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  1. #31
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    German Government's latest 10 year bond offer of EURO 3 Billion has a -0.24% interest rate. A pretty good indication on where rates are heading in the medium term. No need to fix long in my view.

  2. #32
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    Quote Originally Posted by iceman View Post
    German Government's latest 10 year bond offer of EURO 3 Billion has a -0.24% interest rate. A pretty good indication on where rates are heading in the medium term. No need to fix long in my view.
    Yes I agree it's nasty and for years the EU has told the people "Austerity Measures are a Must". I'm curious who exactly is putting money in German bonds, let alone putting money in the EU? Over in America they knew the cards would fall down when the EU bloc was formed after 2000. Their recipe to have a 'united of nations ; like the United States so they could compete competitively, but that didn't happen well.

    We've been told the root cause is none of the various EU nations had 'consolidated it's debt'. You have Italy that is claiming Germany for war repatriations of their gold and $ taken away in early 19th century (hidden in a similar fashion as how Maduro in Venezuela moved the nations gold to Russia). Look at all the different languages and cultures within the EU ; how would any synergy exist economically?

    Any explanation in the past 3 years why the US currency and their equity markets had done so well? It's because the smart wealthy folk in the EU (and many other places around the world) have moved their wealth to the US (China's been doing it for a very long time ; they send their cash to the US and buy the DOW, or real estate).

    If there's any leading interest rate we should follow, then that would have to be the US reserve bank rate. These negative rates we see in the EU have minimal influence outside the EU. Just look at the buyers in the bond market. I recall during the Greek crisis, the US issued T-Bills and China had no problems buying it up. When the Greek gov't went to offer bonds, China wasn't there... When Italy wants to issue gov't bonds but is only able to pay 2%, no one buys any ; because the market thinks at that default risk level, Italy should be paying 8%. So Italy has no choice but to rely on the ECB which says well.. we'll buy the bonds somewhere in between. On the short hand, the ECB screws the rest of the EU nations and that's what we see happening in Germany (rob Peter to pay Paul).

  3. #33
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    Quote Originally Posted by Bjauck View Post
    The trouble with buying a house is that you cannot spread the risk unlike with shares where you can a portfolio of different shares.

    There have been years of increasing prices due to falling interest rates so how many years of falling interest rate fuelled price rises can be left? The CGT resolution may mean that NZ investors still keep on putting their money into residential property rather than equities and business but we may already be near the top of the cycle anyway. Also given NZ's already hollowed out share market and expensive land will there be any more drift of capital from business and share equity to real estate?

    NZ may be very susceptible to a severe correction as we have used the drop in interest rates to load up to the max on debt to out-bid others to leverage ourselves into residential land.

    However The lack of action over a CGT I think will mean that NZ residential property will continue to be the tax-preferred de-facto superannuation scheme for those who are rich enough to afford deposits and can afford investment in land.


    I agree in part ... if we are talking about pure 1x investment NZ Res rental property Vs several NZ Blue chip higher yield shares then yes I agree the latter has some bonus facts ..like being able to sell online within seconds not days to years with NZ prop..

    But on the other hand in "sanctus671" case and many like him paying rent ..owning a house is a no-brainer esp if you make a smart purchase and don't pay overs for a leasehold unit etc ..

    But if sanctus can afford a freehold solid home and rent the rooms out he will be much better off longer term even if NZ property pulls back 20% if he made a smart purchase he should be able to add value and rent rooms out lifting his cashflows better than if he was just renting..

    Then going forward sanctus will have an asset that is nearly as good as Cash ... unlike say commercial property that banks give 50% value or shares that if your lucky 5-10%...

    And as he pays down the debt he will gain equity can borrow upto 80% to buy other investments at the lowest rates available

    Personal Property a Great Core investment to then branch outwards from
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

  4. #34
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    I know a bit off original topic but here's a couple of charts to illustrate the problem with German banks - Deutsche Bank: (with reference on the equity / stock side ; not the bond issue side).

    https://static.seekingalpha.com/uplo...5614645526.png

    https://upcrypto.org/wp-content/uplo...on-660x330.jpg

    Canada has no exposure and i'm certain NZ & Australian banks too have no exposure. This is the thing that even we live in a globalised world, capital flows of $ move freely and tend to pick safer places. I don't see a total collapse of the EU but I do see the average citizen living there will have a tougher time, especially for future generations.

  5. #35
    FEAR n GREED JBmurc's Avatar
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    Default If you have a Central bank then your major banks are all interlinked

    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

  6. #36
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    The exposure in NZ/Aus is a lot less than what's happening in Europe. So to be correct, no DIRECT exposure but some indirect exposure. I would not say an EU collapse would also take down the NZ & Aus economy.

  7. #37
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    Quote Originally Posted by SBQ View Post
    The exposure in NZ/Aus is a lot less than what's happening in Europe. So to be correct, no DIRECT exposure but some indirect exposure. I would not say an EU collapse would also take down the NZ & Aus economy.
    No of course not directly.. but I'm sure an EU banking collapse would certainly hurt all major international banks and cause major systematic issues across Global banking enough to really hurt the NZ's foreign backed credit-fueled economy
    Last edited by JBmurc; 25-06-2019 at 10:35 PM.
    "With a good perspective on history, we can have a better understanding of the past and present, and thus a clear vision of the future." — Carlos Slim Helu

  8. #38
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    On the Canadian front for 'doing something about' the problem of 1st home buyer ownership, it seems the Cdn gov't is taking it all the way to the bank so that low income or 1st time home owners can get their 1st home. Unlike NZ, we've stood flat and done absolutely NOTHING about making homes more affordable for the 1st home buyer.

    https://www.cmhc-schl.gc.ca/en/media...uyer-incentive

    and for more beefier details:

    https://www.moneysense.ca/spend/real...yer-incentive/

    "The federal government launched a new national program on September 2, 2019, that it says will help thousands of families across the country buy their first home. Aptly named the First-Time Home Buyer Incentive (FTHBI), the program offers eligible buyers up to 10% of a home’s purchase price to put toward their down payment, thus lowering mortgage carrying costs and making home ownership more affordable."

    C'mon Ms Ardern, why aren't you doing anything about the issue of home affordability in NZ???

    And the eligibility for FTHBI is pretty reasonable:

    "are not only people who have never owned a home before, but also homeowners who have gone through a divorce or breakdown of a common-law partnership, or those who have not lived in a home that they owned (or that was owned by their spouse or common-law partner) for the past four years."

    And the Cdn gov't will:

    "The government will loan buyers 5% of the purchase price for a re-sale home, or 10% for a new one. That works out to a possible $50,000 on a new $500,000 home, or $25,000 on a $500,000 resale property. "

    This is on top of the 5% down payment the 1st home buyer needs to have. The FTHBI portion is payable after 25 years with no interest BUT the capital gain value of the house the Cdn gov't will also get the benefit; that is the home owner under this scheme SHARES the capital gain with the gov't, likewise in a crash (not likely house values would be less after 25 years) the gov't will share the loss. But it's interesting to see the Cdn gov't is making a bold move to tell 1st home buyers that they are willing to take the risk in lending. Again:

    "Buyers don’t have to make ongoing payments and are not charged interest on the loan. But they do have to repay the incentive, either when they sell the house, or after 25 years—whichever comes sooner. "

  9. #39
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    Quote Originally Posted by SBQ View Post
    C'mon Ms Ardern, why aren't you doing anything about the issue of home affordability in NZ???
    [/I]
    Why even discuss home affordability when central banks continue to suppress interest rates and provide liquidity to pump up asset prices. Why not look at the main reason for house price growth, instead of encouraging the next generation to take on even more debt to keep the ponzi scheme going. I guess it is easier and ensures votes.

  10. #40
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    Quote Originally Posted by Aaron View Post
    Why even discuss home affordability when central banks continue to suppress interest rates and provide liquidity to pump up asset prices. Why not look at the main reason for house price growth, instead of encouraging the next generation to take on even more debt to keep the ponzi scheme going. I guess it is easier and ensures votes.
    Modern Monetary Theory (MMT) is what pulled the US economy out of the GFC in 2008. Unfortunately MMT is not working in the EU as we see artificial interest rates that are well below what the market expects (their negative interest rate policy does not work buyers of their bonds expect a much higher rate). Anyways in respect to NZ, the RB also adopts MMT but I would not say it's anything near what the EU is at. Key distinction is we still have a we ways to go to zero. The better indicator is to watch the NZ currency.

    Housing is only 1 segment of the interest rate variable. Commercial & gov't loans are a big factor so it's more important that the key drivers of maintaining employment, and thus the economy roll through in tough times. Though I do agree, too low rates will encourage the rich to buy more houses in NZ, it also means they stand to risk more in a real estate bubble crash. Sadly, when the economy collapses, so does employment which basically wipes out those trying to buy their 1st home.

    Many NZ politicians would disagree but the real problem why next generations have to pile on more debt to buy a house is simply due to NZ's weak currency and thus, the long erosion of standard of living. NZ is a small country that can not make EVERYTHING efficiently to produce the end product 'the house'. Also NZ's is very poor at implementing tax policies on residential homes as all too many just 'game the system' without paying any taxes. This is very different to the Cdn model where the CRA is effective at collection any capital gain tax on the property. But overall, MMT will cease to work if 'taxation' is not applied across all asset classes and this is a key problem in NZ, and not because of interest rates are too high or too low.

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