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Citi's Bubble Meter for Australia
Topic Started: 12 Oct 2016, 02:40 AM (8,514 Views)
Jon Snow
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Khaderbhai
13 Oct 2016, 08:48 PM
Yes. Last time the "bubble meter" was at this level, Sydney house prices rose for the following three years. Just an observation.
Just an observation. I see. I thought you were implying a correlation.
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Yes, five different data sets for each component's Z score, and a 6th data set, which encompasses the other components, used to create the bubble meter.

Well, there is a way to construct the 6th from the previous 5 using the same data sets.
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Because the price/income ratio, for example, is a stronger predictor of bubbles than real or nominal house prices.
Given the reliability of income changes, they are probably the same number. It's not like you get 2 sigma moves in income for large numbers of people.
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That's certainly important, but it's not the only thing that matters.
It's not the only thing that matters to what? To it's predictive power?
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From a statistical point of view, maybe so. But from a practical point of view, a metric like the price/income ratio is a better bubble indicator than a metric like nominal prices.
I would disagree, because of the tendency to use household income rather than individual income. Governments and other incompetent allocators of capital can create employment booms that can come to a sudden and catastrophic end when fiscal discipline is re-applied, or the return on capital plummets so drastically that no-one wants to invest. The rate of change in nominal prices is a good indicator of a price bubble, but tells you nothing of the underlying causes. And that's OK, because the underlying causes are usually irrelevant sophistry that are used to rationalise fortuitous timing as investment genius.
Speak when you are angry and you will make the best speech you will ever regret.
Ambrose Bierce
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Terry
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Jon Snow
13 Oct 2016, 11:15 PM

Given the reliability of income changes, they are probably the same number. It's not like you get 2 sigma moves in income for large numbers of people.

Yes, that's just common sense.
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Khaderbhai
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Terry
13 Oct 2016, 11:10 PM
Mother cat, those are two independent variables, not a bubble meter comprising 5 different components built on data spanning 18-19 years. I'm sorry but understanding how to frame data is fundamental if you work with data.

And yes, whole numbers and / or rational numbers are necessary.
Roddy, your original claim was that Z must be calculated on a whole number, and that Z could not be calculated on a ratio.

Both claims were incorrect. Z can be calculated on any number, and house price ratios are always expressed as a number.

It's quite clear you don't work with data Roddy.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Terry
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Khaderbhai
13 Oct 2016, 11:20 PM
Roddy, your original claim was that Z must be calculated on a whole number, and that Z could not be calculated on a ratio.

Both claims were incorrect. Z can be calculated on any number, and house price ratios are always expressed as a number.

It's quite clear you don't work with data Roddy.
You could run z-scores on nominal or ordinal numbers.

But why?

Ratios show relationships between 2 variables. They are not raw or simplified data sets such as house prices.
Edited by Terry, 13 Oct 2016, 11:27 PM.
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Khaderbhai
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Jon Snow
13 Oct 2016, 11:15 PM
Just an observation. I see. I thought you were implying a correlation.
Nope.
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Well, there is a way to construct the 6th from the previous 5 using the same data sets.
Of course, but the constructed data set is a new data set.
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Given the reliability of income changes, they are probably the same number.
No, price/income changes are very different to house price changes. House prices tend to cycle through rising and falling periods, whereas incomes just tend to rise. For example, from mid 2010 to mid 2012, Australian house prices fell while incomes kept rising. In 2012, Sydney's house price to income ratio was the same as it had been in 2003, a decade earlier, yet nominal prices were much higher. So nominal prices had increased but the price/income ratio had not.
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It's not the only thing that matters to what? To it's predictive power?
To its ability to identify bubble conditions.
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The rate of change in nominal prices is a good indicator of a price bubble
Price/income ratio is a much better indicator. If nominal prices double and incomes only rise by 10% over a decade, then the risk of a house price bubble is much greater than if prices and incomes both double.



Terry
13 Oct 2016, 11:24 PM
But why?

Ratios show relationships between 2 variables. They are not raw or simplified data sets such as house prices.
I've already explained why, but if you don't believe my answer then ask the IMF why they did it.

Or just read the IMF paper I linked to - it's all explained there.
Edited by Khaderbhai, 13 Oct 2016, 11:42 PM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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Terry
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Khaderbhai
13 Oct 2016, 11:30 PM


No, price/income changes are very different to house price changes. House prices tend to cycle through rising and falling periods, whereas incomes just tend to rise. For example, from mid 2010 to mid 2012, Australian house prices fell while incomes kept rising. In 2012, Sydney's house price to income ratio was the same as it had been in 2003, a decade earlier, yet nominal prices were much higher. So nominal prices had increased but the price/income ratio had not.

To its ability to identify bubble conditions.

Price/income ratio is a much better indicator. If nominal prices double and incomes only rise by 10% over a decade, then the risk of a house price bubble is much greater than if prices and incomes both double.




Mother cat, I don't disagree with you that price to income is a better indicator of bubbles, but that is beside the point. Price to income ratios are not indicators of "price". It is superfluous to the bubble meter.
Khaderbhai
13 Oct 2016, 11:30 PM
Nope.

Of course, but the constructed data set is a new data set.

No, price/income changes are very different to house price changes. House prices tend to cycle through rising and falling periods, whereas incomes just tend to rise. For example, from mid 2010 to mid 2012, Australian house prices fell while incomes kept rising. In 2012, Sydney's house price to income ratio was the same as it had been in 2003, a decade earlier, yet nominal prices were much higher. So nominal prices had increased but the price/income ratio had not.

To its ability to identify bubble conditions.

Price/income ratio is a much better indicator. If nominal prices double and incomes only rise by 10% over a decade, then the risk of a house price bubble is much greater than if prices and incomes both double.




I've already explained why, but if you don't believe my answer then ask the IMF why they did it.

Or just read the IMF paper I linked to - it's all explained there.
You would run z-scores on ordinal or nominal numbers?
Edited by Terry, 14 Oct 2016, 12:03 AM.
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herbie
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Z scores can only be calculated on whole numbers?

Please stop Terry ... 'N go 'n blog over at Macrobitchiness where your 'unique insights' into mathemodicals just might be 'better appreciated'???

PS: Jon Snow ... Ditto for you too - Tho more in relation ta ya 'unique insights' inta 'social principles' 'n 'productivity' than mathemodicals.

Hmmm - A pair of 'homeless' little orphan waifs; Who'd get laughed out of existence even in a low life shithole like that - Yet for wotever reason/s(?), can still continue ta exist here ...
Edited by herbie, 14 Oct 2016, 01:22 AM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Terry
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herbie
14 Oct 2016, 01:00 AM
Z scores can only be calculated on whole numbers?

Yes Jethro. Whole numbers, rational numbers, and integers if you wish.
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herbie
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Tezza, you really ARE gunna be in some seriously DEEP shit when Skamy finally pops up agin ... Unlike K, she just ain't always quite so 'gentlemanly' when it cums ta idiots - Well, from wot I can see anyway ...

Anyway, just watched a movie I enjoyed - "The Flowers of War" - 'N am now part way through another that's at least OK+ - "The Wind That Shakes The Barley" - As in give it a rest for a while Tezza 'n take K's suggestion of go 'n read a comic book , or mine of go 'n watch a movie; But if neither of them work for you personally, then try a bit of bush walking or some such maybe?

'N PS: Don't forget ta take ya gun so's ya can bags us a bit a meat for a bit a nice bunny rabbit stew ... :)
Edited by herbie, 14 Oct 2016, 02:02 AM.
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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Khaderbhai
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Terry
13 Oct 2016, 11:55 PM
Price to income ratios are not indicators of "price". It is superfluous to the bubble meter.
Price/income ratios are a perfect indicator of "price" relative to buying power Roddy.

However Citi might also be using nominal or real prices, or price/rent, or some other house price related measure. The label is not fully descriptive, because for one thing I'm sure it would measure all dwellings (including units) instead of just houses.

A more accurate label might have been 'Dwelling Price to Disposable Household Income Ratio' or similar, but since that was probably too long to fit on the chart, they just went with the simple 'house price' knowing most sheeple wouldn't think too deeply about it anyway.
Edited by Khaderbhai, 14 Oct 2016, 08:19 AM.
Banks can't repossess your home simply because the market value falls. Australia's Consumer Credit Code says consumers aren't liable for things ordinarily outside their control and can't be held to obligations that could only be met by selling their home. Click for details.

"The truth is that there are no good men, or bad men. It is the deeds that have goodness or badness in them. There are good deeds, and bad deeds. Men are just men."
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