Financial Armageddon!!

[Boom]

should we have kept making the trekka?



huge australia has given up on making cars

I dont recall us ever exporting cars.

Timber
Dairy
Food
Primary industries
Technology ie. Fisher paykell
Fisheries

Have been big productive money makers that NZ has under invested in often exporting raw for overseas processing and allowing significant foreign ownership of.

[Boom]

Agreed.

But who or what are "NZ" in that context?

The Neo-liberal individualists who've dominated our (western) politics and business leadership for the last 30 years.

[Perry]

NZ still doesn't seem to understand the benefits of keeping stuff made in NZ even if it costs more.

But who or what are "NZ" in that context?

The Neo-liberal individualists who've dominated our (western) politics and business leadership for the last 30 years.

Although I don't like labels like "neo-liberalist" (because of different perspectives on what it means), I do concur 100% with your sentiments about national productivity perspectives.

Buying cheap labour / goods from overseas = exporting NZ jobs. With all the negative consequences that involves.

Wasn't it F & P that moved their production to Mexico?

[eri]

could you believe it

a 2wd that looked like a 4wd

didn't do well

in the great bowl

of bulldust

[Davo36]

could you believe it

a 2wd that looked like a 4wd

didn't do well

in the great bowl

of bulldust

But just cause that was a sh*t product doesn't mean we shouldn't make stuff though.

What about McLaren cars? They more to your liking? Started here, but like most of these companies, moved offshore.

[eri]

if they'd stayed

would they have won?

we let our young drivers go os where they can perform on the world stage

why not our young companies?

[Boom]

if they'd stayed

would they have won?

we let our young drivers go os where they can perform on the world stage

why not our young companies?

No issue with Kiwi companies going overseas.

Do have issue with Govt. selling off its corporations that then become inefficient monopolies with no incentive for competition or innovation, and pay over priced directors to run them into the ground before flogging the company off to overseas investors.

Do have issue with our primary industries and key exports, prime agricultural land, means of production etc. being owned by overseas countries... particularly China (given its companies are an extension of the state).

[Boom]

Although I don't like labels like "neo-liberalist" (because of different perspectives on what it means), I do concur 100% with your sentiments about national productivity perspectives.

Buying cheap labour / goods from overseas = exporting NZ jobs. With all the negative consequences that involves.

Wasn't it F & P that moved their production to Mexico?

Yep F & P moved a lot to Mexico. The appliances side was bought out by Haier (Chinese owned).

[Chris W]

Understanding future price expectations of market participants - how do you develop your future price expectations?

For long term buy and hold investors, with respect to future long term property price expectations in Auckland, there are three main camps:

1) those who primarily focus on long term historical property price increases to develop their future property price expectations
2) those who primarily focus on historical valuation metrics such as house price to income ratios, house price to rent ratios (inverse of gross rental yields) to develop their future property price expectations
3) those who primarily focus on recent property price changes to develop their future property price expectations


1) those who primarily focus on long term historical property price increases to develop their future property price expectations

For those whose main influence of future property price expectations is historical price increases, they look back at the annual average price increase over the past 55 years since 1962 According to a QV house price index, the compounded annual growth rate of increase over this period has been 8.5% per annum.

Many people cite their own personal anecdotal stories of property price increases where property prices have increased significantly as further evidence that property prices increase over time. The time frames that they refer to in their experiences for the property price increases vary from 8 years to 40-50 years.

Common reasons cited to support their expectation of future property price increases are continued population growth, continuing high immigration numbers, current excess demand for housing over supply, limited new supply of housing to meet the supply shortfall, and rising construction costs. With recent property price increases, this serves to confirm their price expectations. Prior to the incoming Labour led coalition government and potential restrictions on foreign ownership, demand by foreigners (particularly China) was also a cited as a reason for property prices continuing to increase.

One common belief by this group is that property prices double every 7 to 10 years (that would mean compounded annual growth rates of 7.2% to 10.4% per annum). This has been the result of an extrapolation of the property price changes of the historical past and often repeated by many property tutors to their students who commonly accept this mantra.
Due to property prices continuing upwards, those in this group ignore or dismiss the warnings in the Group 2 as they are seen to be wrong or incorrect and that the upward moving property prices are evidence that they are wrong in their warnings.

This group may also believe that there is limited downside to property prices. This group cite that during the 2008 global financial crisis, property prices in Auckland fell by 8 -10% and that this would be expected to be a worse case scenario. According to the QV national house price index, the nominal property price has fallen very rarely over the past 55 years and when they have fallen, price falls have been small, typically only less than 10%. Property prices have fallen in 1991, 1998, 2000, during the global financial crisis in 2008 and now in 2017, so the rare occurrences of nominal property price falls reinforces their belief that property prices only increase in the long term, with very limited downside property price risk. (Note that nominal property prices may not have fallen in the 1970's but real inflation adjusted property prices did)


2) those who primarily focus on historical valuation metrics such as house price to income ratios, house price to rent ratios to develop their property price expectations

Common reasons cited to highlight the vulnerability of property prices are:

a) the historical house price to income ratio which is currently near historically high record levels and well above the historical level of 3 which is considered to be the long term average and affordable for the local residents.
b) the historical house price to income ratio in Auckland is currently among the highest when compared to other large cities in the world.
c) the house price to rent ratios are high in absolute terms, and near record highs (this also means that the gross rental yield are at low levels in absolute terms and near record lows). In some suburbs in Auckland, the gross rental yield (which has yet to have operating costs of the property such as rates and insurance deducted) is below that of bank deposit rates and 10 year NZ government bond yields.
d) record high household debt to GDP ratios, which has surpassed the levels seen just prior to the 2008 global financial crisis.
e) even though nominal property prices in Auckland have very rarely fallen, this group believes that "Black Swan" events can occur. (Note the term Black Swan was popularised by Nasem Taleb's book of the same name) This group cites the experience seen in property markets internationally during the 2008 global financial crisis where nominal property prices fell significantly - such experiences include the United States, Ireland, & Spain. This group also cites the experience seen in Japan in the early 1990's.


3) those who primarily focus on recent property price changes to develop their property price expectations

Those in this group do not have a long term property price expectation framework. As such they develop their short term property price expectations based on recent property price changes. Articles in the media regarding the property market, recent property prices, and projections by property market commentators influence their property price expectations.

[Bluekiwi]

Nine years on from the start of this thread and it does seem much like: situation normal.

Blenglish has indebted taxpayers (borrowed) to the tune of 62 billion (over the last 9 years) to create the illusion of sound financial management, yet we still chug along.

Keep those mirrors shiny and the smoke generators running, folks.

Excellent.

So national kept it down to half of what Labour would have borrowed, excellent news.

[Perry]

Blenglish has indebted taxpayers (borrowed) to the tune of 62 billion (over the last 9 years) to create the illusion of sound financial management, yet we still chug along. Keep those mirrors shiny and the smoke generators running, folks.

Excellent. So national kept it down to half of what Labour would have borrowed, excellent news.

Rank speculation - no less.

I.e. Labour is more inclined to tax-and-spend, than borrow-and-spend.

What the trend over the next three years.

[Bluekiwi]

Rank speculation - no less.

I.e. Labour is more inclined to tax-and-spend, than borrow-and-spend.

What the trend over the next three years.

No less rank than your speculation Perry.
Shouldn't you be moderating your own political views.

Labour is more inclined to spend yes that is correct.
The wish list of what they want to do will require more tax-and-spend and more borrow-and-spend.

National had to get NZ through the GFC and the Earthquake.
Would you really have trusted labour with that job, I don't think so.

[Perry]

Rank speculation - no less.
I.e. Labour is more inclined to tax-and-spend, than borrow-and-spend.
What the trend over the next three years.

No less rank than your speculation, Perry. Shouldn't you be moderating your own political views.

Going on past performance, my presumption seems more reasonable than your speculation. Increasing the minimum wage without any increase in productivity; some sort of fiddle with paid maternity leave; a fanciful tax working group of some ilk; and I'm sure there's lots more to come of that sort.

Labour is more inclined to spend - yes that is correct.

I don't see what you're getting at, there. Expanding the public service bureaucracy is another historical aspect of past Labour governments.

The wish list of what they want to do will require more tax-and-spend and more borrow-and-spend.

That looks almost like you're agreeing with my perspectives.

National had to get NZ through the GFC and the Earthquake.

So?

Would you really have trusted labour with that job, I don't think so.

I don't 'trust' either of them. The words trust and political party or government do not work at all well, together in the same sentence.

[Davo36]

I think Perry has a point here.

Yes National had the GFC and 3 earthquakes to deal with.

But they didn't cut any spending that I'm aware of (apart from the contributions to the Cullen fund), they just kept borrowing to keep everything going.

If in our personal lives we had some catastrophic thing happen, wouldn't we cut back on expenses? Rather than just go "No worries, I'll just load up the credit cards and mortgage" ?

And then when we're over the catastrophe, going "See look we managed really well!" but forgetting to mention you now have $200k of extra borrowings to deal with.

[Chris W]

I think Perry has a point here.

Yes National had the GFC and 3 earthquakes to deal with.

But they didn't cut any spending that I'm aware of (apart from the contributions to the Cullen fund), they just kept borrowing to keep everything going.

If in our personal lives we had some catastrophic thing happen, wouldn't we cut back on expenses? Rather than just go "No worries, I'll just load up the credit cards and mortgage" ?

And then when we're over the catastrophe, going "See look we managed really well!" but forgetting to mention you now have $200k of extra borrowings to deal with.

The source of concern shouldn't be government debt levels. The source of concern should be household debt levels (note below in the chart is household debt to national income which is GDP). The level of household indebtedness increases their vulnerability to an unexpected economic slowdown, or unexpected rise in interest rates.