Watching the emerging markets currencies weakening against the US dollar and their bond yields widening will imo be the first real indictor that there's an issue. So far despite the USD strengthening, that hasn't happened too much. Will also depend whether the ECB, PBOC and BoJ inject more liquidity into the markets or not. There's been chatter from all three tossing around the idea. If they do then it will simply kick the can once again.
That's assuming an orderly decline, but markets can be anything but calm and orderly when something unexpected happens or is rumoured to happen. A number of businesses may not be able to get through another unexpected dip.
It's different this time around. Whilst you mentioned a interest rate rise, its not the same today. Interest rates are at near all time lows, back in the late 80' they were all time highs, 17%. I can't see that happening this time.
If you are talking RE fundamentals then you can't ignore interest rates. Interest rates go up to 15%, all else being equal, property prices drop by 70% as borrowers will be able to borrow less and therefore the prices they are able to pay will be less. It's incredibly simple mathematics and I can't believe anybody investing in real estate would simply ignore the possibility.
Interest rates returning to 15% in the next several years is about as likely as an asteroid destroying the planet in the same time period. In both cases, you'll have more to worry about than the price of housing.
Yep maybe you are right. And I thought the possibility of US stock markets hitting all time highs during a period of zero interest rates and massive money printing was about as likely too, but there you go.
Well Japan has had zero interest rates and massive money printing for 15 years and their stock market is still not even half of the peak in 1990 - so how do you explain that ?
I think it has something to do with their exporting economy. In the 1990's Japan still had the number one electronic export market, not any more. Plus their are new players on the export car manufacturing. So Japan has lost a lot of market share. Should I keep going?
I don't think so.................................I think its more the wealthy and baby boomers playing the stocks or if you have healthy cash flow. Low interest rates means the economy needs a kick start which aint happening.
At the end of the day everyone needs to spend to keep the economy kicking over and for that to happen, everyone needs surplus cash flow regards which life style tier you fit into. We saw not long ago what happened to the new gen borrowing and getting maxed out at an early age to purchase everything now that took their parent's 40 years to accumulate. It will take the next gen to get things going again.
My take is just like when I was a wage slave back in the 1980's we were lucky enough to have a home mortgage loan that was capped at 13.5% we just sucked it in and were virtual vegetarians. My boss at the time lost his house because interest rates went to 19%. He was given a choice lose his family home or sell up his business Kind Regards non recourse
No clue of what that is... Can you present a link to a source that claims and explains what I've quoted from tozak's post?
If stock markets tank and stocks like SLW goes to $3-4USD/share, then they might be much better buys than $10 silver or $8-900 gold. I remember at the bottom of the 2000-2002 US bear market, a few stocks traded below their cash balances.
So this thread is about things not going well this financial year. Have a look at the Astrological threads. I see "the stars" saying the same things. FWIW, I am in lock down mode.... selling investment props (sorry NR, you are right in your thinking, but my circumstances are simply not viable to hold mine - I feel I am letting you down!!, sorry mate) so I can cancel all CC debt, and reduce PPOR as far as I can so that I have room to move when things get down. Just keep on swimming......doin' your best. Shiny.
Indicators I look at are suggesting this, it's not from another source PE ratio's of many blue chips are un-realistic suggesting excess cash has flowed into stocks as a safe haven bet by fund managers who see diversification as simply picking more blue chips, yet almost all of these companies don't have the earnings to justify their current market price The Australian dollar has already started falling against the USD which to me suggests the flight to safety has already begun, breaking US$0.80 will see a free fall effect in my opinion. This was last seen during the GFC, looking at the charts and it's another repetition. Same with commodities, look at ones with long shelf lives and necessary for future building works, iron, copper etc. same as when the GFC hit these are going back into recession prices The markets have already started to weaken just as they did last time, prices again are being justified by market analysts who are saying it's a great buying opportunity but I would argue if I was to buy in at this price who will be buying me out when liquidity tightens further? Smaller companies are going under and larger ones are cutting back, almost everyone and every company is looking to keep what liquidity they can as available circulating money dries up. On a side note the RBA said that they are having issues keeping pace with the demand for cash while spending is actually down so individuals must also be just stockpiling physical cash, this to me does not indicate confidence. In a Fiat currency system we need to create enough new debt to cover at least the interest only portion of existing debt but when almost all currency is only paying debt then even adding extra currency will not stimulate any growth and we are beginning to witnessing the effect on the markets. Everything is linked together, simply looking for a single cause after witnessing a single effect is pointless, you need look at the entire global economy as a whole. If a commodity is traded with the largest volume being done by commodity traders looking at charts then any sharp move in the price does not need to be justified by real world changes to supply and demand however the media outlets will do this as it's what people want, they want everything to be simple and justified as it makes more sense to them and they can sleep easier that way. There is no recovery, the books are just getting adjusted. By previous standards most of our banks would all be insolvent atm, one certain one in particular. Once a small trigger sets it off it will come down fast, when you see the flight to cash start which is what I'm suggesting has just started then it wont take long for the weakest part to crack and set the rest off, which could be anything, I have no idea. But I know what will set it off and that's the lack of liquidity to cover debt, some call it the slowdown of the velocity of money but call it what you want the scramble looks like it has well and truly started and I think the aim is not to inject any liquidity until the larger players have re-asserted their positions again. Once the next cash injection has started, which has to occur or the whole system will crash in a hyper-deflationary spiral, this time it will have to be a mammoth amount and the fear caused by that of hyper-inflation will see the metals rise and those that got burnt in GFC1 and GFC2 will search out such assets. It's the same thing throughout history it's just repeating again.
Trew, this just is not how the economy works. They don't hike up rates for shits and giggles. If the economy calls for it, it will rise, if it calls for prolonged suppressed rates, that's what we will get. The economy drives rates, not the other way round. If rates go up to 15% our economy would be kicking arse and will be capitalising on the high rates.
