AUD / USD
- Thread starter SLT
- Start date
Of the Majors, it's got the most stable economy, currently.
At least until China starts contracting Q1 2015, then the Aussie housing market explodes. That won't be pretty.
Australia & Canada have the two largest real estate bubbles that haven't burst yet. Though the USA is still sitting on a powder keg in a few markets.
At least until China starts contracting Q1 2015, then the Aussie housing market explodes. That won't be pretty.
Australia & Canada have the two largest real estate bubbles that haven't burst yet. Though the USA is still sitting on a powder keg in a few markets.
sqa said:
Yeah sounds about right to me, there is no way i would buy a house "to live in" atm here. When i was a late apprentice, i was paying off a mortgage on a single income! Im not sure how my kids will be able to afford a mortgage in todays economy. 1 house loan 2 generations to pay it off, could be coming our way
dentist007
Well-Known Member
we have a housing bubble in the uk aswell
The housing market blows up. The problem is that the Central Banks work to save the Banks, not the people getting slaughtered. So they buy up mortgages/MBS. The Fed did this in the USA, preventing our housing market from properly correcting.
While there is limitations on Land in a lot of the world, quite a lot of real estate is over-priced by, effectively, mass psychology. The Banks can't afford for the values to collapse, though. The reckoning will come. You always have to pay the piper. Though, as Japan has shown, you can dance around destruction for a long time.
So, the best idea: figure out how to Short Real Estate.
Then just wait.
While there is limitations on Land in a lot of the world, quite a lot of real estate is over-priced by, effectively, mass psychology. The Banks can't afford for the values to collapse, though. The reckoning will come. You always have to pay the piper. Though, as Japan has shown, you can dance around destruction for a long time.
So, the best idea: figure out how to Short Real Estate.
Then just wait.sqa said:
I didn't realise you are an economist sqa. It was hard to pick, as up till now you have tended to make sense.
If by real estate you mean residential housing, then yes, prices are indeed quite high in the most populated centres. We do not however, have a real estate bubble. Almost all prices in Australia are high; our whole cost of living has become inflated to ridiculous levels. Presently we are in a period of low inflation and sadly this makes governments and central bankers uncomfortable. They like inflation. In fact, due to the crazy way they think and try to run the economy, they need inflation. Unfortunately, economic advisers, being what they are, have not been able to work out how to selectively stimulate or retard growth in particular sectors without either losing control or destroying something valuable.
Your suggestion that China is going to start contracting in 2015 is interesting. It is also quite laughable and utterly absurd. You could probably find work as a government adviser with that kind of prediction. I am quite certain you have not a single shred of credible evidence or data upon which to base such a forecast so you would fit right in.
The AUD is definitely not at any risk from a pending collapse in real estate values. I am frankly tired of the steady flow of American "expert economists" who have visited Australia over the last 2 years to pontificate about our alleged real estate "bubble". Some of them were knowledgeable enough but all proved ignorant, either failing to view the Australian context through anything but their American experience and perspective or simply not bothering to question their assumptions, vigorously error-check their models or to validate their data.
Don't get me started on all the ones who didn't even bother to come to Australia. It seems that bank economists and academic economists in America have found a new diversion - trash talking the Australian economy with special reference to the imagined real estate bubble. Fortunately for them the media laps that rubbish up with enthusiasm. Perhaps they think it could be a self-fulfilling prophesy, that if they throw enough words together it might take form and become reality. If so they're wrong, they just look foolish.
Speaking of which, have you heard the latest:
With this MS may well have stalled the current advance!
I'm not sure this is the right place for this but it seems relevant to the drift in this thread. I was struck by how gloomy Dan seems about the state of the Australian economy. In fact, the economy is just fine.
Now anyone who swallows media reports at face value could be excused for getting a bit down but that is pretty much what they are designed to do. Not depress you necessarily, but reach you so they can control your emotional state. Why? Because that makes you easier to predict and to sell to. Remember, whatever the window dressing, the media constitutes a collection of organisations that treat you as little more than a trained consumer. They want to either sell you something or get you into a state where one of their advertisers or affiliates can sell to you. Social research has shown that just a tad anxious and maybe a bit down is the ideal condition. No media is neutral. They all have agendas.
So get an education so you can think critically for yourself, or perish. I'm not saying you need a degree, the school of life will suffice, you just need to learn to think. It is exactly the same when it comes to developing as a trader. You must think critically and you MUST learn to be an independent thinker. I quite like rod178's tag line: "Better a goat than a sheep". This captures the concept quite well. There are far too many sheople out there.
Now, to get back to the AUD or the Australian economy, consider this piece from a media source. At least it quotes verifiable hard data. It doesn't make the Australian economy seem quite so sick does it?
Note that the data "excludes businesses, residences and luxury goods" so our inflated house prices were not used to inflate the wealth measurement.
Cheer up folks. The Aussie dollar is in great shape. It may be an interesting ride but I think it will be around parity at or around the end of this year. Is that fuzzy enough?)
Now anyone who swallows media reports at face value could be excused for getting a bit down but that is pretty much what they are designed to do. Not depress you necessarily, but reach you so they can control your emotional state. Why? Because that makes you easier to predict and to sell to. Remember, whatever the window dressing, the media constitutes a collection of organisations that treat you as little more than a trained consumer. They want to either sell you something or get you into a state where one of their advertisers or affiliates can sell to you. Social research has shown that just a tad anxious and maybe a bit down is the ideal condition. No media is neutral. They all have agendas.
So get an education so you can think critically for yourself, or perish. I'm not saying you need a degree, the school of life will suffice, you just need to learn to think. It is exactly the same when it comes to developing as a trader. You must think critically and you MUST learn to be an independent thinker. I quite like rod178's tag line: "Better a goat than a sheep". This captures the concept quite well. There are far too many sheople out there.
Now, to get back to the AUD or the Australian economy, consider this piece from a media source. At least it quotes verifiable hard data. It doesn't make the Australian economy seem quite so sick does it?
Note that the data "excludes businesses, residences and luxury goods" so our inflated house prices were not used to inflate the wealth measurement.
Cheer up folks. The Aussie dollar is in great shape. It may be an interesting ride but I think it will be around parity at or around the end of this year. Is that fuzzy enough?
)Firstly, AusDoc, don't insult a man by calling him an "economist". Thems fighting words. Especially to an American.
Yes, we hate our "so called economists" as much as everyone else. It's why the economy normally works better when we don't listen to them. It's worse that anyone actually listens to them. Then again, we're so used to Europeans telling us what to do, that I think it is the way our "economists" can get back at them. In the "well, THEY listen to ME" passive-aggressiveness.
As for the Australian Economy, there's two different aspects. The Housing Bubble and the Economy as a whole. I'd definitely be "long term Bullish" on the Aussie Economy, as a whole. Small population, monstrous amount of land, huge natural resource supplies and livable weather in enough of the country to support its own food production. (It's a net food exporter, in fact)
Add on that Sydney (and to a lesser extent Melbourne) are important financial centers in SE Asia, the RBA seems the only central bank that isn't "hopped up on goofballs" (this isn't an endorsement of their quality, but you're King of the Blind with 1 Eye) and I really am quite Bullish on the next 20+ years of the Australian Economy. This also assumes your government doesn't start taking crazy pills.
All that said, even as the "major" cities become financial centers, which will keep their real estate prices higher, there's always an eventual correction to reality. Which is why I said "You always have to pay the piper". What can't continue forever simply won't.
For Aussie housing, probably the two graphs I'd keep an eye on are these: Exports as a % of GDP & Ores & Metals as a % of exports. It's the reason I'd be both "long-term" Bullish, and medium-term expecting a housing correction. Global asset prices always have a Boom & Bust cycle. The next one would be the likely catalyst for an Aussie housing correction.
The upswing is that Chinese & SE Asian demand for Aussie goods probably never goes away, to any large extent. The value of those goods, however, can drop a lot. This is the problem Canada has. Crude Oil getting back to $50 should be what blows up their Market.
As for China, tea leaves & voodoo would probably be more useful than analyzing their "statistics". But the warpath they've been on is going to run into the problems of lowering US demand in the second half of the year. Being the American, I do get an up-close & personal view of the "facts on the ground". ;D US "core inflation" is low. Practical? Pretty dang high. Food prices are up massively on the year, Gas is again quite high, and the only reason we've "recovered" is Natural Gas & Oil in the Midwest. Plus funny money on Wall Street. This will carry over into the end of the year & Christmas retailing.
This is also part of the reason I've come to view "Core CPI" as a complete fiction. It reflects so very little about the actual reality of situations. Even when making an argument for "fundamental" aspects.
In closing, as I said, I'd be long-term Bullish on the Australian Economy. Great place to invest... just not in real estate at the moment. > At the same time, it does take a while for Real Estate bubbles to explode. Before the GFC, the US retail market peaked in Summer 2005, while the residential peaked in Spring 2007. It took a lot while for the economy to respond to those peaks. So, there's still time. I just wouldn't want to be caught holding the cards during a correction. ;D
Yes, we hate our "so called economists" as much as everyone else. It's why the economy normally works better when we don't listen to them.
It's worse that anyone actually listens to them. Then again, we're so used to Europeans telling us what to do, that I think it is the way our "economists" can get back at them. In the "well, THEY listen to ME" passive-aggressiveness.As for the Australian Economy, there's two different aspects. The Housing Bubble and the Economy as a whole. I'd definitely be "long term Bullish" on the Aussie Economy, as a whole. Small population, monstrous amount of land, huge natural resource supplies and livable weather in enough of the country to support its own food production. (It's a net food exporter, in fact)
Add on that Sydney (and to a lesser extent Melbourne) are important financial centers in SE Asia, the RBA seems the only central bank that isn't "hopped up on goofballs" (this isn't an endorsement of their quality, but you're King of the Blind with 1 Eye) and I really am quite Bullish on the next 20+ years of the Australian Economy. This also assumes your government doesn't start taking crazy pills.
All that said, even as the "major" cities become financial centers, which will keep their real estate prices higher, there's always an eventual correction to reality. Which is why I said "You always have to pay the piper". What can't continue forever simply won't.
For Aussie housing, probably the two graphs I'd keep an eye on are these: Exports as a % of GDP & Ores & Metals as a % of exports. It's the reason I'd be both "long-term" Bullish, and medium-term expecting a housing correction. Global asset prices always have a Boom & Bust cycle. The next one would be the likely catalyst for an Aussie housing correction.
The upswing is that Chinese & SE Asian demand for Aussie goods probably never goes away, to any large extent. The value of those goods, however, can drop a lot. This is the problem Canada has. Crude Oil getting back to $50 should be what blows up their Market.
As for China, tea leaves & voodoo would probably be more useful than analyzing their "statistics". But the warpath they've been on is going to run into the problems of lowering US demand in the second half of the year. Being the American, I do get an up-close & personal view of the "facts on the ground". ;D US "core inflation" is low. Practical? Pretty dang high. Food prices are up massively on the year, Gas is again quite high, and the only reason we've "recovered" is Natural Gas & Oil in the Midwest. Plus funny money on Wall Street. This will carry over into the end of the year & Christmas retailing.
This is also part of the reason I've come to view "Core CPI" as a complete fiction. It reflects so very little about the actual reality of situations. Even when making an argument for "fundamental" aspects.
In closing, as I said, I'd be long-term Bullish on the Australian Economy. Great place to invest... just not in real estate at the moment. >
At the same time, it does take a while for Real Estate bubbles to explode. Before the GFC, the US retail market peaked in Summer 2005, while the residential peaked in Spring 2007. It took a lot while for the economy to respond to those peaks. So, there's still time. I just wouldn't want to be caught holding the cards during a correction. ;DAh sqa, thanks for getting back to this thread. I was worried that I may actually have offended you. That would be a crime I've no wish to commit.
We may just have to agree to disagree. I am quite clear that there is no bubble here. Rather than use such loose economist talk though, how about providing a definition of your bubble. Then I may be able to diagnose where you are going wrong.
Incidentally, I made over $2m in after tax profits from residential real estate investing in Australia between 1990 and 1999 alone. I am quite familiar with the market. I know real estate well and am regularly amazed at how little many people who talk about it actually know. I will be interested to see your definitions and perhaps learn your sources.
I think our Australian governments, of all political persuasions, actually live on crazy pills. I think it must be mandated somewhere at a global level because its a complaint I hear in every country I've visited. As for the RBA, I agree with Clifford Bennett who calls them the Reverse Bank of Australia. Hopeless.
You keep talking about correction to reality. I think there may be too many assumptions embedded in there. We do actually regularly have real estate market corrections you know. All markets fluctuate. There are always people to put a spin on things and endless hordes who like to grizzle and grumble. Some get stuck on an idea and fail to update it even when confronted with contrary evidence. Despite all of these and other contributors to mass psychology there is still no support from mere social perception for the bubble notion.
The suggestion that deteriorating balance of trade due to a drop - even a precipitous one - in commodity prices will provoke a housing correction is superficial fiction. It must be difficult for you to understand viewing through American eyes, but the entire structure of our economy and the place of real estate in it differ greatly from the situation you are more familiar with at home.
We have faced crises just like everyone else. We were part of the G when the GFC happened. Our economy, like all others, is far from perfect. Yet we weather the storms, keeping our real estate values soundly intact. We will continue to do so. Nothing about our present values represents any kind of bubble that should cause any worry about some kind of bursting experience. While we will always have our share of grumblers our affordability indices show no cause for concern - complaints, of course, but concern, no.
I do completely agree with something you said earlier though. Our banks are far too concentrated in real estate. Indeed, it is almost all of their real value (the mortgages they hold). They certainly cannot handle a real estate valuation crash without immense pain. However, this is nowhere near the worry or threat that some people try to make out. It is very well known and is being gradually addressed (which is the only way possible). If you were investing in banks this would certainly come up in your due diligence but it doesn't stop massive investment in the banks. There are reasons for that, it is a clearly manageable risk.
Anyway, I'm more than happy to continue this discussion but I don't want to put you under needless pressure. If you're happy to define your terms and make a case then I'm all ears (or is it eyes... hmmm) but I'm equally happy to let you off that hook and agree to disagree, and stay friends.
We may just have to agree to disagree. I am quite clear that there is no bubble here. Rather than use such loose economist talk though, how about providing a definition of your bubble. Then I may be able to diagnose where you are going wrong.
Incidentally, I made over $2m in after tax profits from residential real estate investing in Australia between 1990 and 1999 alone. I am quite familiar with the market. I know real estate well and am regularly amazed at how little many people who talk about it actually know. I will be interested to see your definitions and perhaps learn your sources.
I think our Australian governments, of all political persuasions, actually live on crazy pills. I think it must be mandated somewhere at a global level because its a complaint I hear in every country I've visited. As for the RBA, I agree with Clifford Bennett who calls them the Reverse Bank of Australia. Hopeless.
You keep talking about correction to reality. I think there may be too many assumptions embedded in there. We do actually regularly have real estate market corrections you know. All markets fluctuate. There are always people to put a spin on things and endless hordes who like to grizzle and grumble. Some get stuck on an idea and fail to update it even when confronted with contrary evidence. Despite all of these and other contributors to mass psychology there is still no support from mere social perception for the bubble notion.
The suggestion that deteriorating balance of trade due to a drop - even a precipitous one - in commodity prices will provoke a housing correction is superficial fiction. It must be difficult for you to understand viewing through American eyes, but the entire structure of our economy and the place of real estate in it differ greatly from the situation you are more familiar with at home.
We have faced crises just like everyone else. We were part of the G when the GFC happened. Our economy, like all others, is far from perfect. Yet we weather the storms, keeping our real estate values soundly intact. We will continue to do so. Nothing about our present values represents any kind of bubble that should cause any worry about some kind of bursting experience. While we will always have our share of grumblers our affordability indices show no cause for concern - complaints, of course, but concern, no.
I do completely agree with something you said earlier though. Our banks are far too concentrated in real estate. Indeed, it is almost all of their real value (the mortgages they hold). They certainly cannot handle a real estate valuation crash without immense pain. However, this is nowhere near the worry or threat that some people try to make out. It is very well known and is being gradually addressed (which is the only way possible). If you were investing in banks this would certainly come up in your due diligence but it doesn't stop massive investment in the banks. There are reasons for that, it is a clearly manageable risk.
Anyway, I'm more than happy to continue this discussion but I don't want to put you under needless pressure. If you're happy to define your terms and make a case then I'm all ears (or is it eyes... hmmm) but I'm equally happy to let you off that hook and agree to disagree, and stay friends.
I find the following comment both telling and amusing.
...especially coming from an American.) What's that saying about glass houses and throwing stones?
The populist idea being pumped that China's data cannot be trusted is utter nonsense. However, the US has been caught with its pants down in this department. There must be a Department of Rubbery Figures And Outright Lies, no wait, it would be private enterprise on contract to governments wouldn't it... >
For the record, I studied in the US for some years, have many close American friends, am definitely not anti-American, and do appreciate the roles played from time to time by the US in international relations. A couple of my "yank" friends are far more damning in their criticism of most things American, not least at present the Bush legacy once known as Iraq. What a US foreign policy disaster that continues to be.
...especially coming from an American.
) What's that saying about glass houses and throwing stones?The populist idea being pumped that China's data cannot be trusted is utter nonsense. However, the US has been caught with its pants down in this department. There must be a Department of Rubbery Figures And Outright Lies, no wait, it would be private enterprise on contract to governments wouldn't it... >
For the record, I studied in the US for some years, have many close American friends, am definitely not anti-American, and do appreciate the roles played from time to time by the US in international relations. A couple of my "yank" friends are far more damning in their criticism of most things American, not least at present the Bush legacy once known as Iraq. What a US foreign policy disaster that continues to be.
A "big bank" view tweeted by Chris Lori yesterday.
http://screencast.com/t/oVLuTi32
I think it may be from UBS. Their views do conceptually cohere and they are at least consistent with their usual line of thinking. Given their bearish posture it would be wise to be on the lookout for longs though... ;D
http://screencast.com/t/oVLuTi32
I think it may be from UBS. Their views do conceptually cohere and they are at least consistent with their usual line of thinking. Given their bearish posture it would be wise to be on the lookout for longs though... ;D
shopster said:
Yes, that's the $64 thousand dollar question isn't it. Chris Lori teaches a very technical approach to trading but maintains that keeping informed about fundamentals is important. I happen to agree but that isn't much help to most people really. It is easy to end up rather confused.
My view is that maintaining an awareness of the trading context that comes from fundamentals is the worst explained and taught area in all of so-called trader education. Most people are completely unprepared for this task. Quite simply, most lack sufficient knowledge of the fundamentals and skills in interpreting their likely impact to be able to build them meaningfully into an effective trading plan. (Let's be honest, most retail traders don't even have a written trading plan, much less a proven effective one, and just can't be taken seriously.) Still, we can't blame 'normal' people when supposedly expert economists demonstrate time and again that they certainly don't have a clue.
So if we accept that most people are never going to undertake a serious and effective comprehensive education in economics or finance we end up with various possibilities. One option is to completely ignore fundamentals, to be a purely technical trader. Another is to adopt one or a very select few advisory sources in which some reasoned trust can be developed and then work out how to actually use such a service in an effective way. Another might be to build a plan around specialising in one or two key economic indicators and the way they impact your chosen market or markets.
I guess the options are many and varied really. What's important is achieving real understanding and maintaining focus in application. Just grabbing a bit of information from here, there and everywhere, or even just relying on a favoured source or two sometimes, maybe, if you feel like it, or trying to get by with a half-cocked understanding, just isn't going to cut the mustard.
The truth is, as every trader knows, we trade price now with some expectation of where it will probably go at some time in the future. Our time frames all differ, but this remains true whether you are scalping a fast-moving market or entering a long-term position trade. We have all seen times when markets behaved just like economic theory (and remember, that's all any economics is, just theory) predicts and times when it did the opposite and times when it did something else. Defenders of the economics faith would say that the theory was always right but that traders sometimes misjudge the timing.
I would argue that while much economic theory is sound enough, it is unsuited to the application of informing short term trading. Sure, sometimes it works out, but sometimes it doesn't. The reliability and validity just don't stack up all that favourably for short time frames. I find excuses like, "oh, the data was well anticipated and already priced in" or this beauty, "the results disappointed the market" and similar other post-event attempts at explaining away the uselessness of fundamentals to traders to be quite feeble, though sometimes highly amusing.
Another thing I find amusing is the differing "orthodoxy" in perspectives from various sources. Maybe most people look at the wide variety of views opined by economists, especially big bank and major fund economists, and just shrug it off. I find the diversity fascinating and can have a good giggle at the way they squirm when the evidence that they have been incredibly wrong for ages finally comes home to roost. To me, it isn't that they can be so wrong for so long that is amazing but that anyone still believes that any one of them is ever right.
Market movements are phenomena best explained by mass psychology, not economics. I like to think of it as being a lot like the ocean. We have waves, and swell and tides in the movement of kinetic energy and we have very similar movements of emotional energy in all large markets. I have a good grasp of economics and a better one of psychology and I still reckon that most retail traders are far better off concentrating on being excellent technical traders. The smart thing to do when big economic data is about to hit the market is to not be there, or accept that in reality one is just gambling.
Anyway shopster, that's my take on it. Perhaps the short answer could be, "very, very carefully" and a better answer might be simply: "you don't."
Alpha-Bet said:
That's fair enough, especially if half of what he says just can't be understood. I once thought of him as just another talking head but admit I was wrong. His knowledge of just about everything in global markets is encyclopaedic and he does actually know what he's talking about. My only concern is that he may sometimes have to play the book a bit for his employer but he can't really be blamed for doing his job. I wish I had his understanding of the markets but when it comes to his trade ideas, let's just say that I'm much happier with my own.
