Auctions looking up as rates go down

Posted to The Age (4/12/2012) on 4/12/2012 at 4:39 PM
Commenting on "Auctions looking up as rates go down"
http://theage.domain.com.au/real-estate-news/auctions-looking-up-as-rates-go-down-20121204-2asok.html

The only way we can see a real recovery in the real estate industry is not a rate cut, but good news in the employment front.

Almost every week, we read or hear about either companies going down the gurgler or jobs being outsourced overseas. What so big deal with another $40 or $100 less in loan repayment when all the other utility bills or rates and charges keep going up, leaps-and-bounce by more than 25 percentage point each time. Such increases swallow up any positive cut by the RBA and thankfully from the bank.

Without job security, there is no certainty in one's future, let alone one with a family. Those at the ivory tower with 6-figure pay cheque cannot understand the pain and suffering of the "working families" or very soon the "non-working families". For goodness, it is time the pollies grow up and stop the idiotic squabbles in the Parliament, and come up with constructive policies and strategies to curb the decline of employment.

The Chinese are dealing with real stuff hands-on, with R&D knowledge and blue-prints handed to them free-of-charge from the so-called smart Western nations including Australia, while our university graduates know basically nothing more than just theories and designs on papers. Many Chinese factory workers are working on hi-tech machines while we still ponder when we will have the opportunity to see one.

Stocks dip after RBA minutes

Posted to The Age (17/4/2012) on 17/4/2012 at 10:49 AM
Commenting on "Markets Live: Stocks dip after RBA minutes"
http://www.theage.com.au/business/markets-live/markets-live-stocks-dip-after-rba-minutes-20120417-1x4gg.html

The graph looks spectacular, doesn't it? It is just the scale of the graph that plays the trick.

There's nothing to celebrate these days - the PIIGS are still getting leaner, China has to dig into her own pocket because lean PIIGS are not good for Chinese export, and lean China means less mineral export from Australia to China or same volume at lower prices.

If banks keep increasing interest, more money will be deposited and not go out, that means less profit eventually. If borrowing becomes more and unaffordable, the real estate will continue to decline. Collapse in real estate industry means more defaults, and bank write-off.

Am I too pessimistic? No way, I think I have my brain at the right place and think like a common citizen, while those gurus sitting in the ivory tower having been throwing darts to the future outlook dart board.

Ten of thousands of home owners prepared to switch over rates

Posted to Herald Sun (9/2/2012) on 9/2/2012 at 2:58 AM
Commenting on "Ten of thousands of home owners prepared to switch over rates"
http://www.heraldsun.com.au/news/more-news/ten-of-thousands-of-home-owners-prepared-to-switch-over-rates/story-fn7x8me2-1226266201942

It's easier said than done. Furthermore, most people find it too troublesome to keep switching banks - CBA may be higher in interest rate today, but after switching ANZ may take the cake. This is no difference from shopping around for cheap petrol.

In many cases, real interest rates chargeable are not published publicly, and until one sits down to negotiate with the lender, there is no guarantee that the self-proclaimed bargain hunting expert actually wins the day.

Negotiation demands confidence and skills. Many borrowers are unlikely to do a good job when confronted by experienced professional lenders. Compounding this is that negotiation normally takes place at the lenders office, and therefore gives the lenders a winning edge, at least at the psychological level.

Borrowing approval criteria are getting more and more constrained; those whose income has been reduced due to reduced hours of work may not have the same borrowing power as before. Borrowers are stuck, and unable to refinance their loan at the same magnitude.

Home price falls accelerate

Posted to The Age (30/11/2011) on 30/11/2011 at 3:20 PM - 3:22 PM
Commenting on "Home price falls accelerate"
http://www.theage.com.au/business/home-price-falls-accelerate-20111130-1o5wx.html

The house prices fall is real, many people cannot afford to buy houses is real, many are waiting for the prices to come down further is real, and interest cut by RBA does not arouse buyers' excitement is real.

Student accommodation market is booming is false, there are not enough houses to sell is false, sellers are not prepared to negotiate is false, real estate agents are doing a good job is false, and the Australian's economy will continue at gang busting rate is false.

End of Part 1 of 3

Whew, now that these are off my chest, I shall say something about the current state of affairs. You probably have heard the saying "what goes up must come down". Why can so many things defy gravity and go up? Almost everyone in the real estate or other investment market understands the word "bubble". I prefer an alternative choice - balloon, or to be precise, a helium filled balloon.

If one fills a balloon with helium, the balloon will fly upwards against gravity. When most of the gas has escaped, the balloon will fall back to the ground. If one fills more helium than originally intended, the balloon will either fly further up, but still comes down eventually or burst before it has a chance to rise.

Many helium-like factors made the real estate balloon rise. In fact, before the real estate balloon started to descend after December 2008 (for Victoria), the State and Federal governments topped up the balloon with more helium-like incentive mid-air by extending the FHOG. The hype and craze lived on, pushing the houses prices and interest rate up. The door allowing more foreigners to buy real estate with less scrutiny from FIRB started to sideline a lot more genuine and hardworking home buyers, as distinct from house buyers.

End of Part 2 of 3

The flood gate for overseas investors is closed. The policies on international students coming to study have been revamped. The lending criteria have tightened. These major reasons have resulted in disastrous outcome. Those who did not understand the reasons for the uncontrolled rise of the over inflated balloon and joined in the wild party were hurt badly.

To many people, investment is business. Some business people cut their losses and walk away from it when prevailing conditions are not favourable. However, ill-advised and unwise business people may have to default, and assets are up for grabs.

If that is the case, there should be more properties in the market for sale. Why do not many real estate agents have enough listings? Many real estate representatives (only real estate licensed professionals can be called as agents) lack the human touch. Their technique is too aggressive, and they lack the apathy and sympathy in dealing with potential vendors who are in financial or marital trouble. These clients cannot afford expensive advertisements, and therefore you cannot find them in the real estate section of the newspapers or magazines. They also need every cent of the sale proceed, and cannot afford to pay thousands of dollars in commission.

With all these clues, what is your next move?

End Part 3 of 3

Low inflation raises case for RBA rate cut

Posted on The Australian (27/10/2011) on 27/10/2011 at 3:23 AM (Cannot post as non-subscriber)
Commenting on “Low inflation raises case for RBA rate cut”
http://www.theaustralian.com.au/business/economics/low-inflation-raises-case-for-rba-rate-cut/story-e6frg926-1226177799948

The table headings are incorrect - Quarterly change should be Annual change, and vice versa. Please refer to http://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0

The problem with inflation calculation tied with CPI is that they are not totally correlated. Basing on inflation rate to adjust interest rate by RBA is unrealistic and to some extent nonsensical.

Most services are labour related and provided locally. In almost all cases, services increase in absolute dollars each quarter, and are based on our own currency. The utility prices have been on the increase to the point where many cannot afford such basic needs in everyday living.

Product supply / provision are influenced by currency exchanges, parity, and supply / demand of the products. For the example, the rise of fall of petrol prices are not caused by local supply and demand but parity prices and import prices beyond our control.

I have written often on the issue that increase in utility prices is NOT inflation. Users of utility do not push up the price due to additional demand, and it is through no fault of theirs that they copped double whammy - one from price rise, and two increases in interest rate to curb "inflation".

Interest rates: will they or won't they rise

Posted to The Age (31/7/2011) on 31/7/2011 at 1:25 PM
Commenting on "Interest rates: will they or won't they rise?"
http://theage.domain.com.au/real-estate-news/interest-rates-will-they-or-wont-they-rise-20110729-1i3qu.html

CPI index used to determine inflation rate is incorrect and deceptive. I even go to extent to condemn such impractical approach, whether it is based on standard or weighted index calculation, as unethical and immoral.

Under normal circumstances, without the influence of new taxes being imposed / introduced, adverse climatic and unforseen disastrous conditions, if supply and demand are played fairly in a market, increase in prices due to shortage is a legitimate parameter for the index calculation.

It is nonsensical to increase interest rate because the CPI index and hence the inflation rate shows an increase. The increase in prices for banana, tobacco, alcohol, utility charges, etc. is not due to demand driven. It is bad enough for the consumers to cop with price increases, but to rub salt to the wound to increase interest rate will lead to a new round of vicious whirlpool of increases in mortgage payment, wage, fares, property price, etc. Some of the items which are affected abnormally should be removed from the basket of items until normality is resumed. A weight factor (index) should be introduced and incorporated to items which are affected by new taxes.

If RBA is going to increase interest rate on Tuesday 2/8/2011, the wealth gap in Australia will widen, more small businesses will face closure and many families go further below poverty line. Many Australians are facing utility cut-off, and stress related illnesses are on the increase. For those who are still in the workforce, spare a thought for those who suffer through no fault of theirs. By the way, $16 million just to go to a particular person is an obscene amount. It is a lot of dough to feed many hungry Australians!

Coal exports hit hard by floods, likely to force RBA to hold rates

Posted to Adelaide Now (1/6/2011) on 1/6/2011 at 12:46 PM
Commenting on "Coal exports hit hard by floods, likely to force RBA to hold rates"
http://www.adelaidenow.com.au/business/coal-exports-take-whack-after-floods/story-e6frede3-1226066990243

Australia is definitely heading towards a recession.

The truth lies in the trilogy of negative demand - real properties, cars and household items. In recent months, the supply of properties in the market has increased, but there are many people who cannot afford to buy. They have neither the earning capacity to convince the bank to lend them money, nor the ability to repay after the initial down payment. Renovation market has also slowed down. Car is the largest personal asset item.

Car sales have also slumped, and compounding the problem is the increasing petrol prices which turn away potential buyers from buying bigger cars or 4-wheel drives.

David Jones, Myers and JB HiFi are reporting slow sales for the past few months. This is the third and critical negative demand that puts the nail in the economy coffin. Glenn Stevens and his RBA team are just not good enough to come up with inaccurate forecasts month after month. Sitting in the boardroom, looking at graphs on computer and talking with big businesses and then come up with the economic rationale to increase interest rate is unacceptable.

Not all Australians are miners, and not all 95% employed are full-time workers!

Debt spiral looming for Australians

Posted to Herald Sun (18/5/2011) on 18/5/2011 at 1:53 AM
Commenting on "Debt spiral looming for Australians"
http://www.heraldsun.com.au/news/more-news/debt-spiral-looming-for-australians/story-fn7x8me2-1226057787036

Australia is definitely heading towards a recession. The truth lies in the trilogy of negative demand - real properties, cars and household items.

In recent months, the supply of properties in the market has increased, but there are many people who cannot afford to buy. They have neither the earning capacity to convince the bank to lend them money, nor the ability to repay after the initial down payment. Renovation market has also slowed down.

Car is the largest personal asset item. Car sales have also slumped, and compounding the problem is the increasing petrol prices which turn away potential buyers from buying bigger cars or 4-wheel drives.

David Jones, Myers and JB HiFi are reporting slow sales for the past few months. This is the third and critical negative demand that puts the nail in the economy coffin.

Glenn Stevens and his RBA team are just not good enough to come up with inaccurate forecasts month after month. Sitting in the boardroom, looking at graphs on computer and talking with big businesses and then come up with the economic rationale to increase interest rate is unacceptable. Not all Australians are miners, and not all 95% employed are full-time workers!

Why June is too soon for an RBA rate rise

Posted to The Age (9/5/2011) on 9/5/2011 at 4:37 PM
Commenting on “Why June is too soon for an RBA rate rise”
http://www.theage.com.au/business/why-june-is-too-soon-for-an-rba-rate-rise-20110509-1eez3.html?

Predictions by Glenn Stevens and his team at RBA are far from satisfactory. Either the economic models used or the way the results produced by the models have been interpreted need to undergo vigorous challenge.

The trilogy of negative demand, as I called it, is a signal for heading towards a recession. This may sound farfetched, naïve and ill-founded, but a rationalist will see the wisdom of this doomsday prediction. The trilogy of negative demands is real properties, cars and household goods including fashions. These three categories of items are in descending sequence in terms of average value. In recent months, we witness the trilogy of negative demands take place.

I have written in many blogs and newspaper comments about my predictions, a lot more accurate than what RBA has been predicting. Using dollar value as the key element in prediction is inadequate. The total quantity demand must be taken into consideration for normalisation.

CPI increase, unfortunately, always targets at increase in price which can be due to real reason and artificial manipulation. If quantity demand is increased, causing shortage of supply and thus pushing up the price, then there is room to call for increase in interest rate to dampen the demand. However, it is irrational to increase interest rate because electricity charges, water rates, local petrol prices have gone up, and that the quantity demand of these utilities or items is in fact unchanged or decreased. In short, the total dollar increases bear no relation to the demand curves.