  18. Biker Pete says:

    OK… take 2005, Shoes. Percentage spent on mortgage: 32.1%. That’s 3.1% higher than today’s figure of 29%.

    My point, subtle as it is, is that those who argue like Hanrahan, that “We’ll all be rooned…” need to consider that interest rates are unlikely to slow the property market. I note that the AMP dropped its mortgage rate last week. Members Equity may follow that lead.

    Interestingly, the same article projected that virtually _every_ location in WA would have a median value of a million plus within a decade. Many already do… .

  19. Dan says:

    Additionally to BP’s comment, consider projected population growth, globally and for Australia (approximately doubling in 40 years), and what it will mean to have a house on some land that you actually own – it’s going to be more the exception than the rule with time. The only issue will be beating off the crowds of people, many yet to be born, who will be left with lesser pickings.

  20. Biker Pete says:

    The population just hit 22,200,000. It’s growing at 2.1% per year. Skill shortages (already looming) will necessitate increased migration, whether it’s merely interstate or from the north.

    It may well be that many yet to be born will need family assistance to get into housing. We do the young no favours by counselling that housing will be cheaper in the future… .

  21. SV says:

    BP: re: AMP loan. Some drop. State Custodians offer 5.89%, 0.6% cheaper.
    Dan: doesn’t your scenario actually mean “We’ll all be rooned…”?

    There are a few risks for making projections 40 years ahead.
    Say, if more than 50% of voters will be renters, they will find a way to shift legislation in their favor, like currently it favors home owners. Don’t even need 50% of population, just enough to skew marginal seats.
    Who said the population will double? Our single-term, non-reusable Prime Minister?
    Who said that people can only live in Sydney and Melbourne, close to CBD?
    I mean, what is so important in those CBD? Offices?
    Even now much of office work can be done via the Internet. In 5 years time, all office work will be done via the Internet. You won’t travel to CBD for a client meeting, you will have a virtual meeting from your home if you like. Why then bother living close to CBD?
    And the list of risks goes on… We can’t even predict tomorrow’s weather, you know.

  22. Dan says:

    SV – yeah maybe, but I’d still rather be on the owning side of the situation.

  23. Biker Pete says:

    I’d agree that 40 years is too far ahead, SV. Even ten is a stretch of the imagination.

    SV: “…if more than 50% of voters will be renters, they will find a way to shift legislation in their favor, like currently it favors home owners.”
    It’s likely possession will remain 9/10 of the law.
    Last year we _declined_ a tenant who was willing to pay us $50 pw more than we were asking for our double-storey beach house. We just said no.

    I agree with your predictions about technology. I’m actually doing it right now… . My sons both do it, now. All we need _now_ is virtual shelter and we’ve got it made!!~ :)

  24. Stillgotshoeson says:

    An article from the age nearly 2 years ago…

    http://news.theage.com.au/business/mortgage-stress-could-grip-1m-aussies-20080424-28av.html

    2 year old article.. House prices have increased, number of loans has increased, wages have not kept up any where near the rise in house prices..
    FHOG put 250000 people in homes in the 2 years since this article.. around 1/2 are financialy stressed already…

  25. SV says:

    No one is saying that owning a house is not a good thing.
    I am not even saying that the median house prices will not increase, even after today’s dollars.

    But I am saying that people will not sleep in 4-level bunk beds, not next to CBD nor anywhere else in Australia. There is enough coastal land for 40 mln people, living comfortably in private houses, should this indeed be required.

    This land is just not close to Sydney and Melbourne. But I put it to you that perhaps it does not need to be.

    Dan, BP, if you fear is that your children/grandchildren won’t have shelter, if you feel that property is power – by all means, own property and pass it down the generations – who am I to dispute your choices.

    But I really don’t believe that housing shortages, if any, will persists for 10, 20 or 40 years. Humans have a history of fixing their problems; this is neither the first nor the last one.

    And even if the median price will rise, that does not mean your specific property close to CBD will rise just as much.

    Yes Biker, shelter is important, but perhaps it won’t be so important for it to be close to city. Maybe 100km away will be just fine if you only travel there twice a week on a bullet train – I don’t know.

  26. Stillgotshoeson says:

    I agree 100% SV.. part of the reason why, at this stage in my life I do not want a house. I have an alternate investment strategy thet is working for me.. I work in Melbourne, I rent in a suburb that is near my kids so I get to see them.. (primary school aged). I am not waiting for a housing bubble to crash and then buy a house..
    Even if houses were to crash now I still would not buy.. When I am in a position that I no longer need to work, and when my children are a little bigger, then I will probably look at buying a house… I doubt that house will be in Melbourne however being in Melbourne at this time suits me.

  27. Biker Pete says:

    SV, I don’t disagree with anything you’ve said, other than a.) the biz about the fear my kids won’t have shelter. They won’t even have mortgages, when they buy. And they’ll need _nothing_ from us. Grandkids? Who knows?!
    b.) persistence of housing shortages. If there’s not _big_ money in it, investors just won’t buy it… .

    However we share _exactly_ the same perspectives on location and technological possibilities. Our investment strategies embrace both.

  28. Stillgotshoeson says:

    Told you we are going to get rate rises above th RBA rate increases..

    http://www.theage.com.au/business/westpac-warns-of-rates-pressure-20100322-qrcy.html

  29. John says:

    Oh dear, I guess that means my rent will rise again. The banks put up the rates and the landlords put up the rents. Being at the bottom of the food chain, it’s always the poor renter who is the one who pays.

  30. Don says:

    Not really surprised Shoes, disappointed but not surprised. By bailing out their economies through measures such as direct stimulus, bank bailouts, FHOG etc governments have transferred the losses from the private sector (where if a company goes broke the debts are effectively written off – tough luck borrowers!) to the government sector where debt is effectively forever….. unless of course they inflate it away – such are the joys of the times.

    Australia is quite vulnerable of course since we don’t save enough to finance major projects and the like. The directors from my company are as we speak over in China rattling the tin vigorously :(

  31. Biker Pete says:

    John: “Oh dear, I guess that means my rent will rise again. The banks put up the rates and the landlords put up the rents. Being at the bottom of the food chain, it’s always the poor renter who is the one who pays.”

    No John, landlords invest in rental properties solely in order to subsidise tenants, so tenants can invest in the ASX, gold or cash-in-the-bank. There’s no profit expectation there, whatsoever. ;)

  32. Biker Pete says:

    Shoes, thanks for that link.
    Check out the _vidclip_ in this report on Westpac’s plans:

    http://www.watoday.com.au/business/westpac-warns-of-rates-pressure-20100322-qrcy.html?posted=sucessful#makeComment

  33. Stillgotshoeson says:

    @BP Can not watch the vid at the moment internet connection keeps dropping out…

    Australian Financial Review today…

    Westpac tips five years of rate rises

    One of the country’s leading bankers has warned that interest rates will keep rising for at least five years no matter what happens to the official cash rate set by the Reserve Bank of Australia.

    I posted that this was going to happen…. I seriously hope that my upside guess of 13.5% mortgage rates is as high as it is going to get.. but 10% to 13.5% is my guess… 17% and 18% like the last time will be baked beans and bullets time

  34. Biker Pete says:

    That’s why we ‘insulate’ with offset accounts, Shoes. Rates go up, our money in offsets effectively earns that rate, tax-free. ;)

    Don’t knock baked beans and bullets, son. Toast, baked beans and a little ham is my lunch once a week; and an airgun slug provides a fresh bunny drowned and slow-cooked in red, garlic and rosemary for the crockpot.
    A man with a bit-of-land has it made… . :)

    Watch the vid when you reconnect, Shoes. More food for thought… .

  35. SV says:

    Westpac is offering 7% on a 5-year term deposit, banks typically operate on 2% margin, so it can lend this money at 9%.
    By the way, Rabobank is offering 7.4% for the same deposit. And it is AAA-rated.

  36. Biker Pete says:

    Son # 1 locked in with Westpac at 6.8% for a year. I’ll send him your post. Frankly, I’d rather he pulled his ASX funds… . Doubt he’d look at any foreign bank, though… .

  37. Stillgotshoeson says:

    I am aware of how offsets work BP, my concern is a lot of a) homebuyers and b) mortgage investors are getting cashed strapped and not able to take advantage of offsets…
    I still believe too many “mortgage owners” be they buyers or investors are too close too the edge to survive too many interest rate rises.. this alone may only be a 15 to 20% effect on property
    couple it with a collapse in the Northern Hemisphere and it will be a disaster,, credit crunch and we may well get the doom and gloom 40 to 50% crash…
    Again I will re iterate.. some areas would be hit harder than others in either/both events occuring. Melbourne/Sydney will cop the most damage, Some areas of those two cities worse than others..

  38. Biker Pete says:

    Yes, you should definitely watch the vid, Shoes… .

    I realise that you’re primarily concerned for your fellow t’othersiders.
    As you have reiterated many times, you a.) don’t want to buy a house;
    b.) probably wouldn’t buy one after the GPC.

    You’re a landlord’s dream, mate! :)

  39. Stillgotshoeson says:

    I had already seen it…

    341 auctions last year with a clearance of 75%
    880 Auctions and 87% this year…..

    So seeing properties for Auction more than doubling in a year.. Is that people under stress selling out.. or upgraders, or downsizers..
    Properties for Auction double again to 1760 (may drop to 60%?) properties in a weekend, how will that effect clearance rates.. or Doubles again to 3520 (might drop right down to 35%) then the folowing week 1500 to 3000 more properties on the market to add to the 750 to 1500 that did not sell the week before… You still think house prices will rise or even stay stagnant under those conditions.. (those conditions ARE coming, that there can be no doubt now) Astute property investors such as your self will survive wwith “paper” losses.. less sophisticated property investors and over commited first home buyers will be buying lengths of rope from the hardware or parking their cars in the garage and leaving the engine running…

  40. Biker Pete says:

    My guess is ‘upgraders’, which, in the absence of data, is as good as anyone’s… . Can’t see any paper losses, but inflation will eventually beat us all, in the end. :)

    Interesting to read LMHFB’s Ivan Karamatic’s advice to FHBs in trouble, in the Sunday Times, 21/03/2010: “Move back in with your parents… rent out your property…” Long before FHBs are hanging or gasing themselves, I figure they might take that less dramatic path… but you can live in hope, I guess… . ;)

  41. Lachlan Scanlan says:

    “less sophisticated property investors and over commited first home buyers will be buying lengths of rope from the hardware or parking their cars in the garage and leaving the engine running… ”
    Thanks Shoes it might be naughty but that made me laugh… a lot….oh the drama of the property debate :)
    Biker (and alter egos) you are without a doubt in my mind Australias most passionate property bull! Do you have real bunnies or hares? I tried to eat a hare I shot with one of my ex wifes rifles (aint messin with her she’s armed to the teeth and a gun club president taboot). Hare had good flavour but texture akin to football. Real bunny I really like. We’ve put a fair bit of red deer/venison in the freezer in past also. Slow cooked in crockpot is unreal but cooked the wrong way is tough. Maybe I should re-try hare slow cooked.
    Shoes what is your current take on the OZ stocks. Are you cautious? A family member has a lot invested. I only have a handful of shares left. I noticed you and Ross sounded negative a week or two back. Im concerned about the strengthening DXY although there is no breakout above short term resistence.. yet. Maybe I’m worried about nothing.

  42. Biker Pete says:

    Oh, goody, a lynchin’ party!!~ Let’s hang those miserabble FHBs… .

    Bunnies: Only use the back legs, Lachlan. Eight of those, on a bed of home-grown rosemary, drenched in a good cab sav, with a little port, some flat-knife crushed garlic, a few onions, sprinkle with fresh home-cut garlic chives… and cover with a crown of rosemary*. Now slow cook in the crockpot for five hours, thirty minutes. Going to buy a _bandsaw_ when I finally retire, to speed up the initial preparation. (Oh, goody, a bandsawin’ party… better than the Texas CM.) My Kitchen Rox, OK?! :)

  43. Biker Pete says:

    Forgot the *

    My mate Jack reckons I use too much Rosemary.
    Can’t get enough of Rosemary!~ ;)

  44. Stillgotshoeson says:

    @Comment by Lachlan Scanlan on 23 March 2010:

    Thanks Shoes it might be naughty but that made me laugh… a lot….oh the drama of the property debate :)

    Glad you appreciated the theaterics I threw in to the debate :)

    Biker (and alter egos) you are without a doubt in my mind Australias most passionate property bull! Do you have real bunnies or hares? I tried to eat a hare I shot with one of my ex wifes rifles (aint messin with her she’s armed to the teeth and a gun club president taboot). Hare had good flavour but texture akin to football. Real bunny I really like.

    I have always like Rabbit brushed with garlic butter then wrapped in bacon rashers and put in foil to slow cook in the coals of a campfire…
    Shoes what is your current take on the OZ stocks. Are you cautious?
    I am not a licensed financial advisor… however I will answer your question..
    My take on the ASX is tht it too is due for a correction… some stocks will naturally be hit far harder than others, just like some areas of property will be hit harder than others… My interpretation of all the information available is that the ASX will test a new low.. sub 3000. my best guess is 2400. If I had a crystal ball to say when it was going to happen I would be laughing, alas I do not.. my dollar bet is before December 2011.. so much rides on influences outside of Australia… it could happen earlier than this December.
    Yes I am cautious, however optimistic for the future medium to longer term.. 10 years time could well see the ASX greater than 10000.

  45. Biker Pete says:

    No hares, Lachlan. We’d enjoy having them here… we’re bowhunters… but only bunnies, I’m afraid. We have our own mob of roos of course, but they’re very trusting and I’ve never been inclined to knock one over.

    Like some here, I’d relish an ASX collapse, but the thought of Shoes dangling from his laces is a little too graphic, so I wish you _all_ well…!

    Australia’s most passionate property bull

  46. Stillgotshoeson says:

    I will survive a crash BP….. don’t fret, I will still be here to taunt you after it does….
    Will you be here to retort after property goes south…

  47. Stillgotshoeson says:

    OH that’s right how remiss of me.. you have started to look at selling a few properties… because you have had professional advice from someone you have known for 50 years and has been your accountant for 20 or so.. even though you believe Property is safe, secure and profitable and supplies you with a steady income.. and in fact the tenants are your livelyhood.. your selling your golden geese.. and looking to invest in the ASX……

  48. Biker Pete says:

    Shoes: “…the tenants are your livelyhood (sic).. your (sic) selling your golden geese.. and looking to invest in the ASX……”

    Where did you get the last silly bit, Shoes? We’d shift Super from cash into ASX, to gain 500 points and get out again, ASAP. Reread that post and you’ll see it was the 10% interest rate that beckoned… .

    Actually have a couple of blocks on the market right now. We may sell one house in July, if the tenants don’t renew. Projection of WA’s growth are in line with our plans. Yep, fellas like you are our bread ‘n’ butter!

    Now you don’t sound at all nervous about the ASX. _You_ can time it. :)

  49. Biker Pete says:

    Shoes: “I will survive a crash BP….. don’t fret, I will still be here to taunt you after it does…. Will you be here to retort after property goes south… ”

    Just saw that gem. Nah, I’ll be long deceased, son. ;)

  50. Stillgotshoeson says:

    @Comment by Biker Pete on 23 March 2010:

    Shoes: “I will survive a crash BP….. don’t fret, I will still be here to taunt you after it does…. Will you be here to retort after property goes south… ”

    Just saw that gem. Nah, I’ll be long deceased, son. ;)

    Not planning on living much longer then? Prolly should pack up and enjoy life.. spend your millions, you can not take it with you ;-)

    “Now you don’t sound at all nervous about the ASX. _You_ can time it. :)”

    Out at a high I am comfortable with, In at a low I am comfortable with is good enough for me…

  51. Biker Pete says:

    Shoes: “Prolly (sic) should pack up and enjoy life.. spend your millions, you can not take it with you” ;-)

    Out at a high I am comfortable with, In at a low I am comfortable with is good enough for me…

  52. Lachlan Scanlan says:

    Thanks reply Shoes. Theres always something to be optimistic about. A good selloff will be a great buying opportunity for me..I’m ready to pounce…on anything. Gold is making up its mind at present to go lower or higher. Nat gas is working its way down shaking out the longs. Ive been waiting a while for a successful long entry there. As for the markets well they just seem to stay irrational forever, moreso in Yankland. Our market does seem to be losing traction with strength in USD last few months but Ive long believed this bounce would come and terminate in low 80’s..might be found wrong soon but sticking with that idea until fat lady whatever.
    Biker your crocked bunny sounds great and excess rosemary I can cope with too but good cab sav might have difficulty finding its way into my cooking until I get rich trading my commods. Night all ;)

  53. Stillgotshoeson says:

    @BP
    “Where did you get the last silly bit, Shoes? We’d shift Super from cash into ASX, to gain 500 points and get out again, ASAP. Reread that post and you’ll see it was the 10% interest rate that beckoned… .”

    10% interest rates still beckon, and maybe even higher.. using super or using funds from property is irrelevant.. you_the_ultimate_property_bear.are looking to invest in the ASX….

    and now you quantify your statement with “gain 500 points and get out” yet if someone else posts a subsequent post to “quantify” their position your all over them.. “Oh but “you_said_this (sic)_in_your_(sic)_last_(sic)_post…”

    Yep… I am thinking the tag you have been given Liar Pete serves you well…
    I just finished my cup of tea.. read the tea leaves to get some insight into you.. think I have got it..
    A sad old man full of regrets of the achievments and greatness he so thought he was destined for, so relives a fantasy life here in internet world as a forum troll bestowing the world of his wisdom.. (all accrued in hindsight of course) the great unknown actor.. destined to play his final act as an unknown to the world…

  54. Biker Pete says:

    Here’s an essential difference between us, Shoes. You’re a younger bloke whose missus took his house… and bitterly looks forward to others suffering as soon as possible… not just bad Ol’ Biker Pete… but all those BAD FHBs… hang ‘n’ gas the lot of them… . That missus of yours has a lot to answer for, Shoes… .

    Your bitterness emanates loudly, Shoes. Don’t let it poison your kids’ lives, mate. Get help.

  55. Stillgotshoeson says:

    Here is where you are so wrong… I gave her the house and kept my super.. to do it any other way she would not have been able to keep the house… Was the fairest way to keep the kids in a stable environment…

    I am an affable bloke and don’t take life too seriously at all… unlike yourself..

    Guessing I touched a nerve… truth does hurt I suppose…

  56. Pete says:

    That’s not the essential difference between you two. The difference is that Stillgotshoeson is willing to lay out the facts as he sees them and engage in healthy debate. Biker “The Liar” Pete already made up his mind on the facts more than a decade ago and won’t ‘constructively’ debate anything. but rather tries to shoot down his opponents.

    Funny how no-one seems to pick up enemies as much as you on this site, fraudster Pete. It’s because you’re a troll and a jerk.

    Eventually you will be forced to see the error of your ways. I’m glad I don’t have to be there to see a tired old man cry.

  57. Biker Pete says:

    Love your stuff, Pete. Recall the first taunt I read, in fact… gloating about all the realtors driving last years’ cars.

    The difference is that the property bears here cannot wait for the demise of those they deem enemies… the realtors, the politicians, the FHBs, the property bulls… . Look at the language you use: hang, gas, taunt, rodents, troll, jerk, crying old men… . You’re transparent. Your debate has not moved out of the playground, son.

    Do you imagine I seek popularity on a site which promotes gold, shares, and the Great Property Crash? I address the other side of that coin… the side you openly slate at every opportunity. Of course I attract enemies here… . I’d be a little concerned if I didn’t… ! :)

    You close: “Eventually you will be forced to see the error of your ways.”
    You last saw the error of yours, when Keen capitulated. Glad I wasn’t there for your tantrum, Pete… . ;)

  58. Pete says:

    Your memory fails you, again. Shame that is all you have, made-up memories.

    Bears are not all alike fraudster Pete. Some want blood on the streets for all of the immoral and unconscionable salesmanship that property spruikers have perpetuated. Others simply think the market will fall. Only you can’t distinguish between the two, because anyone who disagrees with you falls into one big category – an enemy.

    Why do you come here, fraudster Pete?

    To troll, to gloat, to talk about cooking rabbits? Any old dog can make up stories about being so clever with property. Perhaps even an entire generation could make that claim. “Oh I was so clever, I bought property in the 90’s, before it got out of control”. Oh wise one, can you please tell me how I can also buy up in the 90’s before a huge speculative bubble? Should I also buy some tech stocks, they look pretty neato?

    You use lazy induction and live in hindsight. It is sad that people who want to read the great comments left on this website have to trawl through yours to get to them.

    And now we get to the part where you have backflipped on your own drivel. You’re starting to get bearish on property, even though less than a year ago you were advising young and old to get in to property quick smart, lest they miss out. You don’t deal in “coulds”, as in property “could” go further. You deal in “is” and “will”s. “Property can only go up, it did for the last decade, that’s practically forever!”

    As for Keen, i’m not his protector. He made a bet and lost, so what? It doesn’t make you any more correct in your flawed reasoning. It just makes you look old and bitter.

  59. Don says:

    You know what? I reckon the lot of you are liars and frauds. There is no way that anyone who claims to be as successful as you guys would waste one minute of your no doubt incredibly useful time and energy engaging in arguments and accusations which are pointless, have no way of ever being proven and just go on and on and on and on until you are all wallowing in the gutter. But you just keep coming back for more and it just puzzles me, why do you do it? If you are really doing that well and are happy with your lot in life then you should not feel in the least bit threatened by trolls or the abuse hurled by them on this site.

  60. Stillgotshoeson says:

    The common denominator to any arguments on this forum are on Biker Pete…
    I have recently come to this forum and have had normal discussions with a few of the other contributors..
    If you read Biker Petes previous “discussions” with other contributors they all have personal attacks against the other person..
    When others highlight flaws in his discussion he gets all high and mighty and quite vengeful in his responses..

  61. Pete says:

    Precisely Stillgotshoeson. This website was great for discussions before he turned up about 18 months ago. There wasn’t any name-calling or such pettiness.

    Ironic for someone of his age? 63 going on 11…

    Some other great contributors have left this site because of his antics. It is a shame because diverse and intelligent conversation should be encouraged, providing it is respectful.

  62. Pete says:

    Stillgotshoeson: This is where it started
    http://www.dailyreckoning.com.au/australian-house-prices-are-severely-and-seriously-unaffordable/2009/01/27/

    If you have the time, it is a nice walk down memory lane. Interesting to see how some of the predictions made then are being realised…

  63. Biker Pete says:

    Pete: “There wasn’t any name-calling or such pettiness.”

    It’s your trademark, Liar Pete…

  64. Pete says:

    Of course you’d never stoop to that would you, BP.

    If only there were some evidence, somewhere, some kind of counter example…

    Dang, you win* again!

    *(make a fool of yourself)

  65. Biker Pete says:

    April is coming, Pete. Guess we’ll have a step-by-step report of the Great Trek. Then, in May, the KHR. Cheers up, you’ve lots to look forward to, Liar Pete!~ :)

  66. Stillgotshoeson says:

    @Comment by Pete on 24 March 2010:

    Stillgotshoeson: This is where it started
    http://www.dailyreckoning.com.au/australian-house-prices-are-severely-and-seriously-unaffordable/2009/01/27/

    If you have the time, it is a nice walk down memory lane. Interesting to see how some of the predictions made then are being realised…

    Had a read through it.. we share similiar views it seems… BP seems to think the FHOG was a good thing.. we KNOW it was not.. ;-)

    A lot of names in the thread that I have never seen…
    The Darwin rental subsidy one was good.. rents went up surprise surprise by about the same amount of the subsidy..
    Further to that Child Care was subsidised and the costs skyrocketed..
    everything the “government” has tried to help us out on has become more expensive.. Including houses… the 9 most dangerous words you will ever hear are “I’m from the government and I’m here to help”…

  67. Biker Pete says:

    Shoes: “Had a read through it.. we share similiar views it seems… BP seems to think the FHOG was a good thing.. we KNOW it was not.. ;-)

    For a bloke determined NOT to buy a house, you spend a helluva lot of time debating FHOG, Shoes… . :) Look, FHOGs were a Labor initiative. As you bears have noted, Tony Abbott will save you… . What was the exact term? Something like Abbot-toired?! ;)

  68. Stillgotshoeson says:

    unlike youself BP I don’t write here from a selfish perspective…
    All your posts are me,me,me..
    The FHOG has made a bad situation worse and many many people will suffer for it, and suffer more badly than if market forces were left to rule the market…

    Government intervention does not and never has helped..
    The property market is a corpse, the government has tied string to the arms and legs and is pulling those strings to give the appearance of life to it… that stimulus was pointless and futile as we will see…

  69. Stillgotshoeson says:

    Still not too good in the US of A either..

    http://finance.yahoo.com/news/January-existing-home-sales-apf-78982446.html?x=0&amp;.v=5

    Oh but that is America Shoe_son… Completely different market blah blah blah..
    America struggles, then so to will China.. as a large part of China’s export business America has to recover to help a sustained growth pattern in China.. the speculative growth in China WILL wane on continued problems in the US and to a lesser extent Europe.
    Austalia has 22 million people, we can not buy enough of China’s goods to support them.

  70. Biker Pete says:

    Shoes: “The FHOG has made a bad situation worse…”

    Yep, freed up over 200,000 rentals keeping rents down. Yes, it has made it harder for _you_ because you missed the boat… could’t access the grant. That house you so desperately DON’T want evades you, son… . Talk about bitter… .

    Me,me,me? Shoes, you can’t decide whether to hang the FHBs, or gas ‘em.
    You’re a great bloke!~ :)

  71. Biker Pete says:

    More Shoes: “All your posts are me,me,me..”

    And this from a fella who has disclosed not just his entire history, but his current earnings, expenditures… and every single transaction he has made, online. You’re a laff-a-minute, Shoes. ;)

  72. Stillgotshoeson says:

    @BP
    Me,me,me? Shoes, you can’t decide whether to hang the FHBs, or gas ‘em.
    You’re a great bloke!~ :)

    No problem with the first home buyers at all… just the idiots that implemented it.

    The rest of your retorts I will ignore..

  73. Biker Pete says:

    Shoes: “…over commited first home buyers will be buying lengths of rope from the hardware or parking their cars in the garage and leaving the engine running… ”

    Yes, you’re right, Shoes. You ooze sympathy for FHBs… . ;)

  74. Stillgotshoeson says:

    As a result of the stupid government policy…..

  75. Stillgotshoeson says:

    They FHB have been encouraged to purchase overpriced homes, in a rising interest rate period during the middle of a questionable global recovery…. why would I not be against the government decision to increase have or even increase the FHOG..

  76. Biker Pete says:

    Shoes: “They FHB have been encouraged to purchase overpriced homes…”

    Let me guess… and you’d like to donate a can of fuel and some heavy-duty cord, right?!~ ;)

  77. Stillgotshoeson says:

    and we have lots of good news for the good citizens of Australia around the same age as Biker Pete…

    http://www.theage.com.au/business/baby-boomers-face-going-into-retirement-saddled-with-debt-20100323-qu5n.html

  78. Biker Pete says:

    Hey, careful, son… I’ve let you off the hook on this one:

    “The rest of your retorts I will ignore…”

    ;)

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