Page 1 of 3 123 LastLast
Results 1 to 30 of 90

Thread: Is low interest rate the key to asset bubble?

  1. #1
    Join Date
    Mar 2010
    Posts
    974

    Default Is low interest rate the key to asset bubble?

    The "lost decade" of Japan from 1990 to 2000 and extend to now (2 decade) was the result of low interest rate and high inflation during the 80s'such that the Japanese central bank feared the economy was becoming unstainable.The central bank began to increase interest rate to cool its economy but it came too late. The nation woke up to realize that corporates were highly geared and consumers were highly leverage in real estate. The bubble bursted and Japan still has not recovered today despite the central bank pumping in money (printing money) and with low interest rate.

    The US was facing the same situation as Japan in 2008 when the bubble bursted.The fear of a lost decade for US is not unthinkable. Fed has maintained near zero interest rate and pumping money into its economy hoping to boost spendings by corporations and consumers but without much success due to multiple problems facing both the US and the world.

    The Fed has said that it could raise interest rates anytime when sign of a recovery and should act forcefully to prevent another bubble should the low interest rate and higher inflation are allowed to prolong.

    The vulnerable economies right now are not US and Europe or even Japan.These new vulnerable economies are Singapore, Hong Kong; China and other high growth, high inflation economies in Asia.

    We are fortunate that MAS has been taking preemptive actions to prevent a bubble with various cooling measures to discourage corporations and consumers from highly leveraged particularly in real estate.

    Question we need to ask is can MAS alone prevents an asset bubble? Economists have differing views with regards to Japan's "lost decade"and the US subprime crisis. Some believe it was due to weak monetary policies while others believe it was due to economic cycle largely at play. Both have their points.

    Bubble usually starts by the rich (top 20%) and filled up by the 80%. The bubble starts to burst also usually by the rich and burst by the other 80%. Interest rate only serve as a catalyst but the bubble usually starts to burst when the 20% feel that the economy is not sustainable and start to move their funds or take profits. This exodus effect will cause the 80% to act and the bubble will burst.

    The moral of this economic lesson is that we should invest with our EYES and not with our MIND. If one is highly leverage, make sure you have plan B.Interest rate in "theory" is just a catalyst. The thing that causesthe burst is the exodus effects when corporations and consumers start to be cautious just like the Japanese did.

    Well! with this, I wish everyone well.
    Last edited by Leeds; 15-11-12 at 10:42.

  2. #2
    Join Date
    Feb 2011
    Posts
    8,926

    Default

    AUD high rate also bubble what ...
    Ride at your own risk !!!

  3. #3
    Join Date
    Dec 2011
    Posts
    1,763

    Default

    Very good article

  4. #4
    Join Date
    Jun 2009
    Location
    Southbank
    Posts
    9,485

    Default

    If Bank can loan me money, I will still buy.

  5. #5
    Join Date
    Jan 2011
    Posts
    787

    Default

    The moral of this economic lesson is that we should invest with our EYES and not with our MIND. If one is highly leverage, make sure you have plan B.Interest rate in "theory" is just a catalyst. The thing that causesthe burst is the exodus effects when corporations and consumers start to be cautious just like the Japanese did.

    Thank you Leeds for this good analysis cum warning reminder !

    with low interest till 2015 and prob extension to 2016, along with QE3 and prob extended operation twist, many will continue to leverage still, in spite of the cooling measures. it is good to make sure that there is always a backup plan along with good holding power, cos the end of the ride may be extremely bumpy when that 20% get off. our cooling measures will then turn out to be the cushions we need afterall for that softer landing.

  6. #6
    Join Date
    Sep 2010
    Posts
    411

    Default

    Bank can always lend u at LTV 60% or lower; asset based lending

    Quote Originally Posted by Arcachon
    If Bank can loan me money, I will still buy.
    if you dont't own any property, you're short. take cover quickly

  7. #7
    Join Date
    Nov 2008
    Posts
    113

    Default

    But my eyes are hungry, my mind says NO. Anyone else has this dilemma?

  8. #8
    Join Date
    Mar 2012
    Posts
    4,990

    Default

    when bubble bursts, the rich are still rich while the poor lose their monies...honeys...and jobs.

  9. #9
    Join Date
    Oct 2010
    Posts
    2,094

    Default

    Quote Originally Posted by condolisa
    But my eyes are hungry, my mind says NO. Anyone else has this dilemma?
    what do you mean by that?
    can you explain?
    I took the road less traveled by, and that has made all the difference. - Robert Frost quotes (American poet, 1874-1963)

  10. #10
    Join Date
    Oct 2012
    Posts
    1

    Default

    Goodbye Leeds

  11. #11
    Join Date
    Jun 2009
    Location
    Southbank
    Posts
    9,485

    Default

    Quote Originally Posted by auroraborealis
    Bank can always lend u at LTV 60% or lower; asset based lending
    Serious, and how long is the repayment period.

  12. #12
    Join Date
    Nov 2008
    Posts
    113

    Default

    For me, it means putting my last dollar on the next property and hope for the best

  13. #13
    Join Date
    Oct 2010
    Posts
    2,094

    Default

    Quote Originally Posted by condolisa
    For me, it means putting my last dollar on the next property and hope for the best
    you got good cashflow to support?
    I took the road less traveled by, and that has made all the difference. - Robert Frost quotes (American poet, 1874-1963)

  14. #14
    Join Date
    Nov 2008
    Posts
    113

    Default

    Doable if i have risk appetite like Arcachon's. This forum has taught me alot and opened up new perspective on growing money through leveraging although I sensed I am abit late with all this CMs in place.

  15. #15
    Join Date
    Oct 2010
    Posts
    2,094

    Default

    Quote Originally Posted by condolisa
    Doable if i have risk appetite like Arcachon's. This forum has taught me alot and opened up new perspective on growing money through leveraging although I sensed I am abit late with all this CMs in place.
    don't over stretch..

    enjoy life is more important
    I took the road less traveled by, and that has made all the difference. - Robert Frost quotes (American poet, 1874-1963)

  16. #16
    Join Date
    Nov 2008
    Posts
    113

    Default

    That's what my mind tells me too

  17. #17
    Join Date
    Oct 2010
    Posts
    2,094

    Default

    good job there.
    I took the road less traveled by, and that has made all the difference. - Robert Frost quotes (American poet, 1874-1963)

  18. #18
    Join Date
    Jun 2009
    Location
    Southbank
    Posts
    9,485

    Default

    Fully agree, buy what you can afford.

    I use to wonder, how can a person buy million dollar property? I did my calculation and still can't find the answer until June 2006. It is not how much you earn a month, how much you keep aside a month, it's how you use others money to grow yours.

    Until 2011, I thought I am using money others person deposit in the bank for the loan until I watch the you-tube about What is Banking.

    Money is created when a person go to the Bank to borrow.

    http://www.youtube.com/watch?feature...&v=on513ZiQA8M

    Money is Debt.

    http://www.youtube.com/watch?v=lsmbWBpnCNk

    Once you understand about Banking and Money than getting the million dollar property is easy.

    Any Banker what to loan me money I will take.

  19. #19
    Join Date
    Nov 2008
    Posts
    113

    Default

    Thanks Arcachon for this link. I will watch it later tonight.

  20. #20
    Join Date
    Oct 2012
    Posts
    460

    Default

    Quote Originally Posted by condolisa
    But my eyes are hungry, my mind says NO. Anyone else has this dilemma?
    There are 2 schools of thoughts... i have friends who have a couple of properties and you can say they are highly leveraged. So far all's been so good... as prices has been going up. No one knows what will happen to these fellows when the prices come down

    Another group who dun touch properties at all; says they got emotions to houses, can't bear to sell even when prices are high they put their money in the stock markets instead.

    At the end of the day, dun follow the herd... follow the head
    When you have eliminate the impossible, whatever remains, however improbable, must be the truth

  21. #21
    Join Date
    Oct 2010
    Posts
    2,094

    Default

    Quote Originally Posted by sherlock
    There are 2 schools of thoughts... i have friends who have a couple of properties and you can say they are highly leveraged. So far all's been so good... as prices has been going up. No one knows what will happen to these fellows when the prices come down

    Another group who dun touch properties at all; says they got emotions to houses, can't bear to sell even when prices are high they put their money in the stock markets instead.

    At the end of the day, dun follow the herd... follow the head
    lol~
    me put in the bank now
    I took the road less traveled by, and that has made all the difference. - Robert Frost quotes (American poet, 1874-1963)

  22. #22
    ikan bilis's Avatar
    ikan bilis is offline i'm Buaya ! Girls BEWARE !!...
    Join Date
    Apr 2011
    Posts
    1,385

    Default

    Quote Originally Posted by condolisa
    Doable if i have risk appetite like Arcachon's. This forum has taught me alot and opened up new perspective on growing money through leveraging although I sensed I am abit late with all this CMs in place.
    better don't anyhow follow... arcachon got a very solid iron bowl.... umm.... i think is steel type...

  23. #23
    Join Date
    Oct 2012
    Posts
    460

    Default

    Quote Originally Posted by roly8
    lol~
    me put in the bank now
    Now put $$ in the bank is same as putting under the pillow
    When you have eliminate the impossible, whatever remains, however improbable, must be the truth

  24. #24
    Join Date
    Nov 2008
    Posts
    113

    Default

    Quote Originally Posted by roly8
    lol~
    me put in the bank now
    Yeah, I miss those days where I can just leave my savings in the bank and still be smiling

  25. #25
    Join Date
    Nov 2008
    Posts
    113

    Default

    Quote Originally Posted by ikan bilis
    better don't anyhow follow... arcachon got a very solid iron bowl.... umm.... i think is steel type...
    As good as solid gold

  26. #26
    Join Date
    Nov 2008
    Posts
    113

    Default

    Quote Originally Posted by sherlock
    There are 2 schools of thoughts...

    At the end of the day, dun follow the herd... follow the head
    Follow the head of the herd, but I must grow taller first

  27. #27
    Join Date
    Nov 2008
    Posts
    3,812

    Default

    Quote Originally Posted by sherlock
    There are 2 schools of thoughts... i have friends who have a couple of properties and you can say they are highly leveraged. So far all's been so good... as prices has been going up. No one knows what will happen to these fellows when the prices come down

    Another group who dun touch properties at all; says they got emotions to houses, can't bear to sell even when prices are high they put their money in the stock markets instead.

    At the end of the day, dun follow the herd... follow the head
    Bro, your friends who have a couple of condos can mitigate the risk by selling 1 of the condo and cashing out.... With this spare cash, he can put in the bank or pay up the some of the other housing loan bringing his leverage down. It all depends on ones play... The result will only be known at a later date.

  28. #28
    Join Date
    Oct 2012
    Posts
    526

    Default

    Hi All

    Lets say if u have the initial 40%, would you buy now at this current price and current economic situation?

  29. #29
    Join Date
    Oct 2012
    Posts
    460

    Default

    Quote Originally Posted by chestnut
    Bro, your friends who have a couple of condos can mitigate the risk by selling 1 of the condo and cashing out.... With this spare cash, he can put in the bank or pay up the some of the other housing loan bringing his leverage down. It all depends on ones play... The result will only be known at a later date.
    Actually there's no right or wrong... For me, I did the other way round. I bought one with very very little leverage. If I've done it like my friends, i would have been owner of at least 3 PCs But I prefer to sleep at ease in the night OR perhaps I'm too conservative
    Whether who turns out to be right is the million-dollar question =. On hind-sight its always easy to say
    When you have eliminate the impossible, whatever remains, however improbable, must be the truth

  30. #30
    Join Date
    Oct 2010
    Posts
    2,094

    Default

    Quote Originally Posted by sherlock
    Actually there's no right or wrong... For me, I did the other way round. I bought one with very very little leverage. If I've done it like my friends, i would have been owner of at least 3 PCs But I prefer to sleep at ease in the night OR perhaps I'm too conservative
    Whether who turns out to be right is the million-dollar question =. On hind-sight its always easy to say
    about your risk appetite..

    the more greed, the more $$ u will get..
    I took the road less traveled by, and that has made all the difference. - Robert Frost quotes (American poet, 1874-1963)

Similar Threads

  1. Replies: 5
    -: 14-08-19, 13:58
  2. Replies: 0
    -: 29-12-16, 18:35
  3. Replies: 6
    -: 18-11-15, 09:13
  4. Ripe for an asset price bubble
    By mr funny in forum HDB, EC, commercial and industrial property discussion
    Replies: 0
    -: 02-09-09, 02:19
  5. Property asset bubble will hurt Singaporeans
    By mr funny in forum Finance and Legal
    Replies: 0
    -: 18-08-06, 17:37

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •