response to the bears.

Okay there are a variety of posts out there from the bears requiring my response. For simplicity I have answered them all in this thread.

Upfront I will make it clear that my overall thoughts expressed in past blogs have not changed. However they clearly have not been expressed in the most accurate way, as it can be difficult to write your thoughts in an unambiguous way that is cannot be misinterpreted by those that want to read them the wrong way.

BigGambler:
"UT your argument has changed before you were saying Inflation is a increase in wealth? have you worked it out now that its not?"

A combination of leverage and inflation DOES increase your wealth but over the long term. However based on your past statements you appear to be only able to understand how to make money off of shorter term trading. As stated in past posts I invest in real estate for the long term as it is a blue chip investment over the LONG TERM. If you pick property in the right area you will get capital growth (regardless of median price changes), and you can value add to it to further increase it's value and returns. The problem for you guys is that property just does not fit into your investment model as it does not give you fast returns which you clearly want. Hey I like fast returns too and made 40% through short term trading over and above my losses for the GFC for the 2008/2009 tax year, however I personally would not borrow money for short term trading. Short term trading has its risks though as you have to get your timing right, and you have to be able to accept significant losses as they are par for the course for significant gains. Risk vs reward - holding property or shares for the long term significantly reduces the downside risks.

Clearly you bears also fail to understand that both the median wage and house price is. For clarity the definition of median from dictionary.com is:

the middle number in a given sequence of numbers, taken as the average of the two middle numbers when the sequence has an even number of numbers: 4 is the median of 1, 3, 4, 8, 9.

Therefore this means that there are still plenty of property at lower prices, and plenty of property at the higher prices. The same goes for wages. Thus with this in mind unless you have buckets of money anyone entering the housing market needs to look at properties at the lower end (under the median) if they are realistic - but hey these properties are beneath allot of buyers as they are not in the area's they want to live in (i.e. outer suburbs of the cities).

Now onto that tired old chestnut that you bears like to harp on about wages vs property price. You guys need to forget about the idea that it should be a single wage earners wage vs property price as the reality is it is household income vs property price which makes things much more realistic as there are generally TWO I repeat TWO wage earners per household these days. This is a consequence of the equality of the sexes and the fact that both people in the household want their own income (for independence). I agree this is not necessarily a good thing but it is REALITY and is not likely to change any time soon. The other downside is that households that may have wanted to live off of one wage are now forced to have two wage earners.

The bears also just seem to think that anyone investing in property especially in the current climate is an idiot - well you can think what you like we have all done our numbers and know what return we can get and are willing to accept we have also accepted the risks (as you do with any investing). Since property is such a bad investment in your eyes in they current climate why the obsession with proving it is a bad one? is it just to justify your own inactions? and make you feel better about your own decisions. Hey we all like the debate and are interested in alternate points of views, but why spend so much effort expressing your views on an asset which is clearly not for you at the moment and will not likely be a good investment to you for many years - seems a major waste of effort to me!

Quote bongodrongo:
"You can't expect people who don't understand simple accounting concepts to grasp macro eceonomics. They are out of their depth."
In terms of myself and I am sure many others - yeah we are not macro economic geniuses like yourself and many of all the high and mighty bears, but we know how we can generate wealth over time in practice do you? Or are you just another armchair economic expert?

Last but not least whoever said that everyone should be able to BUY their own home. That might be an ideal but it is not REALITY. If you can't afford to own then either rent private/public housing or even share a house. Gone are the days where you could just lay your stake on a piece of land, and manually build your own home (not that most people could/would do these days anyway).

Well that's my rant - over to you guys to educate me on your view of reality as I can't possibly be presenting a realistic view of the world today could I?

Oh just one other thing - how will you guys recognise when property cheap enough i.e. you will notice if a 40% drop if it occurred tomorrow, but what would happen if the price just stayed the same for 10 years with an annual inflation of 3.4% which would equal a 40% drop in real value. I suspect that most would continue harping on how expensive property is and would miss the boat before property started increasing again. My view is we will get a small drop in price followed by a period of stagnation (largely the latter scenario).