Economic and property outlook for NZ

[Perry]

Oh. What does "huge rally" refer to?

[jack2016]

Oh. What does "huge rally" refer to?

the american stocks?

[crashy]

I missed something.


". . . we have just identified inflation."

Where? I could not see that in your post.

"The money supply is INCREASING, and the goods and services are not being produced"

And

"Most people think inflation is rising prices. It is not. Rising prices are a symptom of an increasing money supply."

[crashy]

Oh. What does "huge rally" refer to?

https://www.reuters.com/article/us-global-markets/global-shares-oil-rally-on-vaccine-hopes-lockdown-easing-idUSKBN22U01H

https://www.marketwatch.com/story/treasury-yields-rise-as-global-stock-markets-rally-2020-05-18

[Wayne]

No. Never had any time for someone else managing my assets in shaky things like shares. (For a fee - win-or-lose - of course. I.e. They always get paid; I don't.)

But I do have a young friend who is quite worried, which is why I asked hereabouts. Said friend had a kiwisaver plan for a first home soon-ish, but now sees that option fading into the future, after kiwisaver became virally infected.

Share and KW Saver funds have come back a lot - your friend will be feeling better.
Maybe they were in the wrong fund if they wanted the money soon?

[Perry]

Share and KW Saver funds have come back a lot - your friend will be feeling better.
Maybe they were in the wrong fund if they wanted the money soon?

Yes - you're right: less cause for despondency, now.
I neglected to ask which fund was involved.
Perhaps I'll find out, later in the week?

[tim360]

I posted this to my Facebook group 24 hours ago (before the huge rally)

If you listen to the financial "experts" at the moment you will unanimously hear:
1. Stocks are about to crash
2. Deflation is imminent
3. Pay off all debt
4. Sell property
5. Buy precious metals
6. Hold cash

Maybe you need to change your source of financial "experts". All the financial commentators I've heard have been offering relatively good sound advice, ie don't panic and stay the course.

[McDuck]

"The money supply is INCREASING, and the goods and services are not being produced"

And

"Most people think inflation is rising prices. It is not. Rising prices are a symptom of an increasing money supply."

What if the money supply wasn't just one big pool of money?
What if it was several smaller pools?
And you could inflate one without affecting the others?
Say, for example, the "housing money pool" inflated , without altering the "food money pool"?

[Don't believe the Hype]

What if the money supply wasn't just one big pool of money?
What if it was several smaller pools?
And you could inflate one without affecting the others?
Say, for example, the "housing money pool" inflated , without altering the "food money pool"?

How might you do that?

[crashy]

Too bad it is, eh. Unless of course you missed the last 30 years of inflation target monetary policy. That's the one where they try to deflate the "food money pool" by deflating the "housing money pool". Maybe we need a 3rd school of economics: Dunning Kruger?

[Perry]

The Third School of EcoGnomics?

[McDuck]

How might you do that?

It happens to some extent anyway.

Money flows in smaller pools due to laws, social convention and practicality.

If you prevented people from using a house loan to pay off a car, for example, you could keep house money as house money.

Another example, I sold my first car to pay for my second, and so on.

And so with houses.

[OnTheMove]

BNZ is forecasting a 12% median drop. Mostly due to lack of migration and further residential construction (which could be good for realigning cost per sqm res development).

100% disclosure, not a professional economist and suggest getting a better opinion than mine, but my 2c.

IMO Even if China, whom NZ aligned with economically (moving away from the USA at its peak in 2002), have a massive fall out, NZ will unlikely see any signs of this until summer 21/22.

Even if we do see fall out, it will be in niche tourism market areas and those that are still chasing capital gains imo (seems many are yet to feel the ripple from Auckland 2017), QTown lakes, Coromandel, Northland and many more for tourism, imo Dunedin and SOME specific suburbs of Wellington are well over priced imo they may take a fall regardless. They do not seem to be slowing despite an obvious loss of jobs which they do not have to spare. Its like Auckland's correction has not rippled down the country as expected by many 3 years ago.

Auckland has been in a positive/negative quarterly game up and down since Q4 2016, it has lost 12% in correction. IMO Auckland given it has almost all the 7 figure jobs and most of the high 6 figure ones, low to mid 6 figure and evertything in between is least likely of NZ to see a correction in property prices. Not to mention it has the best standard of living with warmer temps, less severe wind, more sun, proximity to some of the best beaches in the world (and some nice ones within its borders), and all the usual outdoor pursuits. Its a self perpetuating growth and suction of migration from the South to the North.

Its not just Auckland that should fair ok, many other areas like New Plymouth (which like Dunedin lack the jobs) maybe ok with their low mortgages and ability to ride it out.

Employment and migration of ex pats coming back is the key for NZ's avoidance of DOOM imo.

Again just my 2c

[crashy]

I posted this to my Facebook group 24 hours ago (before the huge rally)

If you listen to the financial "experts" at the moment you will unanimously hear:
1. Stocks are about to crash
2. Deflation is imminent
3. Pay off all debt
4. Sell property
5. Buy precious metals
6. Hold cash

Here's why every one of them is an imbecile and wrong on all 6 counts.

1. Stocks already crashed, as I predicted. The fed has signaled that it will provide UNLIMITED liquidity into the market. This removes all downside risk, and anyone with brains will take that bet. Companies have been handed trillions of dollars in bailouts, and the fed stands ready to loan them unlimited amounts if required. These companies might be dog crap, but for now they are swimming in cash, and you literally can't lose money betting on stocks, so anyone with brains will buy this dog crap.

2. What is currently happening is money printing, and a plunge in consumer spending. Do you disagree with either statement? Here's the textbook definition of deflation "a decrease in the money supply, relative to the goods and services available to be purchased with that money supply". The money supply is INCREASING, and the goods and services are not being produced. It is therefore impossible to have deflation, and we have just identified inflation. Most people think inflation is rising prices. It is not. Rising prices are a symptom of an increasing money supply.

3. We are currently in a hyperinflation environment. We have not yet seen massive price inflation, because that takes a while to distort supply and demand, causing price rises. We have record low interest rates, and they will probably go negative. There has never been a better time to have debt. During hyperinflation, debt stays the same while everything else increases in price 10x. So if you have a house worth 100k and you borrowed 90k, after hyperinflation your house is worth 1m but you still only owe 90k. To think of it another way, your house didn't go up, but your debt fell to 9k. Are you going to say no to either deal?

4. Why would anyone NOT buy property with record low interest rates and the price of everything going up? Rents will not hit record lows, so it's much cheaper to buy than rent. People can borrow larger amounts with lower rates. You are nuts if you think property is going to crash.

5. Only idiots buy precious metals. Yeah, they go up during hyperinflation. So what? Everything does. Why would you buy something that doesn't produce an income? You could instead invest in stocks for dividends or property for rental income. Most of the idiots buying precious metals argue that you need it because you won't be able to afford food during hyperinflation. So why don't you just buy food while it's cheap? Precious metals often crash in price. Food never does. The idiots that buy precious metals sit on their losses for years, even decades. There has never been a long term period in history where gold made more money than stocks or property.

6. Let's say you have 100k cash. You can currently buy a house with that. But after a few years of hyperinflation, a house costs 1m, so you can only buy 1/10 of a house. To think of it another way, your 100k erodes to 10k. If interest rates go negative, the bank will charge you to keep your money with them, so you will lose even more. So who do you want to be? The guy who rents for $200 a week while you watch your 100k shrink to 10k and pay interest to the bank, or the guy who buys a house with only 10k, pays $100 a week mortgage and ends up with 910k equity?

Debt is money. It's every bit as real as cash. And right now, it's just digits on a screen. It used to be a reflection of someones hard work. Now it's just a number that means very little. It's printed out of thin air. Nobody had to work hard to produce a product or service to back those digits up. We have so much debt now that it's IMPOSSIBLE to ever repay it in today's dollars. The only possible way that debt can be repaid is if it shrinks dramatically, becoming insignificant. And the only way to do that is with hyperinflation. That's why it's going to happen. Because that's the only way out.

The other thing about unsecured debt, is you have a choice about whether you repay it or not. Think about what I just said. How long would it take you to save up that amount? And how long does bankruptcy last? Did you squirrel cash away in the back yard that you will spend over the next few years?

Want to tell me I'm a bad person for suggesting people not paying the banks back? Cry me a river of bailouts...

Bump for review

[JBM]

https://www.spectator.com.au/2021/04/dear-comrade-jacinda/

Running the country into the ground ...thanks Jacinda ...