Blowing Bubbles
I watched an interesting interview with Jim Chanos on the Chinese Property Bubble. Jim Chanos is an American hedge fund manager of Kynikos Associates, a New York investment company that is focussed on short-selling (profiting from the fall in the value of an asset).

Mr Chanos rose to fame in 2000-01 when he identified flaws in Enron Corporation’s accounts, resulting in management significantly overstating the company’s earnings. Chanos began short selling Enron and made massive profits as the company’s stock declined from $90 in August 2000 to a low of nearly $1 near the end of 2001. Chanos’ ability to find and then exploit the fraud at Enron has made him somewhat of a celebrity in the financial press.

In his latest interview, Chanos warns that China is experiencing a severe real estate bubble and is headed for a crash; rather than the sustained boom that most mainstream economists predict.

Chanos first defines what he means by a bubble: a debt fuelled asset inflation where the rental income does not cover the debt expense incurred to purchase the asset. In other words, “Ponzi finance” that requires the “greater fool” and ever-increasing levels of debt to perpetuate it.

After watching Chanos – interview, I thought I’d examine how Australia’s residential housing market stacks up under his definition in order to determine whether we are experiencing a speculative housing bubble or asset inflation based upon sound fundamentals.

Up, Up and Away:
Anyone under the age of 40 and living in an Australian capital city knows first hand that it is becoming increasing difficult to find a decent, reasonably priced home within a reasonable commute to work. We’ve all watched in amazement, disbelief or dread as we, our friends or family are priced-out of the housing market or take on mortgages the size of a small African nation simply to put a roof over our head. But how expensive have Australian house prices become? Where has the money come from? And is this house price growth sustainable?

To answer the first question, Chart 1 plots average Australian established house prices (sourced from the Real Estate Institute of Australia) against average Household Disposable Incomes (HDI) and Average Full-Time Ordinary Earnings (AFTOE).

As you can see, the ratio of house prices to average earnings started at around 2.5 times HDI and 3.7 times AFTOE in 1986. This ratio increased slowly from the mid-1980s to 2000, rose rapidly from 2000 to around 2004 and then settled at around 6 times HDI and 7.7 timed AFTOE in 2008/09.

While you can argue about the choice of house price data and income measures, the fact remains that the trend in prices is clear – housing has become far more expensive overtime and Australians are now required to dedicate a much larger proportion of their lifetime’s earnings to purchase a home.

Buy now, pay later:
Since the growth in house prices has significantly outpaced the growth in incomes, it follows that rising debt levels have been the key contributor to rising house prices in Australia, since the only way to purchase something that you cannot afford through income is to borrow the difference. Chart 2 uses RBA data to plot the level of mortgage debt against HDI and GDP.

As with Chart 1, Australian mortgage debt has increased significantly from around 32 per cent of HDI and 12 per cent of GDP in 1990 to 138 per cent and 89 per cent respectively at the end of 2009.

Based on the above data, we can confidently conclude that Australia’s house price growth has been debt-fuelled, thereby fulfilling the first criterion of Chanos bubble definition.

If you can’t buy it, rent it:
So what about the second part to Chanos ” bubble definition ” the requirement that the rental income does not cover the debt expense incurred to purchase the asset, thereby requiring “Ponzi finance” and ever-increasing levels of debt to sustain asset (house price) growth?

To determine whether this part of Chanos – definition has been met, Chart 3 uses ABS data to plot the growth in real (inflation-adjusted) house prices against the growth in real rents. For this criterion not to hold, we would require rents to have increased at roughly the same rate as house prices such that rental incomes broadly cover the cost of debt repayments.

Ouch! According to the ABS, real rents have increased by only 14 per cent since 1987 while real house prices have risen by a whopping 163 per cent over the same period! It is no surprise then that yields on rental houses have plummeted from around 8 per cent in 1987 to around 3.5 per cent currently.

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Panama, the little country at the end of the narrow strip connecting the Americas, lies nestled between the Pacific and Atlantic Oceans. A climate influenced by prevailing winds, further makes it a unique juncture, enriched by coffee plantations and majestic animal migrations. Indeed humpback whales, raptors, colorful macaws, toucans and the beautiful Quetzal, ensure that even leisurely walks might quickly seem other worldly.

In fact, such extraordinary everyday experiences invite a look at real estate in Panama for sale. For those wishing to be happily well informed, moreover, real estate in Panama for sale is not to be missed!

Exciting to contemplate, Panama real estate for sale is, indeed, very real. Furthermore, if retirement describes one’s near future, it would be wise to consider either part or full time living in such an idyllic place.

While much of Panama is wet, one area, though equally beautiful, boasts the country’s driest climate. Indeed, the drier air and manageable rainy season make the Azuero Peninsula hard to beat! Here, a tract of 102 acres makes Panama real estate for sale a reality for Americans wishing to enjoy their golden years surrounded by breathtaking scenery, in a place offering the world’s best retirement benefit program.

With a modest pension of $1,000/month, or only $750 with $100,000 property investment, retirees benefit from financial breaks producing considerable savings and conveniences. Real estate in Panama for sale never sounded so good!

If looking for a favorable, affordable location, one must consider Panama real estate for sale in the aforementioned tract of acreage, Ocean Ridge Estates, where 3-12 acre mini ranches may be purchased. Large enough to offer privacy, even horses on site, this Panama real estate for sale will truly elevate daily living.

Although Central America hasn’t been known for stability, Panama has made significant progress. Unlike Costa Rica, its equally beautiful neighbor to the north characterized by poor roads, high crime, and expensive goods, Panama has great roads, little crime, and owing to the Panama Canal’s huge port, less expensive everything, even cars, which are heavily taxed in Costa Rica.

Moreover, using US dollars for currency, Panama has no exchange rate, while Costa Rica’s regularly fluctuating one creates uneasy buying. Additionally, with real estate in Panama for sale at more affordable rates, it’s hard to justify spending up to five times more in Costa Rica.

Most importantly, though, there’s simply no comparison with Panama’s retiree program; Costa Rica doesn’t offer any benefits or discounts, hence little incentive for those wishing to settle there. In fact, while full title ownership and all legal rights of citizenship accompany investing in real estate in Panama for sale, squatters in Costa Rica who stay but a short while on your land, have more rights!

Panama City, boasts an impressive skyline, one can envision the Azuero Peninsula experiencing future growth. With a new coastline road, paradise can be updated with elegant structures, while keeping intact the natural beauty that makes Panama real estate for sale so captivating.

Stress test remains significant as it can guage sovereign issues as well as highlight sizable capital need for banks. Speaking to CNBC-TV18, Philip Poole, Global Head-Macro and Investment Strategy of HSBC Global AMC said the key issue at the moment is to raise additional capital. He believes Emerging Markets are still attractive but it is attracting funds lower than last year. However, he remains overweight on emerging markets relative to global markets?? and prefers Brazil, Russia, Korea and mainland markets. Regarding India, Poole remains worried about the inflation situation.

Q: Your expectations from the European bank stress test and what you think might get thrown out?

A: This is an important event. We have seen the euro recovering some ground against the dollar and across currencies. But the stress test is an important element in how people will look at this sovereign related issue in Europe. So, I am expecting to see these tests highlighting the sizable requirement for all banks and capital and the key question then will be how it proceeds.

The authorities are indicating private sector has to take substantial lead in that process, but we are still not clear on the details of what will lie behind the official initiative. So, I think that’s the key issue, how the raising of this additional capital will be performed and how the market takes that.

Q: What about emerging markets (EMs) then because we have been getting good flows, India particularly? How do you assess the fund flow situation from hereon?

A: EMs still attracting funds, at a lower level than we saw last year. But on a net basis, money is coming in again. What is interesting is within the equity space, for example, that money is tending to go into single market funds like India, of course, like Brazil as well rather than into BRIC (Brazil, Russia, India And China) or in to more generic EM funds. Also, I think we are seeing interest in EM currencies. We are seeing interest in corporate bonds in the EM world. So, the fund flows are healthier than they were when we were seeing a month or so ago that correction playing out with risk being taken off the table

Q: At HSBC, which emerging markets are you most overweight on and which ones are you underweight on currently?

A: We are overweight EMs relative to the developed world, relative to their weight in global markets. That’s the first thing to say. Within that, we like Brazil, Russia, Korea and Asia, we also like the meaner markets, there’s value there. But generally speaking, I think we have got a pretty strong call on EM in this environment.

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San Jose is the third largest city in the state of California. It is also the tenth largest city in the United States. The population of the city has been estimated at being 1,006,892 in the city center and upwards of 7.4 million residents in the greater metropolitan area.

If you’re looking for office space in the greater San Jose area you’ll find a wealth of options in various sizes. In a recent search of many open spaces, we found prices of small spaces starting at $400 a month for small private spaces and upwards of $2000 a month upwards to 1200 square feet with storage and retail adjacent spots.

Many a San Jose serviced office can be leased long or short term and some come fully furnished. One will find that there are great options for you to move forward with business, both small and large. It is known for its major tech industry and higher education alongside proximity to nearby cities in the San Francisco bay area. It is a hub for commerce both online and offline.

It has the largest concentration of tech companies in the United States. It has often been called the capital of Silicon Valley. Not only are major companies dealing with tech located there but all the major colleges offer degrees in high tech to meet the demand of the major companies.

San Jose, CA has a great educational region including many colleges of higher learning. There are also many colleges that specifically teach high tech and offers degrees in a lot of different areas to aid the growing demand of the local tech firms.

Arts and Culture have also seen a major resurgence in the area and many funds have been appropriated for that. There have been great amounts of financial investments in both art, modern art and performance art in the area. Furthermore, there have been great new investments in the parks and recreations as well as many private agricultural endeavors. These aspects make for some great sight seeing for tourists and residents alike.

San Jose is a great place to live and start a business, especially for those looking to further their careers in technology. There are many people competing for technical jobs but there are a lot of companies located in this city creating opportunities for millions.

If you’re looking to start a business or start your education, you’re going to find that this large city is perfect for all your needs.

The “flight to quality” continued yesterday (Wednesday) as investors pushed up the price of Treasuries on fears the U.S. Federal Reserve’s drastic rate cut means the economy’s woes are far from over.

But while Treasury prices hit record highs, concerns surfaced among analysts about how much farther the rally can go considering the implied message in the Fed’s statement that the economy is in worse shape than we thought and policy makers will do anything they can to keep it from completely tanking.

“Everyone originally was very enthused yesterday because the Fed made it known they were going to stand and do anything that is necessary, no matter what, to get this economy back on track” said Sal Arnuk, co-manager of trading at Themis Trading in Chatham, New Jersey. “This morning we awaken with a hangover and the realization of how many bullets do they have left”

Long term Treasuries with 10- and 30-year maturities were favored by investors after the Fed said it would keep long-term interest rates suppressed for “some time.” In its statement the central bank vowed to buy agency and mortgage-backed securities and said it will consider purchasing government debt.

Yields on the 10- and 30-year notes tumbled in New York trading, touching their all time lows, according to BGCantor Market Data, as investors continued to bid up prices.

And for the second straight day, investors in the shortest government securities were willing to accept a negative return for the safety of U.S. government debt, as yields on one-month T-bills reached minus 0.02%.

But the Fed’s latest statement has raised doubts about its real intentions with some analysts. Even though the central bank promised to purchase treasuries to keep interest rates from rising, policy makers will likely avoid purchasing government debt, according to RDQ Economics LLC.

“This step is still an unlikely one for the Fed to take, since it is trying to narrow the spread between mortgage-backed securities and Treasuries,” John Ryding and Conrad DeQuadros, founders of New York-based RDQ, wrote in a note yesterday.

30-year mortgage bonds issued by Fannie Mae (FNM) currently yield 1.49 percentage points more than the benchmark 10-year Treasury note, down from 1.62 percentage points Tuesday. The Fed wants to drive those yields down to encourage borrowers and lenders.

More skepticism comes from the rates themselves. After all, how many investors can tolerate a negative return on their money, when the very nature of investing says they will eventually demand a respectable return?

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If you are in a position to get yourself a secured bad credit used car loan then you will more than likely be able to get yourself a used car that you desire within one working business days simply because the financial company that is issuing you the loan in the first place is assuming less risk because you are providing collateral on the face of being bad credit used car the first place. A secured bad credit used car loan essentially means that you have to put down some sort of collateral that has equity built up into extras a home or another vehicle in order for you to assume the risk of the loan before you can be given. This means you need to make sure that you have a steady source of income in order to pay down the debt of your Online Car Loans?? because if you start to miss payments or they have paid in full on time each and every month you also assume the risk of losing the collateral then the first place. The other option is to get yourself a unsecured version of the back credit used car loan in which you as a consumer will assume less of a risk since you are no longer putting up collateral for the loan, however, the back or used car loan financing company assumes even more risk which means that you need to deal the proof your monthly income as well as more than likely having to pay an additional fee points of interest on the back or used car loan itself in order to make it work.

Additionally, definitely in a position where you really having established credit or you have a bad credit history, getting yourself a Car Loans Online for bad credit is going to give you the opportunity to work on improving your credit lot the same time giving you the vehicle you need to get from place to place. As long as you make your payments on time and full each and every month your credit score will steadily increase which means by the time your bad credit used car loan is paid off you’ll be in a position to get a much better rate of interest on your next used car loan that you decide to go about taking our any other type of financial purchase that you are looking to get for yourself as well.

A car loan is simply a way for you to go about paying for the car that you are looking to purchase. You are going to take out a car loan from a financial lending company and bring it to the car dealership with you. The reason for going about doing this is because the moment that you bring your own Used Car Loans to a car dealership you are then considered what is known as any cash buyer in that you can buy the car pretty much out right from them just as if you are paying for it in cash in the first place. You can then you should car finance in order to either buy the car that you want from them or you can also use it to lease a car through them.

If there is one thing more certain in NZ these days than the latest political scandal or sporting event, it is the view people have to real estate and the purchase of a property.

It is so true that everyone has an opinion and every opinion is the polar opposite of everybody else’s!

It was with this in mind that my eye was caught by a great blog post by Jane Yee, who writes on Stuff.co.nz. Jane is a classic Gen X / Gen Y and her life is played out through her regular blog entitled the “Girls Guide”. Now there are two really important things to reflect on at this stage (i) Jane is of the age that most people start to buy property, and (ii) Jane writes from a woman’s perspective which is as is well known very much the influential voice in real estate transactions in the case of couples.

Her most recent post “Real Estate, Everyone’s and expert” is one of the clearest perspectives I have read on the consumer psyche of buying or searching for property I have ever read. It should be mandatory reading for anyone in the real estate industry. Added to Jane’s excellent prose is over 60 comments from “people like her” that further add to the richness. I really urge everyone to read and comment.

By way of dissection, below I have distilled what I consider to be the key takeaways I see as pivotal to the process?? valuable sources of focus for ambitious operators in this industry.

1. Buying a home despite what many believe it to be is not always a rental investment property. Many people just want to satisfy their emotional desire to own a home?? it is also a great form of forced savings.

2. The process of house hunting is time consuming, enormously time consuming involving?? daily review of listings (I clearly need to introduce Jane to Realestate.co.nz as well as Trade Me, after all Realestate.co.nz does feature a more complete view of whats on the market), as well as weekend open homes.

3. The activity is very much a self managed exercise.

4. Everyone has an opinion / piece of advice. At the end of the day the collective wisdom as represented by the comments is that you have to make that decision yourself and accept the implications.

5. Your key partner in the process seem to be the mortgage broker rather than the real estate agent.

6. Unfortunately real estate agents tend to be seen (and demonstrate the behaviour) of being seen as purveyors of other peoples listings.

7. There are huge emotions involved in real estate process?? the heartache of missing out, matched to the desire to find just the right place.

8. Home buying has a benefit in a sense of control, something that can not be attained through renting and therefore financial comparisons are not always relevant.