WTF is going on with THE BLOCK - Prime time TV

I couldn't resist posting this. it's a must Read!

Last Sunday night’s finale of Channel Nine’s The Block was a prime-time portrayal of a property crash. Talk about reality television – three of the four properties didn’t reach their reserve.

The only thing that saved the show was the young bloke proposing to his girlfriend, whose tears of joy transformed into a tantrum not ten minutes later when their property was passed in. (Mark that down as your first lesson, son.)

‘What a bloody waste of time’, said one of the deflated contestants. But it could have been worse. It could have been their money. If they’d put their heads on the block, they’d probably be bankrupt:

Average purchase price including stamp duty: $950,000

Major renovations: stumping, plumbing, rewiring: $300,000

Cosmetic renovations: $100,000

Average total cost per house: $1,350,000

Leading independent property valuer Louis Christopher claims that the couples would each have lost up to $500,000 – and that figure doesn’t include their three months of labour.

It couldn’t have been a worse advertisement for the property pushers who continually talk up the most overvalued property market in the world in the mass media.

After all, they had a pretty good marketing campaign – the agents had 30,000 people through their open for inspection, and 3.4 million people turned up for the auction (okay so there were a few sticky beaks), and they still couldn’t snag a decent price.

So what happened?

Well, while the contestants learned how to build a bathroom, they failed to show them the tricks and tools that developers use every day to push their dud properties on to poor old punters. Hang on a minute – that sounds like a rolled gold, follow-up series: The Block, Dodgy Developers Special.

By Scott Pape August 26th 2011

WTF is going on with the Stock Market? and how does it affect interest rates?

Basically, when the Stock Market crashes (because of people pulling out their money that they had invested) big companies that people buy shares in lose a lot of face value. A lot of these companies invest in other companies and so on and so on. So there is a domino effect that happens.

The banks also invest in companies.

Think of it like the craziest, most tangled up spider web you could possibly imagine, then tangle it up some more and that's kind of what the stock market looks like.

The picture above also shows what the stock market looks like when it's crashing. I think it's a very accurate depiction.

When the banks are investing and being invested in they are just as caught up in it all as everyone else. So when a share market crash comes along, like dominoes, everyone involved falls down for a while, until they figure out how to scavenge their way back up.

Why/how does this impact the interest rates?

look at it this way - If you have invested in shares of a big Bank, and the value of them went down, you’re not going to be impressed, and if they keep going down you will want to sell those shares before they are worth even less and you may even be losing money (see how the domino affect works?), so to keep you on board and happy, the banks have to get money from somewhere. They have money borrowed from them, and the use of that money costs money (what's an interest rate - the fee for the use of money), so the easiest way is to raise the cost of money- the money that’s being used- therefore creating an interest rate rise.

Although the stock market is on a speedy downward trend in America, it dose not seem to be that noticeable here in Australia, so our interest rates will stay pretty where they are for a while. The country we need to worry about is China.

This is how it occurs to me, feel free to post your thoughts!

WTF is going on with interest rates?

The main news over the week just gone has revolved around the release of the RBA board meeting minutes where the Bank decided to keep official interest rates on hold at 4.75%. The minutes indicated that the Bank discussed Greek debt issues and the volatility across foreign exchange markets, and also noted that the rate of growth in the global economy has slowed in recent months. From a positive economic standpoint, China’s economy (and demand for Australian resources) has continued to grow at a solid pace.

Specifically relating to the Australian economy and the property markets the minutes noted:

‘The multi-speed nature of the Australian economy was clearly evident in recent economic data. The resources sector remained strong, as did some service sectors. However, household cautiousness and the high exchange rate were having a dampening effect on a number of other sectors.’ ‘There had been little growth in nominal wealth over the past year, with housing prices having softened and equity prices lower recently. Members observed that this was in contrast to the experience of much of the past two decades. Housing credit growth had eased further, to its slowest pace in many years, although housing loan approvals had picked up in April and May.’ ‘The housing market remained soft, with nationwide measures of prices recording another small fall in May, although with some differences among cities. Mortgage arrears rates had risen over recent months, although they were still much lower than in most other countries. Arrears rates had increased the most in Western Australia and Queensland, where house prices had been falling after large run-ups in previous years. Members observed that this was similar to the pattern seen in Sydney following the rapid growth in house prices in the early 2000s: households that entered the market around the peak in prices, when lending standards were less stringent, had been more likely later to experience difficulties.’

Overall the commentary was much less bullish about the need to lift interest rates however, they highlighted that the medium term outlook is that economic growth in Australia will be strong (which would likely lead to higher interest rates). Despite this expectation, the RBA felt that they had more time to assess inflationary pressures given the recent weak data flow. As a result the RBA decided to keep official interest rates unchanged.

On the back of the dismal consumer sentiment readings, weak economic data both domestically and globally and the jitters associated with the European debt crisis, Westpac Banking Corporation has broken ranks and is now forecasting the next move from the RBA may be downwards. Westpac are forecasting a 100 basis point fall in interest rates over the next 12 months with the first likely to be around December this year. None of the other major banks have taken the same position, however it seems at the very least interest rates are likely to remain on hold for longer than expected.

Luxury suburbs drag down Aussie housing market

RPdata Industry Market info

The near-double interest rate hike in November last year has bitten, with seasonally-adjusted Australian capital city dwelling values down 1.2% in the three months to end April, although in raw terms home values are mostly unchanged (-0.2%). Expensive suburbs have been the poorest performers in line with the share market.

Based on more than 85,000 home sales nationally in 2011, the market-leading RP Data-Rismark Home Value Index for the combined capital city dwelling markets declined by -0.3 per cent (seasonally-adjusted) in the month of April (or -0.1 per cent in raw terms). This is in line with RP Data-Rismark’s forecasts since late 2009 (see quotes).

WTF is going on with the Australian Economy?

Jesse Dean - "I write to help create an understanding of the current Australian Economy"

I have only recently taken an interest in the economy as a result of how it's performance is making a noticeable impact on how I live my life i.e. How it effects my role as a Real Estate Agent selling in the current climate, How it effects my income, my attitude towards spending and how I spend money.

I thought I would share with you the information I have discovered.

Let me begin with

Real Estate - How Real Estate performs has everything to do with Market confidence. (Real Estate, the building industry, tourism, & Retail are equally effected, and are applicable to the conversation) One thing that brings market confidence down is uncertainty and fear of the possibility of an unstable future.

Jobs are still being lost, but why? Where does this instability come from? What is happening to the economy? And what is the government doing?

Let’s go right to the source of it, and work our way back down to it's immediate impact on us. Australia is in debt, heaps of debt. We are in 5 times the amount of debt we were last recession. 5 times! Around $400,000,000,000.00. The interest on our debt is a staggering $540,000.00 an hour! Every hour of every day...
The government at the moment is having trouble dealing with this debt, so they are borrowing $100,000,000.00 a day (adding to more debt) to deal with the current debt.. Sound a little crazy? The government is mainly borrowing from foreign bond markets and is why interest rates have been rising for Australians.

But fear no more!

Another way the government is trying to take money is through inventing a new tax law for Mining. But making huge tax's on mining alone cannot get us out of this debt nor will it scratch the surface, but the government is fixed on taxing the mines big time, because they think they can.

But wait, there's more!

The government have created another Idea to take more money, have you heard of the Carbon Trading Emissions Scheme? It's where the government will take more money from carbon emitting industries. This means if a company produces carbon emissions, the government will make them pay for that witch they put in to the air. Sounds good right... But these companies can only afford to pay this cost by raising prices on what they produce... But we are the ones who will have to now pay more for what they produce.

It seems the government is really good at taking your money indirectly.

While all this goes on no one knows what the future has in store. Back to the debt -We know that this debt isn't going away any time soon, and that it will take years and years before it can be paid off. And as long as the government keeps operating this way they CAN NOT help to promote small business. (This is where you feel it) As long as the cost of living escalates people will spend less, and while spending is down (less spending shows up as a decline in "market confidence") the building industry, Real Estate, Retail, Tourism, and other industries will suffer immensely.

You may have felt this personally through either seeing vacant shop windows, a friend having to close their business or business is slower than usual, or you just can't seem to find a job. I know a few people that have lost their jobs, and just the other week someone I know lost his job, as did the rest of the 20 staff he worked with. He was a tradesman.

Now Australia strives on small to medium size business. We obviously export food, minerals and crocodile skin boots, but at the moment people are not too sure what the future is going to be like, people get less frivolous with their money and are more inclined to hold on to as much of it as they can, which means businesses are the ones who suffer.. And in some way you will be affected by this.

How does it affect you if you don't own a business?

If you don't run a small business this is what it looks like for someone who owns a business or is employing you - if they don't meet sales or get enough people using their services, they don't have enough money to pay for the overheads. Overheads are costs that business's need to pay to be able to operate. These costs include paying for paper, stamps, ink, tools, nails, paint, TAX, advertising, your super, their own wages, YOUR WAGES. Simple things like that. If it is non feasible for the business you work for or own to run, then say goodbye to your job!