I'm kind of battling to keep a Gen X rellie of mine just a little bit subdued at the moment. Kids are verging on leaving home. Has pretty respectable deposits. Has experienced the shit that's happened over the last 15 years re house prices. Pretty much reckons it's 'normal' now. Wants to set his kids up. And credit is SO cheap ...
It's not easy. 'N made even less easy by the fact I have to acknowledge I could be wrong. This shit gets hard on my head ...
I didn't mean that people are not buying and refinancing, they are. It's really busy, but there isn't much of the wasteful meaningless drawing against the house and buying crap that was happening in 2006.
Any expressed market opinion is my own and is not to be taken as financial advice
It is a monopolist issuer of bank reserves. And like like any monopolist, it absolutely controls the price of its product with the banks acting as the transmission mechanism.
Your complete lack of how financial markets work is highlighted in this post. The RBA may be the monopolist issuer of bank reserves but their value is determined on the open market. Only a fool would not understand this.
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You have made the same mistake as most other Bears. "Believing" the cash rate is controlled by market forces, despite all of the evidence to the contrary (like at 2:30pm every first Tuesday of the month).
IR's determined by market forces. The cash rate is just the RBA trying to give the illusion that they control the market. When the market decides to move rates the RBA will follow – they have little choice.
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If the RBA wanted the 10 year bond yield at 0%, they could do it at the stroke of a pen (or tap of a keyboard). They choose to manipulate the short end to meet their policy goals.
Not a chance. If they cut rates to zero and created money accordingly then the markets would judge that. The market may concur with that decision or they may decide it’s too inflationary and increase rates independently; the RBA would then be forced to reverse their blunder.
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The US cash rate is 0% because the fed wants it there. Simple.
The US cash rate is 0% because the market wants it there. Simple. Your faith in the god like power of central banks is really quite sad.
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They do this because trillions of dollars are created via deficit spending. And the dollars have to end up somewhere. They can't be used to buy shares or existing bonds because that simply creates dollars for the sellers. etc etc.
Dollars can go anywhere. People can use them to buy bonds, shares or property or anything else they desire. To say that people can’t use dollars to buy something is just nonsense. The market weights demand and supply and sets a price. This is basic economics, why are you struggling withn this?
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And Bond yields reflect expectations of the Fed cash rate.
Bonds reflect market supply and demand. All expectations are reflected.
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Who says they are a guarantee loss? If they are a guarantee loss - short them. Before you do I would recommend you look up the "widow trade" on Google first.
I say they are a guaranteed loss because I can do basic maths. No need to Google anything.
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But interest rates rose from 2002-2007 and so did property and equity prices. So the evidence disagrees with you. Morover, this pretty much happened everywhere. I see you have now added "credit" to your argument. This too is wrong. Credit growth in Australia was at record levels in 2004 yet prices stagnated.
The net effect of Interest rates rising and the lowing of lending standards/Government support from 2002-2007 was that it became easier to speculate on property and the stock market so actually the evidence agrees with me. Credit, money supply, interest rates, government policy, lending standards etc. all have an effect on prices and sometimes that effect lags. Only a simpleton would expect one of these to have a perfect correlation in a single year.
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No - if the bond market is right, cash rates will rise. You need to do some homework on FRA's.
So if the markets are right and we get a depression you expect rates to rise! Are you just trolling me now?
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This is not analysis. Just wishful thinking plus a bit of hand waving which dates back to 2009. It has been wrong for 5 years now.
Wrong for 5 years?! Please tell me just much banks have lost over the past 5 years and how much tightening they’ve done as a result.
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It has beed discussed and promoted by people who have been consistently wrong. They need new arguments because the old ones were useless. Yields and private debt levels are irrelevant for property valuation (but are relevant to price). The last 10 years should have been a lesson on that. It all comes back to replacement cost. Why won't people learn?
I’m glad that you agree that yields and private debt levels are relevant to price. Do you also agree that at extremes these can indicate a bubble? Replacement cost is largely irrelevant. If a house costs $500k to build and the market says it’s worth $400k then it’s worth $400k.
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Rubbish. Selected bears expect crash. They have expected it for 1/2 a decade. If the "market" expected a crash it would have happened. That is the definitional of a market. But at some stage it will crash and the "broken clocks" will all say they were the only ones to predict it - then they will start their own blog...
Markets always correctly weigh up the future probabilities and they have been screaming depression for 5 years. The fact that it hasn’t happened yet means nothing. Only if interest rates return to “normal” can they be said to be wrong and they are not moving anywhere significantly.
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Then I'm a buyer. As usual I suspect the bears will "predict" it will get worse and miss the bottom.
So if prices were to drop below your purchase price and you make a loss you learn nothing. Prices can move up or down from any price. The S&P at 900 may be a good buying opportunity or it may not.
Your complete lack of how financial markets work is highlighted in this post. The RBA may be the monopolist issuer of bank reserves but their value is determined on the open market. Only a fool would not understand this.
IR's determined by market forces. The cash rate is just the RBA trying to give the illusion that they control the market. When the market decides to move rates the RBA will follow – they have little choice.
Not a chance. If they cut rates to zero and created money accordingly then the markets would judge that. The market may concur with that decision or they may decide it’s too inflationary and increase rates independently; the RBA would then be forced to reverse their blunder.
The US cash rate is 0% because the market wants it there. Simple. Your faith in the god like power of central banks is really quite sad.
Dollars can go anywhere. People can use them to buy bonds, shares or property or anything else they desire. To say that people can’t use dollars to buy something is just nonsense. The market weights demand and supply and sets a price. This is basic economics, why are you struggling withn this?
Bonds reflect market supply and demand. All expectations are reflected.
I say they are a guaranteed loss because I can do basic maths. No need to Google anything.
The net effect of Interest rates rising and the lowing of lending standards/Government support from 2002-2007 was that it became easier to speculate on property and the stock market so actually the evidence agrees with me. Credit, money supply, interest rates, government policy, lending standards etc. all have an effect on prices and sometimes that effect lags. Only a simpleton would expect one of these to have a perfect correlation in a single year.
So if the markets are right and we get a depression you expect rates to rise! Are you just trolling me now?
Wrong for 5 years?! Please tell me just much banks have lost over the past 5 years and how much tightening they’ve done as a result.
I’m glad that you agree that yields and private debt levels are relevant to price. Do you also agree that at extremes these can indicate a bubble? Replacement cost is largely irrelevant. If a house costs $500k to build and the market says it’s worth $400k then it’s worth $400k.
Markets always correctly weigh up the future probabilities and they have been screaming depression for 5 years. The fact that it hasn’t happened yet means nothing. Only if interest rates return to “normal” can they be said to be wrong and they are not moving anywhere significantly.
So if prices were to drop below your purchase price and you make a loss you learn nothing. Prices can move up or down from any price. The S&P at 900 may be a good buying opportunity or it may not.
The definition of Market Forces can vary depending on Prevailing Political circumstances. To think its just Economics and Maths is the height of Stupidity.
Replacement cost is largely irrelevant. If a house costs $500k to build and the market says it’s worth $400k then it’s worth $400k
Oh my goodness! Your post is just full of flawed thinking, misunderstandings of the monetary system, interest rates, property matket and so on, it's hard to know where to start! But I chose the quoted line, as it's a doosy!
If it costs $500k to build a house, but the market will only pay $400k, do you think *anyone* will build new houses??? Of course they won't - you would have to be stupid! And if no-one builds any new houses, what do you think happens over time to the supply/demand balancce? And what do you think that will likely do to prices? Hmmmmm??? This is b_b's point re the "replacement cost". Ultimately, replacement cost - whatever factors drive it, will set the "baseline" price for the housing/dwelling market - with competition, adequate supply, and if you are really lucky advantagous taxation / developer levy policies etc, being your only hope of pushing prices down to as close to that baseline as you can before the developers stop building.
It's no wonder all your calls re both the economy in general and the housing market specifically have been totally wrong for *years*!
If it costs $500k to build a house, but the market will only pay $400k, do you think *anyone* will build new houses??? Of course they won't - you would have to be stupid! And if no-one builds any new houses, what do you think happens over time to the supply/demand balancce? And what do you think that will likely do to prices? Hmmmmm??? This is b_b's point re the "replacement cost". Ultimately, replacement cost - whatever factors drive it, will set the "baseline" price for the housing/dwelling market - with competition, adequate supply, and if you are really lucky advantagous taxation / developer levy policies etc, being your only hope of pushing prices down to as close to that baseline as you can before the developers stop building.
The replacement cost is not fixed or immutable. The replacement cost is made up primarily taxes, financing,materials and the cost of labour, all of which can decline to meet the market.
While it is true that in a socialist economy, taxes and the cost of labour are very sticky, it is also true that in depressions the power of organised labour is eroded.
Oh my goodness! Your post is just full of flawed thinking, misunderstandings of the monetary system, interest rates, property matket and so on, it's hard to know where to start! But I chose the quoted line, as it's a doosy!
If it costs $500k to build a house, but the market will only pay $400k, do you think *anyone* will build new houses??? Of course they won't - you would have to be stupid! And if no-one builds any new houses, what do you think happens over time to the supply/demand balancce? And what do you think that will likely do to prices? Hmmmmm??? This is b_b's point re the "replacement cost". Ultimately, replacement cost - whatever factors drive it, will set the "baseline" price for the housing/dwelling market - with competition, adequate supply, and if you are really lucky advantagous taxation / developer levy policies etc, being your only hope of pushing prices down to as close to that baseline as you can before the developers stop building.
It's no wonder all your calls re both the economy in general and the housing market specifically have been totally wrong for *years*!
Yet another clueless post from Sydneyite.
You build a house for $500k because the market values it higher. The market can then value it lower - prices change. Of course people will still build houses at a market value of $400k because land prices will fall and a new equilibrium is reached at which they can make a profit.
Your thinking is clueless because it's static. As things change the market responds and prices change.
This is why b_b's nonsense about replacement cost being a baseline is laughable. Illogical thinking and an inability to understand that economies are dynamic and responsive.
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It's no wonder all your calls re both the economy in general and the housing market specifically have been totally wrong for *years*!
Really? What calls have I made that have been wrong?
Oh my goodness! Your post is just full of flawed thinking, misunderstandings of the monetary system, interest rates, property matket and so on, it's hard to know where to start! But I chose the quoted line, as it's a doosy!
If it costs $500k to build a house, but the market will only pay $400k, do you think *anyone* will build new houses??? Of course they won't - you would have to be stupid! And if no-one builds any new houses, what do you think happens over time to the supply/demand balancce? And what do you think that will likely do to prices? Hmmmmm??? This is b_b's point re the "replacement cost". Ultimately, replacement cost - whatever factors drive it, will set the "baseline" price for the housing/dwelling market - with competition, adequate supply, and if you are really lucky advantagous taxation / developer levy policies etc, being your only hope of pushing prices down to as close to that baseline as you can before the developers stop building.
It's no wonder all your calls re both the economy in general and the housing market specifically have been totally wrong for *years*!
Yet another clueless post from Sydneyite.
You build a house for $500k because the market values it higher. The market can then value it lower - prices change. Of course people will still build houses at a market value of $400k because land prices will fall and a new equilibrium is reached at which they can make a profit.
Your thinking is clueless because it's static. As things change the market responds and prices change.
This is why b_b's nonsense about replacement cost being a baseline is laughable. Illogical thinking and an inability to understand that economies are dynamic and responsive.
You are wriggling big time now - to re-cap, your original statement was:
NotSoWiseBear
Replacement cost is largely irrelevant
So you are now AGREEING with us that replacement cost is TOTALLY relevent. All you are adding is the (obvious) caveat that the cost may not be static! Wow - pictures at 11! I don't think myself or b_b ever said they were static??? But replacement cost is certainly relevant, real, and usualyl quite sticky. And of course the reality is that most of the time the replacement cost actually goes up, not down.
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Really? What calls have I made that have been wrong?
Everything. I mean come off it! You have been posting, supporting, arguing bearish crap re the economy and house prices on this forum for years.
You are wriggling big time now - to re-cap, your original statement was:
So you are now AGREEING with us that replacement cost is TOTALLY relevent. All you are adding is the (obvious) caveat that the cost may not be static! Wow - pictures at 11! I don't think myself or b_b ever said they were static??? But replacement cost is certainly relevant, real, and usualyl quite sticky. And of course the reality is that most of the time the replacement cost actually goes up, not down.
If replacement cost isn't static then it doesn't form a baseline thefore it's irrelevant to price. It really couldn't be any simpler.
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Everything. I mean come off it! You have been posting, supporting, arguing bearish crap re the economy and house prices on this forum for years.
And yet you're still unable to give an example of a prediction I've made that is wrong.
A thing does not need to be static in order to be relevant.
If you claim that replacement cost is a baseline for price then it does need to be static to be relevant. If the baseline is dynamic what's the point of calling it a baseline and claiming it is relevant to price?
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