Who's cashed up waiting for bottom to fall out in 2018?

[luutzu]

My thoughts are, the asx isn't back to what it was pretty GFC, which actually had FA to do with us.
Yet we copped a massive correction, while our mining sector was screaming ahead, now we have a larger economy everyone is$hitting themselves. Go figure

This time our debt ratios are different. Our banks weren't much affected by the GFC and all that toxic CDOs... now they have a trillion or so of OZ mortgages on the books.

 

[sptrawler]

This time our debt ratios are different. Our banks weren't much affected by the GFC and all that toxic CDOs... now they have a trillion or so of OZ mortgages on the books.

Firstly I apologize for the grammar on the last post, predictive text is a pain in the butt.
Our banking system is one of the most stable, in the World, and unlike the U.S the borrower carries the loan, not the property.
Also we have a growing population, some will be hurt, but the banking system will go on, despite the sentiment. IMO

 

[luutzu]

Firstly I apologize for the grammar on the last post, predictive text is a pain in the butt.
Our banking system is one of the most stable, in the World, and unlike the U.S the borrower carries the loan, not the property.
Also we have a growing population, some will be hurt, but the banking system will go on, despite the sentiment. IMO

Our banks did sensible in the lead up to the GFC, they've since gone full American with toxic mortgages.

I'm no economist and haven't looked up the consequences in an economy like ours... but have seen a couple docs on Ireland and the UK when the property market goes pop and investors/home owners see their equity goes negative...

Without being able to declare bankrupt like the US might actually make the situation worst.

I mean, when a person can't afford to repay their mortgage are it's still hang around their neck... it's not going to be good for anybody. Not the debtor, the bankers or the retailers.

Sometime it's better fr the economy that bad debt be written down or wipe clean.

 

[MarketMatters]

Just look at the capital flows from Emerging Markets (and Australia) and you will see it is flowing to the US as managers chase the returns. Without scratching the surface you will find high PE stocks compared to more fair valued companies in EM and Asia. I'm just saying this trend will not continue for ever. A crash? Don't think so, but a correction would be next. We will have to wait and see how robust this US market is!

I just do not see any signs of a crash in the near horizon. the U.S. economy is growing at break neck speeds, the rest of the world is limping along (aside form emerging markets which are having a mini crises) and global (and even U.S.) interest rates still have a long way to move up before they will be high enough to induce a downturn.

If you look at the GFC rates in the U.S. were already somewhat high and U.S. land prices (and mortgage credit growth rates) had already been declining for over 12 months preceding the crash.

If we see much higher interest rates coupled with an inverted yield curve and U.S. land prices (a leading indicator) that have been declining for a period of time along with softening corporate profits then I would be worried about a crash. I just do not see the conditions for a crash in the near term (6-9 months).

Just look at the capital flows from Emerging Markets (and Australia) and you will see it is flowing to the US as managers chase the returns. Without scratching the surface you will find high PE stocks compared to more fair valued companies in EM and Asia. I'm just saying this trend will not continue forever. A crash? Don't think so, but a correction would likely be the next major event. When? Who knows. We will have to wait and see how robust this US market is!

Very cliche but one of Buffetts quotes sums it up - "fearful when others are greedy and greedy when others are fearful."

 

[luutzu]

Just look at the capital flows from Emerging Markets (and Australia) and you will see it is flowing to the US as managers chase the returns. Without scratching the surface you will find high PE stocks compared to more fair valued companies in EM and Asia. I'm just saying this trend will not continue for ever. A crash? Don't think so, but a correction would be next. We will have to wait and see how robust this US market is!


Just look at the capital flows from Emerging Markets (and Australia) and you will see it is flowing to the US as managers chase the returns. Without scratching the surface you will find high PE stocks compared to more fair valued companies in EM and Asia. I'm just saying this trend will not continue forever. A crash? Don't think so, but a correction would likely be the next major event. When? Who knows. We will have to wait and see how robust this US market is!

Very cliche but one of Buffetts quotes sums it up - "fearful when others are greedy and greedy when others are fearful."

Capital will be flowing towards China in a really big way soon enough.

Saw a lecture by a Chinese-British professor at the Imperial Business School [?] outlining China's next competitive advantage.

Basically the first advantage was cheap slave labour. The wave that's coming is higher margin service, patent, intellectual... i.e. more innovative, kind of advantage that is beginning to show itself.

He was saying that there had only been two instances in history where the interaction of technology, domestic market and capital as is occurring in China. First was the British Empire [after Waterloo], then the US after WWII. Now China after 30 years of embracing capitalism, doing cheap knock-offs etc.

If capital chases growth, and they tend to... growth is highest from a low base with fast developing infrastructure, technological know-how and leadership who actually like building stuff instead of lawyering or financial engineering things.

 

[sptrawler]

I mean, when a person can't afford to repay their mortgage are it's still hang around their neck... it's not going to be good for anybody. Not the debtor, the bankers or the retailers.

Sometime it's better fr the economy that bad debt be written down or wipe clean.

It wasn't long ago , you were complaining that people couldn't get into the housing market, now you want those who did, to have their debts written off, how many cycles will it take for everyone to have nothing?

 

[luutzu]

It wasn't long ago , you were complaining that people couldn't get into the housing market, now you want those who did, to have their debts written off, how many cycles will it take for everyone to have nothing?

I never complain. Only pointing out facts

I don't think I said those in debt should have it written of. Merely saying that from an economic stand point, it might be better for the country/economy if debt are drastically reduced or written off in certain, rare, situation.

A property collapse would be one of those.

But of course it would never be written down or written off. That would be "moral hazard". Only bankers and failed business empire gets a bail out or two or three.

A few economists I've listened to said that the US would have been out of the post-GFC recession if Obama had reduce the inflated mortgages tens of millions of Americans got themselves into.

When people and their low wages can't make mortgage repayment, they simply cannot make it. So teaching them a lesson by forcing them to either go broke or repay with every last dime until the bankers and investors are made whole again. Yea that's all nice and good until you see that ten million families lost everything while those who managed to scrape by doesn't spend a damn cent if they really have to.

That's why the US economy didn't improve much beside investors playing among themselves and buying back their own stocks to push the price higher.

In my opinion, if the OZ property market collapse and our law not permitting personal bankruptcy. Negative equity in a low-wage, no growth, job losses environment will see a couple generations of indebted landless peasants living in rundown properties or tent cities all over the place.

Drove around North/Western Sydney yesterday. I counted maybe 50 cranes still going. Plenty of brand new apartment complexes.

Good luck with that population boom because I can't see how forking out $550K for a 1 room apartment will encourage sex and procreation.

But yea, I know a couple people who's jumping back into the property market thinking the ~9% correction lately is a bargain to be had.

Maybe they're right. I can't predict. But if I have money to bet, I wouldn't bet on it.

 

[sptrawler]

It's too hard to keep up with your stances Iuutzu, no matter what happens, there is losers and you want to make a case for them.
Let them make their own minds up, let them make decissions and own it.
Why do you always have to see a persons choices, as something that has to be overturned, if it was a bad one?
I love your compassion, but you can't save everyone, from themselves.
All you will do, is end up in a misery pit, of disappointment.IMO
Join the Salvation Army, or Saint Vincent DePaul, somewhere that you can focus your compassion.

Your statements about the U.S housing, from what I've read, is wrong.
The Banks got in the $hit, because the loan is against the house, not the person.

So they didn't have to pay their last dime, they just turned in the keys to the house and walked away.
So it wasn't all the misery you talk about, it was a banking crisis, because everyone just turned their keys in. lol
You need to take a deep breath Don Quixote.

 

[luutzu]

It's too hard to keep up with your stances Iuutzu, no matter what happens, there is losers and you want to make a case for them.
Let them make their own minds up, let them make decissions and own it.
Why do you always have to see a persons choices, as something that overturned, if it was a bad one?
I love your compassion, but you can't save everyone, from themselves.
All you will do, is end up in a misery pit, of disappointment.IMO
Join the Salvation Army, or Saint Vincent DePaul, somewhere that you can focus your compassion.

It's either naivety or enlightened capitalism. i.e. don't kill the host; don't crap where you eat; don't cause potential for civil uprising and lawlessness where the masses would rise up and join some idiots with axes to rind, stuff to burn and mansions to confiscate (for the good of the country, of course).

There's the Ray Kroc (of McDonalds') dog eat dog, rat eat rat kind of capitalism... then there's the value creating kind of business that benefit everyone, including the taxman and the parasitic labourers.

It's a lot easier to screw people to make money. That kind of stuff don't last. Not when you're an upstart anyway.

I don't do volunteer work. My wife does and she's great at it. I used to volunteer and raise money during HS for those World Vision Hunger stuff. But even then I only walk around the neighbourhood asking for donation, hand the money in but I never went hungry... I know what it's like to be hungry, no need to reenact that part of the programme. That's just sadism.

 

[Bill M]

As for current market and political structures not allowing this to happen I would suggest you revisit this thought when the next one arrives.

Looking at that chart, since Aug 1968 to right now Oct 2018. if you draw that line right through to the end we are still where we were at 1968. That is 50 years of keeping up with CPI Inflation only. It's not that good really.

 

[Junior]

Looking at that chart, since Aug 1968 to right now Oct 2018. if you draw that line right through to the end we are still where we were at 1968. That is 50 years of keeping up with CPI Inflation only. It's not that good really.

Plus dividends? So CPI + 4.5% or thereabouts.

 

[HelloU]

[just quietly .... who knows what the cpi adjust was (depends if you are a pensioner or not I guess) but then plotted on a scale using orders of magnitude (that are not revealed). It is essentially a chart produced for your grandmother to look at ......not a linear relationship for true data]

 

[kid hustlr]

Firstly,

If that Index doesn't include dividends then it is useless. Add in dividends and it's just not that bad.

Secondly,

I agree the outlook may not look rosy however I don't think the ASX is expensive. Yes there are sections (IT / healthcare / consumer?) where there may be concerns however overall I have our Market premium as around 3.7 and earnings yield approx 6.5. Not exactly crazy when compared to the last 18 years of data.

There would need to be a HUGE earnings contraction for stocks to fall 25% from here given the current 10 year yield IMO.

 

[MarketMatters]

Plus dividends? So CPI + 4.5% or thereabouts.

Yes unfortunately it did not include dividends as it tracked the index only.

When reviewing inflation there have been considerable spikes which need to be accounted for in your calculations.

 

[HelloU]

Yes unfortunately it did not include dividends as it tracked the index only.

When reviewing inflation there have been considerable spikes which need to be accounted for in your calculations.
View attachment 89650

soz mate if that other was yours ....not trying to bring it down (did not show stuff like the base of the log so the rationale behind the 'skewing' calculations goes unexplained - that was the orders of magnitude bit). Anyway, it does get a viewpoint across ...

 

[systematic]

Guys,

Aussie shares in financial years 1970 to 2018 = 10.1%
Inflation same period = 5.3%

That's almost twice inflation, yeah?


And (I'm sure I've posted similar before)...buying at the top in 2007 to today, you've made ~3.76% over inflation ~2.4%
A real rate of ~1% after costs (assuming no taxes) kinda sucks, I get that - but it's not going backwards!


But remember (I am telling myself!)...markets can, have and do go backwards. But the Australian market has been one of the best performers

 

[MarketMatters]

For the sake of any retirees and low income earners here, let's hope BS doesn't get his franking credit legislation passed reducing the meager out-performance above inflation any further!

 

[sptrawler]

For the sake of any retirees and low income earners here, let's hope BS doesn't get his franking credit legislation passed reducing the meager out-performance above inflation any further!

Yes it is a joke, silly Billy, looking after the little man, as if. He is more like the Sheriff of Nottingham, than Robin Hood.
Why doesn't he say, he will bring in a tax on volume, for multinational miners?
No he will hit those negative gearing, of which 80% are earning less than $140k.
He will hit capital gains, when most of the above, are going to see a capital loss.
He will take franking credits, off workers who buy shares, in their low income wife's name.
He will take franking credits of self funded retirees, unless they put their money in a union run Industry fund.
Yep good old Labor, out there looking out for the Aussie battler, just like all the other snake oil salesmen. IMO

 

[SirRumpole]

Why doesn't he say, he will bring in a tax on volume, for multinational miners?

Jolly good idea.

Maybe he's waiting till after the election this time.

 

[sptrawler]

Guys,

Aussie shares in financial years 1970 to 2018 = 10.1%
Inflation same period = 5.3%

That's almost twice inflation, yeah?


And (I'm sure I've posted similar before)...buying at the top in 2007 to today, you've made ~3.76% over inflation ~2.4%
A real rate of ~1% after costs (assuming no taxes) kinda sucks, I get that - but it's not going backwards!


But remember (I am telling myself!)...markets can, have and do go backwards. But the Australian market has been one of the best performers

That is only if you didn't buy any disasters, most of us have a few in the bottom draw, so in reality most wouldn't be back to where they were in 2007.
In 2007 the all ords reached 6,700 from memory, and it still hasn't got back there, despite record migration and a housing boom.

That is why so many are getting disillusioned with saving to get ahead, and are living for the day, and also the reason why access to super will change.

Watch this space when BS gets in.