The next 6 - 24 months - are you bullish, bearish, or sitting on the fence...

[Ahar]

austrokiwi, ........I'm becomming more worried, I think the world is on edge right now. Look at what happened last week, nearly 10% drop in Dow Jones...ok it was as a result of mis-information and most of the loss was clawed back.

But, IMHO if we have any more 'upsets" eg, any country defaulfs on bond repayments or more country's bonds are downgraded to "junk" status then this can only mean as bond prices plummet then will get a huge spike in interests rates....look at Iceland in Feb 2009. Interest of nearly 18%.

I think the central banks will be impotent, & changes to OCR will be ineffective! With super high interest rates, one would expect the stock market to crash and world economies go into free-fall ie, the next great depression. NZ will not be immune! Mind you, NZ economy tends to lag so at least we should have a year till the impact hits.

but then I've always been a "glass half empty" type of girl

[Austrokiwi]

It may seem scarey at the moment.................. that said if people have managed their own personal finances and continue to pay down debt then at least they can moderate any recessionary effects. As far as a depression goes I think its way too early to call that. Greece still has some 112 tonnes of gold in its reserves so if it had to it could sell the gold to cover some of its debt. Span has just over 200 tonnes of gold.



I suspect economically things are going to stutter along for quite a few years. Not because of the current crisis but because of demographics. Baby boomers are retiring......... I suspect alot of the Property boom around the world was fueled by BB setting themselves up for retirement. In the US shares hare a common means of saving for retirement....... however as baby boomers stop buying shares and even cash them up to fund parts of their retirement then the Share market is going stagnate for some time.

[Ahar]

Yep, will have to wait and see. But all the same, if we can get thru the next in 2-3 months then perhaps the big D will be averted and more than a few people will sleep easier.

Mind you, I've got cash....and I can't help dreaming of great bargains and super high yields.

Darn!

[Baby Boomer]

I don't think we've seen the worst yet. The next twelve months will be about the same as the last six months where economies will do anything to remain respectable. But it can't last. Some time there will be a short period of utmost pain followed by true reform. And as we know, some sectors and some people will come out of it nicely and for others it will be end. For most of us it will just be difficult. So don't go spending your pennies yet.

[eri]

at the risk of becoming repetitive

2 years ago it seemed to some that the mature democracies of the western world would sleepwalk down the same path to stagnation that japan has trod since 1990

ie swift downward drops followed by long periods of slow growth which never quite make up the ground before the next externally triggered crisis causes the next big drop

each time the gov. increases debit levels as the populous refuse to take their medicine, or at least suggest that everyone should take it but them and/or not now

and so far

even though the japanese experience stands as a stark warning

that has pretty much happened from greece to london to new york to auckland

so i don't think it will either get better or worse

this will become the new norm

some will cry success whenever growth rates are at 0.1%

then be strangely silent when an external shock drops them 10%

so don't worry

we are unlikely to fall off the cliff

but it's pointless to plan on going anywhere else at the moment as we are still stuck on the side of the cliff

scrabbling for grip

[Austrokiwi]

I think Eri's scenario is one of the more likely ones. I recall reading in 2003 a prediction ( I am being repetitive here) that demographics would drive a 20 year secular ( as opposed to cyclical) bear market.

[donna]

Marc's reading Harry S Dent's 'the Great Depression Ahead' - how to prosper in the Debt Crisis of 2010 - 2012.

Looks a heavy read for the first 280 pages but smoother sailing thereafter - I'll give it a go after Marc. - The summary suggests the following may happen:

Stock prizes crashing late 2010 and flattening out around 2012

Gold and precious metals ultimately collapse after mid to late 2010

A major stock rally between 2012 - 2017 followed by a final setback late 2019 - early 2020.

The next global bull market will be from 2020 - 2023.

------------------------
umm 10 years to get in a good position pre. the Bull market.

[ENP]

Donna that's a great book. I've read it twice over and think it's fantastic. Most of all it just makes sense when you read it.

[ENP]

this can only mean as bond prices plummet then will get a huge spike in interests rates....

Why do you say this Ahar?

Are you talking about bond yields or bank deposit/mortgage yields?

[Ahar]

Are you talking about bond yields or bank deposit/mortgage yields?

All! If bond yields go up, it'll follow thru to the retail banking sector.

[ENP]

All! If bond yields go up, it'll follow thru to the retail banking sector.

So if people are taking money out of bonds causing the yields will go up, where will the money move to that were originally in the bonds?

And I don't understand why the bank interest rates will go up? Isn't it determined by the reserve banks interest rates?

[Ahar]

where will the money move to that were originally in the bonds?

Endless number of places to put your money........

Gold....hence the price increases
Company debentures...IF percieved to be safer than bonds or yield higher
Bank deposits...as above
Property
Under the mattress

The thing to remember is govt bonds are supposed to be the "risk free" investment, hence the usually low yield. But if suddenly they are perceived to be "risky" eg Greek bonds are now "junk" then people panic. The price plumets and yields increase to compensate for the risk of holding a bond that might not be repaid. Panic is NOT good!

why the bank interest rates will go up? Isn't it determined by the reserve banks interest rates?

Only partly. Interest rates are set by a combination of factors. The OCR is only one of them. eg, NZ banks must borrow overseas, hence investors will consider the riskisness of the country as a whole. And of course supply and demand for loans/deposits also effects interest rates.

[ENP]

Only partly. Interest rates are set by a combination of factors. The OCR is only one of them. eg, NZ banks must borrow overseas, hence investors will consider the riskisness of the country as a whole. And of course supply and demand for loans/deposits also effects interest rates.

That's very interesting. I didn't know that. Thanks for clearing it up for me.

[donna]

SST has a new article on how Banks have given their sales staff aggressive lending targets to sell more personal debt to us!

Source of article

We are told NZ's personal debt levels are out of control - yet the Banks continue on with the 'hard-sell tactics' to catch us out. The article says aggressive sales targets by the banks have driven the debt crisis and there's no let up.

So beware of credit card offers etc as Robert K (Rich Dad geezer) says (in his most recent book - Conspiracy of the Rich - easy credit is a sure sign bad times are on the way.

Cheers,

Donna

[Propoholic]

While some mortgage-lending excesses have been reined in, bank customers last week told the Sunday Star-Times they still felt personal debt was offered too freely.

Ive just received a letter from ASB:- "We have recently reviewed your ASB Visa card account and would like to offer you the option to increase your credit limit from $14,000 to $20,000".......and then it says "If you'd like an extra $6000, sign below and its yours".

I imagine there's 50,000 others who have been sent the same letter.