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Peter Switzer comments on Finance @ Yahoo7

“Every time I interview Australia’s academic bear – Associate Professor Steve Keen from the University of Western Sydney (he predicted a 40% slump in real estate prices in Australia) I always need a positive booster to remind me that the Australian economy is an out-performer and looks poised to beat the global worst case scenarios put forward by other bearish or negative economists.”

The Good News

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Last week the Reserve Bank of Australia (RBA) made the decision at it’s monthly board meeting to leave the official cash rate on hold. That means no adjustment to interest rates this month.

But Did The RBA Get It Wrong?

It will be interesting to watch what they do with interest rates in the months ahead. Their actions will be an indication of whether this months decision to leave rates on hold was the right one or not.

At the beginning of 2008 the RBA put interest rates up twice. At the time the opposition argued that the decision to do so was wrong and a reaction to Kevin Rudd & Wayne Swan talking up inflation; citing it as the # 1 enemy to go after. What they failed to recognise was that the negative economic impact coming out of the USA had already begun to work its way through the system and here in Australia the economic slowdown was just about to bite.

The numerous interest rate cuts later in the year is clear evidence that monetary policy in the early part of 2008 was wrong.

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Over the past 8 years or so speaking with all types of people on the subject of investing in property, many, generally new to investing, ask me the “what if” questions. My broad base of experience has meant my answers have generally put their minds at ease. Two questions, however, that I lacked a good solid answer for were:

1. How good will your portfolio be if we have another world war?
2. How good will your portfolio be if we have a worldwide recession or depression?

Well, with regards to Q 1, I still have no concrete answer for, and hopefully never will. With respect to Q 2, however, I can now (i.e. only now) say from experience… “It’s all ok”!

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The Reserve Bank of Australia (RBA) will meet for the first time this year, next Tuesday. While it’s difficult to know exactly what they will do with official interest rates, I expect another generous reduction to be handed out; probably 1%; but certainly at least 0.75%.

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AUSTRALIANS are more confident investing in property than in shares during 2009, a survey says.

Forty per cent of respondents said their priority in 2009 is to buy property, an online survey by mortgage broker Loan Market Group revealed.

>>>> Property a safe haven compared to shares in 2009 | The Daily Telegraph.

To make sense of the property market we must separate opinion from fact. Opinions will always be heard… just in greater numbers now perhaps. If you are prepared to “drill deeper” and dissect the evidence available; the facts will speak for themselves. There’s no reason for allowing the conflicting voices of opinion to keep you confused!

In the current round of Web Seminars we are offering, I highlight four key factors that are a MUST… if you expect to draw any credible conclusions.

1.    Record Population Growth
2.    Investors Have Fled The Market
3.    Home Ownership Unattractive
4.    New Construction Has Stalled Badly

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Last month there was talk that the RBA would drop official interest rates by 50 basis points or 0.5%. I believed there was justification for them dropping rates by a full 100 basis points; or 1%. I kept my opinion to myself and as history has shown, they did…

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Have you ever wondered why the things that evoke the most passion or emotion in us… are usually known by four-letter words? Some of these include love, hate, fear, work and of course… Golf! Another emotion-charged four-lettered word that causes most of us to break into a sweat… is DEBT!!!

Mostly, we are conditioned to fear debt and avoid it at all cost. So why does debt propel one family to great riches… and another to poverty? How come the majority of wealthy people quite adequately manage large amounts of debt? Can debt be a positive thing to help us get ahead… or is it always a negative thing to be avoided? Before we can accurately answer this, we need to clarify our definition of debt!

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I was out last night but when I arrived home my wife was disgusted. Not with me; ha, ha… but with a report she saw on 60 Minutes. Katrina doesn’t usually get so fired up by these sorts of things, but she was really livid.

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As an ‘aggressive’ property investor and someone leading others, I am very mindful of my responsibility to be sober and considered in my views.

Successful people swim against the tide of popular opinion. They carefully consider facts before making decisions of far reaching consequence. As the events in America bring on a feeding frenzy for those with an opinion (and often an agenda); the need for sobriety is needed now more than ever.

My Considered Opinion:

Recent global events in the credit market haven’t altered my long standing confidence in selective residential real estate. I expect my investment strategy will ultimately defy some of the broad-brushed statements being tossed about by a few pessimistic economists; who ironically have had most of the recent television and radio airplay.

Many hours have gone into penning this article… I trust the few minutes it’ll take you to read will deliver real benefit.

Let me start with some background to put into context my thoughts…

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