staringclown

Predictions thread

70 posts in this topic

I think IBM on the New York Stock Exchange will be a good investment in the long term. It is now around US$203 per share. Perhaps the reason Warren Buffett has invested heavily in the company is because of their Watson technology. Basically, this is a case of the 'rise of the machines' technology that can beat human expert knowledge:

http://www-03.ibm.co...tion/us/watson/

So, I am just waiting for a market correction before taking a position in IBM.

...

 

I started buying IBM today at $144 per share.

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prediction for the FED  rate increase, i say 0.1% or ten basis points, " see we raised rates "

I don't see central banks, especially the RBA's obsession with having to move by 25bpts. Ten bpts is far more appropriate when rates are this low - in either direction. Ten does bugger all to signal the market though. 

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I don't see central banks, especially the RBA's obsession with having to move by 25bpts. Ten bpts is far more appropriate when rates are this low - in either direction. Ten does bugger all to signal the market though. 

 

 

yeah thats why i said 0.1%, its an increase but it doesnt  actually upset the markets. and yeah on a %2 rate, its still an increase of %5 on repayments, which is a sizable increase.

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There are now several headwinds for the real estate market

  • A permanent reversal of the current historically low interest rates (lowest in at least 5000 years according to Armstrong)
  • Global crackdown on foreign investment in residential real estate
  • In particular, China is cracking down on capital fleeing the country to buy real estate elsewhere
  • Demographic trends. Many western nations have stagnant or falling populations when not counting immigration
  • Work trends - more and more people can live and work remotely and don't need to live in big cities.

What will this mean for Australia's $6.5 trillion residential real estate housing stock and the country's economy?

Let's assume that inflation will be 2% per year for the next 5 years, and that houses will fall by 2% per year also. That is a total housing stock valuation fall of 4% per year in real terms on average, which is $260 billion per year. If 10% of this flows into reduced spending (reverse equity maaaate) that would be like a $26 billion head wind in GDP. Since Australia's GDP is approximately $1400 billion - that will result in a 1.9% drag on the economy.

Let's hope the rest of the economy will grow by more than 2% per year, otherwise we will end up in a long recession - or at least feel like being in one.

Edited by AndersB

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3 hours ago, AndersB said:

There are now several headwinds for the real estate market

  • A permanent reversal of the current historically low interest rates (lowest in at least 5000 years according to Armstrong)
  • Global crackdown on foreign investment in residential real estate
  • In particular, China is cracking down on capital fleeing the country to buy real estate elsewhere
  • Demographic trends. Many western nations have stagnant or falling populations when not counting immigration
  • Work trends - more and more people can live and work remotely and don't need to live in big cities.

What will this mean for Australia's $6.5 trillion residential real estate housing stock and the country's economy?

Let's assume that inflation will be 2% per year for the next 5 years, and that houses will fall by 2% per year also. That is a total housing stock valuation fall of 4% per year in real terms on average, which is $260 billion per year. If 10% of this flows into reduced spending (reverse equity maaaate) that would be like a $26 billion head wind in GDP. Since Australia's GDP is approximately $1400 billion - that will result in a 1.9% drag on the economy.

Let's hope the rest of the economy will grow by more than 2% per year, otherwise we will end up in a long recession - or at least feel like being in one.

You could add tightening of lending standards to your bullet point list.

We could also add the effects of a prolonged drought due to the solar minimum ... on second thoughts the climate will only warm forever. Houses to the moon! :P

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Anders - that's why the Australian government wants to pump its massive immigration program so that Australia has 3rd world-type population increases.

I think we've finally hit the down slope for property a decade after prices should have corrected.

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11 hours ago, Mr Medved said:

Anders - that's why the Australian government wants to pump its massive immigration program so that Australia has 3rd world-type population increases.

I think we've finally hit the down slope for property a decade after prices should have corrected.

That 'free' government pension needs an exponential number of tax payers to support it.

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Martin Armstrong is again suggesting that we could head into a dramatic cooling period due to lowest solar activity in a thousand years.

As a thought experiment, what happens if food prices rise dramatically?

Over the last 45 years we have seen virtually constant soybean prices (primarily used for livestock feed), as can be seen in the attached chart.

Soybean prices were nearly US$12 per bushel in 1973 ($8.45 today), but $1 back then is the same as $5.68 today after inflation:

https://www.usinflationcalculator.com

But 5 times higher soybean prices would only match the 1973 prices on an inflation adjusted basis. If Armstrong is correct and we are facing once in a thousand years period of cooling, then grain prices may be much higher again - say 10 times higher?

I think it would be prudent to prepare for general food costs that will be at least triple what they are today.

So what will be the implications for such a scenario?

  • Mass world-wide famine. Food commodities are global, and poor countries would import and export grains at the prevailing global market price. Local consumers in poor countries will starve.
  • Massive drop in discretionary spending everywhere. Which would fuel a deep depression globally.
  • Deep depressions will cause mass unemployment and put a huge strain on social safety nets in developed economies
  • All asset classes will plummet. Businesses go broke and share markets crash.
  • House prices will crash - there is no money to pay much rent. Rental yields will fall dramatically.
  • Probably the biggest global deflationary event in history
  • Countries go broke, and there will be many events of sovereign defaults
  • Banks fail

I wonder if keeping physical cash in US dollars may be the only safe haven.

Bearish enough for ya?

soybean-prices-historical-chart-data-2018-10-01-macrotrends.png

Edited by AndersB

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Oh, one more thing.

When the trend starts to unfold there will be many people thinking along these lines and want to hoard cash ahead of a deflationary crash.

That would mean that the demand for cash will skyrocket - i.e. interest rates will rise sharply.

Any form of debt will be crushingly hard to service.

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2 hours ago, AndersB said:

Martin Armstrong is again suggesting that we could head into a dramatic cooling period due to lowest solar activity in a thousand years.

As a thought experiment, what happens if food prices rise dramatically?

Over the last 45 years we have seen virtually constant soybean prices (primarily used for livestock feed), as can be seen in the attached chart.

Soybean prices were nearly US$12 per bushel in 1973 ($8.45 today), but $1 back then is the same as $5.68 today after inflation:

https://www.usinflationcalculator.com

But 5 times higher soybean prices would only match the 1973 prices on an inflation adjusted basis. If Armstrong is correct and we are facing once in a thousand years period of cooling, then grain prices may be much higher again - say 10 times higher?

I think it would be prudent to prepare for general food costs that will be at least triple what they are today.

So what will be the implications for such a scenario?

  • Mass world-wide famine. Food commodities are global, and poor countries would import and export grains at the prevailing global market price. Local consumers in poor countries will starve.
  • Massive drop in discretionary spending everywhere. Which would fuel a deep depression globally.
  • Deep depressions will cause mass unemployment and put a huge strain on social safety nets in developed economies
  • All asset classes will plummet. Businesses go broke and share markets crash.
  • House prices will crash - there is no money to pay much rent. Rental yields will fall dramatically.
  • Probably the biggest global deflationary event in history
  • Countries go broke, and there will be many events of sovereign defaults
  • Banks fail

I wonder if keeping physical cash in US dollars may be the only safe haven.

Bearish enough for ya?

soybean-prices-historical-chart-data-2018-10-01-macrotrends.png

History shows that a good (global?) war resolves these issues!

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On 10/1/2018 at 3:18 PM, AndersB said:

I wonder if keeping physical cash in US dollars may be the only safe haven.

I've been looking at Berkshire recently. I am sort of thinking that he is pissy because he has so much cash but it is real (not borrowed) and given interest rates currently he has to compete with borrowed cash. His cash is mostly US$ and I am thinking a crash would actually play to his strengths (assuming he is alive or has trained the other guys well enough). I figure it is attractive enough as a hedge.

I have US$ obviously just because banks outside of Aus tend to offer alternate currency accounts and I like to spread my spare cash around currencies to avoid getting nailed too badly.

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13 hours ago, tor said:

I have US$ obviously just because banks outside of Aus tend to offer alternate currency accounts and I like to spread my spare cash around currencies to avoid getting nailed too badly.

I have done the same, a significant percentage (not a significant amount) of cash is in USD now. I just have a sickly feeling about the AUD and do not want to be over exposed.

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On 02/09/2015 at 3:49 AM, AndersB said:

 

I started buying IBM today at $144 per share.

For disclosure, I sold out of IBM at $154 the same year I bought. Have been out since.

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17 hours ago, tor said:

I've been looking at Berkshire recently. I am sort of thinking that he is pissy because he has so much cash but it is real (not borrowed) and given interest rates currently he has to compete with borrowed cash. His cash is mostly US$ and I am thinking a crash would actually play to his strengths (assuming he is alive or has trained the other guys well enough). I figure it is attractive enough as a hedge.

I have US$ obviously just because banks outside of Aus tend to offer alternate currency accounts and I like to spread my spare cash around currencies to avoid getting nailed too badly.

Interesting idea.

I also think that Buffett is very much an insider in US financial and political circles. The rest of the world would also be in trouble if he would go down.

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Getting some food and water or water filter is wise!

 

From my own experience i can advise you that 6 months supply of many things is easy to store and keep track off, while more tends to get complicated.

Really important to store in sealed rat proof airtight containers.

 

Generally it will hit mostly poor nations like egypt which dont export food and spend lots of wages on food. Latin america might get a boom and asia isnt as prone to revolt. So mostly middle east can get ugly.

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I used to be a bit paranoid and read prepper sites, but I think it's better to have financial assets (lots of them) and cash flow.

It's quite a way before we hit Mad Max territory. When I say we, wealthier countries.

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On 30/09/2018 at 9:21 AM, cobran20 said:

You could add tightening of lending standards to your bullet point list.

We could also add the effects of a prolonged drought due to the solar minimum ... on second thoughts the climate will only warm forever. Houses to the moon! :P

I think we can now add Labor negative gearing tax policies in to the mix of real estate price head winds.

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