Yes I guess that’s one way of looking at it. I’m providing a valuable service – liquidity! David – I think the property crash is already here, if you haven’t noticed, houses are selling for 20-30% below what they were six months ago.

Wow PaulH – an ‘antisocial blot’!!! That’s a bit harsh isn’t it? What’s so bad about buying shares?

I’m content to live in a small town with a good social network and to make myself useful, I convert cars to lpg at the moment and am bringing some old technology up to date in my spare time http://woodgas.googlepages.com/home, if things turn to shite this old tech’ can keep local emergency services and a few mini buses running, if they don’t then I can flog off generator/ water pump packages that run on the waste from bushfire reduction thinnings.

Not overly pessimistic here, just planning for all eventualities – best case, worst case and just in case

Keep enough cash on hand to last you 2-3 months, bank closures tend to happen quickly.
18k rings and things are handy for bartering and don’t leave a paper trail in the event of gold seizures

RobWindt – that seems to me rather overly pessimistic – especially with the government deposit guarantee? If they’re unable to supply the money its not gold you want to have, but canned food, bottled water, guns and ammo

I’m starting to see property values in my town (Armidale) starting to wobble, a few more ads here and there indicating distressed sellers or foreclosed homes which have been hard to spot in the five years previous. More builders are advertising for work too instead of relying on word of mouth for the next job which indicates that bank finance has dried up.

I don’t think it’s time to invest in tinned food and fire arms though.

Over consumption got us in to this mess and the reality of finite resources suggests that we can’t spend our way out of it. http://www.theoildrum.com/node/4770

We’ve been here before, see this link for an interesting history –
http://chronicle.com/temp/reprint.php?id=477k3d8mh2wmtpc4b6h07p4hy9z83×18

or this one for some local flavour, see if you can spot the similarities with recent shenanigans –
http://nakedmechanic.blogspot.com/2008/09/everything-old-is-new-again.html

Here’s my investment advice fwiw
Keep enough cash on hand to last you 2-3 months, bank closures tend to happen quickly.
18k rings and things are handy for bartering and don’t leave a paper trail in the event of gold seizures

Andrew the ‘least able to afford it’ will do it tough either way. Just ask those who are underemployed, or getting such a low wage they are unable to make ends meet AS WELL as indulge in some patriotic spending.

Why not increase wages? Some would argue that this will result in lay offs (and it may) but most business need a minimum number of people to operate and cannot go below this, it will just cost a bit more.

This will benefit them in the long term as more people have disposable money, to spend on non essential goods and services.

Even with low wages people are still going to lose their jobs, but companies are still paying exorbitant salaries to CEO’s. So IMO it is more a question of protecting the incomes of the wealthy.

Ultimately they bite off their own noses and then expect taxpayer handouts. Not to protect jobs, but their own income.

Those ‘with the most to lose always will be’ until we once and for all reject greed and extreme capitalism.

But eventually, their subscribers, out of work and desperate for cash, will want access to their funds. The pension funds will have to start selling. When that happens, who is going to buy these assets?

The situation is quite different in Australia than the US though isn’t it? Under normal circumstances people over here can’t access their superannuation, whilst in the US accessing the 401k funds is quite straightforward with only a tax penalty. I wonder how much the compulsory superannuation funds in Australia stabilise the local stockmarket – it really does force long term savings.

Apart from the pension funds there are other systemic risks in the near term:

- GM’s debts of $600B USD. If they default it will trigger another round of credit default swaps with unknown consequences.
- Citigroup, which was the largest bank in the world as recently as last year, is on the precipice and may need to be bailed out before Christmas.
- Australian real estate prices relative to income are some of the highest in the world. Every other real estate market with such high price-to-income ratios is now in freefall (US, UK, Ireland, Spain…) but so far real estate prices in Australia have remained relatively stable. A sharp downturn in prices is increasingly likely as household incomes fall, and there are a lot of “low doc” loans out there.

If any of these events occur the Australian financial system won’t escape unscathed.

You’d have to say, given NAB shares are pretty much back to 1999-2000 levels, that they must be undervalued – even if it’s true that all the gains between 2000-2007 years were chimerical, there’s no way NAB is a less profitable business than it was back then.

As Dave Rubie noted, this is the knife-catcher’s rationale.

Because of the dirth of capital, and because of the coming partial eclipse of American pension funds, there is a dwindling supply of capital to turn this optimism into the actual purchase of assets, especially shares.

Moreover, there is a great deleveraging going on worldwide. This means that there is far more money trying to get out of assets than is trying to get in.

At the moment, despite enormous volatility, volumes of transactions haven’t been particularly large. Large investors, especially US pension funds, are sitting there a-hopin’ and a-prayin’ that this storm will pass.

But eventually, their subscribers, out of work and desperate for cash, will want access to their funds. The pension funds will have to start selling. When that happens, who is going to buy these assets?

Any increase in volume is likely to mark a sharp break to the downside.

The dealings of CalPERS, the largest pension fund in the US, is a good indication of the issues facing this sector of the market.

I hope he makes a few bucks out of it. I honestly don’t think it’ll happen (our property crash is probably 12 months away) but you have to admire the chutzpah.

The impact on economic activity and thus employment has barely begun.

It’s always possible that the dividend gets cut – but very,very unlikely.

Investors in Britain’s second biggest bank (RBS) probably thought much the same six months ago, but now RBS’s share price is down ~90%, its had to be partly nationalised, and there’s no prospect of dividends being paid for the foreseeable future.

Of course, it can’t happen here, but then our property market really hasn’t turned down sharply yet like it has in the US and UK.

RobWindt @ 69: That’s one hell of a yarn. I recommend it to everyone: The End of Wall Streets Boom

I’m probably hopelessly over-generalising, but as a self-described centre-moderate – it’s just something I’ve observed on the weblogs.

Confirmation bias is my guess Andrew.

Excellent link RobWindt.

It’s interesting – allow me an observation – I find most of the threads on left wing blogs such as this one unduly pessimistic. My theory is that most left wingers are naturally ‘glass half empty’ type of people. Mostly lots of pointing out the flaws in Western Liberal Democracy rather than celebrating why we live in such a great society. The right wing blogs, on the other hand, are excessively optimistic. Always glossing over the flaws in Western Liberal Democracy and underplaying the positives of other cultures.

I wonder whether those tendencies also manifest in investment approaches? Do left wingers miss out on opportunities because of the worry that things will keep getting worse? Do right wingers lose a lot of money at the top of market because they gloss over the looming storms?

I’m probably hopelessly over-generalising, but as a self-described centre-moderate – it’s just something I’ve observed on the weblogs.