Is shorting this a no brainer?, page-597

At present, the Australia Interest Rate is projected to trend around 3.00 percent in 2020. The concern is that many analysts are expecting our Balance of Trade to tip into the negative by 2020 as well.


Probably one of the bigger problems is residential investment to GDP, which is basically our ability to participate in the real estate market. Given a significant portion of investors are leveraged mums and dads, a doubling of interest rates to 2020 will cause pain. Morgan Stanley Research has indicated that 40% of mortgagees intend to sell if prices remain flat or begin falling. That's almost half our property inverstors.

The big problem with Mum and Dad investors is theyve never really experienced a long period of static or negative growth in the last 25 years (though we have seen some cities correct such as Perth). If you need compounding house price inflation just to break even, I cant see Mum and Dad investors holding a sinking asset in an environment of rising interest rates. This wont be a short correction. It will be protracted and set the scene for the next 15-25 years.

I was listening to Peter Mathers Elliott wave vlog the other day and he happened to mention in passing that we're moving into wave v of v's in the near term, with a Wave V supercycle that began with Wave 1 and 2 being the Great Depression in 1929. Thats's how far back the supercycle stretches. For those of you who dont follow Elliott Wave analysis, Wave 5 is the termination point of a bull market which you can apply to various timeframes. This is probably a 2019 thing.

Of course, all of this gives reasons why CBA has fallen out of its 20 year trading channel - the markets are forward looking.