Is it time for wage increases?

[Sarenco]

The whole policy is bogus.

That may be so but you said our currency was being debased. Can you stand up that claim?

Instead, bond yields have gone into negative territory, indicating a recession.

Really? The Eurozone is not currently in recession and this is the first time in recorded financial history that negative yields on government debt are commonplace.

Incidentally, I would have thought you would be cheering QE as it enables governments to maintain their public sectors and welfare programmes.

Property prices are rising fast in capital cities but remain relatively stagnant elsewhere.

Any basis at all for that claim? It's certainly not reflected in the conventional CRE indices.

In the US, a 0.25% rise in interest rates last Jan knocked 8% of market values.

And yet the S&P is up YTD!

It really is a killer when the facts don't back up your idealogical prejudices.

Stock markets are facing into another heavy crash and with it property prices too.

Have you thought about starting a global macro hedge fund?

With such perfect foresight you should make a killing!

 

[TheBigShort]

That may be so but you said our currency was being debased. Can you stand up that claim?

Yes, hitting the printing presses to prop up a currency debases its value. Even if it is dressed up as QE.

Really? The Eurozone is not currently in recession and this is the first time in recorded financial history that negative yields on government debt are commonplace.

That is the point. If we are not in recession dont you think that yields on government debt should be rising and not falling?

Incidentally, I would have thought you would be cheering QE as it enables governments to maintain their public sectors and welfare programmes.

Why would you think I would be cheerleading QE?

Any basis at all for that claim? It's certainly not reflected in the conventional CRE indices.

And yet the S&P is up YTD!

Yes, the S&P is up YTD, the Dow and Nasdaq are at record levels, US unemployment is at 4.9% according to official figures.
But if interest rates rise even 0.25%, stock markets start tumbling.
Dont you think that is odd? With such good economic indicators that stock markets start tanking even at the hint of interest rates rising?
Dont you think it's odd bond yields are negative despite "not being in a recession"?

Unfortunately I cant afford to start up a hedge fund. Im one of those joe soap heads who got burnt in 2008. I had some "investments" in bank stock which tanked. Since then my savings have been depleted through pay cuts and stealth taxes.
Fortunately my wife and I kept our jobs and we did ok in selling a property, but only by complete fluke.
Since 2008 I have been trying to understand what happened, how, why and who or what was responsible. Im no expert, but ive come to the realisation that in this game there are no experts, only self proclaiming experts.
The last time I heard anyone with the foresight to predict a crash, they were laughed out of town too, told to "commit suicide".
But whether another crash occurs or not, the fact that you make light of my views and proclaim to know my 'ideological prejudices', tells me a lot about what you actually know, which by your comments above, is not an awful lot.

 

[TheBigShort]

Any basis at all for that claim? It's certainly not reflected in the conventional CRE indices.

My err, house prices are increasing nationally, but still lag behind Dublin which is not to be unexpected.
But what is fuelling the price rises? The most recent census shows very modest population increases, if not decreases, in all but a few high density areas. Stricter lending conditions are supposedly in place. Central bank figures show lending to private households is flat and wages over the last number of years are almost flat also.
So the bounce in property prices, in Dublin +39% (CSO) since 2013 seems out of kilter with the rest of the economy.

 

[TheBigShort]

Duplicate.

 

[Sarenco]

Yes, hitting the printing presses to prop up a currency debases its value.

How so? If there's no inflation to speak of how is the currency being devalued?

If we are not in recession dont you think that yields on government debt should be rising and not falling?

Eh, no.

Why would you think I would be cheerleading QE?

Because...

...it enables governments to maintain their public sectors and welfare programmes.

Is that not what you're advocating?

But if interest rates rise even 0.25%, stock markets start tumbling.
Dont you think that is odd?

No, it's entirely predictable.

Dont you think it's odd bond yields are negative despite "not being in a recession"?

But we're not in a recession!

 

[Sarenco]

But what is fuelling the price rises?

Limited supply - basic economics.

 

[TheBigShort]

How so? If there's no inflation to speak of how is the currency being devalued?

I beg your pardon. Let me rephrase, hitting the printing presses to prop up a currency will lead to the debasement of the currency. I simply take the step of QE programs as a clear understanding that the currency is being debased.

Eh, no

I do.

Is that not what you're advocating?

Eh, no.

No, it's entirely predictable

Really, you must have made your fortune by now so.
I can understand why stock markets fall under rising interest rates, but I cant gauge by how much they will fall by. My only view on this is that the last time the Federal reserve raised rates by 0.25% there was quite a substantial negative reaction. So if the Federal reserve or ECB has a target of some 2% inflation (and they are not even close to it) and in turn this is what will prompt interest rate hikes, then by my reckoning stock markets are going to sink. And the biggest reason being is that all these current stock market highs are built on new debt, not on capital gains from productivity increases.
Investment funds, pension funds etc will be obliterated, inflation will rocket and the currency debased.

But we're not in a recession!

Correct, we are not in a recession. The economy is growing, unemployment is falling, stock markets are rising.
So why would anyone in their right mind buy government bonds with negative yields?

Limited supply - basic economics

And thats to dismiss the factors that I have pointed out to you. If we are to accept that there are stricter lending conditions, a relatively stagnant population, flat wages and flat household lending then its hard to see how prices have increased by so much so soon.
For sure, the last decade will hold significant pent up demand and I accept that a property crash can 'overshoot' on the downside as much as the upside.
But it still doesn't explain that if wages and lending is flat, then the demand in itself cannot push up the price by so much.

 

[galway_blow_in]

My err, house prices are increasing nationally, but still lag behind Dublin which is not to be unexpected.
But what is fuelling the price rises? The most recent census shows very modest population increases, if not decreases, in all but a few high density areas. Stricter lending conditions are supposedly in place. Central bank figures show lending to private households is flat and wages over the last number of years are almost flat also.
So the bounce in property prices, in Dublin +39% (CSO) since 2013 seems out of kilter with the rest of the economy.

dublins economy is much bigger than it was in 2006 , the economy outside dublin ( galway and cork aside ) is much smaller , there has been a disproportionate level of recovery in dublin since 2012 , its population has risen significantly and its where people migrate to for work , houses in dublin are cheaper than in galway relatively speaking and in my opinion a better buy than in cork too

 

[Firefly]

but ive come to the realisation that in this game there are no experts, only self proclaiming experts.

One of the top things I'm going to drum into my kids!

 

[Firefly]

Kind of, if not managed right. But if managed right it could be akin to a family investing in their childrens education, carrying out necessary home repairs adding value, and buying a more fuel efficient car.
But you are right, using it to pay off the interest on the credit card and building a sun room does sound wasteful. It all depends on how and what it is used for.

Very fair points made there to be fair. However we have seen major cost over-runs by taxpayer funded projects in the past so any capital expenditure should be planned for correctly.

 

[Purple]

We tried borrowing our way out of recession in the 70's...

Given how bad the State sector is at running things and the massive and obscene levels of waste we have I don't understand why anyone thinks taking more money from the productive wealth generating section of the economy and giving it to the wasteful and profligate State to spend is a good idea.

 

[T McGibney]

Sitting on the upperdeck of a Dublin Bus, looking out at all the apartments being built, even I could tell that it was going to end badly.
But very few knew the extent of the crash to come in 2008. Anybody who did stick their heads out and predict a crash were derided publicly and told to go "commit suicide".
The only ones who could have know in anyway the true extent of the borrowing, would have been the banks themselves.
But like I said, we could argue around the houses on this.
In the meantime,another bank, the ECB, is engaged in the biggest gamble of all time.

We all knew but pretended not to. Ditto the Germans, although their chickens took their time to roost.

 

[Purple]

We all knew but pretended not to. Ditto the Germans, although their chickens took their time to roost.

I sold my rental apartment in September 2008 as I know the crash had started. My main source for that conclusion was this site.
I'm a tradesman and no expert so I find it hard to believe that all the people who are smarter than me who were working in the financial industry, on both sides of the fence, didn't see it coming.

 

[TheBigShort]

We all knew but pretended not to. Ditto the Germans, although their chickens took their time to roost.

We did not know the true extent of the crash to come. I sold a property in March 2008. The market had frozen and despite this tge estate agent wanted me to pitch it at peak price. I dropped the price by €20,000 and managed to sell within a few weeks. If I had known the extent of the crash I most probably would have crapped myself and dropped the price more.
If the buyer of my property had known the extent of the crash to come most likely they would not have bought ( it fell by a further €125,000!!).
I was blessed, but not because I 'knew' anything more than anyone else.

 

[Firefly]

We did not know the true extent of the crash to come. I sold a property in March 2008. The market had frozen and despite this tge estate agent wanted me to pitch it at peak price. I dropped the price by €20,000 and managed to sell within a few weeks. If I had known the extent of the crash I most probably would have crapped myself and dropped the price more.
If the buyer of my property had known the extent of the crash to come most likely they would not have bought ( it fell by a further €125,000!!).
I was blessed, but not because I 'knew' anything more than anyone else.

We sold our house in Dublin in March 2008 too! I hope this doesn't turn out to be like the Munster / All Blacks match of '78 where at least 100,000 were at the match!

 

[TheBigShort]

We sold our house in Dublin in March 2008 too! I hope this doesn't turn out to be like the Munster / All Blacks match of '78 where at least 100,000 were at the match!

Ha! Good one.

 

[TheBigShort]

[broken link removed]

Article from David McWilliams yesterday concerning wages and profits.

"One way to look at things is to view high wages as a sign of success. They can be taken as a sign that the economy is healthy and moving in the right direction. Low wages, on the other hand, signal all sorts of problems

 

[Firefly]

[broken link removed]

Article from David McWilliams yesterday concerning wages and profits.

"One way to look at things is to view high wages as a sign of success. They can be taken as a sign that the economy is healthy and moving in the right direction. Low wages, on the other hand, signal all sorts of problems

Maybe he's reading this thread!

 

[Sarenco]

I don't think that anybody would argue that rising real incomes are not a good thing.

The reality, of course, is that while average household incomes have increased dramatically in many emerging economies, average household incomes have been flat (or have even fallen) in most developed economies over the last decade or so. That's the impact of globalisation.

You can't simply magic a positive income trend out of thin air. Without productivity gains, incomes cannot rise in a sustainable fashion.

 

[TheBigShort]

You can't simply magic a positive income trend out of thin air. Without productivity gains, incomes cannot rise in a sustainable fashion.

Obviously.

So instead of the ECB pumping stock markets and property bubbles etc. How about government borrowing at 0% and pumping massive infrastructure in new technologies, medicine, transport, construction, agriculture, etc..etc..

Obviously easier said than done, but at least it offers the opportunity to strive for productivity gains instead of the short-termism of QE that will ultimately fail.