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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (81146)	10/10/2011 5:03:42 PM
From: Maurice Winn	2 Recommendations Read Replies (2) \| Respond to of 217580

Thanks CB for the information from the front lines. What you wrote matches exactly the impression I have from having watched for decades the housing markets and how people think. The same thing applied here - people borrowed as much as they could to buy more house than they needed with a view to making as much money as they could through tax-free capital gains [capital gains are not taxed in NZ]. NZ doesn't have the melanin aspect which I guess was a small part of the overall mania in the USA, but it was all grist for the mill, inducing grossly ignorant people to try to join the free money ride. Alan Greenspan KBE is misquoted as saying he was wrong. What he did say was that he was surprised that the financial institution shareholders did not consider avoiding losing their money was important enough to avoid doing so. He obviously thought that self-interest would protect the system. My assumption is that the bank shareholders were as much caught up in the mania as the others and did not see the risk which to me was glaringly obvious. I went house-shopping in Escondido [California] in 2005 and house prices were [to me] about double what I thought was a fair price. Also, the whole house price mindset which was pandemic in NZ and I have had many conversations with younger house buyers as has our son who shorted the whole mess and did very well, seemed absurd. Even highly intelligent people [young doctors, lawyers and the like] did thinking by cliche and slogan. "House prices never go down." As the NZ prime minister said 30 years ago, people wouldn't recognize a deficit if they fell over it. How money and exchange rates and tax and the whole vastly complex financial relativity theory system works is beyond nearly everyone. Even though I have had a lifelong [since age 5] interest in money and how it works, I have no idea what " interest-only negative-amortization loans " are. I understand the "interest-only" part but don't know what negative amortization is. 34 years ago, a lawyer was advising me to borrow as much as I could to increase the capital gain on a house. While he was right at the time, that there would have been an increased capital gain, I didn't know when the music chairs music would stop and everyone would have to quickly find a chair to sit on and somebody would miss out. So I missed out on the capital gain but also missed out on the financial disaster of 1987 in NZ when the borrowing hysteria chickens came home to roost. When do you think the market will have cleared and your bankruptcy proceedings will be back to "normal"? [the normal people who for whatever reasons end up in trouble even when there is no macro mess being re-normalized]. I haven't read "The Big Short" and don't plan to do so. I'm much more interested in where to from here and I have plans for where to. TJ says GG aka Get Gold. It is going on a decade ago that I guessed US$2,000 an ounce if financial messes got serious and US$10,000 [in 2002 dollars] for a gold standard to take over. Given the dilution since then, perhaps US$20,000 would be needed to create a gold standard. We are pretty much at $2,000 and the trends of profligacy suggest we'll be there soon enough. A gold standard is too ridiculous for the 21st century. The gold culture it would create would be self-destructive. Already, $billions are being poured into production of more gold. With the production cost nearer $300 than $2,000 there is a LOT of money to be made by diluting existing gold. A culture like the Easter Island Moais will result, with hordes hacking stone out of a quarry and stacking it up to admire. Pointless and leading to no better result. Meanwhile, the markets say "Hooray, France and Germany are going to save the world". Good luck with that. I don't recall Germany ever saving the world and France had its gloire 120 years ago with the Eiffel tower. A couple of times Germany's "saving the world" involved world record carnage. Mqurice