Entertainment & Music The Big Short Movie

We got through the GFC on a once in a lifetime mining boom linked to China's emergence as an economic powerhouse, without that we'd have been in the mess with everyone else.

Our own market is in the exact same position should Australia experience something that causes unemployment on a wider scale, we're seeing it a bit in Perth right now.

There is a reason that APRA has been scrambling to change the banks capital holdings, the Sydney market over the past two years had actually created our own "sub-prime" exposure.

I do agree our regulation is better and to date our economy has held up in the transition away from mining but there is certainly some risk of the same thing happening here, it's a small risk but it's there.

 

Is buying an investment property in 2016 in Sydney a good idea?

Umm.....NO? Why? Well it's not because of a movie and issues that happened in America. It's because we've just had a boom. Sure, there might be pockets of good value, and a bargain here & there, but I'd be treading very carefully buying in Sydney just yet.

So, are you really asking "Is buying property in AUSTRALIA a good idea?" In which case, I would agree with most of the above posters, that our Banks & their policies are different to the US ones.

 

America was leading the last crisis in the world. Australia is not doing it now. America didn't depend on anybody that's why it recovered pretty fast (less then 10 years). Australia's economy is depending on China most of the time and to change that it needs a lot of time, decades I would say. Problems in China are a lot worse than they were in America 10 years ago. Commies got lucky in 2008 that's why Australia barely noticed the crisis, but now that can't do anything, because their problems are not from the outside source, their problems are within themselves. So, in my view Australia has a lot more problems then US had 10 years ago. To see how it will all go, it's better to remember the 97-98 Asian crisis and Japans fate since the early 90s. There is still hope that I'm wrong.

 

Is buying an investment property in 2016 in sydney a good idea?

Broadly, following state cycles is a smart move however,IMHO the proportion of risk that lies within the market, year or city is much less than the extent it lies within the individual investor.

I have seen this time and time again. What is a bad proposition for one person can be a diamond gem for another.

 

If you believe the housing market is going to collapse, you short the companies that are involved in the housing industry.

Timing and cash flow is everything. You can be right long term and be killed short term.

To place a short for a long term bet requires capital because you are using highly leveraged instruments to do so - eg CFDs.

Imo, people who have little or no knowledge of trading should steer clear of CFDs and options.

 

It's interesting that Australia is supposedly in a property bubble that started forming in 1998/2000, 16 to 18 years ago. Yet we are continously compared to Japan, which had a real economic bubble form between 1986 to 1991 in which real estate and stock market prices were greatly inflated - a 5 year period of rapid acceleration of asset prices and overheated economic activity. This makes no sense to me. Although some areas of Australian real estate have experienced significant price growth in the last 16 to 18 years and particularly in Sydney in the last couple of years, you can't say Australia has seen rapid acceleration of asset prices and overheated economic activity during that time period. In fact, some sectors of real estate are already falling a lot and some sectors of the economy appear to be moving into recession.

The other factor that makes this comparison invalid IMO is that at the time is that over-confidence and speculation regarding asset and stock prices was closely associated with excessive monetary easing policy. Whereas in 2007 and 2015, Australia tightened monetary policy.

Remember Japan was not just a real estate bubble, it was an economic bubble affecting real estate, the stock market and commodities. I don't see anyone in Australia saying the share market is in the biggest bubble ever, it will crash and be a bloodbath etc, etc. That's the second point that makes the comparison invalid.

Besides easing of lending policy, which is not happening in Australia, there were also changes to the tax system, which made it more attractive to invest in property in Japan. This is not happening in Australia and another point that I feel makes the comparison invalid.

This is how a real bubble looks: in 1 year, prices per square metre of land increased 45% in Tokyo residential areas and 122% in Tokyo commercial districts. The Japanese yen also reached reached record highs agaist the USD, whereas in Australia, the Australian dollar has decreased a lot compared to the USD.

There are also other factors at play like some unsual laws relating to rents, which affected prices in Japan but do not apply in Australia.

To me, it is intellectually lazy to say the Australian real estate market is in a property bubble, Japan had a property bubble, Japan crashed and therefore Australia will crash too. Ditto Ireland, ditto USA.

And before you accuse me of being overly optomistic, I am expecting in 2016 that prices in Sydney, Melbourne and Perth will fall. Probably Brisbane won't. Don't know about Darwin and Adelaide.

In terms of economy, I feel like we are moving into a recession and it would not surprise me if this becomes official some time this year.

Probably still too optomistic for some. Anything short of a catastrophic property price crash is seen as optomistic these days

 

@Perthguy If everyone saw the opportunities in markets as we do, then it would make it very hard for investors to get great deals.

I have bought most of my properties and deals when the Doom and Gloomers were out in full force. I owe them a hell of a lot to be honest.

 

Mortgage arrears hit decade low: Fitch Ratings - ABC News (Australian Broadcasting Corporation)

 

I saw The Big Short on Wednesday night.

I found it excellent, and probably so would anybody else who liked Michael Lewis's books such as Liar's Poker and Moneyball.

Here's the trailer:-



And the explanation by Margot Robbie of CDOs and Selena Gomez of Synthetic CDOs can only be described as outstanding.

 

D'oh I opened thinking it was a review for the movie !

Is it worth seeing? Great cast.

And for the record, I agree with Skater - not a good time to buy in Sydney as they've gone past 12 o'clock I reckon...

 

Good movie.. Can't say I understood much of it though!

 

Banks are far more regulated in Australia, mainly by APRA and ASIC. There are also other government bodies that have influence. We use a 4 pillar banking policy to prevent mergers of big banks and for years regulation was so strict that very few foreign banks could operate in Australia. There is also much more regulation around financial products. You would be hard pressed to find such complex with 'hidden' bad assets. In comparison, US banking system is much less regulated and are highly fragmented. Their financial and commodity markets are regulated by different and independent bodies to banks, all with their own agendas. Financial prodcuts can be exceptionally complex.

So rather than banks being greedy and stupid, as the movie suggests, a liquidity crunch will probably be triggered by something else.

 

Saw the Big Short today........it was excellent.

Very interesting story behind the movie.

 

I must see the movie soon

Back to Sydney market - I certainly would not be buying in Sydney now because the market has peaked and some markets in Sydney are starting to fall. This cycle is over, buying now would be financial suicide IMO because we may see further drops.


USA/Australia financial systems is like chalk and cheese.

In US they have what is called non recourse loans which means the people can walk away from their loan, not the case in Australia

Also I don't see property prices in Australia falling 70% as was the case in some markets in USA.

MTR

 

Outstanding.

Here's the trailer:-

 

We loved the movie it was fun to watch.

But it's more about the "system" than housing itself. A lot of synthetic securities, and collections of derivatives of securities.

Australia is not run the same way, although we have our own unique risks to worry about.

 

Yeah....I'm going to agree in principle with most of your argument . It's true that Australian banks are more regulated. Especially with consideration to oversight, responsible lending, recourse , and LMI. But their Capital requirements arent especially different to US Banks.

Australian banks have a monopoly and I would put it to you that they didnt need to take the risks US banks took, for profits... had they needed to chase profits for growth, I don't believe for a moment that they wouldn't have had a red hot crack at lowering lending standards way way down as well....

But yes, they are more effectively regulated and that plus their monopoly , and the subsequent massive profits, probably kept them from getting too stupid....

But I will correct one of your arguments . Australia's banking deregulation commenced in earnest in the late 80's and capital requirements were reduced dramatically...and I mean dramatically- allowing far far far far far more competition, and allowing our banks to leverage up to far far far greater levels.

Foreign banks , both directly via lenders such as Citi, HSBC, ING, Rabo, Bankwest( until CBA swallowed them post GFC) GE Money ( who until the GFC funded Wizard before dumping and running from Australias market post GFC ) and indirectly , via investing massively in Australian RMBS "paper", have "traded" here for @ 30 years, and underpin Australia's mortgage business. Where does all the money for mortgages comes from? Foreign banks provide loooooooooooots of it- let me assure you. Australian banks dont have anywhere near enough retail deposits of their own to cover all their exposure....not even close.

 

I read something recently that buying property via a SMSF it is a non / limited recourse loan...

Is this correct? If so, that scares me.

 

Spot on euro73........

 

I saw the movie last night. I thought it was very well executed, with the side explanations. Frustrating though, to see how it played out. It took me a while to realise it was Brad Pitt. Well worth a look.