Aussie Dollar Plummets
 

AUDUSD=X: Basic Chart for AUD to USD - Yahoo!7 Finance - Share Prices, Charts, News and more

Looks frightening:eek:

I'd say it's a matter of perspective.

It doesnt look frightening to those of us who work overseas and send our savings home. Nor, I imagine, would it look that bad to farmers, manufacturers, the tourism industry (especially the airlines) etc. :ok:

Yup...its all of about 4 cents below the 25 year average...terrifying:rolleyes:

Big payrise in Oz$ terms for me and all my mates in the last few months:ok:

Toys for the Bo are more within reach then hey?;)

I was lucky with my toys...... mind you the next big hit is a 20% increase in the GST amount I will have to pay when the goodies come through customs.:(

Hateful for me as an importer ,but it wasnt that long ago it was around the 50 cent mark
75c would be good for the country but I got a felling it will climb again.

Tin

I do recall a time where it ht around 38-39c ...... unless that was a nightmare I had:rolleyes:.

I see the euro is falling and others..... so this is against the USD :ugh: And I thought their economy was all screwed up.......... gotta make ya wonder!

I think around the 80c mark will be the norm, but who knows!

J:ok:

US economy tanks...their $$$ goes UP....pls explain.:ugh:

It's actually our dollar going down, check it against the cross rates! The US is one of Australias main trading partners, our other big partners China & Japan rely heavily on the US dollar also, hence the US dollar dives our dollar dives more....:eek:

Jaba hope not.:uhoh: you arent thinking of gold at $USD34 an ounce in the 70's?
When I escaped from Maoriland in the 60's a maori pound would get you one pound two and six in OZ.:uhoh:

The drop could be short lived with the 1% cut in official interest rates just announced!:eek:

Interest rate cut!

Why will a drop in % rates firm up the AUD?

Based on yields and global economic doldrums this should help it get clobbered. AUD- carry trade, sentiment and commodities currency???

And Then - agreed! Interest rate cut will put pressure on the AUD if anything, should go down some more...

The AUD is trading about 64 US cents, a whopping 35% drop from its peak just a few months ago.

In theory the AUD is becoming more attractive for students from overseas coming to train in Oz, but with a global recession becoming inevitable, I wonder how many airlines and operators will be left operating or actively recruiting.

I hope yesterday's rate cut will stimulate enough domestic consumption but unfortunately so much is dependent on the rest of the world.

Received the following email yesterday:

Lodown, that's pure gold :}

Makes me laugh even after looking at the value of my funds, and that says something :ooh:

'lodown' you email sending friend has gotta run for president, no come to think of it he/she won't make it, their too clever:ok::D
Would have been a good idea to buy lots of green backs a few months ago & stuffed yr pillows with them.




CW

Tin
You are correct, my mistake it was 48-49 cents and that was back in March 01.

1973-74 it was around AUD$1.00 = USD$1.48

No wonder that was the flood of Cessna, Piper and Beech machines down under!

And for Chimbu Chuckles the average monthly rate for the last 25 years was USD$0.723 so you were a day ahead of your time coz it is that now!

J:ok:

AUD1=.6689 as of a hour ago.

For the younger viewers of this financial meltdown please ponder the amount of control being exerted by your elected leaders, precisely zero, for next time they are making claims as to their economic prowess. Australian political leaders, of whatever persuasion, are mere voyeurs - as much victims of what goes on overseas as we are. What they do next shows whether they are morons or not...and they all are.

When they drop interest rates and pump liquidity into the market - the way all western govts are at present -Australia less, so far at least - they are doing that in vain hopes of propping up asset values artificially. If assets are over valued, and real estate in Australia most assuredly is, making money too cheap merely sustains the bubble a little while longer (if they are lucky - and in the current circumstances they are, most assuredly, out of luck) and delays the inevitable correction.

In Australia of late an average house has been 6+ to 7+ x average wages. Historically in Australia it was closer to 3 - 3.5x. In the US, Canada, UK and EU just before the crash it was around 3.5x.

So what do you think house prices are most likely to do next? They weren't going to go up for much longer even without the current financial crisis.

NSW has been in recession all by its lonesome for 12 months. Victoria lives in relative recession permanently as does SA. That leaves NT, WA and QLD, the mining states (ACT is on a different celestial orbit:ugh: ) - with Asia going into recession demand for minerals will inevitably drop, offset a little by the helpful exchange rate - look for layoffs in the mining sector and the unravelling of house prices artificially inflated by CUBs (Cash Up Bogans) who went from marginally employable to 6 figures working for the mines and live in a house they think is worth 600k and have at least 1 very late model Falcon/Commodore/SUV (probably something similar for the Mrs), a new wake boarding boat and a brand new flat screen TV that covers half one wall in the living room opposite the brand new leather lounge...all bought with cheap credit...oh and lots of stuff for their 4 kids. Even a prime mortgage becomes sub prime in a heartbeat if you can't make the payments and the real value just decreased 40%. Think it cannot happen? Watch...real estate had tripled in the last 7 until just recently. Utter madness. Perth will be hit HARD.

Either peoples wages double or house prices crash - which do you think the govt would never let happen...which do you think the govt cannot stop?

This, our consumer economy, is what the Reserve Bank is desperately trying to prop up. Ultimately they cannot because it is impossible.

Jobs will be lost in the mining sector, tourism etc and that ripples out across the economy...estate agents, boat, car, TV, white goods sales all fall...law firms who specialise in conveyancing, trucking firms, mine support industries. All laying off staff and that ripples out further...builders, brickies laborers, plumbers, electricians, roofing people..and then banks.

Local and State govts start to feel the squeeze from a lack of stamp duty revenues etc...they wont fire people of course so they borrow and/or put up rates - we've seen that already - save water they screamed, so we did, they lost revenue and put up the rates based on artificially inflated land values. Wanna lay bets on how fast land values will be adjusted downwards and thus the rates?

Then we get to commercial real estate - already taking a hammering in the US - in fact had it not been for the commercial real estate bubble lasting until a few weeks ago the US would have been in recession last January. Businesses go broke and vacate leases, new businesses don't start and yet look at the mad building of commercial real estate that has been going on in the last 7 years - new shopping malls, industrial estates and theaters.

Look at the enormous amount of high density living that has gone up on the coast, much still unfinished...and look at the developers flirting with insolvency as we speak.

All this debt collateralised, leveraged, rated AAA and sold off to the ignorant in CDOs (Bonds) and worse, CDSs, (placing a highl leveraged bet that debts will default)...all completely un regulated...thank you elected officials again...and NO-ONE knows where all that worthless paper is or what it is worth...this is the real elephant in the beer fridge.

Then we get to the airlines.:sad:

This all must happen. Australia probably won't be hit as hard as the US/EU but we will be hit...how hard depends on how hard asia is hit. China, Japan and India in particular. We'll probably recover quicker because of the exchange rate and our minerals...3-6 years if history is anything to go on.

Who is to blame?

Ultimately our elected officials make the policies/turn a blind eye that allow this madness with low interest rates and affordable housing mandates that entice, or in the case of the US demand, lending criteria to be relaxed so people who couldn't get a mortgage all of sudden are convinced they can afford it.

Mortgage defaults/repo/bankruptsy were at historical highs in Australia for the 12 months before this latest fiasco..what do you think happens next?

If you're older than early to mid 40s you're seen it before - probably not as bad - for you 20 somethings watch and learn. Watch the pollies !!!! this up.:hmm:

Anyone else see the UWS Economics professor the other night on the 730 report? He was very much doom and gloom. I would not be going anywhere near starting out in aviation if you listen to his advice. Basically he said get rid of as much debt as you can and get employment in a secure industry and hang on. Best case scenario was a recession that hits hard and last for a few years. Worst case scenario was great depression stuff. I will post the transcript when they print it.

Chimbu, some very astute observations, as always ;)

BUT I think you're wrong in one of the central and early assumptions in your chain of events: Asia, and particularly China, and to a lesser degree India, will not be dragged into a massive recession methinks.

Why? China is so incredibly cashed up (they are the main financier of the Bush administration's loose monetary policy, a delicate irony often overlooked) and is such a huge net buyer of commodities, that it is very resistant to economic downturn elsewhere in the world. Most of the growth in China is home made. There are hundreds of millions of peasants climbing the social ladder, a development akin to industrialisation in Europe a few hundred years ago. In my view pretty much nothing can stop them. Also, they're protected by a system that is not pure capitalism and as such can be more inventive and ruthless in times of crises.

Of course trade of China (and India for that matter) with the rest of the world will slow, but most of the growth in those countries as I said comes from within and ripples out (private and infrastructure construction is probably the biggest part). Economic growth comes in large parts from population growth and access to means of production, and this is in its purest form what is happening in India and China these days. (I'd even go so far to say that this won't stop even if the world's financial system grinds to a halt. China will simply decree a system of their own and continue. A little far fetched? Maybe. Possible? Absolutely. But I am digressing..:E)

The US are going down fast, and deservedly so, and are taking the willing participants of their financial follies with them. Good! That bubble needed to burst much earlier. I won't look at my share portfolios for a few years and otherwise probably not be affected too much..

Aviation: As mining will continue to develop (maybe a bit slower), demand for aviation in those parts will not dry up. The training industry will continue to grow, demand from China, India, the Middle East and the rest of Asia will not slow too much (see above, growth there will continue). The Middle East is equally cashed up and rapidly growing with their oil money, so I don't expect that too slow either.

House prices in Australia? You're spot on, the situation is ridiculous and there's a bubble waiting to burst, and I've got a few bob stashed away for when it'll happen, I'll snatch up a nice little bargain then. Every folly needs at least two willing participants. In this case it's greedy bankers, estate agents and developers on the one side, and silly private individuals on the other hand who would rather ruin themselves than rent. They've got another thing coming!

Yes, eventually there will be a property crash in Australia, but it's not going to be as a direct result of this US-made crisis. (There'll be a change of government in the US soon, and things will calm down and right themselves, capitalism has a way of adjusting supply and demand automatically).

When it does crash Down Under, it'll crash big, because we're sitting on a house bubble worse than in the US (7.5 times annual earnings? Ridiculous and unsustainable!). But Aussie homes are not secured by the dodgy financial instruments that are falling apart in the US, and banks not majorly affected (we are at the end of the world, remember? :E).

What results the crash here will have I can't even begin to speculate on. But it will hopefully end a situation where the government can keep land release for development way behind population growth (thus artificially increasing land prices), and maybe, just maybe, it will dispel the imported Anglo-Saxon myth that it's somehow uncool to rent..

In three words: Keep flying guys :ok: Demand for pilots will continue to increase, especially because now even more budding pilots will shy away from forking out the cash to get their CPL's.

Economy plummets with bankers screaming (avoiding a nearby primary school)
 

The pilots of the economy grappled with the controls (and tried to avoid a nearby day-care centre) as the economy entered a deadly plunge. Banking passengers screamed in terror as their investments suddenly lost altitude.

"It was terrible, the floor suddenly fell from under us. People were screaming and crying everywhere. I thought this was the end. I saw flashed of 1930 before my eyes. And I'm not sure we're safe yet." a passenger was reported to have said just after the initial fall.

A well known pilots web site released a dramatic trace of the economy's altitude information. A spokesman from the investigation refused to comment when asked to confirm or deny the accuracy of this information.

A Government spokesman said that the problem was caused by a near-miss with another crippled economy and re-iterated that there were no problems with the engines of the Australian economy.

The spokesman went on to say that the economy was still flying, although it is uncertain as to whether it can regain any of the lost altitude. He is confident that the pilots can bring it in for a soft landing.

The regulator, who had been out to lunch for several years, has stated that many of the economy's systems will need to be examined to determine the exact cause of the incident and to prevent a future occurrence.

A factual report should be released within 30 days, presuming the economy lands somewhere.

The AUD needs to be driven down further. Living abroad I have noticed Oz exports are starting to get caned by competition from the USA or USD pegged currencies.

There are a million Australians working abroad. Government should look at how to encourage them to repatriate their wealth to help the economy. They will probably just want to tax them.... :ugh:

Good Australian real estate should hold out OK. Propped up by a supply shortage and foreign bargain hunters.

Australia should do OK. Helped by a lowered currency.

The leading recipient of our exports is Japan. Its a train wreck over there I believe.

The leading recipient of our Iron Ore is China (closely followed by Japan) to the tune of around $9B worth. Chinese leading steel makers today collectively announced an immediate cut in production of at least 20% on Business Asia. Some of our Coal is used for Coking as well as power for the mills.

Hi Gnadenburg,

I concurr with your comments, however, I agree that the best tack is to just ride it out pick up the odd bargain and not get too greedy.

Perhaps is Eden valley anywhere near the abode of peace?

So there's a hiccup in the commodities boom? Thank Christ for that! Have you seen the air in China?

Won't a lower AUD help the mining industry have a softer landing? A lower AUD will help other Oz industries- agricultural export etc.

First thing I would do is put off some expensive defence contracts. The arms race in Asia is on hold Mr Rudd.

I wonder how many Aussie dollars were on board the Qantas A330 that "plummeted" off the coast of WA?

Could have been the cause of the problem!

BC :E

Ah plankbender an optimist after me own heart:ok:

China indeed has an enormous trade surplus which I suspect the Chinese will use strategically rather than just hiding their heads in their hands and screaming "We all doom..la".

But I don't think it will be enough.

Those young people that are currently learning to fly who are REALLY keen will keep on and when things eventually pick up will be well placed to take advantage...many will give up and do something else...has always been thus. I learned to fly in the early 80s during that recession, went to PNG because there were NO jobs in Oz...had a ball. Africa and PNG are still there. Expectations will need to be re-adjusted - LH seat of shiny jet within 3 years of first solo will be replaced with L/H of Cessna Caravan for several thousand hours but that won't bother the dedicated inordinately.

Whomever is in power in the US in January will be more passenger than leader. What needs to be done is so politically unpalatable that I don't think either has it in them - I suspect Obama will make it worse and McCain will be a mere spectator - either will be a one term wonder, as will Rudd. Maybe in 4 years time the next POTUS might do the right thing. As Churchill said "The Americans can always be relied upon to do the right thing - after they have exhausted every other possibility".

This is not the end of the world merely the bursting of the latest economic bubble in a long line of bubbles - until next time.

Actually, I am. I wouldn't buy into a massive bubble like this unless I was looking for a high risk, high cost, long term investment :=

Mortgage payments don't equal investment. A good portion of a mortgage goes to the banks as interests and other costs, which is lost for the buyer of the property.

Ask any independent financial advisor, and they'll tell you that the stock market outperformed real estate consistently over the last two to three decades.

This may sound weird, but if you actually run the numbers, it works: Instead of buying, rent and spend the difference (there is one in most places, although property folk may want you to believe otherwise) investing the stock market (buy now, it's a good time :E), and you'll come out in front after twenty years. Doubt it? Work through an example using average earnings, house prices, real estate and stock market gains, and you'll see what I mean. Assume similar risk profiles when selecting mutual funds..

I wasn't saying growth will not slow, but it won't stop (i.e. China will not enter a recession as per the technical definition).

PB

Who are you trying to convince?

I have seen properties advertised in the last 3 months where it would be possible to purchase two properties in Sydney, rent one and live in the other and it would probably only cost you about $50 per week!:eek: These are not properties out in the 'mortgage belt' either, they are in sought after areas...:ok:

I wouldn't be going with any 'independant advisor' who advises an 'all the eggs in one basket' approach! Shares have their place in a balanced portfolio, as does property. I know a number of people who do not own the house in which they live, they do however have property as part of their investment strategy.:rolleyes:

HH

PM me where these are....I'll go ya halves! :ok:

J:ok:

Check Domain Jaba, many properties that you can positively gear, in particular in the city! Rent's are ridiculous, I reckon it's all the 'get rich quick with shares' types who now have sold off their property to invest in the stock market, pushing the rental prices up!;)

PB.
You have to compare apples with apples. Leverage is required.

Banks etc allow you to leverage into property at a much higher gearing ratio than shares. Unfortunately.

Why would anyone pay rent for a house that is more than what the mortgage would cost? (Except in a slump when no-one can get a home loan)

I am looking at buying my first place (but am being patient and waiting for the bubble to finally burst) and have found that in most cases the mortgage is close to double the price of renting an equivalent property.

ferris, margin lending can do the same for your in shares, but is also associated with increased risk of course.

I looked at it a year ago but steered well clear of it once I dug into the potential pitfalls.. like a huge bet, really. If you don't know what you're doing, you might as well put it on the horses..

Same really with betting seven years' salary on continually rising property prices.. unless you have a really really good case for negative gearing (assumes you'll be paying taxes in Oz for years to come, which is not a given in aviation), you might want to stay flexible and independent..

Says it all, really.. mate, rent a place, stay flexible for the next position on the other side of the country or the other side of the world, and invest the half you've saved wisely. For a young person, generally recommended is a third in bond/cash/term deposits, with the rest in mutual funds of whatever risk you find acceptable, with different institutions around the world, in at least two different currencies.

CFD accounts effectively give you 90% leverage against almost any stock on the asx. Long or short until shorting got banned.:ugh:

I've seen the numbers for this and it can work, provided you are disciplined enough to actually invest the difference rather than spending it on a higher standard of living, and the stocks you buy don't all crash. Personally I would rather have the security of owning the place I live in. Companies can go broke leaving your shares totally worthless.

Property markets can crash leaving you with negative equity, or interest rates can go sky high, but by hanging in there long term you will come out ahead. How much is a Qintex share worth today ? Compare that to a house bought at the wrong time in the 1990s.

PB, you are missing my point. Once saw the bloke from "money" standing outside his first house in SY, talking about how he had paid 100k for it, and now it was worth $350k (this was a while ago!!). He then went on to say that if he had put the 100k in an index tracking fund, he would now have 750k. Thats fine, except to put 100k in an index tracking fund, you need 100k (pretty much). To put 100k into a house, you need 10k (pretty much). Do you see my point about leverage? Go ask a bank how much they lend you for shares if you have 10k.

ps. there is no point in talking about the greater returns of the sharemarket if you cant handle the risk inherant in the sharemarket.

A fairly recent inception are leveraged funds, which might be the answer. A lot different to a margin loan.

A lot of people sweating on a margin call at the moment, I'm not sweating on the bank making a call on my housing loans, not yet anyway...;)

Granted, but don't forget this comes at a high price: interest, immobility to a degree, and certainly when buying into a big bubble you're a sitting duck for years on end potentially sitting on negative equity..

Have you checked the termination conditions on your housing loans? They make pretty sobering reading, they can be pulled at any time with very little notice.

Here are some interesting graphs:-
http://www.whocrashedtheeconomy.com/...homeprices.gif

http://www.whocrashedtheeconomy.com/householddebt.gif

http://www.whocrashedtheeconomy.com/...netsavings.gif
http://www.whocrashedtheeconomy.com/...ricevsrent.gif