08 January 2011

Saturday Open Thread

It's the Saturday Open Thread!

13 comments:

CJ said...

I missed last weeks predictions so let me put a few thoughts out here.

Basically it is all a huge mess. The UK house market has just completed its bull trap and should now plummet for a while - but the powers that be know that if that happens then the banks will once more be in a precarious position and the whole financial house of cards will be put at risk. So stalemate happens. Interest rates stay low allowing house owners to hang on even though no one is buying their over priced homes.

The US is also totally screwed and heaven knows how they are going to get out of their mess.

SA is awash with property - interest rates are low historically for SA so sellers are also not under too much pressure. So houses sit unsold for years, the owners praying to grab a gullible or ignorant sucker rather than reduce the prices.

Of course, our interest rates are high compared to the UK and US so the carry trade is in full force - which means that despite having a bunch of buffoons running the country, the rand is soaring. Which means that manufacturers and exporters are getting wiped out - which means unemployment is going to increase. Which means hard times. Which means people won't want to buy over priced houses.

So basically, the property greed of the previous decade has caused havoc on the whole financial foundation of the world's major countries ... and it is hard to see how this is going to play out.

Let the market do what it wants to do (i.e. crash) and we have financial meltdown. Don't let it happen and the nations get deeper into debt and the problem still remains.

There were some of us shouting from the rooftops for years that this was going to happen ... now that it has and everyone is floundering around looking for solutions, it just makes me so angry that the property greed obsession created this whole mess.

Goldilocks said...

CJ,

Property greed and banker greed is just a symptom of what has been happening. The mess has been created by central banks, no one else.

Is it coincidence that inflation targeting, MMT, low interest rates etc coincided with the property bubble?

This has all been a long time coming and the final nail in the coffin happened 40 years ago when Nixon closed the gold window. We are just playing out what has been inevitable since then.

Fiat money collapses are more common than you think, there have been six in the last decade alone, of which Zim was the most spectacular.

What central banks do will determine the outcome, watch them closely.

Levy said...

Goldilocks, have you watched the documentary's called "Money Matters" and "Secret of Oz"

I found it really insightful on the topic of how the Central Banks took over from the Govt issuing currency.

Tee said...

Off the topic slightly, but I recently decided to sell my 2.5 bed town-house in Harfield Village, CT. It was barely on the market ie. from the 1st of Jan 2011. Valued just under 1mil, asking R985k, got an offer to purchase for R935k and buyers look very sound re bond clearance. Coincidently these were the 1st and only people to view my house.
Luck on my side or what?

Unknown said...

More likely because they saw something close to 3 beds in Harfield village for under 1.3mil and bit your arm off.

Seriously don't understand what reality those Harfield prices come from. Crappy tiny houses, with garden areas the size of potplants & front doors that almost open straight onto the road, right on the bloody train line mostly & they sell like hotcakes for ludicrous prices.

Benjamin Nortier said...

"Wendy Machanik in trust fund shock"
http://www.fin24.com/Companies/Property/Wendy-Machanik-in-trust-fund-shock-20110109

I suspect this is only the tip of the iceberg.

Anonymous said...

Naughty, naughty, very naughty!

Johannesburg - Top estate agent Wendy Machanik’s property agency was in such deep financial trouble, she had to dip into clients’ deposits to keep the business afloat and fund her lifestyle...

http://www.fin24.com/Companies/Property/Wendy-Machanik-in-trust-fund-shock-20110109



LS

Jules said...

2011 is going to be a slow year although I do expect some activity when interest rates come down another 50 basis points in the first half of the year.

Trouble will start in 2012 when a slow rate hike cycle kicks in. Fact is that most households are carrying too much personal debt - people are over extended. Rates hikes will hurt and FORCE people to sell. An over supply of "genuine" sellers will cause prices to fall.

Right now there is an over supply of property but the sellers aren't under pressure to sell. That changes in 2012.

Anonymous said...

@Jules,

Spot on. The “for sale” signs are popping up everywhere, and they seem to stay. The properties aren’t moving because the sellers do not have to sell - yet.

Now is the time to sell. If everybody that owns property that they need to get rid of cannot hold on any more it will be too late.

Benjamin Nortier said...

"House prices maintain momentum"
http://www.fin24.com/Money/Money-Clinic/House-prices-maintain-momentum-20110110

This is a great example of the journalistic and intellectual bankruptcy around property that exists in some parts of the media (and not just in SA). And no wonder poor Tabani in the comments is desperate for advice: "I have bought couple of property on auctions over the past three years, then i rented them out because i could not find buyers. Is it the good time for me to sell them or must i still hold. if i hold when will be the best time?". He probably followed the advice on fin24 in the first place.

To me, if I look at the graphs, the current momentum is down.

At least Business Day is better:
"Property market ‘in for another tough year"
http://www.businessday.co.za/articles/Content.aspx?id=131149

Does anyone have the link to the FNB indices? This link in only up to June 2009
https://www.fnb.co.za/home-loans/house-price-index.html

Goldilocks said...

Levy,

I have watched Secret of Oz because there has been a lot of discussion about it, not seen Money Matters. Governments and bankers work together, they both print money and they are both there to fleece you with taxes or charges on everything you can imagine while they get paid exorbitant amounts, live the highlife, call the shots and do insider deals with impunity. Don’t get enamoured with utopian ideals of government controlled money, we have it in SA and look where we are?

I know that the property bubble is a natural response to what has happened at central bank level, it cannot happen without it. There is greed everywhere yes, and the wish for something for nothing which exacerbates it, but the roots lie in central banking.

Here is a quote from the Mises Institute which will shed light on property price increases over the last 10 years.

the peak-trough-peak pattern that economies demonstrate is not their natural state, but one created by excess growth in money supply and credit. New money is not simply parachuted to everyone equally and at the same time — it is sluiced into the economy at certain initial "entry points." From these entry points, a number of initial goods are bought by recipients of new money causing a rise in price for these initial goods relative to other goods.

The SARB and National Treasury created the SA property bubble with their monetary policies. The property bubble and all inflation of the past decade is actually the collapse of the rand. The rand has lost almost 90% of its purchasing power since the nineties, is that not roughly the inverse of the property price appreciation?

I agree with CJ that the property bubble needs to deflate, and would have deflated, to the levels he describes. However he didn’t bank on one thing, intervention by government. Without the government taking on debt and rolling out its capital expenditure programs amongst other things we would have seen a very hard downturn.Consider how much mortgage debt the banks have at the moment and think about what would have happened if there was no government intervention?

Dont hold your breath waiting for a correction, as long as this government has an electronic printing press it won’t allow the banks and system to fail, there will be serious unrest. This is no blip in the business cycle, this will all culminate in a change in the global monetary system; yes its that big.

Goldilocks said...

Levy,

I have watched Secret of Oz because there has been a lot of discussion about it, not seen Money Matters. Governments and bankers work together, they both print money and they are both there to fleece you with taxes or charges on everything you can imagine while they get paid exorbitant amounts, live the highlife, call the shots and do insider deals with impunity. Don’t get enamoured with utopian ideals of government controlled money, we have it in SA and look where we are?

I know that the property bubble is a natural response to what has happened at central bank level, it cannot happen without it. There is greed everywhere yes, and the wish for something for nothing which exacerbates it, but the roots lie in central banking.

Here is a quote from the Mises Institute which will shed light on property price increases over the last 10 years.

the peak-trough-peak pattern that economies demonstrate is not their natural state, but one created by excess growth in money supply and credit. New money is not simply parachuted to everyone equally and at the same time — it is sluiced into the economy at certain initial "entry points." From these entry points, a number of initial goods are bought by recipients of new money causing a rise in price for these initial goods relative to other goods.

Goldilocks said...

The SARB and National Treasury created the SA property bubble with their monetary policies. The property bubble and all inflation of the past decade is actually the collapse of the rand. The rand has lost almost 90% of its purchasing power since the nineties, is that not roughly the inverse of the property price appreciation?

I agree with CJ that the property bubble needs to deflate, and would have deflated, to the levels he describes. However he didn’t bank on one thing, intervention by government. Without the government taking on debt and rolling out its capital expenditure programs amongst other things we would have seen a very hard downturn.Consider how much mortgage debt the banks have at the moment and think about what would have happened if there was no government intervention?

Dont hold your breath waiting for a correction, as long as this government has an electronic printing press it won’t allow the banks and system to fail, there will be serious unrest. This is no blip in the business cycle, this will all culminate in a change in the global monetary system; yes its that big.