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Wonder how the PP acts in this scenario....

Posted: Sat Apr 27, 2019 1:29 pm
by Hal

Re: Wonder how the PP acts in this scenario....

Posted: Sat Apr 27, 2019 5:03 pm
by ochotona
Better than most any other portfolio, you can be sure of that.

Re: Wonder how the PP acts in this scenario....

Posted: Sat Apr 27, 2019 6:25 pm
by I Shrugged
76 minutes? I would need an executive summary. :)

Re: Wonder how the PP acts in this scenario....

Posted: Sat Apr 27, 2019 9:29 pm
by Ad Orientem
Just did a quick Google. This guy appears to be something of a gold bug and prophet of doom. Haven't delved too deep into the specifics, but we have been hearing this sort of stuff for a very long time (1933?). The future is unpredictable.

Re: Wonder how the PP acts in this scenario....

Posted: Sun Apr 28, 2019 2:44 am
by Hal
Executive Summary :)

Basically Australia's turn to go through what the US did back in 2008 due to bad bank loans for housing

And your are correct, he is a bit of a prophet of doom, but unless you visit Australia you have no idea of the property bubble !

I am writing this in a small country town, population of about 7000, basically zero chances of getting a job, but they are building town houses here. Who are they going to sell them too? The sheep?

Will still stay on with the PP, however if the AUD takes a dive, that's half the PP assets that will be affected, not to mention what will happen to the share market.

"But" no one knows the timing so you cannot be sitting up in the hills with your canned beans and shotgun forever :)
Went through a similar thing in the 80's when the interest rates went up to 18% and some banks failed

http://fsgstudy.treasury.gov.au/content ... dix4-2.pdf

People I know have $500,000 loans with minuscule deposits - cannot help but feel uneasy.

Hal

Re: Wonder how the PP acts in this scenario....

Posted: Sun Apr 28, 2019 1:55 pm
by europeanwizard
I Shrugged wrote:
Sat Apr 27, 2019 6:25 pm
76 minutes? I would need an executive summary. :)
I think it's too long as well, however -- in the first couple of minutes, he refers to a debate he had with Christopher Joye:
https://www.youtube.com/watch?v=nQuKMsmVq5c

It's about 25 minutes long and very fast paced. What I like, is that both sides of the issue get some spotlight. However, they do agree on two things:
1) the prices are crazy high, up to the point that banks offer to borrow you 10x your annual income
2) in case of a depression, the prices not just go down but utterly collapse

What they don't agree on, is calling it a bubble or not. Furthermore, Christopher Joye maintains that the mortgage debt is very serviceable due to the strong economy. And John Adams is saying that historically, there's always a monkey that throws a wrench in the gears.

Re: Wonder how the PP acts in this scenario....

Posted: Mon Apr 29, 2019 6:55 am
by Hal
europeanwizard wrote:
Sun Apr 28, 2019 1:55 pm
I Shrugged wrote:
Sat Apr 27, 2019 6:25 pm
76 minutes? I would need an executive summary. :)
I think it's too long as well, however -- in the first couple of minutes, he refers to a debate he had with Christopher Joye:
https://www.youtube.com/watch?v=nQuKMsmVq5c

It's about 25 minutes long and very fast paced. What I like, is that both sides of the issue get some spotlight. However, they do agree on two things:
1) the prices are crazy high, up to the point that banks offer to borrow you 10x your annual income
2) in case of a depression, the prices not just go down but utterly collapse

What they don't agree on, is calling it a bubble or not. Furthermore, Christopher Joye maintains that the mortgage debt is very serviceable due to the strong economy. And John Adams is saying that historically, there's always a monkey that throws a wrench in the gears.
Thanks Europeanwizard et al,

Your post got me curious. In Europe, back around 2008 when Greece and other countries were in trouble, credit contacting (depressionary), I noted the the German Bond prices didn't spike.
Any ideas why? Would have thought the German Bonds would have been the safest in Europe?

Image

Re: Wonder how the PP acts in this scenario....

Posted: Mon Apr 29, 2019 8:42 am
by Cortopassi
Talking about bond rates, I've posted similar before, and still don't understand why the US 10 year is basically on par with a country like Italy?!? And not too much lower than Greece?

Image

Re: Wonder how the PP acts in this scenario....

Posted: Mon Apr 29, 2019 9:17 am
by pmward
Cortopassi wrote:
Mon Apr 29, 2019 8:42 am
Talking about bond rates, I've posted similar before, and still don't understand why the US 10 year is basically on par with a country like Italy?!? And not too much lower than Greece?

Image
It's purely supply and demand.

Re: Wonder how the PP acts in this scenario....

Posted: Mon Apr 29, 2019 9:49 am
by Ad Orientem
At the risk of crystaballing, I'm going to opine that global bond markets in the developed world are, with a few exceptions, pretty expensive right now. Yields are shockingly low (thanks in part to government manipulation of interest rates) while debt at every level of society... government, corporate and private, is at such high levels that the IMF and World Bank as well as numerous private think tanks have been telegraphing warnings that we may not be far from a tipping point. If I were speculating, I'd say the bond market is high risk and low reward right now.

Re: Wonder how the PP acts in this scenario....

Posted: Mon Apr 29, 2019 1:24 pm
by Cortopassi
pmward wrote:
Mon Apr 29, 2019 9:17 am
Cortopassi wrote:
Mon Apr 29, 2019 8:42 am
Talking about bond rates, I've posted similar before, and still don't understand why the US 10 year is basically on par with a country like Italy?!? And not too much lower than Greece?

Image
It's purely supply and demand.
Meaning as you go down the list, demand is higher? Why on earth, for example, would Spain's bonds be more attractive than US bonds?

Re: Wonder how the PP acts in this scenario....

Posted: Mon Apr 29, 2019 1:59 pm
by pmward
Cortopassi wrote:
Mon Apr 29, 2019 1:24 pm
pmward wrote:
Mon Apr 29, 2019 9:17 am
Cortopassi wrote:
Mon Apr 29, 2019 8:42 am
Talking about bond rates, I've posted similar before, and still don't understand why the US 10 year is basically on par with a country like Italy?!? And not too much lower than Greece?

Image
It's purely supply and demand.
Meaning as you go down the list, demand is higher? Why on earth, for example, would Spain's bonds be more attractive than US bonds?
Demand is only 1/2 of the equation. The EU is in a strange situation where it is easy on the monetary side and pursing austerity on the fiscal side. That’s the crux of the issue right there.

Re: Wonder how the PP acts in this scenario....

Posted: Tue Apr 30, 2019 10:35 am
by Hal
pmward wrote:
Mon Apr 29, 2019 1:59 pm
Cortopassi wrote:
Mon Apr 29, 2019 1:24 pm
pmward wrote:
Mon Apr 29, 2019 9:17 am


It's purely supply and demand.
Meaning as you go down the list, demand is higher? Why on earth, for example, would Spain's bonds be more attractive than US bonds?
Demand is only 1/2 of the equation. The EU is in a strange situation where it is easy on the monetary side and pursing austerity on the fiscal side. That’s the crux of the issue right there.
Surprising the commentary you can find.

This is an article from a person who helped get me started on the PP about a decade ago.
His position is that Government Bonds "are not" risk free assets

Have a read of his PP article. Will be interested in peoples opinions.
Especially if they happen to live in the "more risky" countries !

https://www.caseyresearch.com/articles/ ... om-awaits/

PS: The reason I am interested in this topic is that I need to be convinced the PP is the best method "for the money you cannot afford to lose" before another crisis. Especially since I don't live in the US :-\

For those curious in what's happening down under. https://www.macrobusiness.com.au
For fun look at some of the reader comments on the free articles.

Re: Wonder how the PP acts in this scenario....

Posted: Tue Apr 30, 2019 11:21 am
by pmward
Hal wrote:
Tue Apr 30, 2019 10:35 am
pmward wrote:
Mon Apr 29, 2019 1:59 pm
Cortopassi wrote:
Mon Apr 29, 2019 1:24 pm


Meaning as you go down the list, demand is higher? Why on earth, for example, would Spain's bonds be more attractive than US bonds?
Demand is only 1/2 of the equation. The EU is in a strange situation where it is easy on the monetary side and pursing austerity on the fiscal side. That’s the crux of the issue right there.
Surprising the commentary you can find.

This is an article from a person who helped get me started on the PP about a decade ago.
His position is that Government Bonds "are not" risk free assets

Have a read of his PP article. Will be interested in peoples opinions.
Especially if they happen to live in the "more risky" countries !

https://www.caseyresearch.com/articles/ ... om-awaits/

PS: The reason I am interested in this topic is that I need to be convinced the PP is the best method "for the money you cannot afford to lose" before another crisis. Especially since I don't live in the US :-\

For those curious in what's happening down under. https://www.macrobusiness.com.au
For fun look at some of the reader comments on the free articles.

I do agree that government bonds are not "risk free", but provided the country prints its own money and it's debt is all denominated in it's own currency then the only real risks are inflation and interest rate risk (which pretty much go together). And if you're holding gold you are hedged against that scenario. I'm not sure about his recommendations in the article to swap gold for real estate, crypos, and art... I think gold is still a better asset for an inflation. There may be a point where cryptos (or other future incarnation of digital currency) may become the defacto inflation hedge, but until they've been proven I would rather personally stick to the tried and true hedge the that is gold.

I also don't think underweighting bonds to overweight these real assets is a good choice, this seems especially poor advice considering that the world as a whole is still facing a lot of deflationary headwinds. And from what I understand it sounds like down under you guys are potentially beginning a deleveraging, which is the exact scenario that government bonds perform the BEST. Look at how well government bonds performed in the U.S. in 2008 when our real estate market went bust... they were the saving grace of the PP.

Until there is a prolonged period of time that stocks, gold, and bonds all lose value in unison, I see no reason to doubt the PP. As of the moment, there has been no period in any country that I am aware of that this has happened for more than a year or two, and even in those few cases (1981 and 2018 in the U.S. for instance) the losses have been manageable and have quickly recovered. Those cases have also always come in periods of tight money, which is exactly the opposite of what happens in a deleveraging. I would personally just hold the PP and not worry for the sake of worrying.