US property

[NPCampbell]

Originally Posted by hpeer

IMHO this is spot on. It runs on trust, trust among thieves is my take. My taKe is the 2008 crisis was about loosing trust, enough folks saw the fake boom and were ready to sit pat while the ship sank.

The 2008 financial crisis was full of real, tangible losses. There was definitely a housing boom in there, but I'm not sure trust had anything to do with it:

• From 2001 to 2006, the Fed continually raised interest rates
• Increasing rates reduced demand for homes, with home prices going negative in 2006
• Laws encouraging banks to offer sub prime loans increased the percentage of subprime loans in the mortgage market from 7% in 2001 to 24% in 2006.
• Unlike the normal mortgage market, 90% of sub prime loans were based on floating rates.
• The one-two combo of rising interest rates and dropping house prices made many sub prime loans fail when they reached their readjustment period.
• A staggering 45% of all floating subprime loans were delinquent or foreclosed by 2008.
• Firms that had a high percentage of mortgage backed securities, like Lehman, started to lose money and file for bankruptcy.
• A common method of hedging individual asset losses within an investment portfolio was to pay for an uncollateralized insurance policy called a credit default swap.
• The huge real estate losses brought down any insurance companies that had any exposure to CDS policies.

[john61ct]

The regulatory failures,

including the fact all of the banksters responsible got off scot free,

banks too big to fail all left in place,

mean such a sequence of events could easily happen again.

[Bob Morane]

Originally Posted by john61ct

The regulatory failures,

including the fact all of the banksters responsible got off scot free,

banks too big to fail all left in place,

mean such a sequence of events could easily happen again.

Hell why not ?
The bigger the imaginary pile of money is, the bigger the very real commissions are.
The extremely low risk of going to jail compared to any other crime is the icing on the cake.

[daletournier]

Originally Posted by john61ct

The regulatory failures,

including the fact all of the banksters responsible got off scot free,

banks too big to fail all left in place,

mean such a sequence of events could easily happen again.

True BUT there's alot more to it than just lack of regulations etc.

Our fractional banking system is mathematically destined to fail, currency expansion through debt. The system cannot work without ever increasing debt, it's a prerequisite. Now this works as long as growth outpaces or at least keeps up with the debt expansion BUT you cannot have infinite growth in a finite world.

The previous crisis and the next came (will come) from an inability to service debt, when more and more of an individuals (or nations) wealth is required to service debt this same income can't be directed to where its needed (amongst other associated problems).

Our perspective is limited by the lengths of our lives, our current monetary system hasn't always been, there's been many, the British pound was the dominant currency around the world not that long back, gold backed the Usd (partially) upto 1971, my point is our current system with the Usd at the center isn't forever, it will change and that change is already happening.

Money creation has been abused through history when its not pegged to something that acts as a governer. A note was never meant to be money it was a "note" that represented something of value, often through history this was gold and/or silver BUT not always. When governments take away the "real thing " that a dollars meant to represent then there's no limit to how many dollars (yuan, ruble etc) can be printed, thus money loses it value and asset bubbles are created.

Obviously there's alot more to this and I'm certainly not claiming to understand it all BUT I do know my money dosent buy me what it used to.

[Paul L]

Originally Posted by daletournier

.......

The previous crisis and the next came (will come) from an inability to service debt, when more and more of an individuals (or nations) wealth is required to service debt this same income can't be directed to where its needed (amongst other associated problems).

......

In the US we have a party dedicated to the solution of this debt problem. Reduce revenue by cutting taxes😓

[ShellBack89]

Originally Posted by Paul L

In the US we have a party dedicated to the solution of this debt problem. Reduce revenue by cutting taxes😓

And another party who believes we can tax the upper & middle class out of the debt problem, of course without reducing spending

However over the 21 months we’ve seen:
- GDP most recently gained 4.2 percent in the second quarter, the best performance in nearly four years.
- At the same time, the unemployment rate is 3.9 percent, just one-tenth of a percentage point above the lowest level since 1969.
- The stock market has jumped 27 percent amid a surge in corporate profits.

Courtesy of CNBC

[Paul L]

Originally Posted by ShellBack89

And another party who believes we can tax the upper & middle class out of the debt problem, of course without reducing spending

However over the 21 months we’ve seen:
- GDP most recently gained 4.2 percent in the second quarter, the best performance in nearly four years.
- At the same time, the unemployment rate is 3.9 percent, just one-tenth of a percentage point above the lowest level since 1969.
- The stock market has jumped 27 percent amid a surge in corporate profits.

Courtesy of CNBC

You missed the additional trillion dollar hole in the debt, the increase in the trade deficit and the comparison of the stock market increase in tbe previous admin. Just an oversight I'm sure.

[ShellBack89]

Originally Posted by Paul L

You missed the additional trillion dollar hole in the debt, the increase in the trade deficit and the comparison of the stock market increase in tbe previous admin. Just an oversight I'm sure.

How many trillions of dollars did Obama add to the national debt while overseeing the worst economic growth in history? More than Presidents 1 - 43. Remember Shovel Ready Jobs? More like shovel ready $4!T. Let's not forget all those incredible green companies tax payers got stuck paying for and do I need to mention the Arab Spring? Winning! I'm surely glad you and federal government know how to spend my money better than I do. One can only look to California to see how well that's working out. Jut an oversight I'm sure......


National Debt

January 20, 2009 = $10.626 trillion
January 20, 2017 = $19.947 trillion

Obama had a 2% growth compared to Trumps 4.2% but Obama would like to take credit for it. Right...... The stock market has risen by 45% since Jan 2017.

Keep hating Trump When HRC is the nominee in 2020, she'll get spanked again and we'll laugh again!

[Franziska]

You will all pay the huge bill for the guy with the red necktie once he's gone.
He is very very good in destroying long term international relationships into which many predecessors invested a long time.
US influence in the world is dwindling slowly.
For the moment he looks successful but wait and see.
His success is only a fire fueled by straw......

[hpeer]

We have two parties with very marginal differences. And both, to a very large degree, support the status quo. No real reformers.

Remember how seamless the financial crisis management was transition from Bush to Obama. No true differences, their boood runs green.

[ElVikingo]

I am up in the Pacific Northwest. The market here is great. Continuing to get better with lots of new business in town. Anywhere within 100 miles of Seattle. Good luck!

[Buzzman]

Not sure I'd write off the Oz property market, as we don't have the same underlying shaky foundations that exist in the US. For example, you can't walk away from a mortgage here. If the bank forecloses, you still owe. So people don't walk, they work. Bank income is therefore safer, and so is their share price.
We also have higher average wages to service the debt, and most households are double-income on higher wages.
The pundits here are predicting 10-23% 'correction' in real estate prices, and that looks like it's going to be fairly accurate, based on the numbers so far.
Of course, if GFC Mk II occurs, thanks to the systemic global debt problems, then all bets are off.

As to the income from property issue, I concur with those doing it successfully. You need multiple income streams. So multiple lets, in order to prevent the income stress of going from income to no income between tenancies, especially if you need to repair a trashed property as well during this time.

In Oz we have diabolically protective rental laws. In NSW for example you MUST give any tenant 2 months notice of eviction. So AFTER they've stopped paying rent, so you know to evict them, they then get another 2 months rent free.... having said that, landlords can set whatever rental bond they like, and it's managed by a third party agency, who usually err in favour of the owner in disputes over repairs.

But returns are low unless you are a cash buyer and are not servicing debt.

Boarding houses are also a good bet. Almost zero rental laws. Easy to evict tenants. But only if they are sharing amenities. If each room has a bath or kitchenette, they are required to be given the same draconian rental agreements as people in full houses.

Student housing is good also, especially if it's managed by the local school, as they agree to cover 'summer break' when students tend to disappear home to wherever.

With boardig houses you need an onsite or local manager to hassle/hustle for the rental income, but with multiple tenants, there's always a stream - it just fluctuates a bit.

Also, away from the major capital cities, rents are similar but house prices are lower. For example, AUS$200K will buy a basic 3br home in my town that will then rent for $300/wk. But tenant quality is lower, with higher risk of damage and delinquency. You win some, you lose some.

Multi-let properties like small apartment complexes are the go, if you can afford to get into one.

I remember reading Shirley Maclaines autobiography years ago, and she said the best advice she ever received was to buy an apartment building with the money she got from her first major film role. She could afford Malibu. The resultant income meant she never had to work again, so every other role she got was icing on the cake.

And residential is almost always better than commercial, as in a downturn, businesses go bust and stop paying rent, whereas residential tenants tend to find ways to cut corners, pull in the belt and keep the roof over their heads. But returns tend to be better in commercial, so, again, win some lose some.

It's do-able with care.

There are many grey nomads here who have let their primary home and headed off, and who have no other investments or superannuation other than the govt pension. Risky, but at least you're never more than a week away from home and sorting any issues.

For sailors on a circumnavigation, not so easy, unless you have spare cash to afford to fly home from wherever, whenever.

Everything's a risk, but if we let it bother us too much, we'd never get out the front door!

[daletournier]

Hi Buzzman, thanks for your assessment, I agree with most of it.

It's hard to know how badly the Oz market will depreciate as there's several scenerios that can unfold. "All bets are off" is true as you say, if there's a big shock externally .

My concerns stem from what I consider a total lack of understanding of the mounting debt pressures and the misallocation of funds that come from low interest rates.

I read the speech recently given by the debuty governor of the Rba last night.

I find it interesting he believes we could lower interest rates more and introduce quantative easing. Keep in mind the cash rate was dropped to the emergency level of 3.5% during the GFC, we are now at 1.5%!! and banks now don't actually jump when the RBA says due to outside funding.

Honestly I have no idea where this all goes. Many much more informed than I claim this globally is a crazy monetary experiment we are living through, it's never happened like this before.

One thing I strongly believe in is "the law unintentional consequences".

Cheers Dale.

[daletournier]

Buzzman, just one thing I would caution is "but we're different". We may have different circumstances than what the US had BUT they mostly didn't see it coming, as we don't.

[Buzzman]

Dale
Yeah, I hear you, and agree. But I looked at the analysis last year of the over-supply of apartments, especially in Sydney, Melbourne and Canberra, and the arguments by those economists were persuasive - with the proviso IF nothing external happens.
Thus far, the predicted 'movement' is tracking as per their predictions.
I too share your concerns about the 'finance experiment' we are living through.
It's one of the reasons I paid cash for my home, rather than finance it. To be fair, not everyone is in such a privileged position. And my Dad had to die so I could inherit, so it wasn't exactly a 'win' for me. [sad face]
Love to be a fly on the wall in 50 years time to see what they say about us then....sadly, looks like my due-in-April grandchild is the one who'll be reading the economists analysis of 'what went wrong in the early 21st C'.