Financial advice from Mary Holm

[eri]

yes, as a possibility

but imho

less likely than simple flat growth future

1-2% growth, 1-2% inflation and 5-8% unemployment

which is no way to go into a future where all our cans have been kicked, it's very messy up there now...

In economics, stagflation is a situation in which the inflation rate is high, the economic growth rate slows down, and unemployment remains steadily high. It raises a dilemma for economic policy since actions designed to lower inflation may exacerbate unemployment, and vice versa.
The portmanteau stagflation is generally attributed to British politician Iain Macleod, who coined the phrase in his speech to Parliament in 1965.[1][2][3] [4]
The concept is notable because, in the version of Keynesian macroeconomic theory which was dominant between the end of WWII and the late-1970s, inflation and recession were regarded as mutually exclusive, the relationship between the two being described by the Phillips curve. Stagflation is also notable because it has generally proven to be difficult and, in human terms as well as budget deficits, very costly to eradicate once it starts.
In the political arena, one measure of stagflation, termed the Misery Index (derived by the simple addition of the inflation rate to the unemployment rate), was used to swing presidential elections in the United States in 1976 and 1980.

http://en.wikipedia.org/wiki/Stagflation

[spaceman]

Do you think we have to consider stagflation as a real possibility in these times? This changes everything in regard to future capital growth prediction surely?

Surely not!!!!....inflation is the friend of all those with debt......loan value gets less and less as inflation eats away at it and the income grows and grows as inflation .....wait for it.....inflates it.

Yay inflation!!!....that nytimes graph thingy (from another thread makes that pretty clear in a nice easy to understand graphical format)

http://www.nytimes.com/interactive/business/buy-rent-calculator.html

Cheers
Spaceman

[PatMat]

“Never trust a statistic you didn't fake yourself!”

From http://www.nzherald.co.nz/business/n...ectid=10821018

As for wishing you had been in property, don't overlook all those mortgagee sales of the past few years. (...) Terralink recently predicted this might be New Zealand's worst year ever for foreclosures, and most now involve property investors.

From http://www.landlords.co.nz/read-arti...rticle_id=4332

Chambers said his firm had been involved with seven mortgagee sales so far this year – and 84 since 2008. (...) Almost all the properties Chambers had been involved with were private homes – not property investments

Aye?

[spaceman]

..... Almost all the properties Chambers had been involved with were private homes – not property investments

Somebody clever here (in another thread) wondered if a fairly large % of mortgagee sales were caused by the homeowners business getting into trouble (gfc and all that) and the bank calling in the business loan which was using the home as security......pretty feasible explanation for the rise in mortgagee sales vs them evil property investors being the cause of all our woes...... IMHO

Cheers
Spaceman

[halfempty]

I've probably looked at more open homes that went mortgagee and been to more mortgagee auctions than most and I'd say the main factor is bad budgeting.

The average mortgagee sale property that I see is an owner who is in the lower socioeconomic area, the house was purchased in 2007 or 08' at the top of the market and they paid retail.
It's owner occupied and the purchasers had to over borrow for their capacity to make the purchase.

They haven't done any maintenance during their time owning the property and so the value has dropped a long way under the amount that is still outstanding.

The owner has a TV worth more than their car, and mags on the car worth more than the TV.
All in all their TV, Mags and car would probably cover all the mortgage arrears.

And they have no idea what went wrong.

[eri]

also high earners who thought they could handle some pretty strongly cash flow negative purchases

and wait out a normal 2 or 3 year recession

The 40HA estate of embattled lawyer Barry Hart has been sold from under his feet.

The seven properties, stretching from the west Auckland town of Waimauku to Woodhill Forest and to the west coast, were valued at around $26 million. They were sold by Bayleys real estate this week to a mystery buyer.

Hart owed $30 million to ANZ and the debt was accruing $200,000 monthly interest.

http://www.nzherald.co.nz/property/news/article.cfm?c_id=8&objectid=10821305

[Rabia]

Thanks for useful advice. But it has no guarantee that shares will give better return in next decades. Infect environment is much uncertain along with economy that we can not say any thing with guarantee.

[Winston001]

Thanks for useful advice. But it has no guarantee that shares will give better return in next decades. Infect environment is much uncertain along with economy that we can not say any thing with guarantee.

Agreed.

Logically business must always make more money than purely holding land. If it were otherwise nobody would lease or buy land, build a factory, and sell products. If land alone was goldplated guaranteed to make money everyone would buy it and wait for the money to roll in. However land is nothing unless you can yield an income from it.

The risk/reward of business is higher which means when you buy shares in a company, the odds of you being rewarded are higher - but the odds of failure are equal. Over the long term if you believe capitalism is the right economic system, owning shares must reward you more than simply owning land. If it were otherwise all business would collapse and the value of land would shrink to pennies. Even in the Great Depression this did not quite happen.