Zero Collateral

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–Australia’s biggest problem on Monday, December 2010 is that there’s just not enough government debt. Yes, it may sound strange to you, dear reader. But take it from the Australian banks, the Reserve Bank of Australia (RBA), and the Australian Prudential Regulatory Authority (APRA).

— It turns out your Daily Reckoning editor has been thinking about it all wrong! It’s not too much debt we should be worried about. It’s too little!

–We’re referring to the story this weekend that the RBA will offer “contingency loans” to any Aussie banks if and when there’s another credit crisis. The plan was cooked up in response to new global banking liquidity requirements. Those requirements were set up by the Basel Committee on Banking Supervision. It’s a group that makes the rules for other central banks.

–So what?

–Well, the Basel gang has said that in order to prevent another crisis from taking down big banks, banks must hold the kind of assets they can quickly turn into cash; enough cash to see them through a 30-day “severe liquidity stress scenario,” according to Bloomberg.  That’s the cash the banks would use to settle up short-term loans and obligations (the kinds of loans that are hard to refinance when no one is lending).

–The types of assets that are liquid enough to satisfy the Basel people are cash, government bonds, and non-financial high-grade corporate debt.  Basel says 60% of assets must meet the  liquidity requirement. But here’s the problem…there’s not enough government debt in Australia!

–Aussie banks have most of their assets tied up in home loans, as the chart below from APRA shows. And with only $175 billion in government debt outstanding, there’s not enough government debt for the banks to load up on to reach the 60% threshold. So how can they make sure they satisfy the Basel requirements?


Lots of Housing Assets

–The obvious answer is that the Australian government should go much deeper into debt. Borrow more money at all costs! This would allow the banks to buy up that debt and hold it on their balance sheet as high-quality capital in a liquidity crisis. If only the government would borrow more money, the banks would be better capitalised with more liquid balance sheets. With more debt, the whole economy would be richer.

–But let’s assume the government is not going to issue new bonds fast enough to meet the Basel requirements. No problem! The RBA has said it will accept other kinds of collateral in exchange for liquid reserves that can see a local big bank through a global crisis. What kinds of collateral qualify?

–That’s where it gets a little tricky. The RBA hasn’t finalised what kind of bank assets will be acceptable as collateral for a loan in a crisis. But there are only so many assets on the balance sheet to choose from. The big ones are: residential housing loans, commercial real estate loans, and deposits (expensive watches, gold coins, and plasma televisions do not, unfortunately qualify…not yet anyway).

–If the RBA is going to accept commercial real estate loans as collateral for a loan, it will slowly be turning itself into the kind of pawn shop/brothel that the Federal Reserve has become. We say “brothel” because the joint RBA/APRA announcement says the RBA may simply charge a borrowing bank an “appropriate fee” in exchange for liquidity. Don’t have collateral? That’s okay. Just pay a fee!

–This is called “renting the public balance sheet.” It is more of an over-night rental rather than a long-term accommodation. It’s a kind of financial love motel in which the banks get what they desperately need for the night (or a few weeks). But afterwards, no one has to know what happened and the banks can go back to pretending they are good, upstanding citizens.

–Of course the other possibility is that Aussie banks pledge deposits as collateral for emergency loans. But with deposits also potentially backing the newly-approved covered bonds, surely you couldn’t double pledge the same collateral could you? Or could you!?

–If you dismiss with all the mechanics of which collateral is eligible at the RBA, you can see that the real problem is that the banks have massive over-exposure to housing on the asset side of the balance sheet. But hey, that’s where the money is to be made right? Keep feeding the bubble and you can’t go wrong.

–The only thing different with the story today is that in order to satisfy global liquidity requirements from Basel, Aussie banks have to basically admit they don’t really have any other assets that would satisfy normal collateral requirements. So the RBA has agreed to create a scheme where no collateral is required at all!

–Presto! Change-o! Bingo, bango, bongo!

–So as we begin the week we see that the gradual financialisation/debt enslavement of Australian life continues. The interest of the banks trumps the interest of an economy based on building real things and selling them to generate incomes. Everyone in Australia will get rich with rising house prices without having to do any work. Because that’s worked so well everywhere else!

–Finally, the man who coined the expression, “a currency without a State” is dead. Italian central banker Tommaso Padoa-Schioppa died in Rome at the age of 70, according to the Financial Times. Former EU President Jacques Delors said that Padoa-Schioppa, “Embodied the spirit of European construction,” Jacques Delors, former president of the European Commission…He had a huge historical culture, and he was also a specialist: he had a great knowledge of the economy and financial regulation. And he was even more federalist than me.”

–History sometimes offers up these parallels. Europe’s federal experiment in centralised money without harmonised political and economic structures is falling flat on its face (also dying). It was an intellectual conceit to begin with, based on a flawed understanding of money.

–Money isn’t an idea. It’s a commodity. And if it doesn’t have certain real, tangible properties, it will eventually fail (as all paper currencies do). That will probably be the big event of next year. If this year was the year of the sovereign debt crisis, next year is the year of reserve currency failure. Until tomorrow…

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.
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Comments

  1. “http://en.wikipedia.org/wiki/Reserve_requirement”

    “Statutory Reserve Deposits abolished in 1988,
    replaced with 1% Non-callable Deposits”

    What does Australia have in effect 0-1% reserve requirements? Is there some other legislation to prevent bank runs? (prior to 2008)

    Reply
  2. DD: “Everyone in Australia will get rich with rising house prices without having to do any work.”

    Now I _like_ precious metals_ but I hardly see buying, holding and hiding them as much ‘work’, Dan. Yet we’re constantly advised that buying PMs is the way to wealth.

    See the inconsistency in your argument?! Probably not.

    I _like_ work… and I/we do a lot of it, each week, to ensure our properties not only provide the best possible service to tenants, but steadily appreciate. Please enlighten us: Where’s the hard work (apart from diggin’ up the back yard to bury the stuff… :D) in buying and holding PMs?

    Do you ever stop to reflect on the inconsistencies you offer?

    Now HIT ME, bears. You can do better than three Thumbs Down, guys!~ ;)

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  3. “Now I _like_ precious metals_ but I hardly see buying, holding and hiding them as much ‘work’, Dan.”

    But Biker, the mining and refining of highly productive gold bars and the storing away of them in vaults and guarding them from thieves adds so much MORE to the well being of the human race than the construction of unproductive assets like housing! Surely you can see THIS??? ROFLMAO! :D

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  4. Beginning of the end. Property collapsin’… ;)

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  5. I had the MGM of one of the world’s larger gold mines say to me during a quiet chat one day that he wasn’t at all sure what he was doing spending his life in such a bloody USELESS endeavour Biker? (He wasn’t actually the MGM at the time but became so a few years later.) I hope he goes on to become the group’s CEO – He’s a bloody good bloke!

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  6. Like seriously, have a look at the following pics and tell me that gold is gunna be important in a global depression? :

    http://history1900s.about.com/library/photos/blygd17.htm – They weren’t there to take their gold out?

    http://history1900s.about.com/library/photos/blygd45.htm – She ain’t thinking “Damn, if only I hadn’t pawned my gold wedding ring life would be really great!”

    And he ain’t saying “Aw heck, I really WISH I had a few spare ounces of gold to give each of my kiddies this Xmas” : http://history1900s.about.com/library/photos/blygd50.htm

    But then maybe I’m wrong and still just truly don’t understand???

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  7. The difference between borrowing money to sink into property and mining of gold is that gold can be used to purchase goods from overseas because it is seen as a form of wealth. Increasing debt to increase house prices only has the effect of improving the banks bottom line.
    The increase in debt in this country and others has been a nice tactic by the parasitic banks but unfortunately the game is soon going to be up. The bringing forward of demand by lending everyone money makes us all feel wealthier up until the point where we can no loger afford to borrow any more money at which point the game comes to an end. Unless you have the reserve currency at which point the extend and pretend can last just a little longer.

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  8. Elastic: “The difference between borrowing money to sink into property and mining of gold is that gold can be used to purchase goods from overseas…”

    That’s stretching the analogy a little. There may be a few other differences.

    Property pays a fortnightly dividend. There’s no CGT on your primary residence. Tax writeoffs are generous. Every Aussie _needs_ accommodation. Government intervention is almost guaranteed.

    That’s just five differences, none of which apply to gold. Look, I _love_ the shiny stuff, but if you’re holding your breath waiting for a property collapse, it’s time to breathe out. Your lungs are only so elastic…

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  9. “Where’s the hard work (apart from diggin’ up the back yard to bury the stuff… ) in buying and holding PMs?”

    PM’s are not for ‘making money’, rather, they are to detach from inflation reduced currencies as a liquid storage object. It can be bought, carried and converted in to fiat in relatively small quanta.

    Remember the money needed to buy the PM in the first place has to come from somewhere. Now, that said, when was the last time you saw houses offered no money down… I did, in the last year. I bet a number of people bought that thinking that ‘property goes up’ and all they needed to do to make a killing as sign a document, move in and start the CG engines!

    PMRE. RE is a cashflow engine. It takes work and a lot of capital without leverage. PM’s are merely a replacement for a savings account that is immune from inflation and currency debasement.

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  10. Oh, I forgot. You CAN probably make money on PM right now. Right now PM’s are the equivalent of a stock that have a total market value of less than all to the capital totalled. We arrived at this unusual circumstance thanks to the US. In the old days they we’re locked in to a static oz\$ ratio. When then decoupled, then later dropped the gold standard we had the spike of the early 70’s.

    However it gets really interesting afterwards when the US started paying for Saudi Oil with a combination of $’s and oz’s. During this time they actively beat down the $to oz ratio, and gold traded sideways flat right through the 80’s. Then inexplicably, the price of oil started rising in the early 90’s. This was due to Asian gold buyers eating up the physical market. This broke the flat $\oz ratio that the oil trade needed. Since then the price of saudi oil decoupled and gold has continued to chase it’s ‘true value’.

    True Value! What the hell is that? Well, over the ages gold hel a certain buying power relative to the world. When the fiat dollars started floating uncoupled to the world (floating in a sea of unrestrained inflation) you might assume that doubling the circulating dollars would naturally double the number of those cheaper dollars needed to buy the same amount of gold.

    Here is the nugget… with the massive inflation of all fiat systems over the past 40-50 years, gold has simply not kept up. If gold really did keep up, then the price of where it ‘should’ be relative to dollars is believed to be between 10,000 and 50,000 USD. Crazy? Well consider the fact that the USd has lost 97% of it’s buying power since inception and you start the understand how this came about.

    So why didn’t it just correct? Well, problem is the US government wasn’t ready to allow the correction. There are a number of theories, the one I like best is that bonds are a better ‘safe haven’ asset (for them!) as it gives the US the lowest interest rates on the planet. The other reason is that if gold came to the fore, the USD may lose reserve status, a VERY lucrative deal for them, as exporting inflation buys them a cheaper world to live in.

    Right now, it appears that the masses of physical buyers are challenging this suppression system. It is believed that the rise of India and China is the cause for the physical market pushing forwards. The US is pulling out all of the stops in this battle, reducing margin again and again for comex trades, massive shorting via JPM and friends, but all that does is give a better buying price to physical buyers, rather than dissuading them from seeing gold as a haven.

    The battle is recorded, play by play on ZeroHedge or on this specialist blog:

    tfmetalsreport.blogspot.com

    Hope all this help people think outside the box of ‘gold always goes up’. PM’s will be a BUMPY ride, but in the long run if you use it as a savings account, the AUD to OZ ration will get better in your favour I bet :)

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  11. “So why didn’t it just correct?” – The theory I relate best to is because it only costs about USD500 an oz to produce.

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  12. Depends on two things:

    1) Whether you think Gold\Silver is ‘money’ or a commodity.
    2) Whether you think there is no ‘supply’ side in a demandsupply equation.

    If it’s a commodity then the base premise is correct, in that the base supply reflects manufacturing costs.. when -not unbalanced by demand being greater than supply-. Of course, if you research the silver ‘demand’ then you might find some very pleasurable fundi’s.

    However, if I’m correct in believing that most of the world still thinks silver and gold is money and that they have not forgotten that so far -no fiat system has ever survived more than 100 years before collapse-. Then you may be thinking, that people other than westerners consider PM’s as money for the ages.

    Remember, if it -were- a commodity then it would likely be substitutable without something else which is more expensive or less effective. Palladium is rare but palladium is not money. Palladium is about as rare+ desired as silver, however it costs $700 an ounce.

    Don’t forget that at various times in history when simple supply+demand meant that silver was MORE rare than gold, that it was priced higher.

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  13. Two issues here. First, it was silly of me to comment on the statement, by Elastic, that: “The difference between borrowing money to sink into property and mining of gold is that gold can be used to purchase goods from overseas.”

    That comment was so simplistic that I should have ignored it. :D

    Dan’s comment: “Everyone in Australia will get rich with rising house prices without having to do any work” remains only partially true. One of the attractions in buying PMs is the minimal personal expenditure of effort required. Buying and maintaining property/ies involves far more time, effort and work. The inconsistency of Dan’s comment remains.

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  14. Comment by Biker Pete on 21 December 2010: ……

    Property pays a fortnightly dividend…… Bzzz wrong typical property investment in OZ is at a loss no fortnightly dividend the bills come in fortnightly & the rent will not cover them …

    There’s no CGT on your primary residence…. Yes but you can rent the same thing at half the cost in most cities …..

    Tax writeoffs are generous….. Even after writeoffs most investors incur a Nett loss of approx $5-$10K pa relying solely Capital Gains
    {FYI this is called Speculating not Investing}

    Every Aussie _needs_ accommodation….. & they can achieve this by renting at half the cost of ownership.

    Government intervention is almost guaranteed….. Really tell that to the Irish … no more bailouts there …. USA billions throwm at property Result = 40-70% fall in prices despite Govt Intervention.
    (It wont save housing never has never will)

    Keep up the Spruiking Leatherman

    Not Fooled By Property Spruikers Hype
    December 22, 2010
    Reply
  15. Thanks for those thoughts, Prozak.

    Rent covers all but two of our investment properties. Tax benefits, which you simply don’t understand, cover the rest. The very large cheque we receive annually is alone enough to live on. I accept that there are a few naifs, yourself included, who couldn’t make a quid out of property. You’re advised to rent.

    Yes, it’s possible to rent more cheaply at present. At the end of a ten-year period you’ll have nothing to show for your rent ‘investment’. Bill Bonner, our DRA editor, remarked recently that his employee’s home has doubled in value in four years. We’ve also experienced growth of that kind. Even if your home’s value only doubled in ten years, that’s a nice little tax free gain. There are a few here who would/could invest their savings and double their money in a decade; but they’d then be hit by CGT.

    Any fool who relies on Capital Gain alone doesn’t understand property investment. These folk should also rent.

    Ireland? The US government also intervened… and failed. We’re neither Ireland nor the UK, nor will either L party allow the construction industry to fail. At the moment residential construction is slowing, but population is still growing. Public housing stimulus is about to end in WA. Our boom is beginning.

    Your job is to undermine confidence in the housing market. In PerthNow I commented:
    “Undermine confidence. Spread fear and alarm. Create anxiety: break-ins in Leederville, car thefts in E V Park. This is your stock-in-trade, N Fool. Bottled water salesmen did the same. Undermine people’s confidence in tap water. Long campaign before they launched their product. Won’t work here. West Aussies see through your crisis-mongering. You’ve picked the wrong state, fella. You should have concentrated on your east coast fear campaign.”

    Your reply, 6th December 2010, Comment 31(?): “Wont work here ? … Oh yes it will … ”

    West Aussies can see right through you, Not Fooled By Property Spruikers Hype of Perth of Perth. (Classic nervous tic… :D )

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  16. Rent covers all but two of our investment properties. Tax benefits, which you simply don’t understand, cover the rest.

    So I get a thank you for help paying off your “INVESTMENT” for you Biker?
    Its on me….

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  17. Well, yes, Steve. Thank you. And if you were renting, I could thank you twice, on behalf of your landlord. :D

    In the case of housing… and probably housing more than other investments… tax considerations are critically important aspects of staying ahead. Inflation is also a helpful factor. After a decade, you’re basically paying off loans with 65c dollars. We will pay off three more houses completely, by April 2011.

    Yes, one could argue that inflation takes a 35% bite out of one’s equity after a decade. It’s equally true that Australian housing values rise much more than that, even in turbulent times, as Bill has noted.

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  18. The interest I earn basically covers the inflation Biker….

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  19. You’ve been promoted Biker – Leatherman is so much more endearing than Pinhead! :D

    The lad has a point about it being significantly cheaper to rent than buy over here in the East. Though as a SFR I’m glad I’m not renting regardless.

    Merry Xmas to you and yours also mate.

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  20. Just thinking – What would the rent be on my $300K dunger – $16K pa. What would I earn if I sold and popped the money in the bank – $18K pa – On which I’d pay tax – So $14K pa maybe? Plus I wouldn’t have to do R&M or pay local council rates or insurance. Another $5K pa maybe.

    $16K to rent versus $19K to own. (For now anyway.) I’ll stick to owning – As it’s convenient – And on the off chance that we’ll get 1% pa increases average over the next decade or two – To cover my $3K pa ownership cost. That’s called “NOT speculating” maybe? :)

    Though yep, if you are leveraged, you get to do your sums differently.

    Reply
  21. Steve: “The interest I earn basically covers the inflation Biker….”

    Then if Sydney property is at 0% growth per annum… and you’re paying no tax on your bank interest… you’re neither losing nor winning, Steve.

    If you’re paying tax on the interest, you’re falling behind… but…
    …if you’re not paying board to M & D, you’re probably still a little A Head. (I could have given you a ‘D’ rating for that, though… . ;) )

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  22. The figures you cite are interesting, Ned. With base salaries well over $200K total, our effective tax advantage with property is appreciable. Our goal is to legally reduce tax payable down to the lowest possible rate.
    Salpacking used to reduce our tax debt by 23%.

    I think that’s where the N Fools lose the plot completely. If gross income is around 2.5 X that base figure, taxation benefits start to kick in to the tune of 33% or more saving per annum. Admittedly, once you hit retirement age, a fair percentage of that gain drops off… but, on the other hand, you then move into a very generous double tax-free zone.
    I read Shoes’ figure of $125K(?) with some skepticism, but he may be right, somehow… (?)

    When we started renting out investment homes back in the late seventies, our knowledge and understanding were criminally naive. I shudder to think how _little_ we knew. Reading Prozak’s stuff these days, I recognise the same developmental level we were on three decades ago.

    There’s NO question that buying gold or putting money in the bank is lots easier than what we do. When I look back over the years, though, I think we got much of it right. My kids are doing it another way (although they own property) but they still acknowledge that their parents, two very ordinary people, managed to accumulate much, much more than their fair share… . :D

    Merry Christmas, Ned and to all. May 2011 bring you what you need… .

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  23. It is one of the difficulties of sites like this Biker – People find it pretty difficult to see things from others’ perspectives perhaps? (With me having a bit of a personal blind spot when it comes to bullion maybe?)

    But how exactly does a bloke who is locked into the thought that the only way people can purchase is on 95% debt, get his head around the fact that there can be other ways?

    Our mate Steve is getting closer and closer to falling into that category – Give him a 2 or 3 more years saving and a bit of a property correction (they DO happen as we both know :) ) and at the ripe old age of 28 he could be well on the way to being a debt free property owner – If he still wants to be. Which ain’t bad at all for a young bloke who doesn’t have a partner bringing in a second income, or a second job from what I’ve heard?, and isn’t one of the higher paid blokes in Sydney.

    Plus he will have his super.

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  24. We’d both agree that Steve has a lot going for him. He has a job, he saves, his expenses are low, he has a worthwhile goal, etc, etc. Where the difficulty lies is in timing. He’s not alone there. For decades, through a little savvy and some luck, our average was around 95%. In property and Super, we’re down to 66%. (ie., we ‘won’ in 2/3 of ‘recent’ actions involving land purchase; in Super tweaks, the same: 2/3 actions were very well timed.)

    Yes, we know that property corrections occur cyclically. The trick is, of course (as always) knowing where we are in any given cycle. We got it wrong in one action, right in two. The question then is, will Steve take advantage of a correction? If he really believes the market will crash 40%, he’ll continue to wait for that blessed event, missing smaller corrections along the way. Eventually (who can tell how long?) values will double, treble, quadruple. The best we’ve done is 800% over one decade, 780% over two decades. That’s exceptional. Generally we double or treble.

    I feel some empathy for Aussies sucker-punched by academics who have long promised the gullible massive discounts. These hopefuls truly believe that offering a vendor 60% of asking price will result in a windfall. Many are angry that asking prices are so firm. Some will tell you what it _should_ cost, based on the same theories we read here so much. We remain polite and friendly. We have no problem with subsidising rents through what others assure us are our ‘poor investments’… .

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  25. @ Biker Pete … you love to quote …. Bill Bonner, our DRA editor,… yet you always leave the bit he say at the end out …. You know the bit where he says … ” Our advice to our Colleague is to S*E*L*L* ” ….. Why do you quote the man out of context what are you so fearful of? …..
    One other thing how can a man with all your wealth & assets to look after find the time to be on a dozen websites under different names trying desperately to pump up the property bubble? ….. Oh & I forgot while travelling around the world last year you also blogged on property sites daily hardly a holiday? … pitty you did not have the smarts to take into account the time differences showing you blogging at 3 am from Canada … How do you spell desperate!!! (We all knew you were in your Homeswest Flat typing away at the keyboard)

    Want to see the classic property speculation & how it turned out? … ) #1 Ullinger Loop Marangaroo Bought Jan 2007 for $360K rented out for almost 3 years Sold Nov 2010 for $335K a loss of $25K + Stamp Duty $15 + Agent Fees $10K = Negative rental return after tax of $15K (3 years $5K pa) = Total loss this Canny investor incurred ? = $65,000 Brilliant !!… Now dont forget the Tax Office says that the average investor claiming deductions for Residential property has a reportable taxable income of U*N*D*E*R $70,000 . No doubt in 2007 this investor thought he could not go wrong property had just doubled in price the previous 5 years so he could sell & make a MOTZA even if he lost $5K pa after Tax! …. No doubt theye were just trying to get ahead with what they thought was a sure thing learn from their mistake ….. So what if you take $30K less for your property now than you could have got 6 months ago in another 6 months with investors flooding the market to escape you may have to take a loss far greater. Unless of course you think this is a one off & your property is unique & you will find a GREATER FOOL in 2011 to Buy? …..

    Property Spruikers Number one Myth: ‘ AUSTRALIA HAS A HOUSING SHORTAGE ‘ Then there is there is this wild dream of HUGE DEMAND from Mining BOOM & 457 Visa will keep prices rising. MYTH BUSTED Follow the link to poverty: Homeless figures are`distorting housing shortage’…DOUBT has been cast on the widely held belief that a shortage of housing in Australia is driving up property prices, with a leading researcher arguing there are nearly two million too many homes…”House prices aren’t going to go up because of a shortage of housing for homeless people.”…Real Estate Institute of Australia disagreed, saying demand for housing was exceeding supply and that homeless people should still be included in official figures…. There you go Real Estate Industry thinks Homeless should be counted… That person sleeping under the bridge is going to buy your investment property in 10 years. How do you spell OOPS!! HA HA HA.. Her is the link: http://www.theaustralian.com.au/news/nation/homeless-figures-aredistorting-housing-shortage/story-e6frg6nf-1225823765035 ….. & now In Saturdays West Australian 11th Dec (Page #4 Real Estate Section) REIWA president Alan Bourke states … €” With the exception of the Pilbara there is no housing shortage in WA… ” & without a shortage to drive demand the prospect of strong capital gains is very unlikely.Property SPECULATORS need property to double for their Negative Geared speculative investments to work {Without it property speculation will not work} Faced with years of inadequate capital growth these speculators are starting to flood todays housing markets as they race each other to exit the markets…… How bad is the market when even REIWA is saying that ” With the exception of the Pilbara there is no housing shortage in WA “

    Not Fooled By Property Spruikers Hype
    December 23, 2010
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  26. Comment by Ned S on 22 December 2010:

    Though yep, if you are leveraged, you get to do your sums differently.

    Comment by Biker Pete on 23 December 2010:

    Steve: “The interest I earn basically covers the inflation Biker….”

    Then if Sydney property is at 0% growth per annum… and you’re paying no tax on your bank interest… you’re neither losing nor winning, Steve.

    If you’re paying tax on the interest, you’re falling behind… but…

    @Ned Yep.. throw leverage in there…

    @ Biker “Then if Sydney property is at 0% growth per annum… and you’re paying”… $400000 mortgage @ 7% ($28000) = $5000 in Rates, Insurance and Maintenance
    then it starts to look not so attractive to be “buying a home’
    Throw in 10% or more price correction and it starts to get a little daunting about having all that debt and the effect on personal cash flow
    it has..
    Sure they could all go back to Mum and Dads and rent it out.. get a few doing that and rent rates will drop as they compete for tenants..

    Stillgotshoeson
    December 23, 2010
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  27. Only read the first few lines of your nonsense, N Fool. Bill’s right about the past. His employee’s property doubled in four years. It’s easy to ‘fore’cast the past. DRA has been forecasting an _imminent_ crash for that entire four years. :D

    After that little gem, I started to read your crap… and didn’t bother to read past the Homeswest garbage. Your God-like powers are failing you again, wizened little man. You had my comment about checking out your image as God-like in a mirror removed last time. Check yourself out again, o financial deity. Take a handful of your pills prior to doing so, Prozak.
    If they reassure you, keep *pop-pop-poppin’* em.. :D

    Reply
  28. “DRA has been forecasting an _imminent_ crash for that entire four years”

    DR in the US was sniffing around the possibility of an Oz housing crash as early as April 2005 that I personally know of. :)

    Don’t actually know when they got onto the US one??? But their cited source in April 2005 reckoned Oz was the “canary in the coal mine” to watch for the US housing correction – “Yo Ho Ho” chuckled Santa … ;)

    Which is why I opined above, that IMO, they are looking SO late they are probably just plain WRONG now.

    But irrespective, as a somewhat off topic lesson in learning from the lunacy of others, read THIS one and weep (or laugh! :D ) :

    http://www.brisbanetimes.com.au/business/how-an-unsuspecting-couple-fell-into-financial-ruin-20101222-195mi.html?from=smh_ft

    It should be presented as a mandatory object lesson to all 12 year olds as to what you DON’T do with your money, before they are allowed to graduate primary school!

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  29. Just found the April 2005 DR US article again … BUGGER ME! THE EXPERT THEY WERE CITING WAS GRANTHAM!!! Who reckoned the US only had a “semi-bubble” at the time? :D :D :D :

    http://dailyreckoning.com/the-australian-canary/

    All good fun … We’ll see what the New Year brings soon enough! :)

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  30. Nice research, Ned. Really enjoyed your posts.

    You’ll recall that while we were in the NH six months last year, Pillman was adamant I was a Kiwi living in Sydney. The dill was also betting his left testicle you and I were the same fella. Utterly clueless. :D

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  31. Watching the ‘exspurts’ is all good for a giggle Biker! :)

    It will be nice to catch up eventually, one of these daze, as you sometimes saze. Just bloody hope it doesn’t come about through me feeling pressured to take some bloody job in your booming blooming state mate! As I’m still a bit of a conscientious objector to exerting any effort to help prop up our nation’s over indebted and welfare addicted … :D

    Off to the old’s place for Chrissy. Family do – Me bro, his missus and kids. And his missus bro and family I fully imagine. But will be painting some internal walls in that rental in the name of my SMSF tamara – How about you?

    Reply
  32. “that rental in the name of my SMSF” – Which is another thing Not Fooled just maybe misses? Some of us have long term (20 and 30 year) plans we are putting in place. With a few housing corrections along the way being things to be considered. And balanced against the likelihood of corrections in other asset classes. Plus balanced against a whole HOST of other factors as well – With Not Fooled simply turning up and saying PROPERTY IS DOOMED! But without suggesting any alternatives like Chris asked him to. Gotta take a bit more holistic approach to things when one gets to be an ‘older’ bull (or bear!) – IMO … :D

    Reply
  33. Sounds good, Ned. Enjoy yourself!

    Both sons here for Christmas before they fly OS again; also two Dutch bikers we met during our four-month ride thru’ western Europe in 2005. With just six of us, you’d think it would be a fairly quiet break, but they’re all musicians and a few slabs have already been demolished… . (I’ve hidden the port!~ ;) )

    The big holiday job is re-retic-ing and mulching our orchards. Very humid at present… pointless trying to exert ourselves in the middle of the day.

    Jeez, Christmas eve Tamara. Have a good one, Ned. :D

    Reply
  34. “Sounds good, Ned. Enjoy yourself” – Yep, even when I was working OS I always made a point of being home for Chrissy morning minimum. (As I spent one Xmas day away working early in the piece and figured it REALLY sucked! :D Though also reckoned it must have sucked even worse for the poor baskets of cooks who had the TOTALLY unenviable job of trying to make a bunch of misery gut’s like me feel better about not being home with loved ones when they weren’t either!)

    Glad you’ve got your mob with you mate. It’s as it should be. We’ll chat after Chrissy most likely then I guess – Enjoy!

    “I’ve hidden the port” – Wise decision – Unless the Dutch Bikers are young, cute and female maybe? Hmmm … Nah, you don’t need the hassle – You’ve chosen VERY well!!! :D

    Reply
  35. Biker Pete AKA TRAVS / Dogman / MARK of Vic Park / Bill of Leederville … Get the Port out & watch this series it even has a female version of Steve Keen who in 2003 forecast the Irish Property Bubble but was put down by property Inc …. enjoy my little xmass gift to you. Make sure you click on the next episode there are 5 in total that should keep you up at night … but then again I doubt it you like other property Speculators live in denial …. http://www.youtube.com/watch?v=BQ9UhMHWB2g&NR=1

    Not Fooled By Property Spruikers Hype
    December 24, 2010
    Reply
  36. “Biker Pete AKA TRAVS / Dogman / MARK of Vic Park / Bill of Leederville”

    Right on the first two. You _could_ have added RTW Traveller and Traveller.
    No effort was ever made to hide these, or the shorter version, Travs.

    We’re NOT Ireland, N Fool / Kris / Prozak / Aaron / The Punter of Mindarie, john of dullsville perth / John / etc. Your pretense at being a Perth resident was made glaring obvious in your recent, repeated tag:
    ‘Not Fooled By Property Spruikers Hype of Perth of Perth.’ How many Perths
    do you need to add, son?! Clearly not enough, yet… . :D

    Thanks for the Krismas gift. Here’s a New Year’s blessing for you, champ.
    May 2011 find you still bleating a property crash for WA.
    Another year of faint whining from a whingeing POM. ;)

    Reply
  37. Well the mini cyclone has passed over now so I have hosed away the leaves and cleaned the pool. Time to get stuck into Chrissie Lunch :)Merry Christmas to all DRA readers :)

    Reply
  38. back to the article, maybe the RBA can take the firstborn male as liquid collateral, given the propensity to fob off responsibilities to the next generation. would give the Chinese ‘little emporer’ makers an advantage if adopted by the NWO. hehehhe and hohoho.

    Reply
  39. Merry Christmas to all the DRA gang and hope everyone enjoys the break with their family etc :)

    Reply
  40. The Yanks are pretty entrepreneurial little devils – If they don’t want to buy their shitty houses, I’m tricked if I know why I’d want to?

    Reply
  41. Thanks for which thoughts?

    I commented somewhere on the DR recently but not on this article.

    Reply
  42. Obsession is a wonderful thing… :

    “Your Prozac comes in different colors with little M’s on them…”

    “Another reason to act like we are ‘on prozac’ is the US dollar which is looking shaky…”

    U become what U eat… . Wunderheilmittel: Mere mortals become gods… ;)

    Biker Pete
    January 4, 2011
    Reply
  43. You are right. Your obsession engulfs you.

    Go back to monopoly and stop talking about me.

    Reply
  44. But… but… you’re so God-like and… and… powerful…

    Biker Pete
    January 5, 2011
    Reply

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