Tuesday, April 4, 2017

Incredible stupidity down under.

The Aussies are in serious trouble economically.  They have allowed themselves to be herded into a monster real estate bubble that will implode as soon as the next recession begins killing the job market.  How do we know that it's a bubble?  Well, according to The Australian, "interest-only loans that now account for 40 per cent of the nation’s housing ­finance".  In other words, the bubble is now so extreme that 40% of new loans (not 40% of total) are structured such that they will never be paid off.  Ever.  These people have literally signed up for lifetime indebtedness which is to say lifetime slavery.  If they hadn't done it they would have to live in an apartment or other shitty rental situation because housing prices have been chased up to stratospheric levels by the pump and dump scam of fractional reserve banking.  So they signed the documents and promised to make interest payment for ever and then when they die the bank gets the house back.

This kind of insanity is in line with the ending stages/blow off top stages of a huge bubble.  I do feel sorry for those people who are buying into the peak like this.  There is no doubt that many of them will see the housing values that they thought were a sure thing go down and when they see it they will walk away from the loan and screw their credit for 7 years.  But its still better than being a debt slave for 70 years.

If these people were financially smart they would have put up with renting and then begin saving money so that when the bust comes they will be flush with cash to scoop up someone else's failed dream at bargain basement prices.  That is the right strategy whether you apply it to buying your next home or your next vehicle.  I began paying for my current in 1995 and it is paid off so I don't have to worry about the home part but the vehicle part is looming for me.  I've been nursing my old 2001 Silverado truck along for several years now just waiting for the auto boom to bust again so I can move up.  The vehicle runs good but is fully depreciated so its not worth much.  I've have driven all the value out of it with 200k miles on it now.  So when the bust comes it will not be a case of "gee, what low prices, too bad I can't sell my vehicle for anything to afford one of them".  Instead I'll give the truck to some deserving young kid who needs cheap wheels and then just go buy someone else's late model failed dream for cash.  Based on my wave count for the auto makers, I expect the discounts for lightly used lease returns to be extreme when the next downturn hits.

No comments:

Twitter Delicious Facebook Digg Stumbleupon Favorites More