Just came back from an overseas secondment to spend the Christmas & New Year break with family.
Mum told me that she fell over and hurt her whirst. What relevance does this has?
She accidently went to see a non-family doctor and happened to meet the best general practitioner she has ever came across in her 60-year life so far.
The doctor is very patient and willing to help. Patients walk out of the clinic both of their thumbs up.
One patient told mum that the doctor has gone to the length to call patients 9am to check up on their progress.
It makes me thinking that the greatest asset that one ever has is his/her job, not the million dollar house one lives in or $150,000 invested in equity with a $50,000 collateral.
If most people realise this, we would have avoided numerous financial crisis in the past and many yet to come.
Friday, December 24, 2010
Friday, December 17, 2010
Housing bubble
There are divided opinions about the bubble status of Australian housing market.
It has enjoyed mostly uniterrupted growth over the last decade.
Any real house prices increases in excess of real GDP growth will eventually lead to asset bubble and consequently crash. (i.e. consuming more than one produces is not sustainable)
House bubble has a much larger implication for the economy than a stock market bubble.
The reason is very simple. One needs a roof over its head but not investment in stocks.
Once the housing bubble pops, it will have a broad impact affecting the rich and the poor. Because of the significant amount of capital tied into housing for majority of people's life.
Effect of bubble status will take years if not decades to work through the system mainly via deleveraging of debt starting from the least cost effective forms of debt.
This is essentially the American story. With 70% of GDP relying on consumption, the massive glut of unsold inventory and foreclosed home will take the livelihood of the American consumers when the unemployment is struck at 9%-10%.
What it means for Australian housing market. This is a perfect lesson that most Australian won't learn until it eventuates.
I am not saying the Aussie house price will collapse in near-term. In my opinion, the house market remain reasonably supported by strong employment and neutral interest rate environment.
An outright crash is unlikely. However, the house value has reached a level such that any future return on this asset class will be at best anemic.
If you were told by many that the Australian house market is a sure bet for future financial security, you have been warned.
It has enjoyed mostly uniterrupted growth over the last decade.
Any real house prices increases in excess of real GDP growth will eventually lead to asset bubble and consequently crash. (i.e. consuming more than one produces is not sustainable)
House bubble has a much larger implication for the economy than a stock market bubble.
The reason is very simple. One needs a roof over its head but not investment in stocks.
Once the housing bubble pops, it will have a broad impact affecting the rich and the poor. Because of the significant amount of capital tied into housing for majority of people's life.
Effect of bubble status will take years if not decades to work through the system mainly via deleveraging of debt starting from the least cost effective forms of debt.
This is essentially the American story. With 70% of GDP relying on consumption, the massive glut of unsold inventory and foreclosed home will take the livelihood of the American consumers when the unemployment is struck at 9%-10%.
What it means for Australian housing market. This is a perfect lesson that most Australian won't learn until it eventuates.
I am not saying the Aussie house price will collapse in near-term. In my opinion, the house market remain reasonably supported by strong employment and neutral interest rate environment.
An outright crash is unlikely. However, the house value has reached a level such that any future return on this asset class will be at best anemic.
If you were told by many that the Australian house market is a sure bet for future financial security, you have been warned.
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