Financial Armageddon!!

[eri]

current thinking seems to be it's a bit of a "beggar's banquet" of unsavory things for investors

so imho we should be prepared for a long investors' winter of next to no growth

much of our modern economy was non-essential and based on bullshit borrowing and spending

that has pretty much gone and won't be coming back for a generation

the mindset is just no longer there

meanwhile the populous will savage any gov. that attempts their cut their "entitlement" to other peoples' labor

so gov will preach but continue to keep itself in power by borrowing from creditor nations

eventually they'll claim their share of the country

and for the reason that the parents didn't want to work

the children will lose their birthright

so

get back to work everyone

get used to long hours, low pay, crap pensions and health cuts

then maybe we'll get out of this

before all the net tax contributors flee

to lands where their efforts are appreciated





.................................
Those worried about inflation and looking for a hedge may be more interested in real assets (property or commodities) than in paper ones.

Until recently, gold has been a very strong performer; it has been easily the best asset to own since the start of the credit crisis in 2007 (see chart 2).

The problem with gold, and other commodities, is that with no yield or earnings they are hard to value.(and are now overdone imho) Demand from Asian countries has certainly pushed up prices; non-oil commodities have trebled over the past decade. But if the economy does start to slip into recession, commodity prices could fall very sharply; they almost halved between March and December 2008. This year they have dropped by around a fifth since February.

Property remains the favourite asset of the retail investor. Ultra-low interest rates have eased the pressure on many homeowners. As a result, our rent-based measure of house prices shows most markets looking overvalued (America is one of the exceptions). But lenders have tightened their standards since the slapdash days of the subprime boom; borrowers need much larger deposits than they used to.
That is making it harder for young people to get on to the property ladder, cutting off demand at the bottom of the market. As the baby boomers retire and seek to realise the value tied up in their homes, supply may start to weigh on the market. Again, the boom conditions of the 1980s and 1990s are unwinding.
....................

http://www.economist.com/node/21532276

[Bluekiwi]

I think property can always work for you as long as you have a strategy, that works for you.
Thats why we are all here isnt it ??
For me I am going high yield to stay as safe as I can, and long term 10 to 15 year holds to get some capital gain, with a couple of flips each year for liquidity.
Then 10 to 15 years time, sell off what I need to, and retire with a couple of mortgage free rentals I can pass on to my children.

KEEP IT SIMPLE / STAY AWAY FROM COUNCIL !!!!!!!

My new motto.

BTW

Austro Kiwi what do you do for a job ?

[Austrokiwi]

I don't have a job......ie: no boss a few years ago years ago I became financially independant. I now do jobs ( as a consultant) for the enjoyment not for need. Professionally I am an industrial organisational Psychologist- Starting about 15 years ago I became interested in Economic Psychology (which is IMHO just a slightly different shade of the discipline of economics)-In 2003 I became interested in Bullion investment which evolved into a numismatic interest. For the last three years I have been researching ( for love of the subject) early modern economic history focussing on what I humbly regard as the trueeconomic "middle earth" meaning the far middle east and close ( to Europe) far east- ie: the economic sphere of the Persian/Arabian gulf, Red sea, East coast of Africa and the correspondent regions on the other side of the Indian ocean. I am in the long process ( frustratingly typical of Austrain Beauracrcy) of beginning a PHD in economic history. I have been a minor PI with an NZ focus but my risk intolerance led to me folding on my NZ position last year.




Yesturday I tried to explain my understanding of the velocity of money but After considerable work I hit some thing wrong and lost the lot. So, for me again, the velocity of money is the speed at which money circulates within an economy. For PIs understanding the Velocity of money is easily modelled by comapring the current PI environment with the pre - 2007 environment( as one of many models). Pre 2007 residential property sales were fast and furious money was eaisly available. Now property sales are much slwer so the movement of money is much slower. I read ( and now can#t fin an article two day ago on either stuff of the herald reporting that NY consummers are reduinf their use of credit...........credit can be described as as borrowinf aginst future monetary gains to use now. This brings me back to my view that there is more of a risk of deflation than inflation. With all the current global economic threats the velocity of money is slowing despite central banks keeping base interest rates at record low levels (another way of effectively printing more money) Quantitative easing is failing in its objectives as the money injected into the system is immediately being used to cover previous debts or held to cover the risk of soverien default( The PIIGS US states and federal USA). the extra money is just not getting down to the every day consumer. For inflation to hit high levbeöels or, as gold bugs are still predicting, hyper inflation levels the velocity of money needs to be increasing. So for now we may be in a transitionary period of stagflation that evolves into a period of deflation or in a stagflation era. I with my ( non theoritical) am behaving economically as if deflation is the most likely ( ie plan for the worst while hoping for the best)

I think Eri sums it up in one of his recent posts... we are in for a very sluggish period where its any ones guess where money is best placed. Gold seems to have become ( against previous historical trends) positively correlated with the share market. Silver is just completely unpredictable, for me, despite having the longest historical record of being the moeny of choice ( longer than gold: Silver ceased being money, efffectively, somewhere around WW1).

[eri]

4 more years?

dr.doom wouldn't be surprised

The lead speaker (and panel member) was Nouriel Roubini (who has inherited the title of Doctor Doom from Henry Kaufman). He outlined the case why he thinks there is a 60% chance of a developed world recession.

With the US economy at what he calls "stall speed" of 1% annualised growth in the first half of the year, it cannot continue in such a state. Either it must reaccelerate or fall into recession. .............

History teaches us that financial crises are followed by anaemic growth and the developed economy is duly following the script. Rapid growth is implausible.

........................ Eurozone contagion has been spreading; the US government has almost been shut down by fiscal disputes
.....................................
.......................the outlook is very uncertain and that increases the "option value" of waiting.
........................
There is a vicious cycle in which bad macroeconomic news drives down asset markets which have an adverse economic impact; notably credit .................................................. .........
Big companies may be fine but surveys of small business sentiment are at depression-style levels.

US consumption has been artificially boosted by tax cuts and transfer payments that may not be repeated in 2012. Without them, the outlook is bleak given the weak labour market, slow wage growth and poor consumer confidence.

The massive increase in wealth inequality has redistributed income from labour to capital and from the poor to rich. This has reduced the marginal propensity to consume.

Policymakers are running out of bullets ...................... Fiscal stimulus is being replaced by austerity

He also pretty much dismissed all the eurozone rescue plans as financial engineering. Doctor Doom indeed.

http://www.economist.com/blogs/butto...onomic-outlook

[Austrokiwi]

4 more years would be great news. The risk, based on baby boomer demographics, in the western world is pointing at the possibility of 8- 15 years of retremchment. As baby boomers retire they stop being a pluss for the economy and by drawing on gvt pensions become a further drag on economic development. That said maybe NZ is well placed with low gvt debt and, for the moment, good prices for primary products......looking at Malsows Hierachy of needs in an economic sence primary products may well be the last to be punished in a long drawn out rebalancing of the world economy

[eri]

well we've come full circle

the japanese lost decade comparisons are no longer being laughed at

even as japan starts it's 2nd

the causes are subtly different

but rhyme

and the aging demographic is now broadly accepted as preventing an accelerated exit

the lesson is

be very careful taking on more debt　

as even angles now fear to tread

ps

gold seems overvalued

now that it's more expensive than platinum

[Austrokiwi]

heres some contrary amusement

I love reading this guy...he makes his money selling gold coins. He is also one of many gold bugs who predicts hyper inflation and US$10,000 oz gold

http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=24268&et_mid=522648&rid=2195231

I'm not sure if the monetary supply claims are true but at guess they may only be exagerated a little.......but all the extra money is just filling the even larger holes made by the on going crisis..the average consummer isn't seeing a cent of it. If gold plummeted in value by 50% this guy would still be saying Gold will rise just like his ilk in the 1980s.

[eri]

Is there any good news? Many economic indicators in the US are still positive. US companies still have lots of cash to expand if—and this remains a big "if"—they feel confident enough to do so.

The big rise in US productivity in the past two years also suggests that businesses have squeezed all they can out of efficiency gains and will now have to hire and invest in order to grow.

The easing of oil prices from their mid-2011 highs should give some support to economic activity, particularly in the US. Interest rates remain at or near record lows in many countries. Nonetheless, the overriding picture is one of economic gloom.

http://viewswire.eiu.com/index.asp?l...QlRD7I%3D&rf=0

[speights boy]

The Emperor has no clothes.....but they want to tape the boy's mouth shut.

EU Wants Ratings Firms to Relent on Troubled Nations

BRUSSELS—The European Commission is leaning toward proposing a ban on the issuing of sovereign credit ratings for countries in bailout talks, a top official said on Thursday.
"I think it's legitimate to have a special treatment when a country is in negotiation or is covered by an international solidarity program with the IMF or a European solidarity" program, said Michel Barnier, European internal market commissioner.

http://online.wsj.com/article/SB10001424052970204618704576643001322995600.html#articleTabs%3Darticle

[Perry]

EU Wants Ratings Firms to Relent on Troubled Nations

An expansion of Speights Boy's post:

---

I think CRAs are mostly bullshit, but one has to wonder
at this logical fallacy: "Don't Like The message, So Shoot
The Messenger" knee-jerk reaction. (As only the EU can!)


European internal market commissioner, Michel Barnier
Is he about to pray to or upon something?

EU Wants Ratings Firms to Relent on Troubled Nations
By Laurence Norman And Jeanette Neumann

The European Commission is leaning toward proposing a ban on
the issuing of sovereign credit ratings for countries in bailout
talks, a top official said on Thursday.

"I think it's legitimate to have a special treatment when a country is
in negotiation or is covered by an international solidarity program
with the IMF or a European solidarity" program, said Michel Barnier,
European internal market commissioner.

Should the commission, the executive arm of the European Union, come
to view these sovereign ratings are inappropriate, "we could ban it or
suspend the rating for the necessary time frame," he said. "I am
studying this matter very seriously."

The EU is set to make a fresh round of proposals on tightening rules
for credit-rating firms on Nov. 9.

The 27-nation bloc has been tightening rules on ratings firms since
the financial crisis began, with EU officials blaming them for helping
to cause the crisis and criticizing some recent rating decisions.

On Thursday, Standard & Poor's said it would likely downgrade the
ratings of France, Spain, Italy, Ireland and Portugal if the euro zone
slips into another recession, which many economists say they believe
is likely.

[Austrokiwi]

A letter from the bank today confirms,to me, the reality of the financial problems in Europe... they are dropping our floating mortgage by .375% to 2.25%. Its almost the same rate the pay for term deposits ( around 2%). I'll have to check but I believe one of my Euro term deposits is actually getting 3.5%

[eri]

that sounds like deflation to me...

[eri]

once again

the economist sums up my views

better than i can

http://www.economist.com/node/21533400

[Austrokiwi]

Just a note on that economist article.....it is possible that the youth unemployment in the netherlands Austria and Germany is much Higher than reported........IN austria you are only counted as unemployed if you have had a job........for youth many have never been employed so aren't counted in the stats

[Perry]

Aha. The "fudge it" brigade are the
same - the world over. As I recall,
in the USA, once the dole eligibility
period is over, the unemployed
vanish from the statistics, even
though they remain unemployed.

Maybe that's yet another version
of hedonic statistics?