We only have a brief Money Morning for you today.
We’re back in Melbourne and of course it’s Melbourne Cup Day. So your editor is going to relax for most of today after only getting back into Melbourne at 2am this morning, followed by an hour drive home to Frankston.
One of the things we did notice over the last few days is how easy it is to forget what’s happening in financial markets when you’re enjoying yourself on holiday.
For instance, it wasn’t until Sunday morning that we read about Wall Street’s 250 point drop from Friday.
Naturally, come Tuesday morning and there are probably millions of Australians who still don’t know and don’t care that the Dow Jones Industrial Average fell over 2% last Friday.
And why should they care?
As we strolled around Surfers Paradise on Sunday and Monday, soaking up the sun we must admit that sometimes it feels good to be ignorant of what’s happening in markets and in the economy.
We write on the markets six days a week. Even when we head off on hols we try and send you a few notes on what’s happening in the markets.
Clearly there’s something not quite right with your editor for doing that! Maybe one day they’ll find a cure.
But taking a few days away from the action does highlight something. It highlights the different attitude that different people have towards different things.
Is that an obvious statement? Maybe, let me briefly explain what I mean before I head off to place a few losing bets…
Take yesterday’s article about property investing.
We noted how we saw all those properties being sold as mortgagee auctions. To us it’s the perfect sign of not only a critically ill property market, but a critically ill economy as well.
An economy that’s only being kept alive by a massive dose of stimulus drugs. Once the drugs stop being administered then… well, the patient may not die, but it’s going to at least show the full symptoms of being sick.
That’s what we see.
But is that what everyone else sees?
Nope. We stood outside the Ray White Real Estate office for about 20 minutes on Sunday while the missus and kids were buying earings and necklaces from Diva a couple of doors down.
During that time we saw three people look at the Ray White sandwich board that advertised the mortgagee auction property. Their reaction wasn’t the same as your editor’s. Their reaction was, ‘there’s an investment opportunity.’
Especially the ‘Cash Flow Positive!!’ statement.
I mean, think about that as an enticement. It’s almost like getting a property for free. Of course it doesn’t take into account the financing costs which would immediately make the investment cash flow negative.
Don’t worry about that because the tax man (really the taxpayer) will cover part of that anyway.
But, that’s how markets work.
Right now there are still enough spruikers and investors around who believe in the magical effects of property investing – that it always goes up in value and that there is under supply and over demand.
Nothing we say will change the opinion of most of them.
But that’s OK, we’ll keep on writing about it. Not because we’re trying to stir up them up, but because it’s something we believe in.
Just as we won’t convince the property spruikers that they are only succeeding in blowing up the biggest property bubble the world has ever seen, it’s unlikely they’ll convince us we’re wrong.
The fact is, our job is easier than theirs.
We’ve got logic and common sense on our side, whereas the property spruikers just have falsehoods and tall tales backing up their arguments.
On that note, it’s time for us to wrap up and head off to the TAB.
It’ll be business as usual tomorrow.
{ 5 comments… read them below or add one }
“”"Naturally, come Tuesday morning and there are probably millions of Australians who still don’t know and don’t care that the Dow Jones Industrial Average fell over 2% last Friday.
And why should they care?”"”"
so if the market has gone up say 30% or watever ,i dont know the exact figure ,since march 2009 this year
but it drops 2% does this mean all hell has broken loose?????????????
no
I think the markets (here and the US) actually have gone up 50% since their March lows. Which really is to imply that no, of course all hell didn’t break loose after a 2% drop last Friday. Nope, All Hell actually broke loose at the end of 2008. It is taking its careful time to catch up with us here in DreamWorld – having to navigate the philandering of pissant politicians and the meddling central bankers but it most certainly will – eventually. And as some wit contributed to the Herald on Joe Hockey’s comment about ‘the recession we never had’ – He would be willing to accept Mr. Hockeys version of the GFC non-event over the past year but only if he promptly sends us the billions of dollars wiped off our compulsory superannuation savings schemes. Hear Hear!
Bernard Salt does some forecasts on future population trends which may have serious consequences on the residential property market down the line….if you have access to him(I don’t) I’d be interested in your thoughts Kris.
It was only a few years ago the government was offering a baby bonus because of a looming population decline and an imbalance of age demographic in the economy. Now we need to rush out and buy up all the property now because we’re going to double in population. I’m confused. Must get back to my 6 month holiday, erm tax avoidance.
http://www.invested.com.au/6/bernard-salts-future-predictions-1088/