Coping amidst the doom and gloom

Replies to This Discussion

Permalink Reply by Miffy on February 10, 2009 at 19:39

And here are some of the answers from those of you who have come back to me already!

__________________________________________

Mrs Cake Jarvie
Hello Miffy- welcome back

I have avoided the impact of a sagging economy by purchasing a unit on the cheap and living in it. I am expecting the share market will be ready for my re-investment when I have saved enough cash to invest again.

I am very confident that things will start to improve again soon, but I am also hoping that things will change. I abandoned the "chronic shopper" lifestyle many years ago and prefer my own kitchen to a restaurant, so I am able to save money quickly. I am new to Australia so I am still finding friends who, like me and now you, want to have fun without spending lots of money.

And yes, in my opinion modern people have got it all wrong with over-consumption and needing to have more all the time. Yes, most adults have forgotten how to have fun without spending much money.

I am learning about the lost art of home economics. Did you know that Western Australia had a proud and strong cadre of home economists from the late 1800's to the early 1970's? Intelligent, powerful women who taught each other how to do all the things that we now pay others to do, or use machines for. These nearly lost arts could save us modern women, and men, many hundreds of dollars a year and fill our spare time with meaningful group activities.

Speaking of art, creating and appreciating art is a great way to self-entertain on the cheap. I love listening to live music, and acoustic musicians and groups can host small gatherings in houses and parks. Aspiring artists can pool money for supplies and teach each other about pottery, drawing, painting and more.

A fitness club membership is less than $100 per month and IF YOU USE IT then you will feel healthier and spend some spare time for a good cause.

And I'll always have my paper trading, just practising so when it's time to invest again I am oiled up and ready.

This is how I am using my time right now. What doom and gloom?

• ▶ Reply

Permalink Reply by Miffy on February 10, 2009 at 19:40

Jacquesk

Hi Miffy
I have been watching my share portfolio plummet to new depths but like you I am not too fussed. I am taking a long term view. I am concentrating on staying employed and paying off what debts I have and not incurring new ones.

• ▶ Reply

Permalink Reply by Miffy on February 10, 2009 at 19:41

Mary M

Hey Miffy,

I'm coping ok - by watching a lot less news!!

Best way I've been able to cope with it is through humour, which can get you through most things. Here's one I saw the other day (about the US):

Consider this: If you had purchased $1000.00 of Babcock & Brown stock one year ago, it would now be worth $6.00. With Centro, you would have $15.50 left of the original $1000. With City Pacific, you would have less than $20.00 left. If you had purchased $1000.00 of Minara Resources stock you would have $99.00 left. If you had purchased Storm Financial, you would have nothing left. But, if you had purchased $1000.00 worth of beer one year ago, drunk all the beer, and then turned in the cans for recycling, you would have $214.00. Based on the above, the best current investment advice is to drink heavily and recycle. This is called the Super-Stubbie Plan.

• ▶ Reply

Permalink Reply by Kbot on February 11, 2009 at 7:19

I'm with Mary M & Jacquesk - I'm turning off the news and focussing on what's important to me: my job, paying off debts and not incurring new ones.

• ▶ Reply

Permalink Reply by Depression scholar on February 11, 2009 at 8:02

Hi all been looking for an Australian based forum like this for a long time. I am a recent scholar of the 1930's depression and moved my assets from shares to cash just before the collapse, for me it was obvious what was going to happen next and I have been quite right ever since. I'd like to hear what active investors with some market knowledge thing of my ideas.

1 We are heading into a great depression scenario

Despite what we have learned since 1930 it is unavoidable. I first got to thinking about this in December people weren't stupid in 1930 so why did it happen anyway? Well because the real antidote is unsavory. There is a massive overallocation of capital in every country when we start building the world's biggest.... or tallest... it's over. Those are signs of over optimism in overheated sectors of economies. By throwing more money at these (currently) influential industries more capital is wasted. Japan built huge infrastructure projects for 10 years and got nowhere, this is the same. Why? because the successive governments (and I will keep this discussion apolitical) would rather be seen doing something than doing nothing.

2 Gloom itself is the problem

The economy as it stands is highly consumptive, businesses and entrepreneurs structure their companies predicting growth, they too have had their times of pessimism and under ordered stock to be caught out later, A company still needs anywhere between 3 months (very small business) to 3 years or more (large corporation with end to end supply chain) to change their stocking levels etc dramatically I'm not talking about a 10-20% drop I mean outright cancellations and elimination of stocked items, I'm sure even Australia's retailers take 3 to 6 months to stock for the coming quarter patterns. Anyway I'm rambling.

Point is if everybody is like Miffy and cutting back on consumption then sales decrease, restaurants go broke, which result in more bad debt which results in less lending which will lead to more job cuts and more bankruptcies and so the story continues. When there are more Miffy's thean there are spenders this leads to a downward spiral of consumption.

3. The nail in the coffin collapse of trade and the increase of protectionism

The great depression didn't really get going till trade collapsed the infamous Hawley-Smoot bill that raised the trade barriers in the USA which led to retaliatory raising throughout the world in a spiral of "beggar thy neighbor" policies that created the great depression. Don't think it can happen again?, Germany refused to inject money into their industry when France and the UK did so because they knew they as the manufacturing centre of Europe was the net beneficiary. There is already senators of the US who are saying that all stimulus package money would go to US firms. It will happen here too as demonstrated by the misguided patriotism that sparked the Cronulla riots. In short sooner or later the opposition (whichever party it may be) will get sick of being in opposition and get on the populist band wagon, this might be in retaliation to other protectionist policies in other parts of the world, as soon as it happens the depression will be here to stay for at least 10 years.

I think this process is already in high gear, by injecting the amounts of liquidity (it's not capitol) we have set ourselves up for massive inflationary pressure. Whats going to happen when any government (both sides would have done it) pumps that much liquidity in the market is prices of commodities, electricity and food go upwards, india had to ban the export of rice to feed itself recently. When your food, electricity and input costs go up by say 20% it is far easier for a government to blame things such as in Australia's case foreign prawn importers or foreign rice importers than itself or foreign demand for coal. When jobs are scarce then it's easier to blame immigration than the pessimism spiral that is the root cause of the problem.

My key figures are this your living costs will rise by 20% at the least.

Share markets will continue to fall (there is no decoupling of the Asian tigers or China itself from the USA)

The wise can see it coming but nobody can really do anything about it.
Protectionism will lead to a great depression.

• ▶ Reply

Permalink Reply by Kbot on February 12, 2009 at 14:27

I reckon you're spot on here with point 3 - the increase of protectionism is the nail in the coffin. I thought the whole premise behind the functioning of free markets was that they remained, um, free.

But this talk of "Depression" got me thinking. What is a Depression? Is it nothing more than a massive fall in the standard of living relative to the "peak"? Remember that the standard of living (I hate this term but don't know what else to use) that we've all enjoyed recently has been due to nothing more than borrowings - i.e. it was a false lift in standard of living. We were not really any richer, we just borrowed more so felt that we were.

Of course I know that's a Depression is way more than this, but I can't help feeling that we're all getting our bee in our bonnet when there's not really that much to worry about. Is it so bad if we can't afford a new car/stereo/suit/shit we don't need/presents for people who don't appreciate them/etc. and will have to cut back on holidays/dining out/stuff we don't really enjoy/paying for water/etc.?

• ▶ Reply

Permalink Reply by moonbuggy on February 13, 2009 at 7:09

Hi Depression Scholar,

Welcome - nice first post!

I think the wave is just starting to hit Australia, with unemployment on the rise - "Jobless rate hits 31-month high", bankruptcies skyrocketing and company liquidations soaring - "Court-ordered liquidations soar: report".

The biggest impact on Australians will be a massive dent in property prices. This fall in property prices has got to be inevitable with people losing their jobs like it's going out of fashion. The reason I think this will be the biggest impact on us is not because of the size and scale of the impending property crash, but moreso because we as Australians have (and have had for some time now) a love affair with property, particularly the concept of home ownership.

We think we have a right to own a home and that property prices only go up.

So people losing their homes due to unemployment soaring + property prices crashing will strike a major blow to confidence, which is where point 2 mentioned by Depression scholar comes into play.

I reckon we've got at least a couple of years of retracing the false growth of the past few years, which is false because it was mostly due to ridiculous amounts of lending, rather than productivity increases.

• ▶ Reply

Permalink Reply by Depression scholar on February 14, 2009 at 4:14

The depression lasted for 10 years, Rentals properties were abandoned, factories closed because there were no orders, food and other essentials became unaffordable and currencies devalued by 20% overnight. Yes when you say we need to pay for our decade of hubris do you realise how devastating that is?

We need to reallocate at least 20% of our workforce as the capitol is misdirected to excess. I'm guessing retail, mining, construction. The path we are heading down will prolong the pain like peeling a band aid off slowly. Japan constructed it's "way out of trouble" for ten years and nothing happened. The controlled economy of the former soviet union led to eventual collapse.

The real solution is unpalatable, let the banks fail, lets see who really is in shape to carry on let new players enter the market. Problem is nobody has the political stomach to let this fall short and sharp. We are in for year upon year of recession. Because government needs to be seen "doing something" and hundreds and thousands of people losing their jobs is not doing anything. Unfortunately that ship has sailed. I'd like to know what we are going to do now.

Frankly I see an upside in Australia's case but first we need to readjust our expectations. We haven't seen companies change their profit reports to outright losses yet so i feel we haven't even begun to touch the bottom

• ▶ Reply

Permalink Reply by ff123 on February 16, 2009 at 8:32

So what is going to happen next ?

WW 2 was the end of the Great Depression who are the Yanks going to fight

• ▶ Reply

Permalink Reply by Depression scholar on February 16, 2009 at 8:51

Hope not though it is possible. Great depression first started with a no holds barred trade war, guess we'll have to watch this space.

• ▶ Reply