Garpal Gumnut
Ross Island Hotel
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Picking the end of the GFC
- Thread starter marklar
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inenigma
Oh Sh*t.... That didn't work.
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Why the optimism ???
Australia has been built on debt. Borrowing money can be great - how you spend it is the interesting bit. WE will head backwards very quickly unless we invest heavily in our future.
Absolutely not debt is not neccesarily bad but too much debt certainly is
as you are aware there is good debt and bad debt but too much of either is a bad thing how to measure when it is to much. probably from a national point of view when the interest is above a certain % of income or the debt is above a certain percentage of GDP.
The problem occurs when we pay too much in interest which is not produc tive so our GDP keeps going down for each dollar spent. In other words we get no real benefit from our investments.
Has Australia reached that position ?
Well you won't hear it from the mainstream because they don't look beyond next week, but the more of our productive capacity we send overseas because we pay ourselves too much the closer to that point.So what do we still produce ? Not much if you take out mining and farming. Farming is always subject to price variation and weather whilst mining is subject to ending whether we like it or not. So how do we get our GDP up with any degree of certainty? Once we reach that point were we can no longer service debt we will go into deflation. No option! It is wrong to look at it as an individual with a job because that is not certain if the business starts struggling as is happening now unless I,m listening to the wrong signals
Whose talking about death and destruction I,m only talking about natural or normal trends with corrections only a bit bigger than most think in terms of. I've said it before 35 years of bull market deserves a bit more correction than 18 months and as PE ratios are way above average still (Media only talk about last 15-20 years and they have been abnormal under most serious measures) We should be looking at 50 to 100 years at least.Rents are way below serious measures of return would place them (normal for decades was every $16000 spent should return $40 per week ) we are way overvalued or under returned at the moment. We can always say things are different this time. Trouble is things have a way of getting back to long term average
mate that's a 13% return! Which decades?
You've got the same calculator as me
30's to late 60's and no it is not a 13% return most investments take off costs before working out return
Costs are Rates, Insurance, maintenance and lost rent when empty plus advertising for new tenants (real estate costs) legal costs , Labour to collect rent (or is your time worthless)real estates have been advertising gross return but thats not a real return for the investment and yes in recent years there has certainly been capital gains but that is a bonus not the investment return (or a loss of value in our currency plus some capital gains)So it certainly has been a great investment but not for the "right" reasons. The question remains How long can this go on? I don't know but not indefinitely I feel
You've made a good point. You run a business. Many of my associates who run businesses have noticed a steep decline in business. One in particular employs over 100 staff in the building industry. He's preparing for the worst!
Many are trying to avoid redundancies by forcing staff to work 4 or less days a week. This is WITH Rudds billions of dollars injected into the economy. When this starts to dry up, those businesses will have no choice but to get rid of those employees. With most families dependent on 2 incomes, the lost of that job, in this climate could easily tip us over the edge.
The demographers say the decline is only just begining and the bottom will be around 2025. It wont be a quick crash like we just had, just a steady decline. see www.thegreatbustahead.com
Here's why,
Due to an aging population America will slow and stop buying stuff from China, China will in turn slow and stop buying our ore, and we will be in the proverbial because our leaders are too focused on 'dig it up and ship it out'.
On top of this China also has a demographic problem caused by the 1 child policy.
Going to be interesting.....and hard to trade!
Here's why,
Due to an aging population America will slow and stop buying stuff from China, China will in turn slow and stop buying our ore, and we will be in the proverbial because our leaders are too focused on 'dig it up and ship it out'.
On top of this China also has a demographic problem caused by the 1 child policy.
Going to be interesting.....and hard to trade!
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China is going great guns at present! Can they maintain this growth?That's the key question movie watchers?
Are they ?
There was a documentry on the ABC a couple of weeks ago that said when the GFC hit, China's unemployment hit around 10 million, factories closed and they were so desperate to get trade going that they would send a shipping container to Europe for free...and they had huge stockpiles of ore.
Personally I dont buy into their propaganda machine and dont believe they are going as strong as they say....I could be wrong though.
joeyr46 great post earlier on credit creation and debt deflation.
Regarding China its very difficult for us outsiders to know how much of their economic miracle is real and what is fictious. I don't think even they know as the figures on the ground aren't reliable. So it makes predictions very difficult. Certainly if China & India keep growing and another 2bn western consumers are added (forgetting global warming for a sec) we will be very prospourous going forward and those with the highest level of gearing i.e. debt will do well.
However leaving it to the Western economies of the last 30 years, based on their demographics and debt levels joeyr46 is right, there will be debt deflation. China is the great unknown
Regarding China its very difficult for us outsiders to know how much of their economic miracle is real and what is fictious. I don't think even they know as the figures on the ground aren't reliable. So it makes predictions very difficult. Certainly if China & India keep growing and another 2bn western consumers are added (forgetting global warming for a sec) we will be very prospourous going forward and those with the highest level of gearing i.e. debt will do well.
However leaving it to the Western economies of the last 30 years, based on their demographics and debt levels joeyr46 is right, there will be debt deflation. China is the great unknown
