Financial oppression

We take a high level perspective on the state of government balance sheets and conclude that debt holders have to be prepared to enter an age of 'financial oppression''. - Morgan Stanley Australia 26.08.10

How will you prepare yourself for such a state to survive it and indeed to grow and thrive in it?

Stocks

For now the Euro's fall has ceased, and it is starting to creep up once more. This conversely means the US Dollar's recent rally has turned a corner to head south, which is another reason that commodity prices are back into the green, along with resource stock prices." says Dr  Cowie
He reckons the last six weeks of the year could be very good for resource investors. Good advice to act on now

Property bubble or not?

Australia's most vocal proponent of the country's property market Friday challenged Wall Street investment guru Jeremy Grantham to wager A$100 million on the outlook for the country's housing prices. Christopher Joye, managing director of property research group Rismark International, challenged his equally vocal sparring partner GMO Capital founder and chief investment strategist Grantham to put his "money where your mouth is" on the issue of whether Australia really is in a property bubble. Grantham's downbeat views on Australia's home prices are "sensationalist and spurious," Joye said. Joye challenged Grantham to bet the A$100 million over a three-year term, basing the outcome of the bet on movements in the RP Data-Rismark Australian Capital Cities Dwelling Price Index. For every 1% rise in the index, Grantham would pay away A$1 million, Joye said. But for every 1% decline in the index, Grantham would receive A$1 million away. The trade would be settled at the end of three years with monthly margining to manage credit risk. The high stakes wager comes on fresh warnings from Grantham in his latest quarterly investment letter that house prices in Australia are set to fall as affordability is stretched and consumers are already spending too much on homes. Australian house prices have grown strongly over the last 20 years. In major capital cities such as Sydney and Melbourne, the average median home price has doubled in value in eight years and quadrupled in 21 years.
"If you actually have any conviction regarding your predictions about the 'time-bomb' that is Australia's A$3.5 trillion housing market, we would ask that you put your money where you mouth is," Joye said. Grantham has repeatedly argued house prices in Australia are overvalued warning a speculative bubble was set to burst. At one time, he estimated housing in Australia was overvalued by 42%.
The Reserve Bank of Australia has also waded into the debate saying the bulk of mortgage-related debt is held by those most able to service it. RBA Deputy Governor Ric Battellino said earlier this year the ratio of house prices to income "is not that different from most other countries." Joye has been supported by analysts at Goldman Sachs, Westpac, Commonwealth Bank of Australia, Australia and New Zealand Banking Group and HSBC. Strong population growth and claims there is a chronic shortage of housing in Australia are often cited as reasons to expect strong demand will underpin house price into the future.
But some foreign banks, including Morgan Stanley and the International Monetary Fund, have called the property market overvalued.

Warring over the issue of house prices in Australia has resulted in some strange goings on. Academic Steven Keen walked from the nation's capital Canberra to its tallest peak at the start of the year having lost a bet with economist Rory Robertson that house prices would drop by up to 40%.

Property

If you want to grow your own significant property portfolio, you need to own properties that provide wealth-producing rates of returns.

This means using one or all of the ways listed below:
1)buying a property below its intrinsic value, in an area that outperforms the average over the long term
2) one to which you can add value so you can create some capital growth. This could be through renovations, refurbishment or redevelopment.

This will bring long term sustainable growth

off we go

What do entrepreneurs do? well, not necessarily always go up in balloons but have fun as part of their lives, and what a great birds eye view to see property and combine it with having a great time with friends, so come fly away with me...

our new PM

What is an entrepreneur? According to Wikipedia "An entrepreneur is a person who has possession of a new enterprise, venture or idea and assumes significant accountability for the inherent risks and the outcome"
According to this definition Ms Julia Gillard Australia's new Prime Minister fits the description as she is now in charge of a new enterprise, namely the wise stewardship of Australia.
As such I would like to wish Ms Gillard three things-wisdom, discernment and strength to pursue strong leadership in and of the community of Australian citizens because as Ms Gillard said "No matter which industry, which region or which job – each of us has a stake in the success of all."
Amen to that!

Becoming a millionaire

Now that we can get back on track after our interlude with the GFC, here are some stats that may be of interest to the entrepreneurial woman:

• heading overseas has been of great benefit to the Entrepreneurial woman multimillionaire and buying up big when others were selling at bottom prices, yes, there's always an up to every down! Holding off shore interests has accelerated over the years as globalisation has become more widespread and accepted by the entrepreneur
  
• stick with property even though it was hit by the GFC it remains one of the best ways to become a multimillionaire due to relatively low barriers to enter the market as increases in valuations have grown. buy and hold is the most beneficial property tactic to have. the gain is relatively slow but consistent

Women entrepreneurs and property

Not all property investors, whether they are women or men, will reap the rewards of the next phase of the property cycle because our rising interest rates and lowered affordability which won’t affect everyone equally. The staggering house price boom is dividing our cities into haves and have nots. Higher interest rates will mean that fewer builders will be building the apartments we need to accommodate all these tenants of the future and rents will keep skyrocketing upwards. The expanding population which is increasing by around 9,800 people each week and a shortage of supply, means that despite rising interest rates home owners and investors are feeling confident enough to buy a new home or their next investment. Investors should expect interest rates to keep rising a few more percentage points over the next few years, but they should be comforted by the fact that this will occur because property values will keep rising. So to win “the game” of property investment you have to budget for higher interest rates and own the right type of property. One that has a level of scarcity which means it will be in continuous strong demand by owner occupiers (to keep pushing up its value) and tenants (to help subsidise your mortgage); in the right location (one that has outperformed the long term averages) at the right time in the property cycle (that would be now in many states) and for the right price.

More women millionaires

A new study, conducted by Tulip Financial Research in the U.K, has revealed that women’s incomes are thriving more than ever before, even through the GFC. The study found that the number of females earning the millionaire title has increased by a whopping 40 per cent over the past five years. A significant number of women are making more decisions about investments and the family income.
Men have traditionally invested in stocks, where great losses have been sustained through the GFC but women instead chosen to invest their money into the property market and businesses to make their cash.
Tulip’s John Clemens explained, "If you go back 15 years, 90 per cent of the decisions were made by men. Women are a little more risk averse, but they have invested in property which as been more resilient in the recession." Not only is it the women in high powered business profiles
that were gaining millionaire status, but also the stay-at-home women who are coming up with innovative and ground-breaking business ideas.
So find a niche market, promote it, make strategic alliances and "work smarter, not harder."

Australian women entrepreneurs in property

Reserve Bank of Australia governor Glenn Stevens warns of a housing bubble and we should take note of what he says, for a couple of reasons. First, he's the man who controls the levers, and when he says that he is going to lift interest rates to calm us down and resume our seats at the housing auctions, he no doubt will raise the interest rates again. Second, we must remember that interest rates can be blunt instruments, whose early effects are not always quickly seen. Even with the best of intentions the Reserve Bank may overshoot and pop the bubble rather than have it deflate gently.Here's the message: in the short term property can fall like anything else. In the US, the average home is now worth less than it was in 1980. As Percy Allan's newsletter Market Timing points out, this is asset deflation on a scale not seen since the Depression of the 1930s.According to BIS Shrapnel, the average Sydney house, at $600,000 is worth 7 1/2 times what it was 30 years ago. The situation in other state capitals is similar. "Americans are joining tea parties to vent frustration at their diminishing wealth brought about by a housing glut," says Allan. "By contrast Australia's [huge] housing shortage is creating two classes of city dwellers; those with property who fear further residential development will compromise their lifestyles and tenants who know that home ownership is getting beyond their reach."A country the size of Australia should not have a residential land shortage, but it does.Allan says: "Until the concentration of population in a few state capitals is reversed, the housing crisis will grow worse since urban consolidation is meeting growing resistance in the absence of mass transit systems to alleviate metropolitan congestion."Certainly that's true, but does that mean that the interest rates will be cranked up some more? The answer to that is a "yes" and when that happens, things could get even trickier. The median price of a single-family home during the past 40 years in the all-important US real estate market between 1991 and 2005, housing prices increase at a rapid rate, as did the rate of increase.Housing prices have dropped 35 per cent from the 2005 peak. A buyer who purchased the median priced single-family house at the 1979 peak has seen that house lose value (a bit more than a 4 per cent loss).Not an impressive performance considering that it has taken place over three decades. Could Australian house prices fall in similar manner? Sure, says Intelligent Investor research director Greg Hoffman. "The US property market meltdown should dispel this myth immediately that property prices cannot fall," he says. "Anyone who is not convinced should look at some compelling evidence from around the world that shows that property prices can, and do, fall."Initially it can be hard to accept that prices may fall, especially in, say, Japan, where it is possible to get a mortgage loan at interest rates of less than 2 per cent a year but prices in Japan have fallen uninterrupted for more than 15 years. Hoffman says the reason people don't buy is the exact opposite to how Australians justify incredibly low yields: What use is a high rental yield if the value of your capital depreciates every year?There are substantial differences between Japan and Australia: the former is earthquake prone, it's bad form to live in someone else's house and people don't move often. If they do, they'll often knock down the previous owners' perfectly good dwelling and build a new one. In the early 90s, the economy was motoring, absolutely everyone had a job and interest rates were low."These were all reasons provided to justify high prices. Not only that, but Japan has 128 million people to squeeze into a land area half the size of NSW, " says Hoffman. But fall they did: Organisation for Economic Co-operation and Development data shows real Japanese property prices are more than 40 per cent lower than their 1992 peak.Europe provides further examples. OECD data shows German property prices falling since 1991. Again, it's a country where mortgage rates are lower than rental yields, but past experience is scaring off investors.The Swiss endured 11 straight years of falling property prices through the 90s and into this decade. There has been some relief in recent years, but those who bought in 1990 are still a long way behind.Hoffman suggests Australians need to be wary of the most dangerous thought in investing: that property prices cannot fall."None of the European movements mean property prices have to fall in Australia," he says. "They have looked expensive for a number of years now but, despite rising interest rates, we're yet to see a market-wide correction."But to believe that prices can't fall is exactly the thinking that allowed the banking gurus to turn NINJA [no income, no job, no assets] loans into supposedly indestructible mortgage-backed securities in the US."The run-up in house prices has coincided with an equally impressive run-up in debt owed by Australian households. Despite record low unemployment and an 18-year economic miracle, our savings rate at one point fell below zero. At least now we're spending less than we earn, but we're still not saving much, even with superannuation.Australian house prices rose 13.6 per cent last year and their strength seems to have continued into this year. House prices in Australia have performed far better than those in Britain and US, thanks in large part to the stronger performance of the Australian economy. That's even stronger than in China where house prices are up 10.7 per cent during the past year.So where to from here? AMP Capital's head of investment Strategy and chief economist Shane Oliver is not overly fussed. He agrees that Australian housing is expensive but points out that it is supported by an undersupply. "Worsening affordability is likely to constrain average house price growth to around 5 per cent over the year ahead," he says. "Expensive housing and high household debt levels are a risk, but in the absence of higher unemployment, much higher interest rates or a big supply increase, a US-style collapse in Australian house prices is unlikely. None of these seem likely in the short term. In fact, none of these seem likely any time soon."

Investing in Property caution

Many home buyers and investors are being swept up in a frenzy of fear and greed as property markets hot up. These buyers are setting themselves up for problems in the future.Traditionally when we come out of the slowdown phase of the property cycle and enter a more buoyant market, buyers who were hesitant to make a move start to emerge and in turn, activity increases.However, now many investors, who feel they missed out over the last year as they watched others make good money in property are snapping up properties the day they come on the market, sometimes at thousands above the asking price.
Many of these “green” investors are making poor judgement calls, buying properties without doing their due diligence and paying the same high price for their mistakes as others have before them.
The take home message is that now, more than ever, you need to avoid getting swept up in the housing market hype and keep a level head when it comes to purchasing property, whether you’re a homeowner or investor.

With the market being selective as to which properties are increasing in value, it is critical that you do your homework and remember that you can’t just buy any property and become a successful property investor. You need to look for the type of property that will out perform the averages in the long term, regardless of cyclical highs and lows.

How to successfully promote your entrepreneurial business

To succeed as an entrepreneur, especially a woman entrepreneur you need a good dose of self confidence is a prerequisite. Pushing yourself into the market place is at times a necessity.But what guidelines should be followed when interacting with potential clients?Getting super-promotional is understandable but can cause a difficult situation to arrise. In order to promote your entrepreneurial idea you may find that you are ready to promote your business or product or idea and you may be ready to sell it but the timing may not be right for the client and they are not ready to listen let alone buy or support in any way.

Before jumping in with the sales message and an over exhuberant confidence consideration needs to be given to the context of the situation and the people involved. There is always a need to stop, listen, and appropriately connect when the situation either lends itself or you are able to steer the conversation into the appropriate direction. So to promote your entrepreneurial business don't just tell everyone about it and then take off. You need to placate a relationship, listen and respond appropriately, build your credibility and offer your services when the situation presents itself and you have the foundation on which to successfully build your entrepreneurial business.

time to flower

watch trends in the economy both local and global, take note, think laterally, find niche and flourish

New markets

yesterday, after a very full and productive weekend, I was sitting at a club with my friend listening to jazz and just enjoying resting my feet, when a couple got up and started dancing. wow, they were so good.
as we watched more women and finally a couple of men got up and started dancing, just having a great time. all these people were of the "baby boomer" age. ok, I thought, these people are here to have fun, dance, drink and spend some money and generally enjoy life. this is a niche market I want to get into and as the Universe always responds in my reading today I came across this brilliant article. have a read, it is just so true and correct
http://www.itsinthestarsonline.com/verve/_resources/The-old-generational-groups-of-Baby-Boomers-Generation-X-and-Y-need-rethinking.pdf
I'm in guys!
Whats the next step?

Something new afoot

A major global law firm Allen & Overy are opening shop in Australia. The move to open this Australian practice had been about 10 years in the planning.
It was based on confidence in the economic prospects of Australia and the Asia-Pacific region. "If you look forward about 10 years, this region is where the economic growth is going to be," he said. "The importance of Australia in the global economy is clearly increasing." The arrival of Allen & Overy comes just weeks after another global firm, Norton Rose, finalised its merger with Australia's Deacons.
The move by Allen & Overy was described last night as "masterful" by law firm consultant George Beaton, who predicted it would result in the creation of a firm with extremely high profitability. "They have created a firm with critical mass overnight."
Dr Beaton said Allen & Overy had "picked the eyes" out of the most profitable practice areas and was likely to have a profit margin approaching 50 per cent.
Allen & Overy's core practice areas will be energy, mining and natural resources; finance; infrastructure; investment funds; mergers and acquisitions; private equity; tax; and telecoms, media and technology.
Take note Australian entrepreneurs, this is the areas of Australian investment to get into. Such world companies do not make such major moves with out great investigation and deliberation.

UN says world economy could see 'double dip recession'

21/01/2010 The world economy will bounce back in 2010 with growth of 2.4 percent but could slump back into recession if state stimulus spending is wound up too early, the United Nations said.The UN's preliminary report on the "World Economic Situation and Prospects 2010" cautioned that a "premature" removal of state support could trigger the second part of a "double dip recession" after last year's contraction.World gross product fell by an estimated 2.2 percent in 2009"Premised on a continued supportive policy stance worldwide, a mild growth of 2.4 percent is forecast" for 2010"Mild" growth of five percent in world trade volume was forecast for this year, after falling by a record 13 percent last year.The UN warned that the recovery was uneven and conditions for sustained growth were fragile, with consumer demand and investment remaining weak as unemployment continued to rise, especially in wealthy nations.It cautioned against any early move by governments to unwind a total of about 2.6 trillion dollars of economic stimulus measures for 2009-2010 in the wake of the financial and economic crises."The rebound in domestic demand remains tentative at best in many economies and is far from self sustaining," the report said."Much of the rebound in the real economy is due to the strong fiscal stimulus provided by governments in a large number of developed and developing countries."Industry was also restocking inventories it had run down during the crisis, reviving production, the report added.
An additional 20 trillion dollars of taxpayers' money was set aside to rescue the financial sector after the credit crunch toppled major banks.It also tempered optimism about the resurgence in stock markets."The stronger than expected rebound in equity prices worldwide may belie the fact that there are still problems remaining in financial sectors in major economies which continue to constrain credit availability and could lead to more failures of financial institutions in the near future," the report said.The report indicated that developing and least developed countries had managed to sustain growth through the crisis, albeit at low levels, allowing them to recover much faster this year.
The outlook for developed economies was more subdued, with average growth of about 1.3 percent forecast for 2010 after a decline of 3.5 percent last year.
The UN predicted that China's output would grow by 8.8 percent in 2010, just 0.7 of a percentage point up on last year and still short of the double digit rates recorded in the years up to 2007.It also forecast growth of 2.1 percent in US output this year after a drop of 2.5 percent in 2009.

What's your choice?

We live in a special time. Living in these turbulent economic times is a time when fortunes will be made by those who grab the opportunity by the tail, and not be put off by the fear. I have always said that it is the time where the divide between the rich and the average Australian is going to widen into a gaping chasm.
Yet Australia still is the land of opportunity and becoming wealthy is not just a dream but can become a reality for those who have courage and foresight to take steps to better their situation in life by acting NOW.
Look
learn
discern
leap

2010 property growth

Tony Richards, the reserve banks head economic analyst warns that 2010 may be the setting for a housing bubble if supply does not keep up with the growing population. Housing prices may move towards “undesirably” strong growth. He also warned rising housing prices may not accurately reflect the wealth of the nation, as continued growth would put housing affordability out of reach for many people. "When the price of housing rises, higher-income houses tend to benefit at the expense of lower-income households," he said. In this situation very strong growth in housing prices become unhelpful from a social perspective. He made the bold statement ''Nevertheless, if housing affordability is a concern, it will be necessary to keep working to reduce impediments to the construction of new housing, both inside our cities and at the fringes.'' What we are seeing is a lack of supply. Prices have been resilient, but the supply is not keeping up with growing demand which is causing the problem, and we will see inflationary pressure arising. And from personal experience the greatest impediments to the construction of new housing are the local councils who want to wield their powerstick at times in non rational ways.
A cautionary note: If we get this wrong there is a big economic risk

2010 world breaking point

A new year, a new decade has begun so its worthy of a new blog entry.
Life has been tiring and much has happened.
2009 has been a time when some have succeeded, some floundered and some have just about given up. I will post a short forcast for 2010.
2010 - A Breaking Point for Whole World?
Question:Is it possible that in 2010 that USA will be as badly off as Argentina was a decade ago?
Answer: Argentina's debts were not as bad as those of the USA, they were not fighting in foreign countries and depleting their treasury as the US, nor were they an empire.
The worst news is that when America crashes, no one around the world should be happy about it because this is going to affect the entire planet. It’s kind of like the collapse of the Roman Empire that was followed by a Dark Age in the economy. There is no one there to fill the vacuum. China is not going to emerge, as the Trends Journal see it, as a great power. They have 1.3 billion people and a million problems! In 2008, the last numbers that came out, China had 70,000 major riots and disturbances. What are they going to do when people are thrown out of work by the hundreds of millions because the world is not buying cheap Chinese imports which have been flooding the planet to date?
Be prepared, this is going to be a very de-stabilizing period worldwide.