Sunday, 2 September 2012

It Ain't Over Until The Blonde Lady Sings

The blonde lady is warbling.

Westpac managing director Gail Kelly says compound growth in house prices are over for good

AUSTRALIA is unlikely to ever see the housing boom that sparked a massive rise in personal wealth across the country in the past decade, Westpac managing director Gail Kelly told the economic forum in Brisbane yesterday.
In a closed session, Ms Kelly told business leaders that the years of compound growth in house prices were over for good.

She also said Australians were rejecting the high levels of debt that allowed them to borrow vast sums against the equity in their house.

Her comments were backed by Reserve Bank governor Glenn Stevens, who pointed out to business leaders that one of the main reasons Australians were so "grumpy'' was because of the dramatic change in the economy since the glory days of the housing boom.

The head of a major lender is basically saying  the party 'is over'.
I thought it was the sound economic management  of the Howard and Costello team that saw our wealth increase. Well knock me down with a feather, it was just an easy credit asset bubble.
Gee Glenn, Australians are grumpy because the rising home equity fairy has shut down the ATM. Who would have guessed?

Anyone remember the CBA ad promoting this madness?

Someone else sharing Ms Kelly's view is Marcus Padley, in my opinion, Australia's most astute advisor/broker.

You've got to ask yourself one question: Do I feel lucky?
In which case if you are one of the 65-to-75-year-olds that rode the asset price appreciation over the 33 years to 2007 you should consider yourself very lucky because the chances are that we will never see that happen again, not in your lifetime. Your stocks, your property and your business have all been flattered by a boom in debt. You now need to count your chickens, not your eggs, and be grateful for them because a lot of eggs are never going to hatch. You are a millionaire retiree, thanks to a freak wave, and you should count your lucky stars. And if happiness is expectations met you will be much happier with lower expectations for the next 33 years ignoring the whole finance and property industry, which is still relying on the ''Perfect Wave'' miraculously returning.

To err is human, but to show human frailty is unforgivable

The sharemarket always goes up.
The property market always goes up. Many retirees built great nest eggs on the property and sharemarket booms in the past 30 years, and the assumption is that you will too. But the sharemarket has gone down 9.6 per cent a year for the past five years and it'll take another five years going up at 12 per cent a year to get back to square one.

Dispelling the assumption that the market always goes up is perhaps the most constructive legacy of the GFC. Baby boomers rode a 30-year wave of asset price appreciation. That's how they built their nest eggs and their current job is to preserve them. Everyone else is going to have to build their nest eggs on their wits and with effort because mere participation doesn't cut it any more. (my note: most actually think they were investing gurus not 'lucky')

Far better we accept the reality that making money effortlessly was not ''normal'', it was great. Now maybe we'll appreciate, rejoice in and exploit a bull market when it returns, rather than think we're owed it.

Marcus Padley is a stockbroker with Patersons Securities and the author of stockmarket newsletter Marcus Today. For a free trial go to . His views do not necessarily reflect the views of Patersons.


  1. Welcome back, gee, I thought we had lost your insight in the blogosphere universe. Glad to see your are back with your eye opening cynical style!



  2. Thanks Martin, just a took a bit of time out. Time to get back and kick 'em in the goolies. Or, at least feel a bit better by having a rant ;)

  3. ^ What Martin said :)