Will the Bear come here ?

[NeverQuestion]

When the next recession comes there is going to be a lot of turmoil,' says Jeffrey Gundlach
The Fed admits they’re having discussions about doing QE again, discussing whether it will be a regular policy tool, not one that will be only used during emergencies. The Fed not sure whether they are going to do quantitative easing or quantitative tightening, so the Fed has sort of lost its way.
The biggest risk is the corporate bond market which is extraordinarily leveraged, 45% of investment grade bond market would be rated junk right now.
During the next recession we are going to have an extraordinary national debt problem because the national debt is growing at a rapid rate in a growing economy. National debt increased by $1.27tn.
The biggest problem is we have a growing economy and yet we have decided that debt doesn’t matter one bit, and national debt went over $22tn and it’s growing during a growing economy. Taxation versus GDP gone from 20% to 15% so we have decided to run a large deficit and it seems no is interested in collecting the taxes for that.
Global stock market peaked 26 January 2018. US market hung on until October.
https://www.youtube.com/watch?v=YsSo1rTqMdc

The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

Hope I'm wrong.

[JBmurc]

[QUOTE=NeverQuestion;747796]The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

And of course GFC fix was a ton of cheap money .. the next GFC will be forced by DEBT servicing costs seeing the BOND market crash as rates spike ...US is a consumer economy ..borrow spend borrow spend

like many we don't produce all that much(Outside the leverged exporters working on paper thin margins which also bar new entries to growth) but we love to spend and haven't we done well at that....

Add in opening up the doors flooding the country with more consumers to pump the GDP ...which was a boom for property market and the 10% or so of kiwis employed in it... but we also have all the downsides where costs to live here are skyhigh .... how Bunnings or Supermarkets can get workers in the likes of Queenstown with $250-300pw room costs when you only have $500-$600 in the hand each week..I just can't work out...

It really just doesn't paint a good outlook >>> where is the growth going come from .....when the Building slows down?

As really it's that just how we have grown on the back of cheap debt .. I guess we could see rates here fall to 0%(loans 2-3%) that will kick the can for a few more years but it really is a flight to the end collaspe of fiat currencies ...to be rebuilt one day in a new world order??

[blackcap]

[QUOTE=JBmurc;747839]

The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

And of course GFC fix was a ton of cheap money .. the next GFC will be forced by DEBT servicing costs seeing the BOND market crash as rates spike ...US is a consumer economy ..borrow spend borrow spend

like many we don't produce all that much(Outside the leverged exporters working on paper thin margins which also bar new entries to growth) but we love to spend and haven't we done well at that....

Add in opening up the doors flooding the country with more consumers to pump the GDP ...which was a boom for property market and the 10% or so of kiwis employed in it... but we also have all the downsides where costs to live here are skyhigh .... how Bunnings or Supermarkets can get workers in the likes of Queenstown with $250-300pw room costs when you only have $500-$600 in the hand each week..

It really just doesn't paint a good outlook >>> where is the growth going come from .....when the Building slows down?

On a slightly related topic but its relevant to the NZ situation. So I have a flat that I rent out for $300pw in Wellington. It is a 1 bed room flat and currently occupied by a single mother with a daughter. Now she is on a benefit. But even with the benefit money coming in I wonder how she is able to afford a $300pw rent with enough for food, petrol, phone etc left over. And there must be untolds in this situation in NZ. Are we sitting on a ticking timebomb here? I recently had friends over from Europe who stayed for a few weeks and they were astounded at the cost of living being so high there, especially the cost of housing. If this deck of cards were to fall over we could be in a world of hurt.
On the flip side, as long as NZ is a desirable destination for "global citizens" our house prices are going to stay high as there is limited supply and insatiable demand.

[JBmurc]

[QUOTE=blackcap;747840]

On a slightly related topic but its relevant to the NZ situation. So I have a flat that I rent out for $300pw in Wellington. It is a 1 bed room flat and currently occupied by a single mother with a daughter. Now she is on a benefit. But even with the benefit money coming in I wonder how she is able to afford a $300pw rent with enough for food, petrol, phone etc left over. And there must be untolds in this situation in NZ. Are we sitting on a ticking timebomb here? I recently had friends over from Europe who stayed for a few weeks and they were astounded at the cost of living being so high there, especially the cost of housing. If this deck of cards were to fall over we could be in a world of hurt.
On the flip side, as long as NZ is a desirable destination for "global citizens" our house prices are going to stay high as there is limited supply and insatiable demand.

Yeah ..it is ..and I agree how the average family on average household income survives in this country is really on the back of other TAXpayers ..working for families ,tax credits etc.. which is fine but how it will play out if continue to replace high paying export jobs (Mining/oil&Gas/fishing etc) with more tourism / tech low to no paying jobs as the robot just took your job..

NZ is a desirable destination for "global citizens" yes those in their golden years or those from overpopulated sesspools..but is that how we plan on keeping property at these very high levels to household incomes ??

[blackcap]

[QUOTE=JBmurc;747851]

Yeah ..it is ..and I agree how the average family on average household income survives in this country is really on the back of other TAXpayers ..working for families ,tax credits etc.. which is fine but how it will play out if continue to replace high paying export jobs (Mining/oil&Gas/fishing etc) with more tourism / tech low to no paying jobs as the robot just took your job..

NZ is a desirable destination for "global citizens" yes those in their golden years or those from overpopulated sesspools..but is that how we plan on keeping property at these very high levels to household incomes ??

I have no answers JB, just musings at this stage. I do not agree with keeping property prices up but unless we have drastic immigration/purchasing laws put in place I do not see our prices declining significantly anytime soon and that will continue to create these really unaffordable living situations in NZ for the foreseeable future.

[SBQ]

The only real way out of this for the Fed is to go to a new monetary system. If you look back over the last 100 years they have gotten out of tough situations by slowly removing the gold backing on the dollar. Today there is no gold backing on the USD.

So my guess is that they will switch. But only when there is no other option. This Recession will be scary.

Hope I'm wrong.

The same ol' argument between gold vs fiat money. Keep dreaming. Replace it with what? Cryptocurrencies?? There's good reason why the 'gold standard' went off. If I recall correctly, NZ was one of the last countries to put it's currency to a free floating exchange rate system (early 1990s?) It's benefited the country far more than other countries that had nothing to offer. Would you go back to the time when in order to buy a car from overseas, you needed to have "overseas funds" ? My elders have told me times when a newly overseas imported car would sell more in NZ new because of the restriction in currency.

Anyways, no one knows when the next bear will come. Countless of critics every year are saying it will be this year or that year. No one is following up on those claims when the prove false year after year. As my finance prof told us in class, a bear person will eventually be right if he calls the bear every year for the next 10 or 15 years. Meaning, sooner or later he will guess it right and claim fame.

NZ's situation isn't that bad. I do believe we're able to borrow more as our debt per capita is nothing compared to the US or for the extreme matter.. Japan. I mean Japan has like a 160% debt to GDP ratio and look at their high quality of living. It just shows us that as nations, those that can borrow the most usually have a higher standard of living. Just like the person that borrows the more to buy the bigger house, new car, etc is going to enjoy a better living standard. I don't see a problem for NZ being able to service the debt. But I do see a problem if NZ goes on the path like Spain or Greece of irresponsible gov't fiscal policies. I'm optimistic. If you want to enjoy the scenery that NZ offers, and got the $ to move to NZ, then better expect to pay tax to enjoy it.

[SBQ]

[QUOTE=blackcap;747853]

I have no answers JB, just musings at this stage. I do not agree with keeping property prices up but unless we have drastic immigration/purchasing laws put in place I do not see our prices declining significantly anytime soon and that will continue to create these really unaffordable living situations in NZ for the foreseeable future.

We already have the ban of non-residents buying properties. Uncertain on the full impact if it's making Auckland housing prices coming down. I would much rather see the NZ gov't do what they did in Vancouver Canada by simply taxing them (using taxation to discourage the parking of shady $ in real estate). If a person truly wants to be a NZ resident, then do so and enjoy owning a home. But don't use the real estate market as a means to profiteer tax free which deprives those on the low end needing to get their 1st home. Like I say, look to your children and see what opportunities they have ; can they afford to get into their 1st home? Don't look at the adults that are playing around in the market as they're certainly myopic in sight.

[JBmurc]

[QUOTE=SBQ;747872]

We already have the ban of non-residents buying properties. Uncertain on the full impact if it's making Auckland housing prices coming down. I would much rather see the NZ gov't do what they did in Vancouver Canada by simply taxing them (using taxation to discourage the parking of shady $ in real estate). If a person truly wants to be a NZ resident, then do so and enjoy owning a home. But don't use the real estate market as a means to profiteer tax free which deprives those on the low end needing to get their 1st home. Like I say, look to your children and see what opportunities they have ; can they afford to get into their 1st home? Don't look at the adults that are playing around in the market as they're certainly myopic in sight.

I think bring down costs of building products would be a great start $3000+ per sqm for an basic house is overboard ...of course a good part of this cost is labour .+ land that it at record highs per sqm..many reason too see costs stay high but be great if we seen moves to bring it lower or else we just going continue to see Kiwibuilds unsold

[Xerof]

NZ was one of the last countries to put it's currency to a free floating exchange rate system (early 1990s?)

4th March 1985, at USD0.4444. Never went lower than that either IIRC

[Bobdn]

The same ol' argument between gold vs fiat money. Keep dreaming. Replace it with what? Cryptocurrencies?? There's good reason why the 'gold standard' went off. If I recall correctly, NZ was one of the last countries to put it's currency to a free floating exchange rate system (early 1990s?) It's benefited the country far more than other countries that had nothing to offer. Would you go back to the time when in order to buy a car from overseas, you needed to have "overseas funds" ? My elders have told me times when a newly overseas imported car would sell more in NZ new because of the restriction in currency.

Anyways, no one knows when the next bear will come. Countless of critics every year are saying it will be this year or that year. No one is following up on those claims when the prove false year after year. As my finance prof told us in class, a bear person will eventually be right if he calls the bear every year for the next 10 or 15 years. Meaning, sooner or later he will guess it right and claim fame.

NZ's situation isn't that bad. I do believe we're able to borrow more as our debt per capita is nothing compared to the US or for the extreme matter.. Japan. I mean Japan has like a 160% debt to GDP ratio and look at their high quality of living. It just shows us that as nations, those that can borrow the most usually have a higher standard of living. Just like the person that borrows the more to buy the bigger house, new car, etc is going to enjoy a better living standard. I don't see a problem for NZ being able to service the debt. But I do see a problem if NZ goes on the path like Spain or Greece of irresponsible gov't fiscal policies. I'm optimistic. If you want to enjoy the scenery that NZ offers, and got the $ to move to NZ, then better expect to pay tax to enjoy it.

Japan is a creditor nation so at least have they have the assets to back up borrowings (although I might be misunderstanding the whole thing).

https://en.wikipedia.org/wiki/List_o...ion_per_capita

Just on fiat vs the alternative, if gold went down in price I'd definitely bolster my portfolio with a few ounces. Unfortunately it just seems to be slowly increasing and I love a bargain too much to buy at these levels. I guess its all those central banks buying it up. Apparently its the biggest central bank gold buying spree in 50 years.

https://www.bloomberg.com/news/artic...ree-in-decades