The Mortgage Meltdown Is Not Just Deja Vu


So, the world has survived the mortgage debacle and the stock market free fall. At least according to Obama’s State of the Union address: “Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again.”

What a relief. But wait: “While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover.” That was Herbert Hoover’s comment before the Great Depression really began to hot up. In fact, there are many similarities between the early 1930s and today. And they indicate we are far from through the worst. The third cause of the Great Depression has yet to strike us this time around.

First, let’s recap the other two. This from the excellent book your editor is currently reading on the financial crisis:

At first the securities firms sold only participations in mortgages; that is, on a single piece of property to one investor that they guaranteed. But soon Wall Street firms devised securities based upon pools of mortgages… Of the $10 billion or so in mortgage backed securities issued during the period, some 8 billion of the original face amount were in default by the early 1930s when Congress launched various inquiries into the practices of Wall Street.

Yes, you read that date correctly. And all the thoughts racing through your mind right now are most likely on track.

The mortgage mess of the last decade has been perpetrated before. By the same antagonists, using the same methods, the same terminology, the same victims, and ending with the same results. “The price declines in the mortgage-backed securities market in the late 1920s preceded the crash of the equity markets and the start of the Great Depression,” reports Frank Byrt from the National Bureau of Economic Research.

This may not seem like a revelation to some of you, but the extent of the similarities is remarkable. Repackaging loans, structured assets, special purpose entities – it’s all there.

And it get’s spookier. Aside from mortgage securitisation, and a stock market crash, guess what other asset caused trouble? Sovereign bonds!

Although it was mainly Latin American bonds that got the limelight back then, the conditions were similar to today. But the sovereign issues are yet to truly strike this time around. And the nations in question are much larger. So when you go back and review history to discover what happened next, remember to keep that in mind. Things are yet to really get bad in the financial markets. And with the Australian dollar at highs, along with the resources we export, who do you think stands to lose a lot?

Of course, you shouldn’t actually worry because this time is different. We have a money printer at the Federal Reserve who is willing to print us all out of trouble. And we have wise regulators overseeing our affairs. But why on Earth did nobody spot the similarities between the 1920s and 2000s before things got so bad? Surely people learn from catastrophes like the Great Depression?

Intriguingly, the Glass-Steagall law in the United States was introduced after Wall Street practices during the 1920s were exposed. Banking and securities dealing were to be kept separate to avoid the kinds of conflicts of interest that could lead to systemic trouble. It looks like repealing the law was a mistake. And the same lessons learned the hard way then were learned again.

So perhaps Glass-Steagall will make a comeback, as Senator John McCain has proposed, and the investment banks will have to choose between investment and bank.

But why trust politicians to do the regulating? If they were treated like CEO’s running a company, their own balance sheets would be called into question. Government income statements, such as they are, are expected to post record losses this year. The donations lists to prominent politicians are blotted with banks. It was their laws that encouraged sub-prime lending. It was their backing and oversight of mortgage giants that allowed securitisation to grow like it did. And don’t forget the Federal Reserve… it financed the whole venture with low interest rates.

You can’t expect that bunch to solve the problems with harsh regulation (which is actually enforced). Banks, central banks and politicians are too busy bailing each other out. If the public sector decides to continue supporting the collapsing parts of the private sector, it will merely make the crash more mighty. The question is who will drag the other down first?

Each failed stimulus made Keynesian true believers look either stupid or excessively optimistic. “With so much work done by do-gooders to little avail, things must have been really bad to begin with,” they think, as an excuse for miserable stimulus results. “Better do some more stimulating, until things get better.” It’s a self-reinforcing delusional state of mind that leads straight to bankruptcy.

But as a free-marketeer, can we really criticise fiscal irrationality in the face of pathetic management of private companies leading up to 2008? Shouldn’t the private sector have known better?

Maybe it’s those animal spirits again.

Or the private sector did know better. It knew that Fannie, Freddie, GM, AIG, etc. would get bailed out. It knew that government would foot the bill. It knew that the losses were limited, so it was time to go wild. And that’s what it did. With some help from the central bank each time the party slowed. This is what’s called, “moral hazard”, when central bank policies actually encourage dangerous financial activity.

Like drug dealers, first Greenspan and then Bernanke spiked the punch bowl they were supposed to be taking away from the Wall Street bonanza. Eventually, everyone at the party became hooked and needed more and stronger drugs just to stay sane. First lower interest rates. Then more money. Then security purchases. Then outright quantitative easing with brand new money whisked into existence.

Now that Washington has crashed the borrowing party, it too is on the same stuff – debt. And it’s looking to the same place as Wall Street did for a bailout – the Fed.

As we wrote last week, the demand for US dollars is waning. And could disappear overnight if the rules of the game are changed. Then the great reflation will begin. The dollars will come home to roost and Americans will learn once again what printing money gives you.

One already noticeable side effect is that Chinatown is New York’s new financial district. Apparently Americans are flooding into are place to save in Yuan. And it doesn’t surprise the average street goer one bit.

Of course, there are better safe havens than the Yuan. It is, after all, just paper. And, as former Federal Reserve Chairman Alan Greenspan pointed out on Fox News, fiat currency has a habit of losing value:

“We have at this particular stage a fiat money which is essentially money printed by a government and it’s usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity…”

The solution? Greenspan continues: “There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard. ”

Yes, even a central banker knows a gold standard favours nations that are economically sound, like the US once was. As banking baron JP Morgan once said “Gold is Money. Everything else is credit.”

So which is it for your portfolio? Gold or credit? Emerging market consumers (and even central banks) are increasingly choosing gold. But how did gold do in the 1930s? Well, in the US it got confiscated. And we often receive emails asking whether that could happen again.

The reason President Franklin Delano Roosevelt decided to confiscate gold was because of its role as the world’s reserve currency. To the man on the street, gold was a barometer of trust in the government. Any increase in demand for gold indicated mistrust of economic policies. And FDR’s activities certainly didn’t inspire trust.

So, to avoid gold ringing alarm bells for US citizens, it was taken out of the economy. It’s similar to Cortes burning his ships upon landfall in the New World to avoid mutiny by his troops. With gold in the hands of the government, the stage was set for a massive dollar devaluation relative to those countries that remained on the gold standard. And you couldn’t convert your chips into real money to sit the experiment out.

These days, politicians don’t have to go through much hassle to achieve what FDR did. They just print money (to devalue their currency) and rely on banks to maintain speculative short positions in precious metals (to prevent a price spike that causes a loss of faith in the currency).

So hopefully you don’t have to worry about gold being confiscated. Instead, worry about the effects of inflation. U.S. analyst and fund manager Peter Schiff has been harping on about this for quite some time on various TV finance shows, not to mention at his brokerage firm. (He also predicted the mortgage meltdown.)

In this video he pretty much echoes last weekend’s Daily Reckoning. But it was a comment he made on the side that is fascinating. The media and policy makers point to inflation as a sign of economic activity. We previously reported on how they had given up generating economic activity via stimulus and skipped straight to generating inflation in some absurd horse-before-the-cart solution. Incidentally, this is what FDR was trying to achieve with his economic policies too.

But the mainstream has it wildly wrong within their own disastrous logic as well as common sense. Deflation is a sign of economic activity, not inflation. Competition, innovation, productivity gains, capital expenditure, savings … all the things associated with economic progress and wealth are deflationary. Lower prices are a sign of a competitive economy that’s delivering more of what people want.

Inflation is a sign of trouble. It’s when the purchasing power of your money declines… you get less and less while paying more and more. That’s why countries like Russia are implementing price controls to keep prices lower. If inflation were good, they’d be decreeing higher prices.

Anarchy in the DR Inbox

Joel Bowman’s article in the Daily Reckoning certainly stirred the hornet’s nest. Anarchy is something that makes people think of burnt cars and dead bodies, readers told us. Chaos would ensue and commercial relationships would not be possible without law enforcement. The country would be invaded and the infrastructure would crumble. So why are we advocating it?

This criticism is our favourite: “Who will pay for the roads?” the sceptical readers wailed.

Well, who pays for them now?

Just because government pays for things, doesn’t mean you don’t end up footing the bill. Channel 10’s 7 PM Project doesn’t seem to realise this, as it was advocating that the government foot the flood bill instead of taxing us…

And as for corporate law, what do you think is the source of those rules? Private individuals created, abided by and enforced them – all across many borders – long before government got involved. In the end, governments had to accept them into codified law. (From that point things deteriorated as commercial law became a policy tool for use by government.)

And defence was privately contracted in many places throughout the world. The Renaissance took place under the protection of mercenaries. (We won’t mention the US’s involvement in Iraq.)

Language, money and food were all creations absent of government. Although it hath been ruining them ever since.

The big difference between an anarchist system and a government one is that of monopoly. The government will set up one system of laws, one defence organisation and one set of infrastructure. A majority vote can change these, but none will go away and your peers subject you to them by threat of violence (jail).

If you refuse to pay for them, you also go to jail. Under anarchy, you choose what you get and what you pay for. There is nothing stopping you from competing with existing systems if you can do better and nothing stopping you from opting out. In other words, there is choice instead of compulsion.

Government is not the source of civilisation or a necessity of it. It is the means to implement conformity or compulsion. The opposite of being civilised.

Global Warming believers are just being sarcastic

We got an overwhelming response on the nature of Imre Salusinszky’s article on Global Warming. Thanks for the feedback and comments. Most people informed us the article was in fact satirical, or at least trying to be. Still, the whole thing seems a bit weak for satire. Writers who do this leave themselves open for critique.

But let’s not go there, in fear of filling up the DR inbox with things we won’t read. Instead, ponder this thought.

Imre mocks that 2010 was the coldest year since 2001 for Australia and that global warming has thus been beaten. But 2010 was also the equal hottest for the globe, a fact that readers of The Australian would have known. Imre’s sarcasm is meant to display pretend small mindedness – to only focus on Australia while the world is growing hotter is dumb. But apply the same reasoning to Imre’s point. Who measured temperatures far above the Earth’s surface, somewhere between us and the source of the Earth’s warmth?

Think of it this way: When the temperature inside your house falls, do you blame it on the insulation disappearing, or the sunset?

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.


  1. Could today’s 7% Interest Rate be equal to a 22.5% Interest Rate in 1990?

    In Jan 1990 interest rates hit a record high of 17%
    {This is a Record High for Australia}

    So how would this compare in today’s housing market?…

    The 1990 Median house price was $100K with a 20% deposit & a loan of $80K payments @17% interest over 30 yrs would be $1140 pm or 32% of wages with average family wage of $42K pa…

    So in 1990 @ 17% the worst interest rates in Aust history payments only ever got to 32% of average family income…

    Fast Fwd to 2010 Median House Prices have reached $500K less 20% deposit & a loan of $400K payments @ 7% interest over 30 years are $2661 pm or 43% of wages with a average family wage of $75K…

    So to get to 43% of wages going to house payments in 1990 the payments would need to rises to over $1505 per month … this translates to a interest rate of 22.5%

    In 2008 interest rates were 9.5% this would work out to payments of $3365 or 54% of current wages in 2008 …. so if 54% of wages in 1990 went to servicing a mortgage the payment would be $1890 in 1990 & this is equal to a 28.5% interest rate in 1990

    Now historically for the last 30 years interest rates have averaged 10.11% this would works out to payments of $3545 pm or 57% of wages going to mortgage payments ….so if 57% of wages went to servicing a mortgage in 1990 the payment would be $1995 pm in 1990 & this is equal to 30% interest rate in 1990….

    So summing up current housing mortgage payments @ 7% is still worse than when rates were at 17% but just imagine what will happen when rates rise?

    A .25% rise in interest rates today is the same as a .75% rise in 1990

    A 1.0% rise in interest rates today is the same as a 3.0% rise in 1990

    This might explain why interest rate rises in 2010 stops a nation yet in the past nobody paid a great deal of attention?

    Now try & imagine you are in 1990 & interest rates are @ 22% (what the rate is in comparative terms to today’s 7%)the RBA announce a interest rate rise on Melbourne cup day & the banks match it & this means your rates have just jumped by 1.6% to nearly 24% … How much more Mortgage stress will you & your neighbours be able to cope with?

    Not Fooled By property Spruikers Hype
    January 31, 2011
  2. Well, I see the rants continued as expected.

    The story so far….

    Believing that if you tell a lie repeatedly it becomes fact, the Punter Fool of ‘Mindarie’ attempts to prove that homeowners are three times worse off financially than in 1990 (7 = 22).

    Stumbling about, logically legless, he discloses that a house he bought in 2002 for $250K is now worth $750K. He is, by his own happy admission, three times _better off_ in an eight-year period, thanks to property.
    And he’ll pay no CGT on his profit.

    Contrast this with his ‘Marangaroo’ story, Comment 3, here:

    You’re the kind of anti-property spruiker we like, aNOTher Fool.
    Click goes the screenshot: Click, Click, Click.

  3. Coward Pete has challenged the validity of what I say by calling it a lie …. Then when asked to prove that it is a lie he is not capable of doing so …. Instead like the coward he is he tries to introduce irrelevant…

    Permabull Property spruiker without the courage to admit he is wrong & unable to substantiate his position ….

    Let you judge trhe fool for what he is … IRRELEVANT …

    Not Fooled By Property Spruikers Hype
    January 31, 2011
  4. Here’s his problem, folks: Is it better to advise you that _he_ didn’t buy that $250K house which gained $500K value, or be called a liar again?

    He has repeatedly advised PerthNow readers he isn’t a ‘renter’.*

    Is he better to be called a hypocrite for buying a home which trebled in value in just eight years, then slag property… or be called a liar for the _seventeenth_ time in three days?

    * It’s _tenant_, BTW, Liar Fool.

  5. I reckon Oz housing could be 30% ‘overpriced’. Tops. When one takes into account stuff like the following:

    * GST added 10% to everything
    * Super has deferred 9% of our disposable income
    * The double income family
    * The fact that consumer ‘crap’ is now cheap
    * Neg gearing
    * The additional costs that come with more regulation and bureaucracy – OH&S etc

    And our guvs aren’t keen to see that change a lot. Because as we’ve moved away from manufacturing and become more finance and construction dependent (is my impression anyway), guvs have become more and more dependent on housing as a revenue source.

    I’ve got no interest in the multi-million dollar mansion market. Or apartments – With them being especially vulnerable to oversupply. And the prices of both being most likely to get hammered in any correction.

    So waving a moist pinkie in the air and asking what could happen to prices on more average, everyday properties? Maybe a 15% total drop in actual prices over a few years?? With guv efforts to fight the correction offsetting maybe half of any 30% overpricing??? Followed by a recovery.

    All of which hardly sounds catastrophic to me. Though if one is a smarty, they can presumably find better investments. Or worse ones if they only think they’re a smarty! :D

    Though that’s not a prediction – Just a guess as a bear on a possible outcome.

  6. Well, the QLD scene must look fairly shaky after the floods, Ned.

    We see it very differently here. We think we’ve sidestepped the GFC.
    Developers seem to have taken the major hit, which has meant that
    those who had the cash and the courage, bought well.

    It all looks pretty rosy to us. :D

  7. Coward Pete ….. Read your rants again & see how sill you look?

    All you have to do is show that I am wrong about a 7% rate today being equal to a 22% rate in 1990.

    You said this was a Lie ….. I said you were a coward calling people liars & then not backing it up!!

    But you keep avoid stumping up a answer that would show that what I said was a lie?

    Now you are not able to muster the COURAGE to say you were wrong & you try to go off topic?

    Hell you cant even comprehend that the ABS measure of household incomes in 1990 & 2010 are the same measurement …. your off on some tangent saying but peoples incomes also grow? {What is that about PINHEAD}

    Of course they do nobody said they did not in fact that growth is measured & recorder & reported.

    You are truly clueless trying to pass yourself off as a investor?

    Keep clutching at straws it is funny observing the behaviour of a drowning man out of his depth!

    Not Fooled By Property Spruikers Hype
    January 31, 2011
  8. OK Coward Pete another POP quiz for you:

    What caused the US housing Crash?

    What Caused the Irish Housing Crash?

    What will cause the Australian Housing Crash?

    Ummmmm Let See …….?

    Non – Recourse loans (Only 11 States in US have these & Ireland was full Recourse))

    Unemployment ( US & Ireland unemployment was low in fact US only went above 6% Aug 2008 2 years after prices fell)

    Affordability (US was 4.6 times income at the peak we are??)

    Overbuilding (Both US & Irish commentators were saying they were not building enough prior to their crash)

    Interest Rates (Both US & Irish markets were at record lows?)

    Not Fooled By Property Spruikers Hype
    January 31, 2011
  9. Here’s a fella, a very sill fella, who tells us the house he’s in has appreciated from $250K to $750K in eight years… trebling its value.
    Same fella tells us property is finished… a terrible investment.

    You don’t know what caused overseas property crashes?
    Not surprised.

    You’re ranting from a very angry tenant’s perspective.
    It’s NOT your $750K home, is it?!~ ;)

  10. Response blocked. Must be responding effectively!~ :D

  11. Jeez, DRA… don’t you realise how sill(y) it looks when you block my stuff?

  12. Honestly Coward Pete …. How bad do you have to be to be blocked?

    Never happened to me?

    Must be just you?

    How sad is this>>>>> Jeez, DRA… don’t you realise how sill(y) it looks when you block my stuff? <<<<<<

    Might buy a Lotto ticket on the way home!

    Not Fooled By Property Spruikers Hype
    January 31, 2011
  13. I attended the auctions over the weekend dubbed ‘The Event’ on the Gold Coast – it turned out to be the non-event. Have you ever been in a room with 20+ real estate agents and not seen a smile?
    The clearance rate including pre-sales and after auction negotiations has been noted as 52 from 128 listed properties.
    The sale that made the front page of the newspaper was a penthouse in Surfers that having been bought new in 2007 for 5.5m and never lived in, sold under the hammer for 2.5m on the night.
    I spoke with a gentleman who owned a unit in one of the tower blocks and knew a vendor who bought a unit for 900k two years ago, spent 100k on renovations, and sold for 780k. Other units right in Surfers didn’t get bids over 200k and were all passed in.
    Once these sort of results become common knowledge, we will see real estate become a place to live again and not a speculation. I welcome the day. the only ones to make money from r.e. really are the banks and the gov.

  14. Maybe you have some kind of special pull, Kris?!~ ;)

  15. For the record, no one’s comments are being blocked. If you’ve posted from a new handle, your comment goes into a queue awaiting moderation. If you post a comment with two or more hyper links, it also goes into a queue awaiting moderation. Comments in the queue are reviewed and approved several times a day. It is not accurate to suggest the Daily Reckoning is blocking anyone’s comments. We do reserve the right to edit or delete anyone’s comments if abusive language is used or if a comment is judged, at our discretion, to violate our comments policy.

  16. Always believed that to be the case, Dan.
    No longer believe it. This has happened just far too often, mate.
    I’ll stay with my theory, thanks… particularly as I was thanked for
    ‘a plug’ for his site, on PerthNow.

  17. Oh Dear …. Now he wont believe Dan?

    The whole world is against Coward Pete?

    Just admit you were wrong & I was right .. How hard can it be princess?

    Just look at the votes being cast …. oh I see … the whole world is against you !!!

    Have a look again at my first post & point out a single percentage point that is incorrect & I will happly change it if you are correct?

    What was that you cant find any errors?

    Then man up & say sorry!!

    Not Fooled By Property Spruikers Hype
    January 31, 2011
  18. @ Dan Denning….

    Enjoy the site (despite some of the rif raf it attracts)

    See my first comment re interest rates @ 7% today being 22.5% in 1990.

    Would love to see you guys cover the topic if you get a chance.

    Not Fooled By Property Spruikers Hype
    January 31, 2011
  19. Mike the folks on the gold coast have got the right idea,
    Refuse to pay what the seller wants and demand true value.
    I have noticed on real estate and domain, that prices on the gold coast are in free fall.

    Those vendors might not agree to sell their units now for under 200K, but if everyone collectively continues to refuse to pay what the vendor wants, the vendor will have no choice but to agree to what the seller wants to buy it for.

    After all its supply and demand, something that the sprukers are too happy to tell you when times are good for them, but don’t except when the roles reverse.

  20. @ Steve & Mike

    Australia had 13,158 building approvals in November 2010, which was down on Oct 2010 by 4.2% which was already down 9.9% on the year before, the point being is that this November number is a low number so this would work out to 158,000 housing starts for a 12 month period? ….{Worse Case}

    That is enough housing for 411,000 additional people @ Australia’s current rate of 2.6 people per household? ….

    So what was Australia’s population growth & are we building enough?

    In 2010 there were 297,878 babies born & there were 144,989 Deaths giving an organic population growth of … 152,889 but let’s not forget migrant intake for 2010 which was 213,178 {BTW this number is forecast to fall to under 150,000 in 2011 but let’s work with this inflated number}…. So in 2010 Australia had a nett population gain including migrants of…. 366,067!!!

    However we built new accommodation to house 411,000 people!!! ….

    This was a surplus of 17,282 houses to accommodate an additional 44,933 people that will not be required….

    A little known fact is that this has been happening for many years now right under investor’s noses who have been bluffed by property spruikers into thinking there is a shortage

    Not Fooled By Property Spruikers Hype
    January 31, 2011
  21. “The whole world is against Coward Pete?”

    I didn’t come into a venue which spruiks as its main headline “Australian House Prices Are Severely and Seriously Unaffordable” looking for friends,
    Liar Fool Punter of Mindarie.

    Just keep repeating the lies, son. I’ve enjoyed listing them…
    now all you’ve gotta do is keep repeating them… . ;)

    Best of luck to you all, fellas!~ :D

  22. Not fooled I think Australians would have to be the most dumbest and easiest people to manipulate on the planet.
    No other country in the world apart from Hong Kong agrees to pay as ridiculously inflated prices for property as Australians do.
    Australia the land of the halfwit sheeple.

  23. But But But But … Coward Pete if they are lies expose me …. embarrass me … show where it is either wrong or a lie…..

    Better still explain….

    What caused the US housing Crash?

    What Caused the Irish Housing Crash?

    What will cause the Australian Housing Crash?

    Ummmmm Let See …….?

    Non – Recourse loans (Only 11 States in US have these & Ireland was full Recourse))

    Unemployment ( US & Ireland unemployment was low in fact US only went above 6% Aug 2008 2 years after prices fell)

    Affordability (US was 4.6 times income at the peak we are??)

    Overbuilding (Both US & Irish commentators were saying they were not building enough prior to their crash)

    Interest Rates (Both US & Irish markets were at record lows?)

    You cant do it can you … go on have a go

    Not Fooled By property Spruikers Hype
    January 31, 2011
  24. Embarrass you?

    Straight answer, Liar Fool: Do you rent or own that property whose valued _trebled_ in just eight years?

    Straight answer… ?

  25. Let me remind you of your comment, 30th January 2011, Liar Fool:

    “The house we currently live in bought 2002 for around $250K nothing done to it yet it is valued at over $750K today”

    You won’t find it easily again, folks. The whole topic “Australian House Prices Are Severely and Seriously Unaffordable” has been conveniently cached. I always figured you’d made a mistake ‘pingbacking’ it, Dan.

  26. It’s like drawing teeth!~ :D

    One word: OWN or RENT…

    Cough up, HYPOCRITE or LIAR…


  27. To record a comment for posterity (mine included!) simply hit Shift, Command and 3. It is such an effective method of ensuring accountability… and seeing who is BS-ing you, over time. :D

    Drag your screenshots into a folder titled “Famous Last Words”

    Gotta keep the b*stards (large flightless Australia birds) honest.
    Takes seconds… saves hours!~ ;)

  28. I am in the process of offering my landlord up here on the Gold Coast a price for the place I currently rent that would have been appropriate 5 years ago, that is down about 20% on the currently listed. The landlord is having some financial difficulties at present. Interestingly the agent has encouraged my bid and let slip the comment that if the banks released for sale all the properties they currently hold in vacant possession after foreclosing on loan defaults, then the market would crash. I wonder how many properties are held in this fashion like levees against the flood?

  29. Hey Pinhead …. It is not about me it is about the market …. But when you are incapable of understanding the market you lash out at the messenger …… Tic Tic Tic

    Did you see Today Tonight? .. Drove a stake right through your property dreams …. Looks like it paid off sending all my stuff / rants into them in Dec 2010.

    Amazing how cold hard facts trumps RHETORIC!!!

    Give you a Tip Coward Pete …. Attack my message if you can … attack the messenger & you look like a fool & coward with nothing to support your position!!!

    Tic Tic Tic

    Not Fooled By property Spruikers Hype
    February 1, 2011
  30. Coward Pete said ….. You won’t find it easily again, folks. The whole topic “Australian House Prices Are Severely and Seriously Unaffordable” has been conveniently cached. I always figured you’d made a mistake ‘pingbacking’ it, Dan.

    Oh Dear MR Irrelevant thinks Dan is against him as well & is hiding something? Bonehead try & Google …”Australian House Prices Are Severely and Seriously Unaffordable”

    What a world class CHUMP …. God knows why you want this page visible to the rest of the world … Dan did you a favor not letting the rest of the world see the hiding I gave you in the past few days….Tee Hee Hee

    Better let you get back to your exercise doing laps down the Shallow End of the Gene Pool….

    I know Darwin had a theory but your presence today would have him questioning what he was missing!!!

    Not Fooled By property Spruikers Hype
    February 1, 2011
  31. Oh Dear …. Shift, Command and 3 ….. This speaks volumes.

    An old timer out of date sitting in his retirement village surfing the net on his Grandson’s old MAC computer…..

    The rest of world can achieve exactly the same thing doing:
    ALT – Print Screen.

    Keep up old timer MAC OS really?

    Not Fooled By property Spruikers Hype
    February 1, 2011
  32. “Well, the QLD scene must look fairly shaky after the floods, Ned.” – Haven’t been paying much attention recently Biker. I figure I’ll give it a few months minimum to see what comes out of the floods.

    It was a real late one here – I was doing some more ‘useless’ work on some ‘unproductive’ housing! ;)

  33. Well, let’s see if the Enfooled Punter of Mindarie has answered that simple question. Just _one word_ required… either RENT or OWN. Nope.

    Asked whether he owns or rents that $250K ‘Perth’ home purchased in 2002 he now states is worth $750K, embarrassed, he declines to answer. Intrigued? There’s a good reason. Having badly screwed up, he can only make his situation worse.

    Your situation isn’t perilous at all, Liar Fool. Why, Bill Bonner himself noted recently that his female employee’s home in Melbourne has doubled in value in just four years… . Why should you be in excreta for reporting that _your_ Melbourne home trebled in value in eight?! ;)

    And here we have the biggest lies, folks: that you can’t make a quid from real estate; that housing is a poor investment; that the property market is going to crash. Lies or hypocrisy? Both.

    Asked to cough up just ONE word, you choke on it. And, as Ned concurs, you’re a timewaster, N Fool Liar of ‘Mindarie’.
    Far cough… .

  34. Coward Pete …. again you quote Bill Bonner out of context … because at the end of the article his advice to the employee was to …. S*E*L*L!!!!!

    Happy to answer you question right after you answer the question asked to you F*I*R*S*T…..

    EG: … show how what I say about a 7% rate today is equal to a 22% rate in 1990 is a lie? …. you made the statement … so answer the question …Coward!!

    Not Fooled By property Spruikers Hype
    February 1, 2011
  35. What a Pinhead … one breath … you infer I am from Mindaree … then you say …. “Why should you be in excreta for reporting that _your_ Melbourne home trebled in value in eight?!” … inferring I am from Melbourne ….then you say N Fool Liar of ‘Mindarie’.

    Poor confused TROLL!!!! you have no idea …. But I am enjoying watching you dance to my tune …. my own personal puppet …. pull this string & you jump … tee hee hee …. Mr Irrelevant Coward!!

    Not Fooled By property Spruikers Hype
    February 1, 2011
  36. In a single sentence, you’ve demolished your past, present and future argument, Liar Fool of ‘Mindarie’:

    “The house we currently live in bought 2002 for around $250K nothing done to it yet it is valued at over $750K.”

    It will follow you wherever you go, mocking your attempts to *POP* the property market. Suck it up, son. Time for you to fully morph into one of your numerous PerthNow identities. Why not resurrect Naomi, the chain-smoking ex-private school realtor who bitterly complains she can’t sell anything?!~ ;) No, wait-a-bit, you’ve replaced Naomi with ‘Real Estate Agent in the real world of Perth’, a real estate agent who ‘tells it like it is’.

    Jeez, mate what happened to Naomi? One minute she was there blowing rings… the next she was gone in a puff of smoke! :D

  37. Not Fooled has his own blog here:

    Starts off with this:

    “The first and most important reason that high interest rates would be good for the housing market is that it would lower the price of housing to what a normal individual can afford.
    Prices of houses are not truly determined by what one is willing to pay for the house; it is determined by what one is willing to pay per month for the house. A homebuyer really doesn’t care if his house costs $100,000 or $1,000,000 – he cares whether his monthly mortgage payment is $1,200 or $1,300.”

    “a 7% rate today is equal to a 22% rate in 1990” – That’s an impossible statement to prove or disprove. Too much has changed since. Refer to my list of some things that have changed over time when considering ‘overpricing’ for just a few examples:

    * GST added 10% to everything
    * Super has deferred 9% of our disposable income
    * The double income family
    * The fact that consumer ‘crap’ is now cheap
    * Neg gearing
    * The additional costs that come with more regulation and bureaucracy – OH&S etc

    And even if it could be proven or disproven, wouldn’t tell us anything except that one thing is different (or the same?) as in 1990. With it being quite obvious that ‘things’ generally are now VERY different – In lots of ways. The exercise is a waste of time.

  38. Spot on, Ned.

    Utterly impossible to compare families’ financial situations 1990 – 2011… and Naomi knows it (Tee Hee Hee… dead giveaway, son!) ;)
    Not only are tax structures entirely different, but family assistance has increased immensely. Take a butcher’s here:

    New benefits are being added all the time… .

    Bill of Leederville totally wiped you on your maths on 7% = 22.5%, Naomi. Blowing smoke up the proverbial, as you are wont to say…

    Now c’mon, cough it up, Liar Troll: OWN or RENT ? You’ll feel better after you expectorate. Just think… no more gagging on reflux (and teeth) for the next few weeks/months….

  39. What a Pinhead … one breath … you infer I am from Mindaree … then you say …. “Why should you be in excreta for reporting that _your_ Melbourne home trebled in value in eight?!” … inferring I am from Melbourne ….then you say N Fool Liar of ‘Mindarie’.

    Now I am Naomi (Whoever she is )

    Poor confused TROLL!!!! you have no idea …. But I am enjoying watching you dance to my tune …. my own personal puppet …. pull this string & you jump … tee hee hee …. Mr Irrelevant Coward!!

    By all means keep focusing on me it is Irrelevant …. better still I can make it easy for you …. Here you go a belated XMass gift copy and paste the following….

    Well Biker Pete what can I say you caught me out for the fraud that I am …. desperately tying to talk the property market down in the slim hope that it will fall enough for me to buy in… But then of course I would still have to get off the dole , get a job, stop drinking half my income, catch up on 6 months outstanding rents so that I can get my credit rating back, pay off the $30,000 bankcard as well, then register my 1973 HQ holden belmont so that I have some transport to any employment I might find with my limited skills base , perhaps one day I might just reach the hights that you have …. At least I can set that a a 5 or 10 year goal.

    There you go that should give you enough, make it all about me … But I will be talking about the real issues….

    Did you see my handy work on Today tonight (Perth) last night …. some of my best work … tee hee hee

    Not Fooled By Property Spruikers Hype
    February 1, 2011
  40. The list of things that have changed is virtually endless Biker.

    Our economy and even our society generally has restructured in fact. And will continue to do so. The one constant is change as ‘they’ say eh? :)

  41. Not Mindarie, ‘Mindarie’ …

    Sorry I missed your ‘best work’ on Today Tonight.

    I’ll send them the $250K – $750K in-eight-years link. OK?

    Be prepared to explain that.

    You’re a classic case, calling a man a coward, then repeatedly punching yourself in the mouth, Liar Fool of ‘Mindarie’.

    Sadly, you’re undoing _years_ of solid, temperate, careful work done by DRA. Undone by a very high-risk individual… . No organisation can afford to keep an individual whose ego transcends its needs.
    OWN IT … or RENT IT? Cough it up….

  42. Hi all

    Just want to stick my 2 cents worth in

    The Australian market has been in a slow steady rise since the 60’s(and then a blistering rise since 2004 ish) that is why there a 2 or 3 generations of Australians who believe that prices always rise.

    History teaches that in fact the opposite is true, no commodity can go on increasing in price forever, so lets end this nonsense argument now and get back to some decent debate

    Yes some people have become very wealthy from property, and some people have/will become very poor from property, life is all about cycles and this one may be at the crest of the hill.

    Humans, being what they are, I am sure that this argument will be raging again in, oh, another 60 years time.

    History is a sadly undervalued area of study, especially economic crisis and their causes, should be taught in schools

  43. And the Screen Shot, too… in case the quote suddenly disappears!~ ;)
    I’ll mail it this arvo… . :D

    And what was your dismissive comment again?

    Oh yeah, “An old timer out of date sitting in his retirement village surfing the net on his Grandson’s old MAC computer.”

  44. You are the one who makes it about you Not Fooled. And what you apparently want to see happen.

    When no-one could be bothered commenting on your statement:

    “Did you see Today Tonight? .. Drove a stake right through your property dreams …. Looks like it paid off sending all my stuff / rants into them in Dec 2010”

    you felt compelled to follow up with:

    “Did you see my handy work on Today tonight (Perth) last night …. some of my best work… tee hee hee” – Just a touch of megalomania there I’d suggest? :D

    My god – You MUST be an Investigative Journalist for Today Tonight! ;)

    Just remember brother: Life really IS like a box of chocolates! So I like hedging as a financial strategy. Whereas you seem to like talking the market into doing what you reckon it should. Steve Keen gave that a crack. And now he is ‘homeless’. Though he is also the proud owner of a very worn pair of walkers I’d suspect? And a somewhat wiser if embittered man! :D

    Enough of this crap – I’ve got some real ‘stuff’ to do …

  45. You do that my little puppet …. I will just pull this string a little more ….tee hee hee …. have to run if I leave it too late it gets very crowded at Centrelink

    Not Fooled By Property Spruikers Hype
    February 1, 2011
  46. Property 2011
    Reporter: Mark Gibson Today Tonight

    Perth Today Tonight

    Mailing address:
    PO Box 77
    TUART HILL WA 6939
    Switchboard: (08) 9344 0777
    Today Tonight fax: (08) 9344 0887

    Gone on Puppet phone them ….. Media disclosure rules they will tell you jack…

    In fact I told them about all the RHETORIC that is surrounding property in todays market & if you phone they will hear it first hand …..

    Oh Dear you really are a special case ….
    Ok Puppet off you go

    Down, down, down. Perth property prices are collapsing. When Dane and Joanna bought their Seville Grove home, they never dreamed its value would disappear before their eyes.”You always expect to make money on an investment not to lose money.” In 2006, the couple paid 370 thousand dollars for the four bedroom, two bathroom house. They spent almost 25 thousand on the backyard, a patio and a spa. Four and a half years later, it’s on the market for 349 to 359 thousand – less than what they paid for it. “Probably stand to lose 40 grand plus the interest we’ve paid over the years.” Joanna says “Definitely consider it to be a bargain especially considering how much we paid for it only four years ago.”

    “There are bargains, no doubt about it, if you look carefully and even not so carefully you can find some pretty good buying.” Real estate agent Greg Rossen says forget trying to sell your home within weeks.. it’s now taking months.

    “The average time is 71 days but that belies the real truth that people have had their property on the market for 6 months and there’s even some that have had a birthday, 12 months, horrible facts but true.”

    Figures out today have confirmed Perth as the worst performing city in the country.

    In December, the median house price fell another 0.6%.

    In the last 3 months of 2010 the drop was 1.9%.

    Over the whole year, Perth suffered a 1.5% fall..

    while nationally, prices ROSE 4.7%

    Four years ago, Janine MacLeod paid 520 thousand dollars for her Mount Lawley unit. “I put it on the market almost 3 months ago at 640 which was considered to be the market price.” But Janine’s had to slash the price by 40 thousand dollars. “So we’ve put it down to 599, it’s from 599, so I’m hoping that perhaps that will appeal more to more people.”

    Janine’s made an offer on another place, so she needs to sell. “Two bedrooms, a bathroom, a powder room and also a separate study and as you can see it’s got this beautiful view. -Stunning isn’t it? -It is it’s a beautiful view.”

    It’s not hard to see why prices are tumbling.. there are too many for sale signs and not enough buyers. In fact, right now in Perth there are 5,000 more places on the market than this time last year.

    “There’s currently almost 16,000 properties for sale, equilibrium’s about 12,000 properties so a lot of properties on the market.” Greg Rossen says if you’re selling your home you need to be realistic. “If you’re not prepared to accept that the market prices are lower than they were, perhaps even going back to 2007, take your property off the market, listen to your agent’s advice, possibly rent it out and find a different solution because flogging a dead horse just simply won’t work if there are no buyers at the price you’re hoping for.”

    It’s a buyer’s bonanza. On average, properties are being reduced by 6 per cent.. the more money you’ve got, the more you can save.

    This Dalkeith mansion listed for 5.6 million dollars last January.

    It sold for 4.15 million – almost one and a half million off the price, or 26%.

    An apartment in this Crawley complex was listed for 2.28 million.

    It sold last month for 1.78 million – a 22% discount.

    And this Nedlands home was reduced from 2.6 million dollars, to 2.15, down 17%.

    “Buyers do your homework, have a really good look around, speak with the agents who can tell you what properties have sold for, do your own research on the available data bases and shop with a sharp pencil.” Since the real estate peak in October 2007 there’s been no real growth. So, what’s the hot tip for the rest of 2011?

    Greg Rossen says “It’s going to remain very much a buyer’s market and we don’t expect there to be any significant capital gain and we’re hoping in fact the reverse doesn’t happen where prices are eroded and prices decrease, time will tell. Could things get worse before they get better? -They could indeed.”

    That’s not what our anxious sellers want to hear.. they say they can only cut the price by so much. “Definitely prepared to negotiate keen to make a sale but obviously you don’t want to lose too much money in this market as well.”

    And if you’re buying. Greg Rossen says “Be guided by the real estate agent but above all don’t be afraid to put an offer in.”

    Not Fooled By Property Spruikers Hype
    February 1, 2011
  47. Looks like your PerthNow credibility is unravelling, mate.

    (You only said that about the $250K-$750K rise to win the argument?! Lovely!)
    Screenshot looks good in colour, particularly with my three-liner below it.

  48. Coward Pete Still about me … Gosh I have you in a pickle … meanwhile I move on getting my message across ……

    Today Tonight on Channel Seven did a story on Perth Property prices falling … here is a link for anyone wishing to read the story in full for themselves ….. ….. Now Property Spruikers take a BEX & have a lie down …. tee hee hee ……

    Follow the link & smile …..PUPPET

    Not Fooled By Property Spruikers Hype
    February 1, 2011
  49. Did you BUY that home you ‘live in’ which trebled in price in just eight years, or do you RENT it?
    Fifteenth time I’ve requested that info, Liar Fool of ‘Mindarie’, including PerthNow.

    Who’s the coward, son? ;)

  50. Appears your newly-formed PerthNow Fan Club wants to know, too.
    Did you BUY that property which exceeded the ‘double-in-seven-years-theory’
    or do you RENT it? What are you so _afraid_ of, son?

    We know, don’t we? ;)

    That’s attempt No. 19 to find out a _ONE-word_ answer!

  51. Not fooled, can i play with Biker Pete also? I only know him as Travs, the old timer from the retirement village who says he is a world travelling, 13 plus property owner……LOL.
    I like his embarassingly wrong property predictions for Perth he made on the Perthnow site he was shamed off.
    He predicted that Perth property would skyrocket last year…..Bzzzzt FAIL.
    He then predicted a bumper 2011 for Perth property….Bzzzt Failed so far (albeit only 1 month in) and let me predict for you – Will fail for the rest of the year.
    Given the Carnage and dead flat sales, i can confidently say old Biker Pete / Travs / Traveller of WA will be wrong wrong wrong for a long time on Perth Property. Its a Train Wreck over here and everyone knows it!

    John of Dullsville
    February 1, 2011
  52. Yes, let’s play by all means, John Punter Fool. Who does THIS look like, folks?

    John of Dullsville of Perth Posted at 11:25 PM January 29, 2011
    Travs – you have been W*R*O*N*G for the last 18 months

    Recognise him? Walked straight into that, Punter Fool of ‘Mindarie’… ;)

    Next round?

  53. Amazed you’d try _that_ little stunt, Liar Fool. Dogman caught you out so many times, ‘John’. Shamed off? Tired of reading reams of posts written by the same easily-tracked hack.

    Five or six long consecutive posts tagged ‘Not Fooled by Property Spruikers’; ‘Not Fooled by Property Spruikers of Perth’; and ‘Not Fooled by Property Spruikers of Perth of Perth’, I could tolerate. Add in a dozen aliases from this obsessive liar… and I dropped out for a time.

    Answer the question, John/Fool/johnno/john, etc: Did you BUY that house or did you RENT it? You know the house: $250K – $750K in eight years. :D

  54. Enough for today, you sad case. Do we need to ask another 20 times, tomorrow? Surely not! Spare them this repetitive BS. Get it over with… fess up! :D

    Let me remind you, Liar N Fool. You said: “Happy to answer you question right after you answer the question asked to you F*I*R*S*T…..”

    Both Ned AND I responded. My response was my second… .

    Still waiting, Liar… .

    (Your tag needs changing to Not Happy to Cough Up!) ;)

  55. You do know the reader has no idea what you are on about …. in the meantime my message is the first in the comments field … readers read it …. get bored with your dribble by comment 5 & they switch off to you while my message is taken on board…..

    Sad Sad PUPPET … now which string should I pull …

    Hey just imaging how smug I would feel you clutching at straws call me …Niaomi / John / Punter / Aron etc etc etc … & I was none of them …. Tee Hee Hee … Very Very Smug

    Now which string should I pull ……….

    Not Fooled By property Spruikers Hype
    February 1, 2011
  56. It’s not a _string_ you’re pulling, son. ;)

    Just invited another of your PerthNow aliases into the ring.
    I’ll be interested to see if he/you show(s) up… .

    What you are showing up is your complete inability to see how you’re perceived. You’re a liar, you’re a fool for not responding to my query the first time; and you’ve now brought your _imaginary friends_ in to attack me.

    Each time you bring a new alias in, I’ll quickly demonstrate it’s you. :D

  57. Oh Dear Coward Pete ….

    I see you are still spending your days trying to BITE YOUR OWN NECK ….

    Try Biting a Pillow instead ….

    Meanwhile my message gets out …..

    Now my little puppet bite & respond on Perth Now …. or have you given up in defeat?

    { Thinking Thinking … Should I respond? .. If I do I show him he is pulling the strings .. If I dont he will think he is winning …. Dam it is so hard }

    Not Fooled By property Spruikers Hype
    February 2, 2011
  58. I’ve got a pretty good idea what you’re pulling. I suppose it’s possible that in your case it looks like a string? :D

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