Recession etc, are things really that bad?

[Pager]

I see on the news, read in the paper and read on the internet about the economic crisis and how bad things are and set to get, falling stock and house prices, unemployment, recession, depression………………….

But then I look around me and life goes on as normal?, most people I know are no worse off in there everyday lives if anything with falling interest rates and big ticket items like cars and whitegoods things are actually a bit better for some, so if the average person has a job then yes there super may have taken a hit and the house has stopped going up in value, if you own stocks you may have taken a hit but your everyday life is pretty much unchanged or better due to lower interest rates.

They say unemployment may rise but even if it goes up considerably its going up from the lowest level in decades, so lets say to 10%, I remember growing up in the UK in the 80,s and the rate hit 13% or 14% and life still went on, although as well as high unemployment, the 87 crash followed by a property slump, the large majority came through it and the good times came again for home owners, workers and investors, like summer follows spring that followed winter and the cycle starts again

So what’s different this time? and haven’t you heard that said when the markets are going higher as well during the Tech boom, commodity boom etc.

This time its different is it?

 

[tech/a]

Its really hitting Governments and Bigger business.
They are all trying to pull up the out of control Elephant with a dog leash.

There will be a knock on effect and there will be some who lose jobs,houses,and fall on harder times.

But life does go on and whatever your experience in these times you'll carry it forward into the next period.

Hence the saying.

"I wish I knew then what I know now!"

 

[kincella]

I have a very simplistic diagnostic tool 10, 20, 100 year charts that showed house prices, covered most of the crisis of all those years.....and I use that as my guide for investing......use hindsight to chart your course for the future

Of course there are people and situations which fall along the road and for whatever reason fall outside the system.

With property it can rise, then stagnate and be flat for another 7 years, and then in the final 3 years triple in price....hence the age old attitude of holding for 10 years or until the cycle corrects again.

That why I do not wait for the bottom before investing, of course I would like to, but I have sufficient faith that it will restore its value and climb again.
Its an inflation busting tool.
My timing is when it works for me to invest, depending on my financial circumstances and how many projects etc I am involved with, with existing properties . Some are time consuming, large renovations , or a strata project etc.
I entered the property market in Jun 2000, after the tech wreck, looking for a stable and I believe safe investment, with a 10 year view. Apparently a load of other investors did exactly the same thing, I was not looking for the bottom of the market, just believed if I held for 10 years i would make some nice profits. Within 3 years some properties had tripled in value...blew my 10 year plans haywire.
I believe a similar situation is occurring right now. But this time rates are coming way down, making it a stunning play for the future.
Ps I have lost all confidence in the stockmarket, and prefer to manage my own investments.
cheers

 

[theasxgorilla]

It's not that bad here either, yet. Consumer goods and the car market (both new and used) have gone to hell. Of course everyone thinks it's great that they can buy a better car or big screen LCD for less money. Many shops here were running 30-50% sales weeks before Christmas. The impact on business profits will filter through the real economy eventually.

 

[basilio]

It does seem to look reasonable on the surface doesn't it?

Unfortunately there are way too many big problems that are impacting through the economy. Some examples

1) Collapse of mineral prices is losing thousands of jobs and will cause very large drops in tax revenue and dividends

2) Loss of billions of dollars on share market is causing some widespread dumping of larger properties. I believe many of the wealthier people are going to find it harder to keep their lifestyles together.

3) This will knock on to the retail and consumer market. There is simply much less discretionary income to spend.

4) The collapse in car sales is hurting the automotive industry and ancillary services . Layoffs, unemployment and so.

5) The huge losses in the financial sector is causing mass layoffs.

6) Finally much of the economy is geared to the gills. Loss of income will be magnified as what little money people have is directed to house loans, debt repayments, food and basic bills.. That doesn't look good for the rest of the economy

 

[Bill M]

So what’s different this time? and haven’t you heard that said when the markets are going higher as well during the Tech boom, commodity boom etc.

This time its different is it?

Nothing is different this time. I went for my daily walk today and the cafes were all full with people actually queuing to get in, seems no shortage of people willing to spend their money. The clubs and pubs were full over the whole Month of December. Record sales in shops too (link here for story). For me I am retired and living off my portfolio of shares, most are still paying good dividends.

The biggest lesson I learn't from the 87 crash and recession of the 90's was to buy good stocks at cheap prices, this time I am doing what I should have done in the 90's. I was short of cash then unfortunately. If a recession comes to Australia so be it, I will simply accumulate more shares to fund my retirement. Good luck to You all.

 

[Glen48]

The down turn started in USA about 05-06 when we were just getting started. I guess most store owners are keeping their staff over Xmas thinking the Krudd 10.4B will boost sale and lay offs will start in 09.
I find what happens in USA will happen here it is like having you own connection to the future...so once USA turns give it a few yrs and we will do the same.
Even what happens NSW seems to take 12 mths to get to QLD.
Like that World famous woman said It won't happen over night but it will happen.
Once we come out of this it will be a new World, maybe back to corner stores, items to your door because the big centers have been vacant to long and will need to be knocked down and stared again.
The average OZ doesn't watch ABC or worry about finance matters or try to keep up with World events and sadly they are the ones who will suffer.
A pawn broker told me people are bringing stuff back to hock they bailed out last week and pokies had 10 fold increase.

 

[doctorj]

It's probably not that bad in Aus yet. How bad it gets really depends on what field you're in. FIFO staff for miners (particularly the ones that fly interstate), engineers and everyone else who works in support industries will suffer first. Then there be natural flow on to the rest of the economy via reduced spending and investment activity. Where or not 'G' makes up for the fall remains to be seen, but I doubt it.

For those who doubt it will get bad, take a look at the spread between contract & spot iron ore or the baltic dry shipping index (http://www.investmenttools.com/futures/bdi_baltic_dry_index.htm). All this means less economic activity around the world and less money flowing into Australia's pockets.

So far the world is trying to have an economic crisis where no body gets hurt. I doubt we'll see the end of it without a fair amount of pain.

 

[kincella]

Well I have hardly spent any money this xmas, negotiated with the family, since the govt handed over $1000 to each child, they agreed they did not need any more...so I suggested that I would donate money to animal welfare and charity on their behalf..
And now the boxing day sales,,, I cannot think of anything I may need for the next 12 months....it will be the first time in 20 years that I do not go out looking for bargains.
I usually only shop at boxing day sales and june 30th sales.....buy everything at between 75% to 50% off retail prices.

I guess I sound like scrooge, but the huge savings work for me...and I buy up big at those huge discounts.....plus I dislike shopping....

I played no part in the 38 billion spend up before xmas or the 14 billion post xmas bash.......am conserving funds for investment opportunites

Might take the dog for a walk along the beach and do lunch
cheers

 

[gfresh]

To me this seems like the "typical" reaction to a (possible) recession "it's not bad now, therefore it won't happen".

I'm with basilio... things are probably not too bad now, but the worst is a few months away as there are many nasty fundamentals creeping in locally.

I also find it hard to believe as an ageing population, a large number have not also found their retirement savings reduced by 20%+ in the last 12 months and this will effect their lifestyle and spending in the next while. As well as those who were close to retirement and now have to work longer, or those who will be retiring and will have less to spend each week. That spending capacity cannot be easily replaced, unlike the younger set.

I think by this time next year, even despite the hope that it will have improved, the US will still be in recession - 2 years of recession to me makes it more like a Depression, but anyhow if so, this will keep holding Australia back from better times.

 

[numbercruncher]

Yes patience young Grasshoppers, dramas in financial markets etc have hardly had a chance to hit our real economy yet ....

Wax up those surfboards ready for when your jobs gone

 

[kincella]

I agree, people have their head in the sands....unbelievably irresponsible to spend 38 billion on xmas and 14 billion post...on basically disposable items....and when they lose their jobs post xmas...they will be looking for more bailouts....unemployment benefits etc, family tax benefits...

it will take longer to recover than any guru estimated....
some of us saved for the rainy day....and will be ok.....
look half the kids cannot count, spell read, tell the time...education system stuffed for past 30 years....what can you expect ?

but luckily there are responsible families holding down jobs and budgeting for such a downturn....
and some angry baby boomers with good cash flows...
it will not revert to the 1930' and the horse and cart

 

[Green08]

When in Sydney I see it in the car yards like the up market ones. Getting more difficult to sell a new car with tight financial credit lines. Second hand cars have lost substantial value in the past 12 months.

Just a look on Domain is a reasonable indicator of how many homes are for sale. I've watched certain suburbs for about 8 months now as an exercise, prices are dropping and the stock is increasing.

I certainly see it in those about to retire in the next 12 months or those that have - there is fear in them due a lack of principle in their super.

I think the roll on effect will be with us in the next few months. Various people will be effected at different degrees but I do think it will be worse than we hypothesis.

I too do 90% shopping at Boxing Day or end of June. David Jones has been extremely quite during the year. The sales today had bigger reductions than I anticipated - despite the advertisements. I wouldn't be surprised if they start to close some of their stores not in the mainstream areas, the rent is a killer.

Due to pride most people will not admit to others their circumstances. I think if you wait 6 months – the enrolments for private schools will drop significantly.

 

[kincella]

green..I am a baby boomer...have many friends and associates the same...most have multiple properties....and they are not selling, interest rates were hurting for past 12 months...but we all see it as rosy again with the big rate cuts coming, no problems renting...oh and none of us have purchased new cars, most are still savers....we all battered down the hatches last year.....stopped eating out so often etc.....most like me only buy at the biggest sales...june 30th and boxing day.....
or if we really must have a bargain...we go for the interest free period and pay off whithin that time...never pay interest on it etc and conserve our cash flow.....
I am actually planning a new car or a near new...6 months old this year if the price is right....
but then most of us boomers were never big spenders anyway.....well not the luxury cars you are talking about.....that must have been the gen y and gen x'ers
astounded at the speed some people will drop their bundles...and panic at the first hint of bad news...... the stamina gene gone missing?

 

[numbercruncher]

but then most of us boomers were never big spenders anyway

Thats hilarious


Your surely only speaking for your "circle" ?

 

[Green08]

but then most of us boomers were never big spenders anyway.....well not the luxury cars you are talking about.....that must have been the gen y and gen x'ers
astounded at the speed some people will drop their bundles...and panic at the first hint of bad news...... the stamina gene gone missing?

Interesting response. I think you have misread what I wrote and have not read any of my past threads.

I'm not looking at a prestige car. Merely stating a fact or observation and discussion with people. I sold my car recently driving my brother's most unglamorous ute for the time being, does the job A to B, country or city.

That is a pretty wild assumption. Luxury cars for gen Y and Gen X'ers. Might be good to stop pigeon holing people. Not all youngsters throw money around. And some baby boomers have rather expensive cars.

I was referring to indicators of a slow down in a general sense.

Ahh DJ's this morning was to buy wool under lays for the kids beds 40% off. Cash. Kincella-might also be good to stop assuming all people are stupid.

Assuming Kmart or Target are cheaper can be wrong. I'm of the thinking when I can afford it - preferable pay cash, I would rather buy quality at a discount so it lasts.

 

[chops_a_must]

green..I am a baby boomer...have many friends and associates the same...most have multiple properties....and they are not selling, interest rates were hurting for past 12 months...but we all see it as rosy again with the big rate cuts coming, no problems renting...oh and none of us have purchased new cars, most are still savers....we all battered down the hatches last year.....stopped eating out so often etc.....most like me only buy at the biggest sales...june 30th and boxing day.....

My mum is a boomer, has 4 properties, probably needs to sell one to pay down debt. Therefore all boomers have too many properties with too much gearing without sufficient income in return.


Over the various christmas parties over the last week of friends I went to, I really was surprised at the amount of people that have lost jobs, or have been told there wont be a job for them when they return in January/ their contracts wont be renewed. About 20% I would say, being conservative.

But then again, it is my demographic in Perth, 20-28 year olds I suppose...

 

[Smurf1976]

It's like a drought.

Before the drought, all is well and the farms seem unstoppable.

Then it stops raining. But not to worry, the dams are full so we'll just irrigate the crops until it starts raining again.

Then the dam levels start to drop. But not to worry, the're still at a reasonable level and the drought must end soon.

Then the dams get low, it's still not raining and people start to worry.

Then the use of water from the dams is cut in order to hopefully avoid them drying up completely. This is when the real impact occurs. Previously it was opening some valves, messing about with pumps, sprinklers, hoses and so on. A bit of hassle and expense but nothing too serious. Now we've got to let some of the crops go to ruin and that's serious.

Then we get the reduced harvest. This is the first real loss in financial terms, and yet it comes a long time (possibly years) after the drought started.

Then, if it doesn't rain next season, we're all but stuffed completely. A bit of water left in the dams but we're facing massive losses. The farms will go broke if it continues and job losses are everywhere. The buffer (water in the dams) is gone and we're now at the mercy of whatever happens next with the weather. We're out of bullets.

Where are we now in our economic drought? The dam level is starting to drop, we're spending past surplusses, but the crops are still going fine at the moment.

If it rains tomorrow then all will be fine. We turn off the sprinklers and the dams fill up again. Trouble is, the drought looks like getting worse...

Once the surplusses are spent, when the finanical dam is getting low, that's when the real cuts and the real impact on main street will occur. With not much going in and lots going out, the level is going to keep falling and do so rather quickly.

Nobody's likely to tell you the dam level with any accuracy, but when unemployment starts to soar you know the dam is getting close to empty. If they start sacking police and closing hospitals then you know it really has run completely dry.

 

[Glen48]

IF the big shops make most of their money over Xmas break and they can offer 30-70 % off how much mark up is there or are they all in a fools paradise thinking it is short term and just get some money in.
Remember we have never had any thing this bad in in 80 yrs and most of the younger have never even seen a credit squeeze to them this will be like going from the Grand State Room on the Titanic to a life boat at midnight.
Thanks to our World leaders who wanted votes and let all this unregulated credit happen we could be only just surviving for another 20 yrs in the Worlds first depression.
Also I heard a lot of people are in shops but how many are spending?

 

[Julia]

Might be good to stop pigeon holing people.

I expect Kincella was just reacting to having been pigeon holed himself/herself given all the generalisations usually made about baby boomers. I can't think of any other generation which has been so classified.

Every generation has spenders and savers, stupid and sensible.