# Your Memories of the Last Recession



## chops_a_must (13 November 2008)

I just thought it might be an interesting discussion to see what people's lasting memories are of the last recession, given the world is heading into recession, and it looks like we will eventually follow suit.

Probably the biggest event for me was the dad losing his job, despite being a well regarded and well educated industrial chemist and previously, metallurgist.

Being a kid, it didn't really effect me a whole lot, but perhaps my lasting memory is from going to the footy every second week on the bus to Subi, and seeing probably half of the office blocks in West Perth vacant with for sale signs, or to let signs on them. I often wonder whether or not the people who work there, and live here realise that it was a ghost town back then, with what it is like now. But in Perth, it was probably more like a depression in certain sectors, rather than a recession.

I also remember the constant piss taking of Keating on Fast Forward. And him wanting to sell Australia's greatest Asset - its people. 

Your thoughts...


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## MrBurns (13 November 2008)

chops_a_must said:


> I just thought it might be an interesting discussion to see what people's lasting memories are of the last recession, given the world is heading into recession, and it looks like we will eventually follow suit.
> 
> Probably the biggest event for me was the dad losing his job, despite being a well regarded and well educated industrial chemist and previously, metallurgist.
> 
> ...




I remember the house I'd just bought losing 30% over 2 years, I worked out my net worth at the time and sat in the top room with a bottle of brandy.

People I knew, clients, worth 10's of millions,  being sold up by the banks even though they had good equity the banks panicked.

There was no real drama at the time things just went down, activity wanned.

This is far worse and it hasnt even really hit home yet.


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## chops_a_must (13 November 2008)

MrBurns said:


> People I knew, clients, worth 10's of millions,  being sold up by the banks even though they had good equity the banks panicked.
> 
> There was no real drama at the time things just went down, activity wanned.



Weren't some of our banks on the verge of going bust though?


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## MrBurns (13 November 2008)

chops_a_must said:


> Weren't some of our banks on the verge of going bust though?




I don't actually recall that, they were complete bastards though I remember that very well. A client of mine had $30m plus in commercial property, bank moved in as soon as they could, not allowing him to re adjust things, I don't think he ever missed a payment, ruined him. 
I trust the banks may be a little smarter these days but here 's the point, if they shut a commercial property owner down no one gives a stuff but foreclose on one homeowner and they risk being on 60 minutes.


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## chops_a_must (13 November 2008)

MrBurns said:


> I don't actually recall that, they were complete bastards though I remember that very well. A client of mine had $30m plus in commercial property, bank moved in as soon as they could, not allowing him to re adjust things, I don't think he ever missed a payment, ruined him.
> I trust the banks may be a little smarter these days but here 's the point, if they shut a commercial property owner down no one gives a stuff but foreclose on one homeowner and they risk being on 60 minutes.




Here:



> # 1992: Westpac recorded a 1.6 billion dollar loss, which at the time, was the largest loss for an Australian corporation. In this environment, the Bank dismissed staff and raided the superannuation[citation needed] to sustain its viability. In the process Westpac came close to insolvency, and slipped from being Australia's largest to third largest bank.




Would be interesting to see what the banks would do if it was similar again. I think they'd be smarter than they once were and realise moving in on property is a sure fire way to depress the overall collateral on their books.


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## Gundini (13 November 2008)

While I lived through it, I was still young. The memories are quite fine! I always had debt, so I remember that drops in interest rates were very helpful. Massive drops! I paid 27% on a credit card once at that time. They taught me how to use credit 101... 

My employment was solid, and I believe that made the recession easier for me. God only knows if I lost my income. It would be devistating. I remember thinking, "this is not so bad", thing got cheaper, and there were times you could make a great deal! 

The only problem was you had to take advantage of someone elses misfortune, which never sat well with me.


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## MrBurns (13 November 2008)

chops_a_must said:


> Here:
> 
> 
> 
> Would be interesting to see what the banks would do if it was similar again. I think they'd be smarter than they once were and realise moving in on property is a sure fire way to depress the overall collateral on their books.




I must have been so preoccupied with my own problems then that I missed the problems the banks were having or maybe they didn't admit to it till it was all over.

It's better for banks to work through problems rather than foreclose in many cases but they're bureaucrats, no street sense.


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## basilio (13 November 2008)

In the last recession Westpac was  very close to falling over. Took big hits from business and property and dropped very big numbers on a failed computer upgrade.

I remember the collapse of Estate Mortgage taking down thousands of retirees and then the Pyramid collapse flattening Geelong. It also threatened other banks with financial contagion. State Bank of Victoria was also retired after it lost its balls through Tricontinental

It was tough but overall I didn't see such huge levels of indebtedness as we see now either in the corporate or domestic sector. 

Another big difference is the overall aging of the population. There are simply far more people at retiring ages now as a proportion of the population than there was in 90-91. The baby boomers are moving on.  That brings up questions about the security of  superannuation funds, the impact of government liability for Public sector superannuants and then the numbers of pensioners in an aging population.

And we havn't even considered the impact of an extra 500,000  unemployed on the budget... 

As Mr Burns says we are barely 3-4 months into the process and with State and Federal budgets already polaxed I can't see where the money is going to come to keep all the balls in the air.


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## MR. (13 November 2008)

chops_a_must said:


> Weren't some of our banks on the verge of going bust though?




State Bank (Victoria) was in trouble and so the state sold it to the Commonwealth Bank.  It was approx 1991-2.   

As for the thread 16% interest on the house and 19% on the factory. Little work and little to no money left over after the interest payments.  Ofcoarse interest rates are nowhere near but I must admit, back then, both factory and house I had approx $150k to $200k in loans. 

Mr. Burns, you claim "This is far worse and it hasnt even really hit home yet."

Why is this time going to be worse?


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## BigAl (13 November 2008)

Hi

Have been an avid reader every day here for the last 6 months.  1st post.

I was 15 in 1987, still at High School.  My old man was a sparky.

I distinctly remember on the night of the 87 crash, my old man had his head in his hands and was muttering that jobs were going to be slashed.  He said that no one would be putting on apprentices for a long time (how true with our mining / building skilled shortages in the last few years).  It would take a year to filter to the real economy, but everyone was stuffed.

Within a year, he wasn't getting overtime anymore.  Bought his own work van to get a higher hourly rate, but still no over-time.  Then left 3 of us at home (Perth) while he got a higher paying job up North (WA).  As interest rates approached the 17% mark, he started up an Electrical / Plumbing / Refrigeration business in Leonora / Laverton (WA) employing 10 staff within a year and raking in the money.

Meanwhile, by 1990, with me not having a Father figure at home I would  rebel at my Dad, when he would come home for a few days every few months. His marriage disintegrated and failed.

This was all amongst me being, at the time, oblivious to the problems of money and the problems in the economy.

He also sat me down, at the time of divorce, and told me "NEVER allow your mortgage to get over $100K.  Above $100K its unmanageable".


So yeah, I've great memories of 87... NOT!


I also remember in the early 90's a interview with John Hughes, a big car dealer network in WA.  All his friends had gone bankrupt, ala Bond etc..

He said that all he knows, business wise was to sell cars.  He was seeing his mates become billionaires and wondered if maybe he too should of ventured into other businesses to make a fortune.  Even he started doubting his firm belief that all he knew about was cars.  Then his mates lost everything.  He said it was through sheer luck and fear of the unknown that he didn't venture outside of what he knew.


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## MrBurns (13 November 2008)

MR. said:


> State Bank (Victoria) was in trouble and so the state sold it to the Commonwealth Bank.  It was approx 1991-2.
> 
> As for the thread 16% interest on the house and 19% on the factory. Little work and little to no money left over after the interest payments.  Ofcoarse interest rates are nowhere near but I must admit, back then, both factory and house I had approx $150k to $200k in loans.
> 
> ...




I remember the State bank of course and I'm told by someone who knows first hand that the RBA would have bailed it out as long as the state Govt didnt do anything stupid, it was that close.

I blame the Cain Govt and then Kirner brought in the pokies to save the day financially so the State Labor Govt are to blame for the pokies being in Victoria, we now rely on them so much they're here to stay.

Why is this worse ? this is global we're seeing firsts on all fronts banks being supported all over the globe it's seriously bad, I dont recall anything like this previously..

I've been watching the residential housing bubble grow for years, nothing like previously where we saw the prices as at a bit of a high not at the top of a gigantic bubble.


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## nunthewiser (13 November 2008)

I was a Bogan back then so my memories are a little hazy .

But do remember saving up my dole money  and recieving 15% in a term deposit , i also remeber the home loan rate dropping down to 13% and thinking thats great so i bought properties in balga at an avereage cost of 51k

so all in all i found it a lifechanging opportunity if one was on the right side of the eight ball at the time


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## So_Cynical (13 November 2008)

Last recession i was in my late twenty's and got stuck in a very 
crappy job, just had to stay, as there was nothing else...first time 
i had ever worked 6 days a week...in pain every day, chiropractor
every 2 weeks....with out doubt the worst 5 years of my life so far. 

:bad:

Living in Victoria at anytime is not good...in a recession its horrific.


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## Gundini (13 November 2008)

MR. said:


> Mr. Burns, you claim "This is far worse and it hasnt even really hit home yet."
> 
> Why is this time going to be worse?




I think it is worse now because of 20 years of easy credit. Back then it was difficult to get money, you had to prove everything, and the lender had to have full proof of your earnings.

The last 20 years changed, Lo Doc loans, Margin lending, Expanding credit limits, Privatisation, all sorts of gearing, a multitude of "No deposit, No repayments, No interest for 4 years"....

The writing was on the wall.... This time had to come, and whats worse, the bailouts are not going to help this credit rape and pillage!

I'm not a doom and gloom guy, but I am battening down the hatches, and willing to wait quite some time for opportunity.


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## cuttlefish (13 November 2008)

I remember that there were no cranes up anywhere in Sydney city and a lot of holes in the ground from defunct high rise projects.  World Square in Sydney sat for well over 10 years before finally being redeveloped.  It would have been a fantastic time to buy developable land if you had the funds.

Consumer confidence was low - where I worked there were retrenchments pretty much every year so for the first four years or so of my working life I really never felt secure in employment (even though I never got retrenched).  That translated to fear to buy houses or leverage into other investments.  

The share market was flat.  Westpac did nearly go broke.  Kerry Packer in his bottom feeding style bought a big shareholding and a lot of jokes were made about the banks credibility.  He and Al 'chain saw' Dunlap stormed out of a board meeting and he ended up selling his stake to Lend Lease I think it was for a 100% or so profit.   (Westpac shares had fallen to $2 or even less when Packer raided them.  He then sold them to lend lease for $4 or $5 from memory).

Interest rates fell from around 12% when I bought my first apartment to 6% introductory rates.  I remember seeing plenty of positively geared 1 and 2 bedroom units in Sydney - gross yields of 8% plus while introductory rates were down at 6% and real rates around 6 to 7%.

After the recession the banks recovered and started to make large and growing profits but they still traded on ridiculously low PE's and very high dividend yields vs the current interest rates.  e.g. I'm pretty sure I recall NAB trading on an 8% fully franked yield and a PE  ratio of about 6, when bank account interest rates were down at 5 or 6%.

I remember it took quite a while for people to gain confidence in the property and stock markets again.

I think Australia was one of the more hard hit countries during that recession due to wreckless corporate lending by our banks to the Bond's and Skase's etc.

Some of them (particularly I suspect Westpac) probably still have those days entrenched in their corporate memory and have hopefully been a little more conservative this time, though others, looking at the Allco's and ABC's and Centro's etc., it appears have not.

I haven't checked the figures provided - they're all from memory so there's likely to be discrepencies.


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## MR. (13 November 2008)

Gundini said:


> I think it is worse now because of 20 years of easy credit. Back then it was difficult to get money, you had to prove everything, and the lender had to have full proof of your earnings.
> 
> The last 20 years changed, Lo Doc loans, Margin lending, Expanding credit limits, Privatisation, all sorts of gearing, a multitude of "No deposit, No repayments, No interest for 4 years"....
> 
> ...




This is where I stand as posted before:
https://www.aussiestockforums.com/forums/showthread.php?p=353843#post353843

It has the potential to be worse, agree.   Now do we have any good news?   Some banks like the State bank was government backed! off memory!

Also BigAl your father did well bringing staff up to 10 in those locations. His market must have been well picked with little competition.


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## Smurf1976 (13 November 2008)

Constant stories on A Current Affair etc of 5,000 people applying for one job as a cleaner etc and queues not just out the door, but right around the block.

The big government job losses with entire departments abolished almost literally overnight. Likewise huge job losses from major private employers with hundreds going in a single swipe.

Chronic government deficits that seemed impossible to resolve. That was to the point that Victoria especially came pretty close to going broke.

Factory closures.

Collapse of Pyramid building society and the trouble with the state bank of Victoria. I'm pretty sure there was trouble with a local bank in SA too (?). The state bank in Tas never officially went broke, but it was very hastily merged with another local bank (since taken over twice again, finally by CBA).

General doom and gloom everywhere. Job losses here, investment cancelled there, a factory shut here, a mine closed there, schools closing somewhere else and so on.

In Tassie, those various "how to fix the economy" public meetings called by various people that went on for fully 5 years after the recession officially ended in the other states.

Newspaper headlines that were simply a figure followed by a % symbol. Everyone knew it was a reference to unemployment with no need to actually say it.

1 million officially unemployed.

50% youth unemployment.

Politicians voting themselves a pay rise amidst the chaos. 

An effective end to community concern about issues not directly related to the economy. For example, the environment, underage drinking, traffic and so on just went out the window as far as media and public attention was concerned. Jobs were the focus and everything else just didn't matter that much anymore.

The general notion that everything had to be done as cheaply as possible.

Personally, well let's just say I don't ever want me or anyone else living like that again. And I've retained my loyalty to those individuals and businesses which in some way helped my family at that time. And I've retained my hatred towards those who were absolute ********. It was most certainly a life changing event for me and I'd say I'm a better person because of it - but I'd rather not repeat it.


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## juddy (13 November 2008)

I remember no more than 5 pages of employment ads in Saturday's paper and knowing you'd be competing against at least 100 people every time. Making the interview stage was an achievement in itself.


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## Smurf1976 (13 November 2008)

Gundini said:


> The last 20 years changed, Lo Doc loans, Margin lending, Expanding credit limits, Privatisation, all sorts of gearing, a multitude of "No deposit, No repayments, No interest for 4 years"....



With the exception of privatisation, those things are all comparable to having stacked the warehouse full of high explosives whereas before it was simply an empty timber building.

Privatisation is comparable to having cancelled the insurance.

Better hope a fire doesn't start...


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## CanOz (13 November 2008)

I want to thank Chops for starting this thread, and those that have contributed some truly amazing stories.

I've been in the business that i'm in for some time now (17 years), but i have yet to feel the real pain of a recession. I count myself as a very lucky person. Our business is somewhat recession tolerant.

I also think that i have been somehow blessed yet again, to be in China at the time of this, the potentially the greatest recession.

Our MD just got back from the US, apparently he said its a "complete disaster" there. Now with Citi less than 10.00, GM less than 5.00 and many other S&P 500 companies at almost unheard of levels, one must think that we are near maxiumum pessimism. 

But after reading some of the stories on this thread i somehow think we have a ways to go.

Cheers,


CanOz


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## MR. (13 November 2008)

Smurf1976 said:


> Factory closures.
> 
> It was most certainly a life changing event for me and I'd say I'm a better person because of it - but I'd rather not repeat it.




Factory closures: Melbourne northern, every third factory was up for sale or up for rent.

I don't want it repeated either.  Need good news.


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## BigAl (13 November 2008)

MR. said:


> Also BigAl your father did well bringing staff up to 10 in those locations. His market must have been well picked with little competition.



He was in the right place at the right time.  Two mining towns, Leonora and Laverton (about 400km NE of Kalgoorlie) had no Electricians working in the town.

On the minesites (30 - 50Km out of town), yes.  In the towns no.  No one to do electrical work in houses, fix and install air cons, repair fridges / washing machines.  If the pub wanted a new ducted air con installed they'd call up a big Electrical firm in Perth, whom would fly a sparky up for a few weeks... with the pub wearing all expenses.

Then on top of having a branch in Leonora and Laverton, employing 10 x staff plus 2 working owners, he opened up an electrical / whitegoods store in one town as well (Fridges / Washing Machines / Radios / TV's etc..).

He cleaned up... then paid for it by losing his marriage and to be quite frank, lost his marbles in the process.  A shell of the man he once was.


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## alphaman (13 November 2008)

Before/during the recession we had to have, was anyone able to lock in the ridiculously high interest rate for say, at least 2 years?


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## MR. (14 November 2008)

alphaman said:


> Before/during the recession we had to have, was anyone able to lock in the ridiculously high interest rate for say, at least 2 years?




I was in debt, so not I. But I remember the bank manager telling me about all the pensioners having to be told that the interest rate had dropped a huge amount. That wasn't that long ago.  Some of these term deposits were on 10years.

BigAl,  to learn from this "keep your family together if possible".


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## Gundini (14 November 2008)

alphaman said:


> Before/during the recession we had to have, was anyone able to lock in the ridiculously high interest rate for say, at least 2 years?




I am not sure, but from experience, fixed rates are only good once you have bottomed in the cycle.

I locked in once, and all was good for the planed 7 years. But the penalty for early payout negated the benefit. Circumstances change, and I came unstuck by trying to be clever! 

Sorry, I was talking about mortgage holders, not investers. I do recall the term that you could fix became less as time went on.


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## refined silver (14 November 2008)

This is from Richard Russell, the 84yr old venerable financial writer of "Dow Theory" fame. 

His memories of the 1930s and some stories from the US today.

http://www.321gold.com:80/editorials/russell/russell111008.html


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