The Platypus Exception

Reddit

Will the markets – both housing and equity – continue to be responsive to changes in the cash rate made by the Reserve Bank of Australia? Or will Aussie mortgage rates decouple from the cash rate as the global cost of capital goes up? That was just one of the many interesting questions that came out of last night’s debate with Rory Robertson.

If you’re a pugilist or a fan of broken noses, you will be disappointed to learn the evening did not come to blows. It was spirited though. And by the end of the night, it was clear what the differences are in the positions: one camp believes things are pretty much okay here and house prices are supported by population growth and low interest rates. The other is a bunch of wacko residents of Extremistan with odd theories about what money is.

More on that shortly! A hint – we are all residents of Extremistan now, thanks to 30 years of cheap money fuelled global growth. The great contraction is upon us.

But the RBA was really the big newsmaker in Sydney yesterday and was not at all worried about Extremistan. The men who set the price of money in Australia decided it was neither too hot nor too cold yesterday. It’s just right…for now.

If it’s really true that a small group of men and women can know what the price of money should be at any given moment, then we’re going to write Pope Benedict and ask that he cannonise Glenn Stevens. Each interest rate decision is a kind of transubstantiation…a miracle whereby the tens of millions of private calculations in the real economy are simultaneously subsumed in the brain of the central banker…and turned into a price.

Monetary miracles aside, the markets seemed to like the RBA’s statement. US stocks were up and the Aussie dollar rallied. Newswires referred to the RBA’s vaguely bullish comments about Asian growth. Everyone is still hoping China can do whatever it’s still doing for Australia, in whatever way it’s still doing it.

What is it doing, anyway? It occurred to us that the correlation between low levels of Australian unemployment (around 5.6%) and Chinese resource demand is something more alleged than proven. There may actually be some proof that Chinese resource demand supports a large part of the Aussie job market. But we haven’t seen it yet. If you have some, let us know.

Meanwhile, the Wall Street Journal‘s Matt Phillips reports that the RBA’s statement might not be as bullish as risk traders and yield hunters have been led to believe. He quotes this line from yesterday’s announcement: “The expansion remains uneven, with the major advanced countries recording only modest growth overall, but growth in Asia and Latin America, to date, very strong. There are indications that growth in China is now starting to moderate to a more sustainable rate.”

“Starting to moderate…” Hmm. The issue of China’s relative strength has indirect bearing on the housing argument. The bulls argue that a strong economy with low unemployment means no mortgage stress for cashed-up and fully employed homeowners. Only a rise in unemployment to U.S-like levels (officially 9.7% but likely at least twice that) would kick the legs out from under all those new first home buyers the government invited into the market.

But as long as it’s all good in China…she’ll be right.

And in what looks at least to be unambiguously good news, Australia ran a $1.65 billion trade surplus in May, according to figures released yesterday from the Australian Bureau of Statistics. Thank you coal, you black beauty you. And thank you iron ore you reddish orange beauty, you.

That kind of national income may, now that we think about it, support employment indirectly. The money comes in. It has to go somewhere. Will it go to foreign shareholders? The government (taxes)? Or will it go forth into the economy and multiply?

John Peters, a senior analyst at Commonwealth Bank, says the figures may force the RBA to put up rates even higher later this year. “Trade will clearly be one of the key factors to drive economic growth back to a higher level, along with dwelling investment and business investment. This type of growth in export income is a fairly significant stimulus.”

If he’s right, then the obverse must be true too, right? That is, if booming coal and iron ore exports support the economy in strange, mysterious, and potentially stimulating ways, then crashing coal and iron ore prices undermine Australia’s economy in potentially recessionary ways, do they not?

Well of course they do. It’s not that much of a mystery. But if you’re not familiar with the argument, check out our Exit the Dragon report for the whole story.

We’ll leave it others to decide who won last night’s debate. To be fair to Rory, most of the time, anyone making the orthodox, steady-as-she-goes, keep doing what you’re doing argument is right. Most of the time, the extremists are wrong.

But not all the time. And when they are right, the magnitude of their rightness is breath taking. More importantly, our central point last night was that central bank manipulation of the cost of capital is what creates bubbles…giant oceans of misallocated capital based on bogus price signals that encourage consumption and production out of whack with underlying demand (not supported by cheap money).

Further, there is ample evidence in the last ten years that globalisation accelerates instability. Cross-border capital flows are great for investors, to be sure. But the more complicated any system gets, the more unstable it gets too. And in the chase to instantly price in and understand thousands of events each day, investors rely on models to find out where the best place to park their capital.

But these models – from Long Term Capital Management’s to Bear Stearns and Lehman and AIG – rarely model the extreme event (a credit depression). Statistically, their models tell them the probability is so low it is not worth preparing for.

We’ve seen how that worked out, haven’t we? And if the number of extreme financial events seems to occurring with more frequency than models would suggest, an inquiring mind would want to know why, wouldn’t it?

The answer, we think, is obvious. Cheap money creates credit bubbles and misallocated capital. Asset prices driven up by borrowed money eventually revert back to a mean when the money dries up. Our central argument is that Australian house prices are the last in a long line of leveraged asset booms, all of which, save Australia’s housing market, have blown up.

Real estate, though, unless it’s a world-class cluster-storm like the U.S. subprime crisis, rarely blows up. It unwinds over many years. Buyers are generally not forced to sell and the market can remain illiquid for many years until a market clearing price emerges. In real terms, house prices stagnate.

That is one possibility here in Australia. Another is that your editor is flat-out crazy and has failed to understand the basic structural forces that support house prices in Australia – immigration, restricted supply, low rates, and a pre-disposition to homeownership.

For various reasons we won’t go here, we think all of those arguments are tenuous, or at least variable (immigration rates can change…demand for accommodation does not automatically correlate to mortgage finance demand…interest rates are at historic lows and probably headed up).

But by the end of the night, we think the debate had produced a clear difference of honest opinion. Rory, if we understand him correctly, believes the ultimate job of the central bank is to support asset prices by lowering the cash rate in times of crisis. We believe the central bank creates the crisis with an artificial cost of money that inevitably is kept low to promote growth (and keep the property spruikers happy).

It ought to be the central banks role to promote and guard sound and honest money, not support asset prices. But then, we don’t believe there ought to be a central bank at all. And in any event, the coming months will tell us who really determines the price of money in Australia – the RBA or the global bond market.

Already Australian banks borrowing money over-seas – and Aussie banks finance at least a quarter of their domestic lending from foreign borrowing – are having to pay more than the cash rate. Funding costs are up. Rory conceded that in a genuine credit crisis, Australian banks would be hard done by.

The question is whether there will be a crisis that pushes up funding costs so high Aussie banks must put up mortgage rates too. It may not have to be some crisis event, though. As we’ve reported in the past, public and private sector borrowing – some new short-term borrowing and some rolled over from lower rates – is set to hit nearly $5 trillion in the next 24 months.

Australian banks have to compete for that capital with other global borrowers. The big saving grace now is that the difference in yields between Australian and American debt makes some Australian debt attractive on a yield basis to foreign investors. Imagine that. Investors hunting for yield through securitised residential mortgages.

You could even argue, though Rory didn’t, that fixed income Australian securities would be the toast of the globe if the Fed chooses to keep rates low. But our argument would be that in a second phase of the credit depression, Australian assets will be treated like the plague (as is the case with most risk plays…and Australia is considered a risk play). Without the funding, what then for house prices?

What we both agree on is that no one knows what will happen. Your editor believes that the Austrian theory of the business cycle has both explanatory and predictive power when it comes to figuring out what has to happen at the end of a leveraged asset boom. But it is true – from meat pies to the platypus (both reptile AND mammal!) and in many other ways-Australia is exceptional. So will the housing market here be the only exception to the rule?

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
Reddit

Comments

  1. Apropos to Mr. Denning’s excellent arguments, Adam Smith said: “A dwelling-house, as such, contributes nothing to the revenue of its inhabitant; and though it is, no doubt, extremely useful to him, it is as his clothes and household furniture are useful to him, which, however, makes a part of his expence, and not of his revenue. If it is to be let to a tenant for rent, as the house itself can produce nothing, the tenant must always pay the rent out of some other revenue which he derives either from labour, or stock, or land. Though a house, therefore, may yield a revenue to its proprietor, and thereby serve in the function of a capital to him, it cannot yield any to the public, nor serve in the function of a capital to it, and the revenue of the whole body of the people can never be in the smallest degree increased by it. Clothes, and household furniture, in the same manner, sometimes yield a revenue, and thereby serve in the function of a capital to particular persons. In countries where masquerades are common, it is a trade to let out masquerade dresses for a night. Upholsterers frequently let furniture by the month or by the year. Undertakers let the furniture of funerals by the day and by the week. Many people let furnished houses, and get a rent, not only for the use of the house, but for that of the furniture. The revenue, however, which is derived from such things must always be ultimately drawn from some other source of revenue. Of all parts of the stock, either of an individual, or of a society, reserved for immediate consumption, what is laid out in houses is most slowly consumed. A stock of clothes may last several years: a stock of furniture half a century or a century: but a stock of houses, well built and properly taken care of, may last many centuries. Though the period of their total consumption, however, is more distant, they are still as really a stock reserved for immediate consumption as either clothes or household furniture.”

    Benjamin Marks
    July 7, 2010
    Reply
  2. I personally believe that rather than China being the supporter of our economy, it is house price stability (stabilised partly through Government manipulation via increased FHBG, banking guarentees and the RBA) that has maintained our low levels of unemployment. We fortunately avoided a large enough bubble popping pin, for the moment..

    Currently, I see house prices supporting the economy more than the economy supports it. Although real wealth cannot be generated through a non-productive speculative investment, business stability provides more productivity than business instability. Now the point where this has become skewed is that instigation of large boom cycles (house prices for example), leads to a misallocation of wealth and capital, an annoying clean up process. If this allocation of wealth and capital has been changed to a non-productive area, productivity of the country in the longer run is reduced and a reason why we should dislike those who encouraged property spruiking. For now, perhaps (and i do this gritting my teeth) property prices should be stabilised until they become “affordable”. An economy in the long run likes genuine stability! Not fake growth…

    Reply
  3. Jay, super, the 4 pillars, house prices. All the same cheap one liner socialist party trick to ride cycles and build pretend wealth.

    “Stabilisation” until the forces of misallocation created by that very false notion of systemic de-risking cause inevitable bubble then collapse. From the perceived “stability” we generate discretionary services consumption which we milk with consumption tax and it lasts as long as the pantomine does.

    You will get to look back and see whether you have built good productive infrastructure in the meantime or whether we have flushed it all down the toilet with middle class welfare and/or handed bogus rent to the smart ticket clippers that have cashed out of the local asset pantomine.

    Such will be the reckoning when our urban base has to start earning a living with external receipts to fund the debt hole.

    Reply
  4. Ah, Jay… you would need the Govt right out of housing to sort it out. From their Council planning experts and zoning to their fees for permits; from the stamp tax for State Govts right through to the Feds competing with private landlords and having a private bank, the State distorts the housing market.

    Without any State involvement I’d expect houses to drop from $400K to $200K, but much more important is that you could stick two packiing cases together and live in them. Its not the million dollar end that suffers important distortion, (although from the moans of the middle class you might think so!) it is the bottom end the really suffers from the State sticking their nose in.

    Although many people would see it as unproductive, I’m afraid having a house to sleep in rather than a car is something everyone desires. The market is still underpinned by supply and demand.

    “Stabilised”? No thank you! Abandoned to drift on the market sea, definately!

    Reply
  5. any chance of getting a transcript for that debate? Maybe the video/sound was recorded and can be put up on youtube for all DR followers? I and im sure many others here, would be very interested to hear more than just a summary of the events…..

    Reply
  6. “To be fair to Rory, most of the time, anyone making the orthodox, steady-as-she-goes, keep doing what you’re doing argument is right.”

    Yeah! :)

    and

    “…your editor is flat-out crazy and has failed to understand the basic structural forces that support house prices in Australia – immigration, restricted supply, low rates, and a pre-disposition to homeownership….”

    Nah… . Dan’s been here for decades! He _understands_ us. :)

    Reply
  7. What would be worse, allowing the banks to fail through letting house prices rot or maintain a stable price level? Dont get me wrong, I would love to see prices fall to pieces, besides the fallout…but say if it were possible for our hard earned tax money or use of low rates to keep house prices under support, would the country be better or worse off 10 years down the track?

    Reply
  8. “…would the country be better or worse off 10 years down the track?”

    A few here certainly would be better off… and that’s far more important, isn’t it? :) Your hypothetical demonstrates perfectly why financial refugees should immediately charter a vessel to Extremistan before Australian banks fail, property crashes, stockmarkets plunge, unemployment doubles, China pops and numerous other calamities befall us.

    If the vessel sails off course, put ashore _anywhere_ else on the planet and seek refugee status. You’ll be _much_ better off than in Oz. And remember to advise the government of your new refuge of your ‘banks-must-fail’ plan. ;)

    Reply
  9. US bankster insiders with less self incriminating testimony emerging :

    http://noir.bloomberg.com/apps/news?pid=20601088&sid=aB6iaq_10GJo

    Motive for smoke derivative counterparties is established. A long way to go yet.

    Question on Obama political position on $400m bankster lobbying spend vs bank balance sheets position being far worse than presumed? How about both?

    Reply
  10. Hey Dan, this is interesting post. Australia has succeeded by staying out of the global recession but will the country bet better or worse after ten years is very tough question. Personally I think the country’s property bubble may be worse off in 5 years as I think it may go burst as it’s getting out of hand with some of the prices and competition to buy houses , it reminds me of some areas of Europe where for about 10 years of booming money its goes all of sudden burst.

    Reply
  11. Hey Biker, what do you reckon about that idea of trading Oz residential RE housing indices on the ASX? Sounds like it could have some advantages – No tenants to give a bloke grief; Don’t have to share any of the rent with the likes of management agents or local city councils or tradies (because there is no rent I guess – Bit of a bummer that but what the heck, they don’t earn much rent anyway); Could still do all the neg gearing stuff I assume – Just like any investment; But a bloke wouldn’t get to claim depreciation like he does on real housing; Although all the rent and depreciation type considerations would be reflected in the indices one was trading that are based on real housing anyway; Oh, and there’d be none of the current hassles re liquidity or needing to save up a deposit to participate. Lots of pros and maybe not too many negatives perhaps? :)

    Reply
  12. Don’t know enough about it, Ned. We’re really happy with the way it’s working now… . Our only real concern is that one of our two rental agents is really ripping us off. The other company charges us about half as much. Once we’re both fully retired, we’ll scrap the first agent… and save ourselves thousands annually. We’ll keep the second agency, as a.) they’re honest and fair; b.) we’ll be abroad so much.

    What appeals to us about property is that it really is _tangible_. There’s nothing illusory or transitory about it. I read OMG’s post with some “there-but-for-the-grace-of-God” reflection, I can tell you. Property may rise slowly at times, but it’s still _there_ every time we check!

    Reply
  13. Comment by Jay on 8 July 2010:

    “What would be worse, allowing the banks to fail through letting house prices rot or maintain a stable price level?” ” would the country be better or worse off 10 years down the track? ”

    My personal belief is the banks in America that were going to go under should have gone under, those people fortunate enough to have had a mortgage through those banks
    should have ended up with their houses free and clear.

    The “Keynesian” aspect is the US honours the citizens deposits only. TThe US would be in a far better position than it is now. The government would be in less debt, consumers would be in less debt and the charletons and fraudsters in the banking world would have learnt (hopefully) a valuable lesson.

    As for what would that entail 10 years down the track…. probably a period of hig inflation, however… that is going to come anyway, so would it be worse off? I doubt it, and think strongly that if the debts had been written off and limited, instead of going onto the public purse whilst still on the private sector too.. THings would be a lot better…

    Stillgotshoeson
    July 8, 2010
    Reply
  14. “…if the debts had been written off and limited, instead of going onto the public purse whilst still on the private sector too.. Things would be a lot better… ”

    Initially I thought your opinion completely correct, Shoes. But why should bank depositors’ savings be lost, to save property owners? Neither group should ever have been exposed to the fraud of those Ross rightly terms ‘banksters’.

    Something of the magnitude of this fraud would undoubtedly be the subject of a Royal Commission here, with the guilty parties gaoled as Alan Bond was. Yes, the Yanks convicted Madoff, but they also financed the gifting of many of their complicit banksters hundreds of millions in bonuses.

    Your assertion that the US might actually be ‘better off’ had the homeowners’ debts been written off is probably still true, but those who chose saving as their asset class would be caught out in much the same way as OMG has been… .

    The creed of Gordon Gekko epitomises this dirty era. It may well be the dirtiest line ever spoken in cinema.

    Reply
  15. I did not say depositors money should be lost.. The Deposits should be guaranteed..
    either through an insurance or government policy.. “deposit Guarantee”

    Stillgotshoeson
    July 8, 2010
    Reply
  16. “I did not say depositors money should be lost.. The Deposits should be guaranteed.. either through an insurance or government policy.. “deposit Guarantee”

    We agree. But as _no_ private company would ever insure no-doc, low-doc NINJA loans, you really mean government insurance, government intervention.

    Reply
  17. Madoff got done in because he ripped off the _wrong_ people. Us ordinary people don’t really count.

    Reply
  18. “Us ordinary people don’t really count.”

    Hey, we ordinary people count… on all seven fingers, in my case… ;)

    Reply
  19. Depending whether you are talking about one hand or two, you’re either a chippy or a mutant then Biker?

    I can normally get to five OK, but lose count when I have to switch to the other hand.

    ‘Course me bro’s the brains of the family – I’ve heard him get into double digits with his shoes and socks off! :)

    Reply
  20. It is possible, if Biker is truthful, that he lost a few fingers in a motorcycle accident. I nearly lost my left forearm when I crashed my FJ1200 back in 1989. Lucky for me Surgeon saved it so I still have 10 fingers

    Stillgotshoeson
    July 8, 2010
    Reply
  21. It looks like the “investors club” is at it again,

    http://au.biz.yahoo.com/100706/2/2e463.html

    Apparently they are now “demanding” the Reserve bank slash interest rates by 2%
    “demanding” woow I am sure the RBA will be taking this seriously hahaha

    “Investors Club president Kevin Young said the group recently had a meeting with RBA officials to ask why Australia’s interest rates are higher than those of other nations.”

    Maybe while he is at it this moron could ask why our housing is over double the price is should be and why his greed is more important than Australians who want a roof over their head.

    Biker when will you be joining the investors club???

    Reply
  22. Yeh, by and large Shoes, from what I’ve seen, bike enthusiasts either find their careers cut short or find it is no longer critical to keep testing their theory that the faster they can get across the intersection, the less likely it is that something will hit them. ;)

    Reply
  23. Or I simply can’t count to ten, as Ned surmised. Maybe a kinder way of correcting the all-too-common ‘us / we’ phenomonen(?) ;)

    Nice motorcycle, Shoes. Hope the bike survived OK… . No digits missing, but enough stainless and titanium to keep a Third World country in budget surplus. (Just got thru’ the metal detectors without a peep.)

    “I’ve heard him get into double digits…”

    Ahhh, if we get into double digits, Steven might get his McMansion, Ned!!~

    Investors’ Club? Ours has two members. A fella who _is_ a member dropped by when he saw our For Sale sign recently. Sounded just like _you_ Steven.
    He tried to tell us how poorly property was doing. Quite a few tales of folks in trouble and it’s all gonna get much worse. Didn’t wait for him to make us an offer… just politely told him to keep looking. He never looked back… ! :)

    Reply
  24. Ned: “…their theory that the faster they can get across the intersection, the less likely it is that something will hit them…”

    That’s actually one of my ten rules for survival, Ned. Comes right after: “Every b*stard out there is trying to kill me!~” Forty-two years’ continuous riding on 26 motorcycles and our Ten Commandments still apply. :)

    Reply
  25. “Every b*stard out there is trying to kill me!” – I rode for a few years Biker. And ended up coming to the genuine conclusion that automobile drivers genuinely didn’t see me. ‘Course the reason they don’t see a bloke is usually because they aren’t looking for you. But either way none of it is a huge consolation while the various body bits are (hopefully) mending … :)

    Reply
  26. Yes biker you tell him that I am sure he had plenty of other properties to pick from.

    Reply
  27. Comment by Biker on 9 July 2010:

    Nice motorcycle, Shoes. Hope the bike survived OK… .

    Nope.. Bike was written off. Bought another FJ1200 in 1995 Had that till 1999 when my first son came into the world and I sold it.
    My first bike was a BSA Bantam.. Not many of them here but back home as a teenager they were a bit more common.

    Stillgotshoeson
    July 9, 2010
    Reply
  28. Shoes: “Bike was written off.” Sorry to hear that. Mine cartwheeled at 110 kph, full-toss hit. Rebuilt it, using parts obtained from the internet, after I got out of hospital… a fairly long visit.

    Steven: “I am sure he had plenty of other properties to pick from.”
    There are a few, but not in our price range; or built to the quality we attain. Doubt he found one, but maybe the Investors’ Club found him one! ;)

    Ned: “…automobile drivers genuinely didn’t see me…” It’s the ones turning right, across your path, that will take you out. Nearly forty years since I suffered that fate… . Dropped at 80 kph… . _No_ damage.
    Got up and rode away (albeit cursing… .)

    Don: Enjoying your Cairns. That immense saltwater pool on the Esplanade adjacent the tidal flats is really something…!~ Looking at it now… :)

    Reply
  29. Just reading the front page of the Sydney Morning Herald online, an oversimplification could be that either the days of ‘high’ interest rates are over or the Djia is on its way to 1K over the next Austrian business cycle:

    http://www.smh.com.au/business/stagnant-rates-rock-savings-returns-20100709-10383.html

    http://www.smh.com.au/business/guru-predicts-dow-could-fall-to-1000-20100708-102eb.html

    The good news is that horse meat may be available for the privileged few who can afford protein:

    http://www.smh.com.au/lifestyle/wellbeing/horses-for-courses-as-diners-eye-off-equine-entrees-20100708-101ws.html

    Bunny ‘n bungarra stew is sounding better all the time Biker! :)

    Reply
  30. “It’s the ones turning right, across your path, that will take you out” – Yeh, one got me that way too; A bit over 30 years ago. Not sure what the go was really? – She was on a giveway sign and had slowed right down to do all the right things and have a good look both ways – And immediately after looking at me she drove into me? ! :) :) :)

    Reply
  31. Shoes: “Bike was written off.” Sorry to hear that. Mine cartwheeled at 110 kph, full-toss hit

    Over 100mph for me… Shattered both bones in my left forearm, 6 broken ribs, wrenched knee and a dislocated shoulder. Not a scratch on my body though, riding gear took the “scrapes” Only have scars on my left forearm from the surgery to put the plates in..

    Bike. Busted forks, front wheel never seen again, frame bent, engine casing ground down on one side.

    Stillgotshoeson
    July 9, 2010
    Reply
  32. Pretty sure it was actually Shoes who alerted me to Prechter’s warnings, Ned. Coincidentally, he also recently predicted that the banks would forget about the RBA’s recommendations… and just raise rates willy-nilly… .

    Against that scenario, new rules prohibiting exit fees _may_ rein the banks in a little. And construction and new building starts are falling all over the country, meaning banks will compete for reduced starts.

    The figures for FNQ, if true, are staggering. House monthly approvals have fallen from 177 per month to 68. Units are worse, having fallen from 85 per month, to just _four_. The number of construction workers (14,876 in August 2008) has crashed to 6640 in May 2010.

    With Cairns the most rapidly increasing Australian city, at 4% per annum, we can’t see the current low rents staying so cheap for too long. Don’s figures (14% unemployment, now 10%) may be a critical factor, as may be low wages here… but Cairns’ units under $300K look like a good buy right now… .

    Reply
  33. “…front wheel never seen again…” HaHa….!!~

    I never saw my front mudguard again either. It’s said that no-one bothered to extract it from the roo.

    The roo was apparently propped up against an electricity pole, its front paw wired up in the V-for-Victory salute. It was gone by the time I was discharged, so I can’t verify the story. :)

    Biker Pete
    July 9, 2010
    Reply
  34. “…immediately after looking at me she drove into me? ! :) :) :) )

    Two similar near misses, Ned. Both drivers (one an elderly woman) established eye contact, then proceeded to turn across the bike’s path.
    Rule One applies again. “Every b*astard AND his Mother is trying to kill me.”

    Biker Pete
    July 9, 2010
    Reply
  35. They slow down to steady their aim maybe Biker? :)

    There’s a correction cooking over this way. Out in the boondocks at least. Stuff you could buy 15 years ago for 50K that went up to maybe 320K looks to be more around 280K now. Lots of differences in suburbs though. The new boondocks on the northside has lots of stock but no cheapies.

    I do love bike yarns – On the few occasions I hit the deck I don’t recall much about it – Happily doing my own thing one moment – Flat on my back the next wondering where I was and what I was doing there. (A bit like a market crash maybe?) But do recall one of my mates reflections on his experience – Similar to mine except it was interupted by a slow motion view of his pillion passing overhead to finally settle about 15 yards further down the road.

    Yeh, bike riders should always bear in mind that some of their fellow road users are carsales yard personnel and their dependants! :)

    Reply
  36. Always fancied a little BSA Bantam Shoes. Only ever even got sort of close to buying one of them – It had been left outside with no spark plug in the head – For quite a long time. (Some people just ain’t got no respect!)

    One of them and a 500cc twin AJS parked in me loungeroom to keep the polished boards well oiled and my joy would be complete maybe? I dare say DRA might tell me they aren’t productive investments? But what the heck! Hey I don’t spend much on productive investments like hair cuts and razor blades and perms … :)

    Reply
  37. Why not slash rates by 2% just like the investors club want

    Why not?

    Let have inflation at 10%

    Why not?

    Lets end up like Zimbabwe,
    lets all be rich

    why not?

    lets do that and watch my 140K go down to 100K in real terms

    why not?

    and watch house prices go from 700K to 900K

    why not?

    just to make the investor club happy

    They looked scary protesting on the news “demanding” the RBA slash rates
    we had better do as they request, after all they work had for their investments

    Reply
  38. Yeh, or as Buffett apparently said “If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.” :)

    “Keep a dancin’ Maria” – Paul Hogan.

    Reply
  39. I try pretty hard to not think too hard about what the world might be like if it was fair – ’cause that would mean doing away with national borders and passports – And by and large, I’ve seen nothing to indicate that Aussies would enjoy that.

    Reply
  40. By and large, I see my fellow inhabitants of the planet as greedy money grasping pieces of shite – With Aussies having the special good fortune to be amongst the more ‘spoiled’ of same. Whilst simultaneously seeing nothing especially wrong or unusual in this. Given that neither Jesus’ nor Marx’s proposed alternatives seemed to suit our natures very well? :)

    Reply
  41. By and large, I see my fellow inhabitants of the planet as greedy money grasping pieces of doggy do – With Aussies having the special good fortune to be amongst the more ‘spoiled’ of same. Whilst simultaneously seeing nothing especially wrong or unusual in this. Given that neither Jesus’ nor Marx’s proposed alternatives seemed to suit our natures very well?

    Reply
  42. http://www.dailyreckoning.com.au/cba-and-their-bad-debt-problem/2010/02/10/
    Comment by Biker on 9 July 2010:

    Pretty sure it was actually Shoes who alerted me to Prechter’s warnings, Ned. Coincidentally, he also recently predicted that the banks would forget about the RBA’s recommendations… and just raise rates willy-nilly… .

    If I delve deeper into the older threads I am sure I can find an earlier post saying a similiar think about banks raising rates outside of RBA moves…
    Fairly sure I raised in in my arguments in our “debates” on property last year when I first started posting to the forum…

    Comment by Stillgotshoeson on 10 February 2010:

    Credit is going to get harder and more expensive to come by and the banks need to refinance or build deposit base to cover these billions of dollars of loans that are due to be covered by June 2011.. Deposit rates are going to rise to attract deposits… interest rates on mortgage, credit cards and business loans are going to rise regardless of RBA moves over the coming 12 months.. tighter credit and higher rates is going to put pressure on the mortgage markets.. those that have over commited or have poor savings discipline and just used the FHOG to get into a house could well find themselves in serious financial difficulties.. even more so if they furnished that nice new house with no deposit, no interest and no repayments for 3 or 4 years.. higher morgage rates next year plus the payments due on the stuff they bought 12 to 18 months ago = nastiness, then you have those that bought shiny new cars with the equity they have gotten over the last couple of years and the loan is now bigger than what they originally paid for the house.. equity markets at best have levelled off but I don’t think so I think the world is going for a double dip recession…
    UN:F [1.7.5_995]
    please wait…
    Rating: 3.4/5 (5 votes cast)
    UN:F [1.7.5_995]
    Rating: +1 (from 5 votes)
    #

    Comment by Biker Pete on 10 February 2010:

    You’re assuming a lot here, Shoe-son: “…tighter credit and higher rates is (sic) going to put pressure on the mortgage markets..”

    Yesterday’s 9/02/’10 comment by Glenn Stevens: “…the bank could not stand by and let financial imbalances develop – as happened in the US housing boom, which then collapsed spectacularly, pitching the world economy into its worst recession for 75 years. But he also forecast that if Western governments give priority to cutting back their budget deficits sharply – as the Rudd government has promised – this would inhibit growth, and therefore could mean ”a lengthy period of rather low short-term interest rates'”.

    On one hand, Stevens is saying that the RBA won’t permit a property crash. On the other hand, he’s predicting a long period of low interest.

    Ultimately, banks like Westpac will implode. Lots of cash deposits, but no borrowers. Banks like the ANZ, with low or no fees, lower interest rates and _no early withdrawal penalties_ will have to fight off borrowers… !
    Australian rates being higher than the rest of the world’s, I doubt our banks will have difficulty attracting money. And several, like Members’ Equity, for example, have billions available through Super funds.

    Not good news if your five-year-plan relies on a property crash for success… .
    UN:F [1.7.5_995]
    please wait…
    Rating: 1.0/5 (1 vote cast)
    UN:F [1.7.5_995]
    Rating: -1 (from 5 votes)
    #

    Comment by Stillgotshoeson on 10 February 2010:

    50% of bank funds are from deposits, 50% from overseas markets, the rates from both these sources are set to rise.. these rises will be passed on to borrowers regardless of what the RBA does or does not do in the future in respect to rates.. Bank rates will move outside RBA moves as they already have at times… The reserve bank and the government have no control over the banks… Stevens and Swan can comment on the bank moves but can do nothing about those moves.

    Don’t forget to send a letter of thanks to P Keating for those Billions of funds in super ;-)
    UN:F [1.7.5_995]
    please wait…
    Rating: 5.0/5 (2 votes cast)
    UN:F [1.7.5_995]
    Rating: +2 (from 2 votes)
    #

    Comment by Stillgotshoeson on 10 February 2010:

    forgot too add, I am not waiting for a housing crash.. of gone Gold instead more specifically Gold Mining. Bought another 50000 shares yesterday..

    Stillgotshoeson
    July 10, 2010
    Reply
  43. Interesting reading in todays NY Times….

    http://www.nytimes.com/2010/07/09/business/economy/09rich.html?_r=1&ref=business

    Biggest Defaulters on Mortgages Are the Rich

    http://www.nytimes.com/2010/07/10/business/global/10won.html?ref=business

    In Asia, an Era of More Expensive Borrowing

    Stillgotshoeson
    July 10, 2010
    Reply
  44. S: Why not slash rates by 2% just like the investors club want

    BP: Most members I’ve seen, on the news, appear to be retired. Possibly an equal number of retired folk live on interest from their savings. Dropping rates for one group of investors hurts the other… and raising them vice versa.

    S: Let have inflation at 10%
    BP: Don’t follow your logic.

    S: Lets end up like Zimbabwe,
    lets all be rich
    BP: You think they’re rich in Zimbabwe, Steven? Do you think the ZIC caused inflation in Zimbabwe?

    S: lets do that and watch my 140K go down to 100K in real terms
    BP: It will anyway. And our houses too will be worth less, in real terms, due to inflation.

    S: and watch house prices go from 700K to 900K
    BP: They will anyway. And $900K will be worth $700K.

    S: just to make the investor club happy
    BP: And savers unhappy… or vice versa.

    S: They looked scary protesting on the news “demanding” the RBA slash rates
    BP: Don’t be scared, Steven. It’s called lobbying. When interest rates crashed, another retirees’ lobby group did the same thing… .

    S: we had better do as they request, after all they work had for their investments
    BP: Retirees with money in the bank work harder? How?

    Biker Pete
    July 10, 2010
    Reply
  45. Ned, on bikes: “I dare say DRA might tell me they aren’t productive investments?”

    I’ve actually made money on one bike and one boat over the years, Ned.
    The profit from the boat went into realty… and I’ve never been able to retrieve it!~ The missus isn’t really a great sailor…

    Figure I’ll make money on the next of my vintage bikes I sell. One recently sold for five times what I paid, in the US.

    On ‘fairness’. All one can really do is practise it oneself. Think global, act local.

    Biker Pete
    July 10, 2010
    Reply
  46. Great to hear that you are enjoying Cairns Biker! The lagoon pool is pretty cool – they have recently finished repairs on it last week and reopned it so good timing mate!! Hope the weather clears us soon – it has been overcast for a month almost now :(

    Pleased to hear that you don’t think Cairns is a lost cause mate, still we are moving to Townsville in the next few months as we are recommissioning a mine at Charters later this year.

    Reply
  47. G’day, Don. What is particularly impressive about the lagoon pool is the perpective from the road and park. To the uninformed eye, it appears that it all connects with the ocean (at high tide, anyway… .) Also great to see so many people using it, from 6:00 am….!! Yesterday there were several hundred swimmers, loungers and sunbathers in the immediate vicinity, enjoying the sunshine.

    Yes, it’s very overcast today. We canned a day out on the GBR, in fact… .
    Still, Perth is experiencing a week of storms, with winds up to 100 kph.
    Our jet’s engines screamed for the first ninety minutes away. The glances the flight attendants exchanged did nothing for anyone’s composure.

    I expect that the Chinese middle class will invade FNQ within a decade, as Japanese tourists do now. Cairns’ growth may quickly treble…

    Enjoying the warmth, casual lifestyle and the nightlife here. Port Douglas and some diving tomorrow.

    Biker Pete
    July 10, 2010
    Reply
  48. Ned I reckon my cows n chooks must think Im a greedy parasite. But they certainly love me at feeding time, even when not. But im a happy parasite I guess since my system is sustainable. To be honest I dont have my own cattle at present but helping manange 100 or so on the farm I live on.

    With the private sector in tatters USA mega government spent 2.6T for 1.6T return in tax revenue (first 9 months 2010 fiscal year). They cant save the planet.
    Wait there. I think we can break the deadlock. All we need to do is uniformally agree to eat grass. Worked for Job. And not breed too much, possibly a given in this scenario. The power predators at the top will eat grass too, or starve. Nobody/nothing will need to suffer or slave.

    Or, the controlling alliance of governments/banks/entangled mega corps could moderate their spending/taxing. I’m sure the herd will thank them for the easing. Their not necessarily seeking a perfect world.

    Smaller governmant or kikuya.

    Reply
  49. Have you been to the salthouse yet? Not a bad bar or restaurant :)

    http://www.salthouse.com.au/

    Don’t count on this overcast weather clearning up mate – it has been like this for weeeeekkkkssss.

    Enjoy Port Douglas! Good food at the Salsa, try their thai chicken spring rolls with banana mayonaise :)

    http://www.salsaportdouglas.com.au/

    Reply
  50. Comment awaiting moderation? Hmmm try this then:

    Have you been to the salthouse next to the pier yet? Not a bad bar or restaurant

    Don’t count on this overcast weather clearning up mate – it has been like this for weeeeekkkkssss.

    Enjoy Port Douglas! Good food at the Salsa, try their thai chicken spring rolls with banana mayonaise

    Reply
  51. The human appendix was probably more equipped to handle grass four thousand years ago, Lachlan. We have evolution to thank for our reduced omnivorous diet! :)

    Like you, I suspect that for many, sustainability is achievable. Government subsidies for solar electricity are promising; as is the development of cheap(er) solar desalination. Rainwater supplies both the houses, gardens and orchards on our main property.

    Back in 2006, we stayed at Lanarch Castle, NZ, where its creator implemented methane power in the 1870s. You probably have sufficient chickensh*t to operate a small methane plant yourself… !

    I figure that in a more ideal world we’d all be able to detach from (some more of) the systems that enslave us. Can’t see myself being all that _mobile_ without the system. Electric motorcycles are a reality, but commercial solar-powered airflight is probably a few years off.

    Sun keeps melting the wax on my wingfeathers, too!~ ;)

    Biker Pete
    July 10, 2010
    Reply
  52. I have commented before Biker, but they are awaiting approval. Hope this gets through :)

    Check out the salthouse at the pier if you have a chance – walk past the lagoon pool if you can :)

    When in port douglas, go to the restaurant called Salsa – try their thai chicken spring rolls with banana mayonaise, oh and avoid the seafood place where george the groper is supposed to turn up. Overpriced fish and chips mate and george is normally a no show haha.

    Reply
  53. Steven, I’m so injured and hurt that you’re zapppping me with a -1 and one star again. It has really damaged my morale and made life here in FNQ quite unBEARable.

    Sky’s clearing, birdlife is amazing, bands all along the 2.5 km esplanade.
    Hire delivered Tamara, so we’re off to explore… .

    Reread my post about the Investors’ Club, Steven. You should gain some comfort knowing that inflation affects all socio-economic groups… including the ‘comfortable’…. . ;)

    Biker Pete
    July 10, 2010
    Reply
  54. Once again biker it wasn’t me,
    Didn’t your parents teach you when you were younger its not a good thing to accuse people of doing things they never did???

    http://au.news.yahoo.com/thewest/a/-/breaking/7562528/big-rise-in-perth-properties-for-sale/

    It looks like your mate who knocked on your door the other day would have had no trouble finding another place to look for

    “Sellers need to be very, very realistic about the price they’re asking for their property,”

    It looks like there is no shortage of properties in Perth, especially near your beach side suburbs where your properties are.

    So the question is when prices fall as they already are now in Perth what are you going to say?

    Reply
  55. Nah, I’m an orphing, Steven…. so I just go back to the last post, to see where The Tooth Fairy starting pulling… and sure nuff, there you were… pulling, as usual!~

    Which Perth beach suburbs have a surplus of homes, Steven? It’s certainly news to us! If prices _do_ fall, which two strategies do you think we’ll employ, ya little property genius?

    – Sell our stuff?

    – Hold and rent our stuff?

    – Buy rather than build… and rent ’em?

    Did you ever think that finishing school might have been a sensible idea, son? You’re competing in a very expensive city, against people who earn double to ten times your wage… and it’s a recipe for continued noisy pain… .

    Biker Pete
    July 10, 2010
    Reply
  56. It’s Don here – my comments for whatever reason are awaiting approval and I don’t know why. Hopefully this gets through…

    Reply
  57. Suspect if there was a sequel to Animal Farm where the cows took over from the pigs Lachlan, that things wouldn’t work out much differently.

    “Hold and rent” + “Buy rather than build” – I’ve started taking a bit more of an interest in prices on established properties over this way again Biker.

    It’s definitely way less hassle to buy them than build.

    Reply
  58. “It’s definitely way less hassle to buy them than build.”

    Yes, but we’ve really enjoyed building the last half dozen, Ned. It’s fairly creative work… and we’re getting better at it. It’s much cheaper to build (here), too.

    If there was no stamp duty buying homes, we’d probably quit building… if prices fell about $50K. That’s our approximate saving building a house. Sales tax adds another $18K or so, in our price range… so our saving is around $68K – $70K per project. Saved well over $300K one year DIY*… !~

    * I mean DIOS…

    Biker Pete
    July 11, 2010
    Reply
  59. Definately Ned. Those cattle can be pretty greedy/pushy when feed time comes around.
    Know what you mean but and completely agree.
    The next small gov will grow in to another big one. As a group we humans behave consistently over time. We assume more privelages, eventually beyond affordability which limits power.

    Reply
  60. Jeremy Grantham has studied 34, 40 year bubbles and so far 32 have come back to the mean. the 2 outstanding bubbles?: the UK and Australian housing markets. Normally the Aussie house price is 3 time the family income ie/ right now it should be about 90*3= 270k mean. that means about a 50 % drop is probable. I reckon that once we have a 10-20 % drop that the “poverty effect” will cause people to stop spending and this will fuel a deflationary spiral. then we’ll get panic selling in the housing market as unemployment goes up. i reckon at the end house prices will fall more than 50% because markets will aways over correct. Interest rates: the RBA doesn’t control them at all .it tries to convince people that it does . The rba follows the 3 month treasury bill. type in on google: “Think That Central Banks Move the Markets? Think Again”. i personally dont think that low interest rates will save the aussie housing market. i reckon that once the downward spiral begins there will be no stopping it.,
    thanks,
    Bill Foord.

    Reply
  61. Comment by Bill f. on 11 July 2010

    “reckon that once we have a 10-20 % drop that the “poverty effect” will cause people to stop spending”

    Oooops! There goes bank sharholder equity.

    “the end house prices will fall more than 50% because markets will aways over correct”

    Don’t believe the hype Bill f. This is os, the lucky cuntry, it aint gunna happen here I tell ya. Could it? Nah!

    Reply
  62. HaHa… “…the lucky cuntry…” You’re a laugh a minute, nv. ;)

    Biker Pete
    July 11, 2010
    Reply
  63. Rats – none of my posts made it through :(

    Reply
  64. Oh wait! success! For some reason all my previous posts were awaiting moderation hmmmm.

    Check out the restaurant Salsa when in Port Douglas Biker, try their chicken thai spring rolls with banana mayonaise!

    Reply
  65. Some housing-related news snippets:

    * Nichola Saminather, Housing Shortage Makes Australian Home Prices Almost Twice U.S., bloomberg.com, July 6, 2010:

    Christopher Wood, chief equity strategist at Hong Kong- based CLSA Asia-Pacific Markets, said the first-home buyer incentives in 2008 and 2009 – at a time when interest rates were at a half-century low – may have put Australia on the path to its own version of the subprime mortgage crisis.

    “In the long term, that policy will boomerang back on the Australian economy and the government because all they’ll have succeeded in doing is incentivizing people to buy houses who can’t afford them – very similar to the subprime issue in America,” Wood said.

    Australia’s household debt to disposable income ratio was 158 percent as of March 31, based on RBA data. That compares with 133 percent in the U.S. as of 2007, prior to the housing collapse there, according to Federal Reserve Bank of San Francisco figures.

    * The Economist, Froth and stagnation, economist.com, July 8, 2010:

    House prices in Australia rose by 20% in the year to the end of the first quarter, faster than the 13.5% recorded in the 12 months to late 2009. More concerning, however, is our analysis of “fair value” in housing, which is based on comparing the current ratio of house prices to rents with its long-term average. By this measure Australian property is the most overvalued of any of the 20 countries we track. A frothy property market was one of the reasons for the Reserve Bank of Australia raising interest rates six times between October and May. Since then, the bank has become more sanguine about the state of the market. It cited “some signs that the earlier buoyancy in the housing market was easing” when keeping interest rates on hold in June.

    [According to The Economist’s “housing-price indicator,” Australian house-prices are 61.1% overvalued – Hong Kong 53% and Spain 50.4% – no other country, that they monitor, is 40% or over.

    [In readers comments, Jon_Kristopher posted:

    [We will look back on the Australian government’s decision to double the First Home Owner Grant (FHOG) to $14,000 when interest rates were at 50yr lows as some of the most irresponsible policy in the history of Australian politics. In a competitive bidding market, all the FHOG does is push up prices. Furthermore, because most residential property purchases are geared at 80%, the multiplier effect of the FHOG is an additional $70,000 of purchasing power. The vendor who sold this property for an additional $70,000 now has an additional $350,000 of purchasing power to upgrade into their bigger home. This multiplier effect then continues up the entire property food chain. Mortgage repayments in Australia being roughly double that of rent is the very definition of an asset price bubble].

    * Manisha Thakor, Co-author, “On My Own Two Feet,” Pros & Cons of Home Ownership, pbs.org/nbr, July 7, 2010:

    As a 40-year-old personal finance junkie, I’ve long argued, mostly to deaf ears, that the reason home ownership was such a massive source of wealth generation for our parents was a set of perfect storm of conditions that is not likely to repeat for our generation. Specifically, number one, our parents bought smaller houses, typically for total purchase prices of three times or less than of household income. So no McMansions, just functional, reasonably sized homes they could truly afford. Number two, our parents had to put down 20 percent and they took out 30-year fixed-rate mortgages, so they knew exactly what they were paying every single month – no ARMs, no option ARMs. Our parents, number three, experienced several periods of high inflation in the 1970s and 1980s. As a result, they received healthy cost of living increases in their take-home pay, thus enabling them to pay off that flat, fixed payment with a rapidly increasing paycheck. Of course, the paycheck wasn’t increasing so fast in real terms, but it didn’t matter because their mortgage payment was fixed. Today, it’s time for a total housing rethink. In our more mobile and energy starved society, perhaps the natural rate of home-ownership is closer to 50 percent. While I still believe strongly that homeownership is a wonderful thing, like food, it must be consumed in the right proportion and at the right time to keep it from causing financial indigestion.

    Reply
  66. “In a competitive bidding market, all the FHOG does is push up prices.”

    The FHOG also stabilised and even _reduced_ rents in some parts of Australia. Up to 200,000 people exited the rental pool.

    “…most residential property purchases are geared at 80%”

    Interesting fact. Source, please.

    “Mortgage repayments in Australia being roughly double that of rent.”

    Fascinating data. Source, please.

    I suspect that we’re overusing generalisations here, to make a point; but I’m happy to be shown these stats, providing they’re independent… . :)

    Biker Pete
    July 11, 2010
    Reply
  67. Don: “Check out the restaurant Salsa when in Port Douglas.”

    Sounds like a must. Will do so. Thanks, Don… .

    Biker Pete
    July 11, 2010
    Reply
  68. Simple scenario:

    a) Actual prices on existing Oz housing correct downwards by 10% and stay there for a decade (or two)
    b) Oz wages go up 3.5% pa for a decade – Namely they are about 40% higher in a decade than they are now (or over two decades that means they double)
    c) New Oz housing ceases being McMansions and becomes ‘affordable’ – Maybe pulling the median price down another 10% overall (maybe???)

    Hey presto, Mr Grantham can chalk up another win – In somewhere between 10 and 20 years perhaps? Either that or Oz house prices continue to go up and he gets to wait a bit longer to have his win.

    Just on a side issue, I struggle a lot with comparing Oz to the US – Like those turkeys sent the real lunatics into the asylum to disable the guards and let the inmates go outside and play in the real world – Certainly Mr and Mrs We don’t have jobs and never have had jobs and never will have jobs, sign here for your jingle key mortgage – We reckon we can dump the liability on some foreigners – And if that doesn’t work then there’s always our own taxpayers … :)

    Reply
  69. Of course my suggested scenario could make both bears and highly leveraged bulls a bit queasy in the tummy I guess? Bears want their genuine 40 or 50 or 60% discount in real terms NOW! While the leveraged bulls would be a bit distressed by the prospect of no capital gain for a decade or two – Heck a bloke could invest in American stocks if he was happy with that.

    Reply
  70. Comment by Ned S on 11 July 2010:

    Of course my suggested scenario could make both bears and highly leveraged bulls a bit queasy in the tummy I guess? Bears want their genuine 40 or 50 or 60% discount in real terms NOW! While the leveraged bulls would be a bit distressed by the prospect of no capital gain for a decade or two

    I think we are going to have a combination of both over the next decade Ned.. A correction in property, different areas of Australia will be hit harder than others (Melbourne/Sydney most likely)
    Then we will have a long period of stunted or even nill capital growth.. over leveraged peole will be culled from the market or limp along.. those less leveraged (investors here) will probably do Ok with the income stream..
    Why I have always held the view that income is worth more than “paper” wealth.

    Stillgotshoeson
    July 11, 2010
    Reply
  71. http://www.ratecity.com.au/credit-cards/news/dump-it-and-save/

    Credit Card debt is up 3.3 Billion Dollars from this time last year.. Retail Spending is fairly flat, I would read this information (maybe wrongly) that people are using their credit cards to supplement their living costs..

    Higher Debts in a higher interest rate market.. As Biker and others have pointed out.. “Aussies” will do anything to keep their houses.. including racking up credit card debt and paying minimum payments hoping they can get through this “tough” bit.. Not a wise move in my opinion…

    Stillgotshoeson
    July 11, 2010
    Reply
  72. Agree fully about the income Shoes. Very, very few of the sums that I do have got anything at all to do with what I figure my capital gain on anything might be. Although I’m very interested in what the pa income is. And feeling confident that the risk of being forced to sell in a correction is minimal.

    Think that as a bloke is putting his retirement portfolio together, income and whether the assets will still be there to produce it (GM failed that test) and to what degree the income might tend to reflect either inflation or deflation in the price of consumables and services are probably more important ultimately, than whether one thinks they under or overpaid 5 or even 10% for the asset at the time. Providing the plan IS to hold the asset long term as an income earner.

    And while I see lots of advantages in trading for those who do have the skills, it also strikes me as important to be buying other assets along the way that fit the criteria above. If only because paying CGT on stuff one has traded successfully, reduces you to less than the replacement cost. Unless one loves trading and figures they’d like to still be earning their income from it when they are 80 maybe.

    Of course, if one’s plan is to spend both the income AND the capital in retirement (as I gather it is for most?), then the considerations change immensely.

    Reply
  73. The long term trend for equities is down.

    The charts don’t lie.

    Reply
  74. “I expect that the Chinese middle class will invade FNQ within a decade, as Japanese tourists do now. Cairns’ growth may quickly treble…”

    Well then, I guess it’s time to spruik the FNofQ since it’s ‘never been so cheap’ and tourism is a ‘boomin’. Oh itsa boomin awrite since all major airlines are solidly booked (standing room only) coaches fully booked (Indian style ride on roof only available) train seats limited so get in early, resorts are converting their ‘very profitable’ studios, 1 & 2 bedroom suites into permanently liveable ‘units’ at the never to be repeated price of, wait for it, sub 200K, thatsa you herd that right sub 200K. Thatsa rite folks cheap as chips. Get in before itsa too late (now where have I herd that before) ’cause it will be too late ya know, very soon it will be too late. Never mind the 10K annual fees nope, cheap as chips ‘n if you dont wish to live here well, let us do it rite for yoouuuuu and place your stunning unit in our letting pool as we are inundated with tourists and forward bookings as a matter of fact we canny cope with all the tourists up here in FNQ so we are currently seeking a broad range of experienced (we’re sooo desperate for staff inexperienced will do) hospitality workers from cleaners to managers so come on up here to cheap as chips FNQ where a new career awaits as we have thousands of open positions so make the move to a tropical paradise replete with humungous mozzies, mud flat beaches, swamps, millions of tourists who tip everyone, cheap as chips rentals and even cheaper are the cheap than chips blocks of land to build your new dreaaaam waterfront home but why wait to build when we have thousands of properties for sale cheaper than chips so you can move in rite away. You herd it ‘ere first so don’t delay and getaway to FNQ where you too can have a “thai chicken spring rolls with banana mayonnaise” (yummmmmeeeeeeeee……….), before you wade through the lagoon pool onya way for a dip in the saltwater pool before aquicky dive on dat ‘reef’, woohooo! I AM THERE!

    Reply
  75. HaHa… Well, Don’s favourite restaurant is booked out three days ahead, nv.
    Port Douglas looks like pretty good value, too. All comparative, of course.

    You’re lookin’ a little green around the gills, son… . You OK? ;)

    Biker Pete
    July 12, 2010
    Reply
  76. Of course it’s booked three days in advance, it’s the only_one_open, still operating.

    The rest are up for lease or sale and some for lease and or sale (I just checked and because FNQ is_in_season most are off the market, for_now) all very negotiable of course.

    Reply
  77. “…it’s the only_one_open, still operating.”

    What _nonsense_ you spout, nv. Port Douglas is packed. Every restaurant is doing immense business. We searched for a parking spot for thirty minutes yesterday… .

    What planet are you living on?!~ :)

    Biker Pete
    July 12, 2010
    Reply
  78. You’re definitely dwelling in an alternate solar system (without the sun), nv.

    Since your posts are several light years from reality, I’ll ignore your sad, silly attempts to talk down FNQ here. Good luck trying to convince anyone else… . ;)

    Biker Pete
    July 12, 2010
    Reply
  79. HaHa… !~ I can see this is of great importance to ya, son.
    We’re off to the Daintree.

    Have fun trolling for bad news in FNQ, while we’re just havin’ fun! :)

    Biker Pete
    July 12, 2010
    Reply
  80. I enjoy your humour nv!!

    I think part of the problem with aussie culture is the almost global drive to maximise profits coupled to a consumer society. It all but eradicates an ethical stance to say poverty and is an affront to human nature. We get around it by playing the ‘choice’ card. “It’s their ‘choice’ they’re poor. They are responsible for the ‘decisions’ they made” etc. True in many cases granted, but what happens when ‘they’ get fed up with being part of someone elses hidden agenda?
    Got to keep checking the fine print and asking myself exactly what it was that I signed up for and can I get out of it legally.
    For the record I wouldn’t touch property in aussie at the moment either. You’ll get a small boundary-line in someone else’s huge mind-boggling gameplan, sucked-in again. Don’t do it to yourself, wait, the prices will come down. Wait, and don’t be a fool either for this aussie BS!!

    bearamundi
    July 12, 2010
    Reply
  81. Holy moly – booked out three days in advance?!!? Things must really have picked up this season, we have not had an issue with walking in, except for a month ago but we only had to come back in an hour for a table :(

    I noticed that Port Douglas was jumping at that time – it is a lovely spot yeah?

    Enjoy the Daintree and take the aerogard! I picked up a mild strain of Dengue when we went up to Cape Tribulation last year.

    Reply
  82. “I noticed that Port Douglas was jumping at that time – it is a lovely spot yeah?”

    Delightful, Don. In fact the whole coastal strip is impressive. I can see decades of prosperity for this area and I’d be hitching my star to tourism here if I was twenty years younger. We’ve calculated that many of the larger tour boats are pulling up to $60K per day. Some of the little ones in the Daintree River may easily be pulling a million a year!~

    Frankly, most of our WA beaches are infinitely better, due to your tidal situation, but you have everything else, mate. Can see why the rest of the world is flocking here. (Apart from giant butterflies, we haven’t seen an insect up here. Where are the mozzies?!~)

    We figure the WA and QLD economies are going to lead the pack for the next couple of decades… boomtime for both.

    Biker Pete
    July 12, 2010
    Reply
  83. No mozzies eh? Good point, my partner is a regular mozzie magnet and she has not been compaining for the last couple of months about getting bitten. Benefit of the dry season :)

    Reply
  84. No mozzies at all. We get a few back home… but none here.

    What a life… living on barra, coral trout, tiger prawns and calamari.

    Couldn’t believe the Happy Hour Special at a beachfront restaurant yesterday afternoon: coral trout, chips and all the trimmings, plus a beer… for $8.50 total! You banana-benders seem to live even better than we sand-gropers do, Don.

    Tried to get in to your restaurant again, tonight, hoping for a late cancellation. Even dropped your name, to no avail. Not a chance. Maitre D took one look at my ugly mug and grunted: “You’re ze Biker Pete, aren’t you???!~ NV warned uz you’d be back here. Lizzen zport, Ze Comfortable zey aren’t welcome here, zee?!~” Difficult to understand his French accent, but we got ze mezzage… . :)

    Reply
  85. Sorry to hear you couldn’t get in mate, I could just imagine your disappointment “ahhh no, not Coral trout/barrumundi/prawns again!!!! Noooooooo!”

    Glad to hear you are having a great time :)

    Reply
  86. well im glad that global warming is only a conspiracy thoery. Perth the first ghost city of the world when the water runs out, FNQ subject to regular ‘1 in 100 year’ cyclones, most aquatic life extinquished as the water acidifies. could happen within a decade or two. youll all get your free market in the end (excepting the mixed economists amongst us), feudal style (not a free market at all).

    on another note, me being horrified at the 3.5% real estate agents fees for selling a property…. why is it that agents get double the fee when prices double, does it take twice as much work to sell in a hot market? this is the free market, isnt it? government gets another 3.5%…. adds up to 30k+ on 400k sale, and makes for a disincentive to move for jobs…. ok when paid for from rising prices, but when things get more real? a case against workers owning homes.
    not complaning too much, Ive got my blood money (locked up in the asset).

    Reply

Leave a Reply

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au