How did my predictions turn out in the last 12 months?
Now I know I put across a lot of controversial views in these posts. Partly I do it for fun. I’ve always been a bit of a sh*t-stirer.
But mostly I just see that as my job. To tell it like it is – even if that means that a lot of people won’t agree with me, or I end up tipping some sacred cows.
As my old man said, ‘make money, not friends.’
Actually, don’t listen to Dad. That’s terrible advice.
But my point is I don’t do this for popularity, or for a bit of an ego boost. That’s what karaoke’s for.
I’m just sharing with everyone my view of the world and what’s going on – and how I reckon you can make money in times like these.
But now that this election is being defined as a battle between who you can and can’t trust, I thought I’d step forward, and let my record speak for itself.
Comparing my trust-worthiness against politicians might be setting a low bar, but bear with me. What have I been saying over these past year, and did I get it right?
And if you followed my advice, did you make money?
Well to start with, I’ve been saying for a long while now that arguments that Australia was on the brink of bursting property bubble or economic calamity were totally overblown. In my words:
“Claims that Australia is facing a financial meltdown are rubbish.”
I’ve been saying that for a while. And how’d I do on that one? Well if we had had an economic meltdown, or a property bust, you’d know about it. You wouldn’t be hearing about anything else this election.
Ok, perhaps that was an easy one. It always seemed unlikely (to me at least). But there were a lot of people predicting the end of the world, and just for the record, I wasn’t one of them.
But let’s go for something more specific. House Prices
In November last year I wrote:
“If you take the last three rate cutting cycles (1996, 2001, 2008) as a guide, you’d normally expect house prices to be up between 15 and 20 percent this far into a rate cutting run.
And that means house-prices have some catch up to do. The rough maths suggests that they’re at least 15 percent behind the curve…”
I was highlighting the fact that house prices had a lot of upside potential, especially since interest rates had fallen to such lows.
When I made that call, there had only been one quarter of decent growth posted – certainly no clear trend starting to assert itself.
But since then, we’ve had three quarters of solid growth. According to the ABS, house prices were up 2.4 percent in June and 5.1 percent over the year. Still some way to go to 15 percent, but we’re certainly moving in the right direction.
And if you take the June quarter pace of growth, even if there’s further acceleration from here, you’re still looking at 10 percent year on year. A steady pace puts 15 percent within reach in less than 18 months.
But there’s every chance that prices will keep accelerating, and we could get there a lot quicker.
So on my books, that core promise is still well on track.
What about interest rates?
In February this year, Paul Bloxham, Chief Economist at HSBC was saying that the rate cutting cycle was over and the next move was up. I thought he was nuts:
“Interest rates are going nowhere.
…what’s inflation doing?
Nothing. It’s going nowhere. It’s right at the bottom of the RBA’s target band and going nowhere fast.
So if the RBA was worried about this “asset price inflation”, they’d have to make the argument that 1. there was a bubble, 2. that the bubble was about to burst, and 3. when it bursts it’s going to take the economy down with it and drive inflation through the floor.
That’s a pretty big call to make.
And could you imagine just how much of it would hit the fan if Glenn came out and said, “Hey, we’re jacking up rates and adding 300 bucks to your mortgage. Why? Because we think your homes are worth too much.”
Forget it. He’d be torn to pieces. And once the dust settled, he’d be lucky to still have a job guiding tours around the currency museum.
Rates aren’t going anywhere, buddy.”
And then in another piece around the same time, commenting on RBA forecasts:
“…the thing that really jumps out at you is just how many uncertainties there are in the outlook – or more specifically, the lengths the RBA went to point them out.
They’re giving themselves plenty of room to cut rates further if they want to. I’d say they’d be expecting their hand will be forced at least once or twice more this year (in the best case scenario!!)”
And what have we had since then? Two rate cuts. And there’s ample scope for at least another one before the year is out.
Perhaps I could be chief economist at HSBC
The point is that over the past year or so, my predictions have pretty much been on the money.
Not bad for a fly-by-the-seat-of-his-pants ruffian, hey?
But the real question is, if you followed my advice, did you make money?
More on that tomorrow.