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Remembering the Future

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Remembering the Future

Posted on 08 June 2013 by MoneyMorning

An edited extract from a presentation by Phil Anderson

[Below is a response to a question on how he interpreted recent building activity and technology]

I saw that they’re starting to build the southern hemisphere’s tallest residential tower. What it tells me is this: it tells me the strength of the commodity sector, in a bizarre sort of way.

Every single cycle I’ve seen, certainly in America and around the world and in Australia, the tall buildings get built, they open up in recession and generally it takes 6–7 years to actually recover before we start thinking about building another tall building.

This is a little different. It’s been the first time I can remember where tall buildings are getting put on the drawing board so quickly after the downturn that we’ve had.

Now they’re even thinking in Dubai of building something, I think it’s even bigger than a mile high and both the Chinese and the Americans are working quite feverishly to develop new lift technology that will allow those buildings to get built…so you can get up and down the buildings very fast.

We’re here in Melbourne and if you walk around the CBD of Melbourne and you go to many of the suburbs, every single street in Melbourne has become a construction zone. I’ve just never seen things so busy.

That to me indicates the sustainability of the new cycle going forward, based as it is, particularly for Australia, and commodity producing nations and the Middle East on commodity prices. It’s become obvious now this sort of stuff is dependent on China and things going forward and everybody is really nervous about whether this can last or not

It wasn’t so obvious ten years ago — even though it was all on my website, you can see it. It’s the 64 million dollar question really.

[WD] Gann in 45 Years on Wall Street — and Gann put this book out in 1949, so its um more than sixty years old now — Gann suggested that during the past history of the world following each depression some new discovery or some new invention has stimulated business and progress and bought on another boom.

Now that’s happened for sixty years, 3 additional cycles after Gann died, I think we can expect another one. You can see, generally in the US, what has happened after each major real estate cycle, major downturn, you get one of two things happening that starts of the next boom.

You either get the creation of new technology or you get a new energy development that just allows costs to come down and new technology does the same thing.

The US at the moment is unprecedented. It’s now having those two things happening. So you’ve now got with the energy related stuff (leaving aside the environmental concerns) and getting the gas out of the earth, it’s going to prodigiously lower cost for business to such an extent that you’re finding that manufacturing activity is going back to the United States.

That’s very significant and could bring a new, in my view, it’ll bring another huge boom. At the same time as that you’ve got all this new technology developing. I was going through some of my old files in preparation for today’s talk and you know, I had a cassette tape drop out of the file and I thought ‘I wonder what’s on there?’

Do you know, I couldn’t find a machine upon which to play it. And that’s only been, what, 15 years? Ten years even? Does anybody still have a radio player or a cassette player in their car? Not many. I don’t. I actually had to get, go to a friend, an elderly friend, they still had one…just to play a cassette tape.

The technology is prodigious. The invention is prodigious and relentless and while inflation stays low as it is at the moment because it feeds on itself as costs come down it lowers the inflationary process, it means business can look long term…much more forward, so they can continue to innovate and create. So it’s a cycle that can feed of itself.

Now I know this has gone a long way from a simple tall building question, but because I think with the energy cost savings and the technology inventions this is probably going to make Ben Bernanke a hero and its going to allow him to get away with prodigious money creation.

Money creation, as you know, it’s supposed to be inflationary. But if he continues to create that credit but the deflationary tendencies of the energy and the technology taking place, then we’re not going to get so much inflation, so he’ll be allowed to do that for quite some time and it will allow quite a recovery to take place.

In my view, and I could be wrong but what it’s tending to suggest to me out of all the cycle history that I’ve studied, it’s tending to suggest that we’re very early in the next cycle.

We’re so early to get new buildings, it could be the next cycle is very, very productive and enormous wealth could be created and lead to quite a substantial boom. And now we’ve just had the US market go into all-time new highs; nobody was expecting this, except me and one or two others.

It’s very clear in America and it’s very clear in the UK that there’s rising rents and it will eventually lead to a major recovery, and you’ve seen that already in the US. It will spur new construction and you get into the next cycle.

Now we just have to wait really to see whether Australia will continue to traditionally follow the US and its cycle or whether Australia is changing over a little bit and timing itself to what might be a Chinese cycle.

Phil Anderson
Contributing Editor,
Money Weekend

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Queensland Housing’s 100-Year Slump

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Queensland Housing’s 100-Year Slump

Posted on 10 October 2011 by Kris Sayce

If you own a home or investment property… or are thinking of buying either in Queensland, today’s Money Morning will make you think twice.

After spending a week holidaying on the Gold Coast we’ve come to the conclusion that Queensland house prices could fall and stay low for up to 100 years!

It’s a big claim. But we’ll explain all in a moment. First… Continue Reading

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Is the China Boom Rumour or Fact for Aussie Stocks?

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Is the China Boom Rumour or Fact for Aussie Stocks?

Posted on 04 July 2011 by Kris Sayce

“Doubts are mounting about the health of China’s property market, Beijing’s ability to control inflation and the true extent of government debt. Last week, the central government disclosed that local governments owed debts equal to a quarter of gross domestic product. It’s hard to imagine a large chunk of those borrowings won’t turn sour.” – The Wall Street Journal

It is hard to imagine.

That’s why we believe the China Ponzi economy will burst.

And when it does, it’ll have a major and disastrous impact on the Australian economy. It’ll make the Aussie property crash look like a blip. Continue Reading

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Shades of Things to Come

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Shades of Things to Come

Posted on 28 June 2011 by Aaron Tyrrell

In the Guardian this morning, the chief of UK Asset Resolution (UKAR), Richard Banks, reckons the UK could face a ‘tsunami of home repossessions as soon as interest rates start to rise’.

UKAR has £80 billion worth of bailed-out mortgages on its books. And Banks is convinced it would be better to let them go under than force homeowners further into debt.

For a lot of Aussies, this is tough to believe.

Not that it could happen to over-stretched UK homeowners. They believe that alright.

But they can’t believe it could ever happen to them. Continue Reading

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Your ‘Great Property Debate’ Digest

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Your ‘Great Property Debate’ Digest

Posted on 10 June 2011 by Kris Sayce

Your ‘Great Property Debate’ Digest

What can we say… the Great Property Debate went pretty much as we expected.

The housing bulls would drag out their usual excuses, and we’d counter them point for point.

Of course, the format wasn’t really a debate.  Rather it was seven individuals giving a presentation one after the other.

The event kicked off with Tony Hayek.  As we understand it, Mr. Hayek owns a property investment business.  The following three quotes will give you a good idea of his 15-minute presentation:

“The property market has grown forever.”

“The property doomsayers have been wrong forever.”

“The GFC was the best financial period of my life: interest rates went down… rents went up… and capital values went up.”

[Ed note: The last quote is paraphrased; we were a bit slow jotting down his full comment.] Continue Reading

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Why the Mainstream Wants to Silence Us

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Why the Mainstream Wants to Silence Us

Posted on 09 June 2011 by Kris Sayce

Why the Mainstream Wants to Silence Us

“Currently, there is a shortfall of 200,000 to 230,000 dwellings; we should be building 180,000 to 200,000 dwellings every year and we are building less than that, he said.”

The above quote is a summary from Margot Saville at Property Observer.

She was commenting on the claim made by Dr. Shane Oliver at the Great Property Debate in Sydney on Tuesday.

We don’t know why Ms. Saville didn’t mention our presentation – we spoke straight after Dr. Oliver.

Because we can guarantee you, we made it perfectly clear there’s no evidence for a chronic housing shortage.  In fact, we made it so clear we spent 12 minutes out of our allocated 15 minutes talking about it!

(If you were there for the debate you’ll know for the first 12 minutes it was as though we were taking a leisurely stroll with our presentation as we covered one of our five points… whereas for the last three minutes we raced through it in the fashion of Usain Bolt covering 100 metres!  Sorry about that.) Continue Reading

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How to Avoid Getting Caught Between 4500 and a Hard Landing

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How to Avoid Getting Caught Between 4500 and a Hard Landing

Posted on 24 May 2011 by Murray Dawes

How to Avoid Getting Caught Between 4500 and a Hard Landing

The ASX 200 fell sharply yesterday.  It lost 89 points to close at 4643.

The banks were the story of the day.  The big four each dropped around 3% by the close of trade.

But wasn’t just in Australia where markets fell.  Asian markets all fell sharply during the day…

China’s Shanghai composite index was down nearly 3%… Japan’s Nikkei fell 1.5%… and the Hang Seng fell over 2%.

The market trouble didn’t end there.  European markets reacted badly to the possible downgrade of Italian debt by Standard and Poor’s and the election defeats of governments in Spain and Italy.

But the real story is economic growth.  It’s slowing dramatically at the moment. Continue Reading

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The Difference Between Gold and House Prices

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The Difference Between Gold and House Prices

Posted on 27 April 2011 by Kris Sayce

Here’s a headline you don’t see in the mainstream press that often:

“Plenty of glitter left in gold price”

The Australian Financial Review’s, David Potts notes:

“For a bubble, the gold price must be the slowest forming ever, having taken 29 years to beat its previous peak.”

He goes on:

“And never mind that in Australian dollars, gold peaked two years ago at $1550 an ounce.  If gold had kept pace with inflation it would be worth at least $US2292 an ounce… gold is nowhere near its peak, unlike oil, which passed its 1980 inflation-adjusted peak more than three years ago.  Nor are there any other typical bubble characteristics.  For all the attention gold gets, it is not heavily traded.” Continue Reading

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Great News for Options Traders

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Great News for Options Traders

Posted on 19 April 2011 by Kris Sayce

Great News for Options Traders

“We would like to advise you that the Australian Securities Exchange (ASX) is introducing a new standard contract size of 100 shares per contract for the single stock Exchange Traded Option (ETO) market.”

We’ll explain what that all means in a moment, and why it’s great news for serious investors.  First, this…

According to Money Morning reader, Bill the word used in knitting isn’t “pearl”, but rather it’s “purl”.  No wonder we were so bad at it if we couldn’t even get the basics right!

Apologies to knitters everywhere.

Get in now, before it’s too late!  This morning, Eric Johnston at The Age writes:

“Prospective borrowers have been urged to get a home loan while they can.”

Although, after reading the article, we’re still trying to figure out who’s doing the urging.

It can’t possibly be Matthew Davison of Merrill Lynch.  He’s quoted by Mr. Johnston saying:

“We believe the strain on the household budget is too big to ignore, and banks don’t accurately measure household costs.” Continue Reading

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Why There’s Nothing Genetic About Housing

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Why There’s Nothing Genetic About Housing

Posted on 18 April 2011 by Kris Sayce

Why There’s Nothing Genetic About Housing

Of all the emails we receive into the Money Morning mailbox, the most enjoyable are the patronising ones.

Not surprisingly, a big chunk of them are from property spruikers… mostly telling your editor we don’t understand the property market, so why don’t we just “shut the heck up!”

That’s right, today we’re back to smack the property spruikers round the ears…

Words from a “credible” analyst

The funniest email we’ve gotten was from a “credible property market analyst and advisor”… that’s his own words.  Extracts of the email are below:

“Just been reading your (comical) writings on the housing bubble.

“There is no bubble!  There is no “one” property market! Continue Reading

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Should You Buy, Sell or Rent?

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Should You Buy, Sell or Rent?

Posted on 06 April 2011 by Kris Sayce

Should You Buy, Sell or Rent?

It’s not surprising with everything we’ve written about house prices in recent weeks, your editor has gotten plenty of emails asking for personal advice.

Unfortunately, I can’t give individual personal advice.

But what I can do is repeat what I’ve written here several times before.

If your finances aren’t stretched – and you believe you’ll keep your job – then unless you want to lock in a profit on your home, you may be better off not selling… even if it means seeing the value of your home fall.

On the other hand, if you’re paying out a high proportion of your income on mortgage repayments and you’re concerned about servicing the loan, then you should seriously consider selling up and getting out.

That could mean renting somewhere.  Or if you think prices will fall, but you’re not entirely convinced, then you should at least think about moving to a smaller or cheaper home. Continue Reading

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A Tough Year for Asset Prices

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A Tough Year for Asset Prices

Posted on 26 March 2011 by Kris Sayce

“Around 37 per cent of Australian households had owner-occupier mortgage debt in 2009, up from 31 per cent in 2001.  This debt was largely concentrated in households in the top two income quintiles (those with annual after-tax household income of $77 500 or more), with these households holding around 70 per cent of mortgage debt in 2009.” - Reserve Bank of Australia, Financial Stability Review, March 2011

Much has been made by so-called property experts and mainstream economists about how most of Australia’s mortgage debt is held by those who can afford to service it.

The underlying impression (emphasis on the –lying) is that most household debt is held by wealthy people.  Those with bucket loads of cash and secure jobs.  People who can easily handle an economic downturn or increased interest rates.

In fact last week, HSBC chief economist, Paul Bloxham wrote this in an article for Business Spectator:

“However, there are other reasons why levels of household debt should not be a large concern. The key one is that 75 per cent of all household debt in Australia is held by the top two-fifths of income earners.” Continue Reading

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Australian Economy Going Cold Turkey

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Australian Economy Going Cold Turkey

Posted on 17 March 2011 by Kris Sayce

If you want to hear some common sense on what the Japanese government should do to repair its economy, click here.

You won’t find praise of the latest multi-trillion yen stimulus package.  And you won’t hear any fawning over the supposedly heroic central bankers.

No.  What you’ll hear is a straightforward and common sense argument for why the Japanese central bank should increase interest rates right now.

If it doesn’t, it will result in more wasteful and misdirected government spending and even greater pain for the Japanese.

Now onto other business… Continue Reading

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Why Property Investing is for Mugs

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Why Property Investing is for Mugs

Posted on 08 March 2011 by Kris Sayce

We’ll stick with the property theme for today.  Tomorrow we’ll have something different… probably.

Have you ever wondered why property investors just can’t bear to admit that house prices could fall?

I mean, ask any other investor and they’ll admit it’s possible for their favourite asset class to drop.

It doesn’t matter whether they’re share, gold, bond or art investors, every last man jack of them will say, “Prices can fall as well as rise.” Continue Reading

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Melbourne’s Costly Hobby

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Melbourne’s Costly Hobby

Posted on 04 February 2011 by Kris Sayce

“If the property value goes up every seven or eight years and it doubles, which I understand, I agree – how many years do you have to hold the property for the property to make enough cashflow… to cover your mortgage, your rates, your water and all your outgoings?  Ladies and gentleman it’s sixteen years.  So the property can double in seven years, it can double in eight years but for you to walk away from your job it takes sixteen years… before it makes enough money for you to stop going to your job to support it… so what happens is we find people go ‘I’m worth a fortune’, and they are.  But they still have to go to the job every day at 6.30 in the morning because they’ve still got to put money into the fortune!” Continue Reading

Comments (92)

Your 2011 Investment Health Check

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Your 2011 Investment Health Check

Posted on 15 January 2011 by Kris Sayce

My view for the last two years on the stock market has been consistent. But I thought it would be handy to jot it down here so it’s plain for you to see.

In this week’s Money Weekend I’ll give you a brief outline of where you should have your money right now…

I’ll break it down into:

  • Small-cap stocks
  • Blue-chip stocks
  • Cash
  • Precious metals
  • Property Continue Reading

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Building a Psychological Frenzy

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Building a Psychological Frenzy

Posted on 29 October 2010 by Kris Sayce

Strap yourself in reader. Today’s episode is a long one…

Ah, we love the quote from ANZ Bank [ASX: ANZ] chief Mike Smith in today’s Australian Financial Review (AFR):

“It would appear he’s [Shadow Treasurer, Joe Hockey] been taking economics lessons from Hugo Chavez and I don’t really see there’s much future in Australia for this type of policy; it’s crazy.” Continue Reading

Comments (210)

Why You Should Protect Your Portfolio Now

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Why You Should Protect Your Portfolio Now

Posted on 12 October 2010 by Kris Sayce

Have you checked your insurance policy lately?

Is it up to date? Do you have any insurance? Are you under or over insured?

Don’t worry, I’m not trying to sell life insurance. We’re not licenced for that. No, I’m talking about something more important – investment insurance.

Continue Reading

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Beware the “Independent” Analysis

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Beware the “Independent” Analysis

Posted on 11 October 2010 by Kris Sayce

The property spruikers have gotten themselves quite excited about an article by PIMCO Australia chief, John Wilson in Business Spectator last week.

Mr. Wilson headlined the article, “Our non-existent housing bubble.”

As you can pretty much guess from the headline, Mr. Wilson sums up the article saying:

Continue Reading

Comments (41)

Free Speech for Dummies

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Free Speech for Dummies

Posted on 23 September 2010 by Kris Sayce

Your editor is back on-board. But only for the time being.

Because for today and the next few days we’re racing against the calendar to write, edit and publish the September issue of Australian Small-Cap Investigator.

And seeing as my colleagues, Slipstream Trader Murray Dawes and Diggers & Drillers editor, Dr. Alex Cowie have done such a good job of filling in while we’ve been away, we’re sure they’ll be happy to pick up the slack again over the next week or so.

Continue Reading

Comments (71)

Market Having Extreme Reaction to Anything that Happens Overseas

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Market Having Extreme Reaction to Anything that Happens Overseas

Posted on 19 May 2010 by Shae Smith

As Kris sets off to work on the next issue of Australian Small-Cap Investigator, I’ve got to be honest, I was scratching my head this morning wondering what to write about.

I thought about tackling property (again), but I’ve only just emptied the Money Morning mailbag from yesterday and so didn’t want to create more work for myself by opening that can of worms.

Then I remembered I went out to dinner recently for my birthday [Ed note: That's the seventh time you've mentioned it today and it's not even lunchtime!]. During the course of the evening, work became a brief discussion.

Continue Reading

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The Property Spruikers Have Been Awfully Quiet

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The Property Spruikers Have Been Awfully Quiet

Posted on 17 May 2010 by Kris Sayce

Have you noticed? The property spruikers have been awfully quiet in recent weeks.

In fact, since we started our occasional ‘Preposterous Property Spruiking’ section we’ve been amazed at the, well, almost complete lack of preposterous property spruiking in the mainstream press.

Monday is usually the day when the spruiking is at its most shrill. It’s usually when the property hacks to go all gooey-eyed over the latest “amazing” auction results at the weekend.

You know the drill, they’ve got a standard template, “A house in [insert expensive suburb here] sold for a [insert ridiculous price here] dollars above the reserve price of [insert another ridiculous price here], what great/fantastic/amazing* [*delete as applicable] news for the property sector.”

But not today.

Continue Reading

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No Evidence of a “Chronic” Undersupply of Housing

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No Evidence of a “Chronic” Undersupply of Housing

Posted on 23 March 2010 by Kris Sayce

If you’re one of the many Money Morning readers suffering from property and housing withdrawal symptoms then don’t worry, because this morning we’re back on the bandwagon.

And if you’re one of the many Money Morning readers who’s glad we’ve stopped banging the housing drum then all I’ve got to say is, “Sorry, we’ll have a non property article for you tomorrow.”

Since we last stuck the boot into property a couple of weeks ago there have been more ridiculous headlines from the property spruikers than we could eat.

We had intended on keeping a record of them, but we figured it was a waste of time as it’s basically the same story being recycled every day:

Continue Reading

Comments (47)

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Diggers and Drillers

After three years in the doldrums…

Aussie resource stocks
are now a raging BUY
The last time resource stocks traded this low we saw a two and a half year rally that saw them gain 124%...
Now they’re getting ready to do it again. Read on to discover why…and three tiny Aussie miners that could explode up many times higher than that in 2014…click here.

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