Lateline Business: Macquarie Bank chief economist on the looming depression

Lateline Business - 26/06/2007: Macquarie Bank chief economist on the looming depression (includes link to video)

... bit of a doom-and-gloom report if you ask me ... but some words of caution that are well worth considering anyway!

All I want is 1 more year of good times. Then I'm selling my managed funds, paying off the margin loan, paying off the mortgage and will sits on lots of debt free equity waiting for the next cycle.

I've given up on good times, things are pretty crappy right now. But it doesn't matter some time in the future things will get better and property will boom again. Then shares, then property, etc. So long term things are looking good. Just have to deal with the bad times.

Not so cheery
quoll

Ever the optimist me!

I'm just about to buy another cheap IP or two inter-state and stretch that LVR of mine a bit further. I've got my personal banker to confirm I can do that ($500K in total) as well as the $1M lend to develop Mona Vale. She's running the numbers now, but another $1.5M never hurt anyone right?

And I've stretched the margin on my Navra funds to 65% LVR now. I've got a $500K margin loan against my $300K LOC principal.

Ah well, if it all comes crashing down there's always the soup trucks at Hyde park right?

But like Glebe said, I'm really only a year away from really getting set-up, two tops. Once Mona Vale is built and leased then I'll be sweet. I'm just about to pay off my PPOR (valued at $850K) so will be bad debt free. My managed funds are liquid and can be disposed of at a days notice. Provided I get even the slightest bit of advance warning of something big happening I could clean out there quick enough. Mona Vale is the only sticking point with a 3% yield at present. Developed it jumps up to a 6% yield and is virtually neutral. Pump my spare cash flow into its offset account for a while and it will be.

Oh yeah, and the new places inter-state are neutral from the get go and are primed for some decent growth. Can't disclose location as promised a mate I wouldn't. When the dust settles I will though. Then its on to location number two that I'm watching for a couple more neutral cash flow growth potential IPs, but that's probably six months off.

Just two more years please?

Cheers,
Michael.

Fortune favours the brave Mike, just make sure you go over all the scenarios and you know in your heart of hearts that the downside is protected before gearing up again.

Sage advice...

I guess the subprime problems and credit crunch stuff we're going through at the moment can be thought of as a good thing, in the context of it's bubble being burst now rather than a few years down the track...

I think the chance of a depression has lessened substantially.

Unfortunately, I think my wish for one more year of good times has lessened substantially also!

Another point of view.

"Are we on the brink of a move in financial markets much worse than anything that has occurred in our time.
The UK Telegraph - Thierry Breton, former French Finance Minister said, that the losses from the contagion of sub-prime mortgages could reach USD 1,500 billion.
Look at what happened to the markets when LTCM defaulted, the losses there were about USD 3.5 billion, Wall Street was able to cover that. They won't be able to cover 1,500 billion.
Equities in Asia are down nearly 2 per cent today. Central banks are called on to provide increasing amounts of liquidity. What is the next step....financial institutions becoming insolvent ?"

Meh, it's only money

I would say ... numbers.