I've noticed that attendances at residential multiple distress auctions are picking up? Properties appear to be trading and good discounts to peak prices, but what % off peak should we be climbing in?
There is a common myth that our property values have increased or decreased these last few years.
The real situation is that the value of the rand gets weaker or stronger. A brick still takes the same labour and the same materials to create as it did 10 years ago..this is a constant. On the other hand it takes more rands to purchase said brick as it did 10 years ago. So what happened? The value of the rand is weaker and requires more rands to purchase said brick.
The SARB says on its "how to fight inflation" factsheet on its website: http://www.reservebank.co.za/
"Combating inflation requires the prevention of excessive money supply growth. In turn, this requires the private-sector banks to maintain interest rates at levels that are high enough to prevent excessive growth in bank credit extension."
I have posted before about how the banks monetize your signed loan agreement or bond and just simply write the money into your account.
"For a continuous rise in the general price level, the money supply has to keep on expanding. Only with "too much money chasing too few goods" can the general price level continue to increase. Graph 1 clearly illustrates that high rates of growth in the money supply in South Africa in the past went hand in hand with high rates of inflation. The only effective way to contain inflation in the long run is therefore to restrict the growth in the money supply."
One thing we cant do however is to control the importing of inflation through the stock market, for instance the price of oil or wheat. Excessive money supply growth in the USA or Europe, China or Japan can raise prices of all commodities...or help create a property bubble in SA through investment of excess money.
The problem with this system is those who have fixed assets or who are creditworthy can consistently increase the money supply to the detriment of those without the fixed assets (which can track inflation)
In this way the rich get richer and the poor get poorer. Not a good socioeconomic factor looking 10 years into the future.
Take your time as you have plenty of it. We are almost officially in recession and looking at the rest of the world there is bad economic news everywhere of a magnitude that will take years to get right. If you arent getting minimum 50% off peak then it aint worth it.
Our banks are reasonably ok here due to negative carry prohibiting investment elsewhere. They are also ridiculously risk averse and prefer to make money off the populace through excessive bank charges than traditional banking revenue streams.
Looking at the real price graph we need about a 63% real drop.
House prices should be about 11 times rent
You should be able to buy in the area you live for 3.5 times salary.
Property peaked Autumn 07. We are now 1.5 years later. Property crashes usually take at least 3 years. This is the biggest crash ever so it will probably be longer.
Our real peaks and bottoms tend to happen a year or two after the US peaks and bottoms. They are one year ahead of us in their crash, and according to Schiller they are still only half way to the normal trend line and it should be expected that prices will overshoot and go under that.
There is a global depression underway that is only just starting. This baby has years to run.
When Time and Newsweek start having cover stories about how houses just don't stop falling, then you know their bottom is near. Add a year or two and we will be there also.
Japan in their crash dropped 75%. Some land in Florida in the early 1900's crash dropped 90%. Some towns in California have houses that have dropped 60%. SA had the biggest bubble of them all. Cape Town so far has dropped 20% according to Rawson.
Yip, the economic meltdown is happening on a global scale. Many SAfricans will lose their homes, and most will be hungry. What will be a hard economic time in the developed world will be an impossibly hard economic time in SAfrica, as well as a violent time. Unfortunately SAfrica does not have the organization, infrastructure, halfway uncorrupt government that the rest of the world has. Forget about Zim, the real crisis will be right in the good ole RSA.
But, in the end, the rich will still be rich and the poor will still be poor.
A few years ago I was invited to lunch by a friend and amongst the group was the DG of one of our gov depts. On topic at one point was the stock market and a bit of insider trading etc and the explanation and justification was this. "more and more there is a global elite and the worlds poor and as far as I am concerned I want to be part of that elite"
Patriotism is a tool that is used to whip up a population...at the top they couldnt care less as this example showed me and should show you.
None of us, myself included, have an conception of just how bad this is going to be.
Trust me, I am the King of Bears, and I saw this coming a while back and when I made statements like "World War Three in the financial markets" and "America will slide into the sea" I still did not realise just how quickly the system would buckle.
Don't be fooled - this is coming to SA and it is going to be big.
Appropriate statement, as I too have little doubt as to what's coming. Someone asked me the other day: "What's the next big thing" ... and to my shock (after the fact) I didn't even think about it, I just answered "food".
Think about it: Bergies generally survive without money, gold, or a roof over their heads, but they have to find food, or die.
Henry Kissinger, when asked what it will take to sort the whole mess out, had this chilling answer: "Reduce the global population by 80%"
Everything, but everything, that is bought with credit WILL deflate in value over the coming depression. With credit gone, you might as well consider all price inflation during the build up of the credit bubble as moot. It's gone, nada, no more, except it takes the human condition time to adjust to the shock and for reality to set in (think sellers still asking 1.6 bars for cubby holes). Something like the rabbit trapped in the spotlight... it just stares at the light until it's too late.
Farmer's on a global scale (the real producers, and not the processors or the predatory chain stores) are in deep muck. They cannot get credit to finance fertilizer, seed, or cattle feed, and as a result farming production is increasingly geared down into survival mode, fields are left fallow, and cattle holding is reduced.
The 2009 planting season will drop on us in 2010. In 2010 we'll use up what inventory is left, and in 2011 we'll be paying R50 for a can of tuna, if anyone is still selling. (no wonder Jim Rogers is buying up farms in Brazil and Canada)
The Baltic Dry Index is the most important leading indicator of all time as far as I'm concerned. And forget the pundits who shout that it's recovered by +100%. The thing is still down by 90% from 2007.
Ask yourself: You haven't eaten in 14 days, there's no food to be had, what's the house really worth? ...maybe a can of tuna?
Anyway, this view is pretty much fringe lunatic stuff, but history shows what happens when food runs out, and the stupid, stupid, stupid idiot goons who are going to be running this country through this mess are setting SA up for a big fall. We're net importers of food because they've wrecked our ability to feed ourselves.
Property (and all other credit based asset classes) has a long, long period of deflation ahead of it.
Inflation is about money and deflation is about fear.
If you think your statements are fringe lunatic its only because you are thinking.
Whats is very funny is that a government can do things like look for aliens, train men to stare at goats to see if they can kill them through mind power, explore antigravity, prepare for black swan events, build nuclear bunkers or build a doomsday seedbank in the Arctic circle etc.
If you did those things you would be labeled the biggest conspiracy theorist, kook, lunatic nutcase alive and would probably be jailed.
14 comments:
I've noticed that attendances at residential multiple distress auctions are picking up? Properties appear to be trading and good discounts to peak prices, but what % off peak should we be climbing in?
There is a common myth that our property values have increased or decreased these last few years.
The real situation is that the value of the rand gets weaker or stronger. A brick still takes the same labour and the same materials to create as it did 10 years ago..this is a constant. On the other hand it takes more rands to purchase said brick as it did 10 years ago. So what happened? The value of the rand is weaker and requires more rands to purchase said brick.
The SARB says on its "how to fight inflation" factsheet on its website:
http://www.reservebank.co.za/
"Combating inflation requires the prevention of
excessive money supply growth. In turn, this requires
the private-sector banks to maintain interest rates at
levels that are high enough to prevent excessive
growth in bank credit extension."
I have posted before about how the banks monetize your signed loan agreement or bond and just simply write the money into your account.
"For a continuous rise in the general price level, the
money supply has to keep on expanding. Only with
"too much money chasing too few goods" can the
general price level continue to increase. Graph 1
clearly illustrates that high rates of growth in the
money supply in South Africa in the past went hand in
hand with high rates of inflation. The only effective way
to contain inflation in the long run is therefore to
restrict the growth in the money supply."
One thing we cant do however is to control the importing of inflation through the stock market, for instance the price of oil or wheat. Excessive money supply growth in the USA or Europe, China or Japan can raise prices of all commodities...or help create a property bubble in SA through investment of excess money.
The problem with this system is those who have fixed assets or who are creditworthy can consistently increase the money supply to the detriment of those without the fixed assets (which can track inflation)
In this way the rich get richer and the poor get poorer. Not a good socioeconomic factor looking 10 years into the future.
Anon,
Take your time as you have plenty of it. We are almost officially in recession and looking at the rest of the world there is bad economic news everywhere of a magnitude that will take years to get right. If you arent getting minimum 50% off peak then it aint worth it.
Anyone been reading about the imminent collapse of US mega-banks? Shock 1: Lehman. Shock 2: no bailout by feds. Then the dominos start falling.
I'm wondering what the impact of that would have on our own banks?
Our banks are reasonably ok here due to negative carry prohibiting investment elsewhere. They are also ridiculously risk averse and prefer to make money off the populace through excessive bank charges than traditional banking revenue streams.
A few clues about the bottom -
Looking at the real price graph we need about a 63% real drop.
House prices should be about 11 times rent
You should be able to buy in the area you live for 3.5 times salary.
Property peaked Autumn 07. We are now 1.5 years later. Property crashes usually take at least 3 years. This is the biggest crash ever so it will probably be longer.
Our real peaks and bottoms tend to happen a year or two after the US peaks and bottoms. They are one year ahead of us in their crash, and according to Schiller they are still only half way to the normal trend line and it should be expected that prices will overshoot and go under that.
There is a global depression underway that is only just starting. This baby has years to run.
When Time and Newsweek start having cover stories about how houses just don't stop falling, then you know their bottom is near. Add a year or two and we will be there also.
Japan in their crash dropped 75%. Some land in Florida in the early 1900's crash dropped 90%. Some towns in California have houses that have dropped 60%. SA had the biggest bubble of them all. Cape Town so far has dropped 20% according to Rawson.
So basically keep your powder dry ... and wait.
Yip, the economic meltdown is happening on a global scale. Many SAfricans will lose their homes, and most will be hungry. What will be a hard economic time in the developed world will be an impossibly hard economic time in SAfrica, as well as a violent time. Unfortunately SAfrica does not have the organization, infrastructure, halfway uncorrupt government that the rest of the world has. Forget about Zim, the real crisis will be right in the good ole RSA.
But, in the end, the rich will still be rich and the poor will still be poor.
So if our houses have all dropped 20% already, can we get them readjusted for rates again?!
So true what I read recently... Saffers, especially expats, are the WORST ambassadors for our country.
I have NEVER heard an Englishman, German, American speak BADLY about their country. Yet Saffers go on and on and on!!!
Get over it people. Overseas aint all that! Trust me! Every country has its issues... they may be different but they are issues non-the-less!!!
If you complain so much, why the hell dont you fill in that immigration application and live "happily ever after"???????
ITs not really complaining I see, its more like warnings of the shitstorm that is about to blow!!
Sakkie,
A few years ago I was invited to lunch by a friend and amongst the group was the DG of one of our gov depts. On topic at one point was the stock market and a bit of insider trading etc and the explanation and justification was this. "more and more there is a global elite and the worlds poor and as far as I am concerned I want to be part of that elite"
Patriotism is a tool that is used to whip up a population...at the top they couldnt care less as this example showed me and should show you.
None of us, myself included, have an conception of just how bad this is going to be.
Trust me, I am the King of Bears, and I saw this coming a while back and when I made statements like "World War Three in the financial markets" and "America will slide into the sea" I still did not realise just how quickly the system would buckle.
Don't be fooled - this is coming to SA and it is going to be big.
Prepare appropriately!
Munch? you from page88?
Appropriate statement, as I too have little doubt as to what's coming. Someone asked me the other day: "What's the next big thing" ... and to my shock (after the fact) I didn't even think about it, I just answered "food".
Think about it: Bergies generally survive without money, gold, or a roof over their heads, but they have to find food, or die.
Henry Kissinger, when asked what it will take to sort the whole mess out, had this chilling answer: "Reduce the global population by 80%"
Everything, but everything, that is bought with credit WILL deflate in value over the coming depression. With credit gone, you might as well consider all price inflation during the build up of the credit bubble as moot. It's gone, nada, no more, except it takes the human condition time to adjust to the shock and for reality to set in (think sellers still asking 1.6 bars for cubby holes). Something like the rabbit trapped in the spotlight... it just stares at the light until it's too late.
Farmer's on a global scale (the real producers, and not the processors or the predatory chain stores) are in deep muck. They cannot get credit to finance fertilizer, seed, or cattle feed, and as a result farming production is increasingly geared down into survival mode, fields are left fallow, and cattle holding is reduced.
The 2009 planting season will drop on us in 2010. In 2010 we'll use up what inventory is left, and in 2011 we'll be paying R50 for a can of tuna, if anyone is still selling. (no wonder Jim Rogers is buying up farms in Brazil and Canada)
The Baltic Dry Index is the most important leading indicator of all time as far as I'm concerned. And forget the pundits who shout that it's recovered by +100%. The thing is still down by 90% from 2007.
Ask yourself: You haven't eaten in 14 days, there's no food to be had, what's the house really worth? ...maybe a can of tuna?
Anyway, this view is pretty much fringe lunatic stuff, but history shows what happens when food runs out, and the stupid, stupid, stupid idiot goons who are going to be running this country through this mess are setting SA up for a big fall. We're net importers of food because they've wrecked our ability to feed ourselves.
Property (and all other credit based asset classes) has a long, long period of deflation ahead of it.
Inflation is about money and deflation is about fear.
Joe,
If you think your statements are fringe lunatic its only because you are thinking.
Whats is very funny is that a government can do things like look for aliens, train men to stare at goats to see if they can kill them through mind power, explore antigravity, prepare for black swan events, build nuclear bunkers or build a doomsday seedbank in the Arctic circle etc.
If you did those things you would be labeled the biggest conspiracy theorist, kook, lunatic nutcase alive and would probably be jailed.
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