Marvelous Melbourne, Magical Margins

Cross posted from Prosper By David Collyer

DC1

The weighted net annual rate of return on land investment in Melbourne 1880-92 was a remarkably high 34.6 per cent, peaking at 78.3 per cent in 1887, according to a fascinating paper researcher Philip Soos has unearthed Rates of Return on Melbourne Land Investment 1880-92  by doctoral candidate Ron Silberberg[i] of Monash University in 1975.

Land prices move in very long cycles.  The largest complete bubble episode in Australia’s short history should be studied carefully by all in the land market.  Soos’ chart of Australian Constant Quality Real House Price Index 1880-2012 is an excellent place to begin.

During the period 1880 to 1892, the group of Melbourne investors Silberberg studied held their property for 3.7 years on average before realizing a sale. After 1884, many investors bought land purely for the purpose of lot sub-division (14 per cent of sampled observations), with the allotments in preferred and populous suburbs keenly sought due to the expectation of ongoing price rises that would allow investors to flip the property later for a quick profit. Some of the greatest gains in Melbourne land prices were seen in the 6 to 7 mile radius from the CBD.  Many land investors were purchasing semi-rural land with the expectation a future change in land use would gift them a large windfall.

By late 1888, it was patently obvious that ‘the supply of land offered vastly exceeded demand’.  Indeed, in November 1888, the Journal of Commerce commented:

‘A very simple calculation of the number of allotments reported to have been sold in the last 12 months, will show that with a population of a million, provision has been made for five millions.’

Silberberg:  Average returns after 1884 declined slightly until 1887 and thereafter fell dramatically, becoming increasingly negative after 1888.  Two factors contributed to declining profits in the land market.  First, after 1888, many investors found themselves in illiquid circumstances and, being unable to fund buyers to purchase their land at increased prices, were in many cases forced to sell at a loss.  Second, many mortgagors chose to default on their debts once it became clear that the prospects of land sales were remote except at a loss, while falling land values after 1890 reduced the proportion of equity in their land.  The returns for the years 1888 and 1889 demonstrate clearly that buying land after the rapid growth phase had taken place could result in substantial losses to speculators.

…..

Once the expectation that land prices would continue to increase became built into the speculative process, rising levels of demand for land ensured high returns for investors.  This expectational optimism contributed in an important way to a belief that the profitability of real estate investment was irreversible. The anticipation of continued land price inflation or confidence in the economic growth of an area was the cornerstone for many a favorable investment result.  However, as more and more investors entered the market and demand was satisfied, numerous investors with mortgage-financed properties eventually lost their investments in the years of land market depression, or were forced to be satisfied with low rates of return.

Many property ‘bulls’ with little sense of history are quick to shrug such an episode off, until it is pointed out both Melbourne and Sydney house prices did not recover their 1888 values in real terms until 1950.

 Soo1

Yes it is different today.  Now we have banks willing to lend a lifetimes’ income to anyone with a pulse.  We have zoning rules to ration and inflate the price of periphery land.  We have a tax system that nets minnows and lets big fish pass unhindered.  We have a Reserve Bank determined to sustain the bubble with emergency interest rate settings.

One thing unchanged from 1888 is the urge to speculate, to project the gains of the recent past into the future.  Yet prescient forecasters would say the most likely future path is ‘revert to mean’. This is not a party to be fashionably late for.

Don’t Buy Now!

Further reading: I highly recommend The Land Boomers by Michael Cannon Melbourne University Press 1966, extended and republished 1995. 

108 Responses to “ “Marvelous Melbourne, Magical Margins”

  1. md says:

    “Yet prescient forecasters would say the most likely future path is ‘revert to mean’.”

    Have they factored in all the immigrants and foreign investors that we are now relying on to prop up prices?

    • Tea Merchant says:

      Happy new year comrades, many will find the following paper from Basispoint SIV June 2013 (Australian Significant Investor Visa) well worth a read and thoroughly enlightening providing perspective on the Chinese direct foreign investment in existing and off the plan domestic and commercial realestate in Australia.

      After reading the article it would be worth writing a few Ministerial letters to the State/Territory Government who sponsor the individual SIV applications to Immigration and Border Protection administered by the feds. The SIV is aimed to attract innovation and expertise but in actual fact provides nothing more than the added value of a spring role at a Chinese restaurant and box of rice noodles at a Chinese supermarket.

      Worth noting that “Of the 11,142 FIRB approvals from all nations, (see above tables) 9768 was for residential real
      estate” This can directly be attributed to Mr Joe Hockey Australia’s Treasurer and Chief Fascist and before him his neoconservative brethren Mr Chris Bowen and Mr Wayne Swan.

      http://basispoint.com.au/PDF/SIVAustralia%20June%202013.pdf

      Some headlines:

      *90% of EOIs have been submitted by applicants from the People Republic of China.
      f.
      47% of Visa Applicants wish to invest and reside in NSW, 38% in VIC, 10% in QLD, 3% in
      WA and 2% in SA

      * Foreign real estate investment in Australia
      Of the 11,142 FIRB approvals from all nations, (see above tables) 9768 was for residential real
      estate year to June 2013.
      Of the $58 billion in real estate, $19.7 billion was in residential real estate, of which there were 70
      approvals for $10.9 billion in off the plan residential developments

      *More than half of ultra HNWIs have expressed interest in establishing “family trusts,” while
      15 percent have already done or started to do so.

      Luxury residential sales to Chinese buyers;

      Altona, Point Piper, $54 million

      Wolseley Crescent

      Bang & Olufsen house

      Point Piper, $33 million

      According to the Courier newspaper, recent (NSW) residential sales to Chinese buyers were;

      Bay Street, Mosman, $20 million

      Vaucluse Road, Vaucluse, $14 million

      Bay Street, Mosman, $12.8 million

      Seaforth Crescent, Seaforth, $6.5 million

      Vaucluse Road, Vaucluse, $5.8 million

      According to Knight Frank, (press release 27 March 2013) Chinese direct (commercial) real estate
      investments include;

      Sydney Water Board site ($100 million),

      231 Elizabeth Street ($201 million),

      1 York Street ($117 million),

      10 Barrack Street ($62.5 million),

      333 Kent Street ($48 million),

      80 Alfred Street ($49 million) and

      Palazzo Versace Hotel in Queensland ($68.5 million)
      Other notable deals
      a.
      $950 million Jewel resort project in Surfers Paradise is backed by China Ridong Group.
      (with a $500 million investment in the development, according to the Australian newspaper)
      b.
      Benny Wu bought the Double Island resort (was reportedly on market for $8m). Plans $10m
      resort upgrade to target the very top end of the (Chinese holiday) market.
      c.
      Unnamed Chinese property developer from Guangzhou seeking to spend $20m to buy 100
      hectares of land in north Queensland to build a $200m integrated development.
      d.
      William Han bought Lindeman Island (584 hectares) in Whitsundays for $12 million and plans
      a $200 million upgrade. Han is chairman of the White Horse Group.
      e.
      A $500 million Chinese Theme Park in Wyong Shire, NSW is proposed. The Australian Chi-
      nese Theme Park Pty. Ltd. (Chairman Bruce Zhong) has purchased 15.7 hectares of land
      from the Wyong Shire Council for $10 million. Construction is anticipated to start in 2015, and
      with completion by 2020.
      f.
      Chinese purchases of Australian vineyards are also increasing. A goodfood report notes that
      13 vineyards have either been sold to or have investments from Chinese buyers, with a cu-
      mulative total of at least $46.7 million. The article also notes that some buyers have 30,000
      to 50,000 employees in China and the wine produced will be given to their employees as
      presents.

      Enjoy the read provided at the link.

      • md says:

        At least we don’t have to worry about the Chinese invading us. They’ve already done so and we have willingly complied. We may as well just hand over the rest of Australia to them and get it over and done with.

      • Dave_Comments says:

        Chi-stralia movement. We become an official chinese SAR in exchange for some infrastructure investment. Lets put the real adults in charge.

  2. Turnitup says:

    Is anyone able to interpret that graph for this simpleton? Why is Melbourne so far ahead of Sydney?

    • Janet says:

      The Constant Quality bit might infer than you have always got more real bang for your pound or dollar, in Sydney? It looks to me like the quality of Melbourne houses fell with mass subsidised immigration to that city in the 50′s and has not really improved since. ( just a guess, mind!)

      • Turnitup says:

        Hmmmmm….. The title of the the graph tells us that 1880 = 100, so that’s our starting point? Unfortunately without a label on the vertical axis we’re just guessing. 10 Turnitup points for the statistician who can interpret it.

        Check this out http://www.researchgate.net/publication/4988608_The_Real_Story_of_Housing_Prices_in_Australia_from_1970_to_2003/file/9fcfd508af997d7653.pdf

        Page 18 and the final page were about all I read. Can’t make much of it except that I think they’re saying that the fact that places are built with more comforts today impact their price….

      • drsmithy says:

        Hmmmmm….. The title of the the graph tells us that 1880 = 100, so that’s our starting point? Unfortunately without a label on the vertical axis we’re just guessing. 10 Turnitup points for the statistician who can interpret it.
        It’s an index.

        So if you paid X for a house in 1880, it would cost you 2*X for an equivalent house in the late ’70s or mid ’90s.

        EDIT: What I’m not sure of just from quickly reading the article, is whether “X” would be an amount (ie: some amount of inflation-adjusted dollars) or a proportion (ie: a percentage of the median wage). I would hope the latter, as it is a more useful measure.

        The graph is saying that housing in Melbourne increased in price more quickly and has remained more elevated in cost than in Sydney since 1880, and that housing today is ca. 5x (Melbourne) and 3x (Sydney) more than it was in 1880.

      • Turnitup says:

        Thanks drsmithy. So I take it that Melbourne must have started at a very different base (much lower) than Sydney back in 1880.

        10 points coming your way :)

      • drsmithy says:

        Thanks drsmithy. So I take it that Melbourne must have started at a very different base (much lower) than Sydney back in 1880.
        Possibly not.

        I’d assume each graph is only measuring relative to itself.

        Ie: it only tells you that a house would cost ~5x as much today in Melbourne as it did in 1880. It wouldn’t tell you anything about how the cost for a house in Melbourne compared to the cost for a house in Sydney.

    • disco stu says:

      Turnitup, don’t forget that Melbourne was the Sydney of it’s day – thanks to the 1850s gold boom it was Australia’s largest city and the most prestigious housing market. It wasn’t until the arrival of Australia’s first international airport that Sydney recaptured the title.

      • PhilBest says:

        Melbourne was simply one of the fastest growing cities in the world in the 1870′s. It was usually referred to in the same breath as Chicago, which was also growing very rapidly then.

        Los Angeles hardly existed at the time.

        One of the most interesting books I have ever read, James Belich’s “Replenishing the Earth: The Settler Revolution and the Rise of the Angloworld” has quite a lot about it, in context.

      • Gunnamatta says:

        Phil, Disco, on the money.

        Melbourne was about the richest place in the world in the 1880s in particular – when most of the developed world (Europe and North America) was wallowing in deflation Melbourne was home to the creme de la creme of the worlds spivs and shysters on the make – courtesy of a long mining boom and major population growth (does anyone else have a case of deja vu?). The spivs and shysters par excellence in the case of Melbourne engineered a speculative land boom on the back of extending the train and gas. What basically happened (read Cannon, the Land Boomers) was that vested interests in Vic parliament Thomas Bent, Fink etc used state funds to build train lines and gas networks to open paddocks which they had bought – think Mont Albert, Box Hill, Balwyn, Canterbury, Bentleigh etc – and then subdivided the paddocks to produce a real estate frenzy which ramped up prices, ramped up massive debt for a lot of people and then went spectacularly downhill from there in the early 1890s leading to the collapse of a load of Melbourne based banks, and the deepest recession Australia (and Melbourne in particular) has ever experienced. What these guys did was noted with great interest elsewhere for its pioneering of suburbia (as we would know it today).

        That, for mine, is why punters started leaving Melbourne for other Australian cities. Sydney became Australia”s largest city again circa 1910 from memory, but most of the money was Melbourne based for much longer (arguably until the 1960s).

      • PhilBest says:

        Gunna,

        I am convinced that the rail-based expansion of the urban land market that you accurately describe, was a cause of urban land market cyclical volatility during the great urbanisation phase of economic development – and still is, in developing countries.

        Rails by definition lend themselves to “gaming” of the supply of land, because the supply is necessarily limited to the quantities accessible from the radial rail lines. It is automobile based development with competition enabled rather than disabled by government, that changes all this. I believe the 1920′s were the last significant phase in most first world countries, of rail based property bubbles. The stability that followed WW2 was due to roads and automobiles being the basis, and the supply of land vast and competitive.

  3. Ortega says:

    Australia, the country of the revered ‘fat of the land induced mass psychosis’ – with its millions of sufferers and no treatment available (!)

    There is a very distinct point in a society’s life span, where acts of stupidity are perceived, ubiquitously, as acts of unadulterated genius.

    I think we’re here!

    We can do no wrong. We are indestructible.

    Nothing can stop us now.

    • meltfund says:

      This reply is by far and away the best I have seen, on any forum, about any topic, in my entire life.

      I’m deadly serious.

      Go well Ortega!

  4. Mav says:

    Ron Silberberg worked at the Housing Industry Association and recently retired as Director (from Prosper’s website

    I think I may have stumbled upon the Patient Zero of the Great Australian Housing Ponzi.

    http://www.watoday.com.au/wa-news/father-of-first-home-owners-grant-retires-20090625-cxtl.html

    I am shocked the same person has conducted extensive research on land bubbles, yet chose to ignore it entirely while working for the HIA and proposing housing policies to the government. It must take a special kind of cognitive dissonance and a sizeable salary to ignore one’s own research!!

    • Janet says:

      “In the early 1980s, Dr Silberberg designed the first incarnation of the First Home Owners Grant”.
      I guess it’s all a matter of terminology and application!
      “The Home Savings Act 1964…the scheme provides for a grant of $1 for every $3 saved by an eligible person under 36 for the purpose of buying their first home after marriage…..the maximum grant available to a married couple is $750 on savings of $2,250 or more. “

      • Mav, you are a wag! No, Doc Silberberg didn’t design the FHOS, but ‘improved’ it outasight. He knew what he was doing, in very different economic circumstances. I wonder wheher he could be coaxed to comment on the distortions in recent First Home Vendor Boost programs.

        I remain unshakably bearish.

        Don’t Buy Now!

      • This from ‘Paul Bogan’:

        Pity about Ron’s later work after showing such promise in the mid-70s…

        In the early 1980s, Dr Silberberg designed the first incarnation of the First Home Owners Grant, and convinced then Prime Minister Bob Hawke to introduce the measure – which has been extended, repealed, and reintroduced several times since.

        But wait, it gets worse… Ron helped to restore negative gearing after Keating axed it in the 80s. How could you Ronny…

        http://www.zoominfo.com/p/Ron-Silberberg/35655190

        Ron has a long career in the housing sector and was instrumental in driving policy reform in the areas of home ownership, taxation and workplace relations. He designed the successful First Home Owners’ Scheme, led the campaign on restoring negative gearing and secured the reversal of the 12.5 percent sales tax on building materials. Ron’s leadership in housing policy led to the Federal Government establishing the Productivity Commission Inquiry into Housing Affordability. Most recently he initiated the National Summit on Housing Affordability.

        He’s also fond of suing internet forum operators (and losing) when they comment on his Jewish ancestry and stereotype re: monetary behaviors:

        https://en.wikipedia.org/wiki/Silberberg_v_The_Builders_Collective_of_Australia_Inc.

        Silberberg v The Builders Collective of Australia Inc is a 2007 judgment of the Federal Court of Australia, and the first Australian case exploring the liability of Internet forum operators for racial vilification under the Racial Discrimination Act 1975.

        Background

        The applicant, Dr Ron Silberberg, was the managing director of the Housing Industry Association Ltd (HIA), a company representing the interests of people involved in the residential building industry. The Builders Collective of Australia Inc (the Collective) was an incorporated association of predominantly small builders, and opposes the policies of the Housing Industry Association in many areas. The Builders Collective operated a website containing a discussion forum, which contained confidential information regarding the building of transmitter sites for the Digital Radio Oceane project.

        In May 2005 and January 2006, a registered user of the forum posted messages which suggested that Silberberg’s Jewish background was responsible for a perceived unhealthy monetary focus on the part of the HIA. Silberberg complained to the Human Rights and Equal Opportunity Commission and, when that complaint was terminated by the Commission, sued The Builders Collective and the forum user in the Federal Court.

        The judgment

        Justice Gyles held that the forum postings conveyed the anti-Semitic imputations alleged by Silberberg, and that the forum user (the second respondent) had posted the comments because of Silberberg’s Jewish background. He held that the messages were reasonably likely, in all the circumstances, to offend and insult Silberberg or other Jews, and that their posting contravened section 18C of the Racial Discrimination Act 1975 (Cth).

        Justice Gyles held that the Collective had knowledge of the presence of one of the offensive postings in the forum (which they had denied), and had failed to remove it. However, there was no evidence that they had failed to remove it because of the Jewish race or ethnicity of Silberberg, as required by the Racial Discrimination Act 1975 (Cth). The case against the Collective was dismissed with Silberberg to pay some of the Collective’s costs.

      • Mav says:

        Wow..to the HIA members, bringing back negative gearing and FHOG was like shooting yourself in the foot with a double barrel gun – because these policies drove speculation in second hand houses and away from New housing. HIA members should be encouraged to tar and feather Dr Silberberg

      • PhilBest says:

        Yeah, but none of this stuff Silberberg is responsible for, would be a problem if it wasn’t for the land rationing racket.

        Prior to that, genuine building booms were created and home ownership was increased or lowered in cost.

        But if Silberberg has never been among the warriors against the urban planners, he ends his career as a failure as far as I am concerned.

  5. mikeinnz says:

    “Many property ‘bulls’ with little sense of history are quick to shrug such an episode off, until it is pointed out both Melbourne and Sydney house prices did not recover their 1888 values in real terms until 1950.”

    It’s also these very same “bulls” that label people like myself “doomsters”, “cynical”, “negative”, “missing out”. But at least I will make more sensible and informed decisions by looking back and learning from the past.

  6. meltfund says:

    I’m not sure why we have to keep going round and round delivering ‘infinite evidence’ on the one and only way to get rich.

    You either affirm it and get wealthy in that knowledge, finding a life. Or deny it and struggle with your children tagging along behind, eventually dying never having lived, and them too.

    Property is the only investment that delivers a profit, over the long term guaranteed. All other assets – Capital – *always* fall in value relative to property. ALWAYS. There is so much evidence supporting this, that small children can understand it with great ease. Its astonishing to watch the ‘intellect’ in adults repeatedly showing how blind it is to something so basic.

    We call this staggering level of denial – ‘poverty in spirit’ – living an entire lifetime, dead!

    Today, the mortgage is the primary ‘vehicle’ for property speculation. Its a giant Ponzi. So what, its perfectly legal.

    Remember the ‘eye at the top of the pyramid’? There is no conspiracy or master class. This Game is what all people aspire to rich and poor, powerful and wealthy. We are all “at it”.

    So what to do?

    Get into it thick and fast. Ideally by ‘ticket clipping’ or even better by speculating not in property directly, but the pyramids main vehicle, The Mortgage. Because that is what is most underwritten by government of all party’s, under both tyranny and democracy. The majority selected it, so nothing can stop it and its guaranteed. The People will send our children to war in its defence.

    Whatever you do, avoid taking any notice of the experts, especially the ones claiming to be “here to help you” or “save the planet” or any kind of idea institutionalised, religious and secular. These ‘experts’ are The Pharisees keeping you blind, to reality. To see it, rely on what you know already using your own perfectly capable mind.

    MeltFund is the first ever asset fund designed to take this on from the root and to take the speculation to more intense levels than even Rome. Actually to do nothing but speculate to the maximum extent possible under the law, something the banks are way too timid to take on. Eventually the fund will grow so large and powerful there will be only one way to stop it. I bet you cant guess what that might be?

    MeltFund is the first ever and only legal Ponzi. Take a look at it and let us know if you find anything untrue about our guarantees.

    Hint: We do not respond to straw men, question begging, reliance on marginal cases and demands for infinite evidence. Our clients are bold and confident innovators.

    Yours,
    Robin Smith
    CFO MeltFund
    +44 7786 078836

    • Janet says:

      “..Our trade is arbitrage from mortgage repossessions…” Cool, Robin, real cool……”…deny it and struggle with your children tagging along behind, eventually dying never having lived, and them too.” Sub zero, even….

      • meltfund says:

        Janet, would you like to expand or what you are saying or try asking again in a different way. what you say does not make any sense.

      • Janet says:

        “A man is measured not by what he does, by what he doesn’t do”. That works in many ways. You see your company as legally exploiting/arbitraging a market in human necessity.( “If I don’t do it, someone else will” is the usual justification). Depending upon your age, you will see that as an obvious opportunity, or the continued financial slavery of your descendant ( if you choose to have any. That often is the first casualty, in several ways, of ‘success’). The mortgage repossession business, like many other forms of exploitation may be legal ( take prostitution, and dare I say it – banking ), but those who take advantage of the weak social positions of others will look back in horror at the”value” of their work as they age. Some, admittedly, don’t. Most do. You will measure yourself, with age, not by how much you have in your bank account, but how much you have in your soul. Remember this post as you march ‘triumphantly’ through life allocating assets to tax and safe havens, and measuring your success on whether the figure in the left hand column is bigger than the one in the right. One night you will wake in the dark; probably alone, in a cold sweat, realising what your endeavours are really producing. And on that night, you will also find it is the first night of all nights, for the rest of your life.

      • Escobar says:

        Janet, you’re a hypocrite.

        Everyone, in one way or another exploits someone else’s labour / time / capital / revenue.

        You and other traders feel you’re above exploitation. But your profits or gains are someone else’s losses.

        And as we know society picks up the tab.

        It seems reasonable to me that ultimately a society’s profits or gains will eventually flow into property somewhere on the planet.

      • Janet says:

        It’s hard to know where to start to refute your post, Escobar! If by hypocrite you mean someone who backs their opinions with action, then that’s not me. If you mean someone who looks at their actions in life and changes them to what they see as a better course, then that’s not me. Trader? Yes, I was. But in simpler times. When deals were still done ‘on a handshake’ – before telephone calls were recorded; before computerised communication was possible, and before ‘the bonus’ became the be all and end all of commercial business. When financial trading was part of business, not a business wholly of itself. When trading wasn’t as much exploitation, as assistance. But times change. That’s not a bad thing unless, as you suggest, those in a weaker, more defenceless situation cannot protect themselves. It’s the stuff of revolution that I so earnestly wish is avoided. But as for you comment that ‘ society’s profits or gains will eventually flow into property somewhere on the planet.’ - they did, is my answer. The failure and hardship that is to come, is to those who continue to follow the belief in ever rising property prices, for they have failed to recognize that the game is over. If there’s one thing that’s more certain in life than “property always goes up’ , it’s that life is always, and always will be, uncertain. What was, is not guaranteed to be….

      • Escobar says:

        Janet

        You seem pretty bright.

        “The failure and hardship that is to come, is to those who continue to follow the belief in ever rising property prices, for they have failed to recognize that the game is over.”

        You’ll be proven right eventually. In the mean time you look like a doomsayer.

        We realise property stagnates, falls and crashes while providing a rental return.

        Sounds a lot like the stock market.

        Do you recommend not buying stocks now because of an imminent crash or dip or stagnation?

        Or do you trade houses based on the trend?

        I understand your concern for society. But governments have gamed the economy in favour of borrowers.

        Change the system. Don’t blame those trying to protect themselves.

      • dumb_non_economist says:

        Escobar,

        I don’t see how you can compare exploiting people in need of “shelter” to trading shares. Someone buying/selling shares does so on an expectation of gain, but doesn’t do so out of need.

      • Escobar says:

        DNE

        I make the comparison to the share market with all its gamed derivatives and fractional Fiat currencies, which put whole economies at risk. Ultimately risking people’s livelihoods.

        See Greece

        Point being that majority of all profits eventually are distributed and consumed until you can’t consume any more and those funds with leverage find their way into the best dressed housing / economic markets.

        After all the average Joe must protect themselves from Fiat inflation. Buying a house is a no brained.

        And telling someone not to buy is financial repression when you realise housing and banking are a protected species.

        Besides, rents won’t ever be more than what one can reasonably pay….. is that possible?

      • Escobar says:

        DNE

        “I don’t see how you can compare exploiting people in need of “shelter” to trading shares. Someone buying/selling shares does so on an expectation of gain, but doesn’t do so out of need.”

        No…. share trading is done so out of greed.

        Besides don’t you see share trading is ultimately based on a company’s prospects which are based on profits and in many cases how they exploit workers in less regulated economies.

        Western society represses eastern societies and you claim stock trading is incomparable?

        Your gain is someone else’s loss….. or if you like someone else’s lower living standard.

        Not always. But mostly.

        Most people are in denial because they’re ignorant or it makes them feel better to deny or they have a bias.

        Please don’t be holier than thou.

      • Janet says:

        All things in life, Escobar, are a matter of position and timing. Where and when we are born being the primary one. Do I recommend not buying stocks right now? Yes. Do I alternatively recommend buying & selling houses in the meantime? No. Have Governments gamed the system in favour of borrowers. Yes. As you appear to be new to MB you’ll have missed my strategy of many years standing – since 2006 to be precise, and implemented from Feb 2008, onward. Sell…everything ( I did – 2008) and borrow all you can ( I did backed by the collateral of the cash I released – 2011 – and an undertaking to use the funds for a property purchase at some future stage)….and wait. So what am I doing? As you imply – fighting the Gamed System on its own turf. If I am to be forced to borrow, then so be it. But not to spend. To hold until the collateral value of cash and the risk of business is returned via higher interest rates. What do I intend to ultimately do with my store of bank provided goodies? Do another start-up ( sigh, groan – all the hard work and worry!) and pay peoples wages. When, where and if that works will determine whether I return to home ownership.

      • Escobar says:

        Janet

        I’m not 100% new to the site.

        Everyone appears to be well informed and we’ll intentioned.

        But it appears vested interests will keep the ponsi / gamed system going for longer than I care to be out of the market.

        And I can see how money finds it’s way into housing and of course the share market.

        Anyway, I’m just a little confused with your loan against cash.

        I take it then you have an offset so you don’t pay interest? In which case you’re making repayments of principal at the moment?

        Or do you simply have some sort of line of credit?

        Forgive my ignorance.

    • migtronix says:

      See Japan. Property does not always goes in value. See Lehmann Bros. Mortgages don’t always get bailed out.

      • meltfund says:

        Migtronix: Over the long term it ALWAYS goes up. All other assets – capital – ALWAYS fall relatively. Investing in stocks is for fools, the blind and the dead.

        See here for proof: http://www.meltfund.com/2011/06/who-is-getting-your-earnings-useful.html

        Gold and silver tend to hold the same value over time. Gold is quite stochastic. The only time gold rises over time is just prior to confiscation by government. Silver is stable.

        Capital always falls.

        Rents always rise. Affirm this and you will get very rich, very quickly.

        Try to avoid marginal cases and look at the general.

      • PhilBest says:

        Meltfund:

        You are right MOST OF THE TIME, OVER THE LONGER TERM.

        However, in the short term of episodes of mass mania, quite a LOT of money WILL be lost completely by everyone who entered the market near the top and were “leveraged”.

        And genuine first home buyers who did not wait for the crash, will sorely miss the hundreds of thousands of dollars too much mortgage repayments they have to make over their entire lifetime, or declare bankruptcy.

        Uni Prof. Elizabeth Warren became a YouTube sensation and got elected to the US Senate by pointing out the fact that while global capitalism has brought down the cost of food, clothing, appliances, cars and mobility, and a lot of discretionary items, somehow “housing” now swallows a higher proportion of double incomes than it swallowed of a single breadwinner’s income in 1970.

        I think she is dead from the neck upwards about the role that urban planning has played in this, but she makes a LOT of good points about the consequences:

        “The Coming Collapse of the Middle Class”
        http://www.youtube.com/watch?v=akVL7QY0S8A

        The “savings” (in food, clothing, appliances) have been in low-proportion and “discretionary” spending items. The big increases have been in “basic” and unavoidable expenses. In fact, I would like to inform her that when there is a successful closed-loop land-rent-extraction effect at work in the urban economy, savings made in other areas will be sucked up in increased urban land rents.

        Single income families in the 1970’s made less money, BUT “big basic expenses” absorbed 50% of their income, while the 2-income household now needs 75% of their combined income to meet these costs, and have less discretionary income.

        The typical household now is at HIGHER risk – if one earner loses their income or some of it. The 1 earner household had the chance of the non-working spouse adding a little income in times of stress; or even becoming the main breadwinner (as many widowed and separated women did). But now? Both adults are already fully committed and there is no slack able to be taken up.

        Elizabeth Warren presents some very interesting breakdowns of data. Income volatility is higher for everyone now than it used to be, but is highest of all for two income families.

        Housing cost for families with no children, is up 50%; for families with children, it is up 100%, obviously representing the need for more space.

        There are more children in bankrupt households, than in divorced households.
        85% of bankrupt households successfully hide the fact.

        The households who are fortunate enough to get through life without suffering a reversal (health, accident, job loss) will probably “make it” without dropping out of the middle class. but even so, will never get security, and are always on the treadmill, in contrast to their parents (1 income earner) generation.
        Everyone who does suffer even one significant reversal drops, most likely permanently, into the bottom class.

        As Hugh Pavletich calls it: the bankers benefit scheme; women becoming mortgage slaves along with their husbands. Pity about the collateral damage, eh?

        (BTW, are you sincere, or a parody of a true believer in Aussie property Ponzi?)

    • dumb_non_economist says:

      I suppose it’s evidence that MB is certainly traveling, but since when did they take such direct advertising?

      Hey, what’s happening to my investment?

      http://www.youtube.com/watch?v=Yj-mbvuduGY

      Edit: I don’t know I haven’t even had a drink, but maybe this is the slow melt we’ve been waiting for!

      • meltfund says:

        dumb_non_economist.

        Good name, I like it. Me too!

        Your capital investments and wages will all be getting absorbed in economic rent by property owners as rents or mortgage assets, through the euphemism creditors call “interest”.

        RENTS always rise, relative to CAPITAL RETURNS. ALWAYS.

        So get out of capital investment and trying to make a living by earning a wage before its too late. Get into property – just property – fast before it gets out of reach. We hit the bottom of the market last year. Its not too late. 2016 we will see the return to 30% year on year growth of property assets, mortgage credit money being the vehicle for their exchange.

        This is the general case today. True, there are other things which are tiny in comparison. Concentrate on the general case, avoid the teeny marginal distorted ones. All else being equal. Over time. In all places.

        Sell all your capital investments and BUY LAND and get rich, forever. Ignore the experts and high priests of economics. They are blind to this.

      • csfn says:

        Oh, I don’t know that MB is ‘travelling’ on the basis of this recent contribution DNE, it reads like a typical post from the trolls nest. They must have some extra time on their hands this time of year to spend on their favourite activity…..trolling.

      • PhilBest says:

        I can’t believe “Meltfund” is not a typical parody writer like some of the better known ones on here. I was expecting his early, long comment on this thread to end with “and then I woke up”, or something like that.

        However, assuming you are sincere, and intelligent, and have a conscience, Mr Meltfund; please consider the following.

        For decades, urban land has been in a relationship with incomes, that resulted in house price median multiples being stable at around “3″. Yes, investment in urban land was a safe and steady winner because as incomes grow, so do land values. Land values also grow as a city grows spatially – that is, land gradually becomes “more central” relative to the whole, as the city continues to grow outwards.

        The gains of property investors under these circumstances were “a share of rising aggregate income”. I have no problem with this.

        But what we have had since the 1990′s is a new phenomenon, based on urban planning interrupting the “price stabiliser” of greenfields land, abundant and cheap within quick driving distance of the city fringe. The price of land in the urban economy has NOT just risen commensurate with income growth and spatial growth of the city, but has “spiked” by some 2000% over the last decade and a half. This roughly translates into house price median multiples of over 6, with the size of sections in new developments shrinking dramatically to keep the “house and section” package down to “only” 100% more expensive than it should be.

        This spike is, firstly, one-off – you would have to be mad to regard it as a sustainable new norm of capital gain rates. Secondly, it is NOT “a share of rising aggregate income”. It is a ZERO-SUM gain at the expense of all producers and consumers in the economy.

        The UK market illustrates, since their urban planning policies imposed in 1947, that it is possible for a kind of new norm of very much higher land rent per square foot to last for decades. But once the early one-off “spike” adjustment is over, there is not the same opportunity again, except for people very cleverly exploiting the new volatility that also applies from then on. Buy at the bottom, sell at the top. Make a killing. Wait for the next cycle. Or, be in it for the long term rental income, buy at the right times and “hold”. That is fine.

        But look at the UK now. Crisis after crisis.

        http://www.macrobusiness.com.au/2013/10/the-urban-consolidation-end-game/

        Do watch the video. And take a look at:

        http://www.theguardian.com/commentisfree/2014/jan/05/housing-benefits-and-private-landlords?utm

        http://www.express.co.uk/finance/city/450944/Government-s-Help-to-Buy-scheme-is-at-risk-of-collapse

        http://www.dailymail.co.uk/news/article-2513125/Cost-new-home-jumps-1-300-week-SEVEN-people-fighting-property-average-house-price-soars.html

        http://www.dailymail.co.uk/news/article-2381451/Slough-spy-plane-detects-6-000-illegal-beds-sheds-thermal-imaging.html

        Is this what you want for your grandchildren’s generation?

        Note, too, that the “destruction of capital at the hands of economic land rent” effect you describe, is killing the UK economy itself. I will post a longer comment at the end of this thread.

    • Wow.

      Robin, you are wrong. The fact you (appear at least) not to understand how wrong you are is disturbing.

      I can only hope you spend some time on proper education and research before you get too far along screwing over “customers” with your rubbish.

      • meltfund says:

        Insight Wealth. That is quite some hateful response. Are you OK?

        OK lets do a very quick and simple experiment. And if the result is that I am correct, will you promise to withdraw you allegations about my disturbed nature, and start to scrutinise what is now revealed to you, that has astonished you?

        And then we will be able to decide, on level terms, having used logic and reason, not emotion, about who is really “screwing over who with your rubbish”

        Is that a fair deal? I’m all ears.

      • PhilBest says:

        Meltfund, I have posted a long comment above that has gone to moderation, Please watch out for it. I am sure you have not had certain points explained to you before about the current phase of urban land market behaviour in Australia, and potential long term similarities with the UK.

    • dumpling says:

      “Property is the only investment that delivers a profit, over the long term guaranteed. All other assets – Capital – *always* fall in value relative to property. ALWAYS.”

      WTF?

      • meltfund says:

        Dumpling

        Did you not know? Perhaps you can tell me what your expertise is, given these data are the most simple to understand and observe of all economic observations?

        I assume your profanity is because you have certain proof otherwise, from all times and all places?

        Would you be able to furnish it so we can proceed with the matter?

        Check this for observed fact. True, its astonishing isn’t it. The thing is, can you affirm what is so obviously happening… or not? Try not to project onto me. Ask yourself, using extreme care.

        http://1.bp.blogspot.com/-uYq0xS5sEQM/Te1Ain7gIkI/AAAAAAAAA4w/4LgeqNRg7iA/s1600/Who+Is+Getting+Your+Earnings.jpg

      • dumpling says:

        In my experience, owning minor stakes in great businesses has been highly profitable.

        By asserting “Property is the only investment that delivers a profit, over the long term guaranteed”, you are displaying your lack of understanding in stocks.

      • PhilBest says:

        Meltfund; by definition, what you are describing will destroy a national economy.

        It is doing precisely this in the UK right now after 6 decades of the ultra high land rent and cyclical volatility that accompanies an “unfree” market in urban development for expansion.

        I have posted a long comment above for your consideration, that has gone to moderation.

    • Turnitup says:

      Robin. Please. Turnitup. If you’re serious (and my visit to your site suggests your are), may I suggest that you are the reverse of Robin Hood. There are lots of fallacies in your post. In fact, your first sentence contains one ….’the one and only way to get rich’. Utter nonsense. And what on earth do you mean about ‘eventually dying never having lived?’

      Oh and btw, you’re confusing being wealthy with being rich.

      • meltfund says:

        Turnitup

        Oh and please…

        Can you define what you mean by the terms wealthy and rich. Wealthy in what, and rich in what exactly?

        As requested in the original reply please try hard not to project onto me, use ad hominem attacks (Robin Hood), beg the question, use straw men or request infinite evidence.

        By avoiding these defence mechanisms I will most easily be able to credit you as an honourable person most likely to promote progress in any dialogue.

        BTW I much prefer to talk directly in person or on the phone if anyone wants to understand the observations I’ve put on the table. My skype id is toplard.

        By all means try to call me. Social Media is the scourge of good ideas.

        Yours,
        Robin Smith
        CFO MeltFund

      • Turnitup says:

        For the second time now, what on earth do you mean by ‘eventually dying having never lived?’ I posed this question already, but for some peculiar reason you were either unable or unwilling to respond. Pease don’t take it as a personal attack. Internet forums are really no place for over sensitive types.

      • PhilBest says:

        Meltfund: real wealth creation involves the use of resources, supplying things for which there is genuine demand, and providing jobs.

        I know you CAN make money for yourself quick in property, but this is zero-sum gains at the expense of the general economic interest.

        Governments are foolish to allow this to persist because it is a means of economic and socio-economic destruction. The solutions are “freedom to sprawl”; and/or land taxes. Or rather, the “problem” is urban planning.

    • flyingfox says:

      @meltfund Interesting. Out of curiosity, what exactly is your time frame for always.

      • meltfund says:

        Flyingfox, thanks for responding with courtesy

        I don’t mean to be flippant. But Google the term “always”.

        That is what I mean by it.

        We had a PHD from Cambridge who went like researches do through the entire history of civilisation. And found that nothing changes in the world here, that is important.

        Always! In all times and all places. Always!

        Remember very hard not to focus on the margins. Look directly at the general case, all else being equal, and analyse everything in relative terms not absolute terms. Always compare the rises between what you take home, with how much your home or commercial property costs and its annual rental value (selling price is 5% or 20 times annual rent minus property taxes which are small compared to income taxes)

        What staggered us is that people keep ‘forgetting’. The standard period of ‘forgetfullness’ is around 18 years, about the same timeframe as the most overt business cycle, in property boom busts.

        Is this a coincidence? Who knows. What is certain is that it definitely happens and all people seem determined to deny it.

        If gold were to trade in known certain periods of equal length and history showed this over say a 1000 years, would you trade it on that basis?

        But so what, one has to be a very very very poor trader to lose on property even if you buy at the top. Because its certain even at the top to go up and overtake previous highs in the end. And the hold out period is normally 6 months. Look to 2008 and see the only thing that in general fell in value were wages and capital stock. Rent and selling price held out well. Oz had their bust in 2009 but it was smoothed out by enormous exports. Ignore the end of times freaks, you guys are safe and on track for quite some time in property profit. I speculate 2026 as the next bust. Hmm 2026 – 2008 = 18. Interesting.

        Look at the graphs. They are observed fact. Unanswerable.

        So be it. We at MeltFund affirm it. And are accruing an enormous tax free, work free fund, in that knowledge. Eventually it will grow enough for us to start lending at interest. And we will not be loaning for capital formation. It will be ALL for mortgages.

        The only way the fund can be stopped would be to abolish all tax on work, enterprise and capital investment. And instead tax the land values, rents and property gains at a rate of 100%. Can you ever imagine that happening? So we are fully confident. Its early days though. So get in early. You know how pyramids work. This one is perfectly legal too.

        Its your call, I cannot change your mind in this. We do expensive training, but you will be the one that has to make the supreme executive decision for your own portfolio.

      • flyingfox says:

        @meltfund

        Thanks for your detailed reply. As you highlighted, what you are referring to as mortgage arbitrage is essentially timing the business cycle. What you are proposing is no different from what Blackrock etc are doing in the US now. Business cycles exist, for various reasons and I agree if you can time one, it makes you very rich.

        However some of your assertions are very wrong.

        We had a PHD from Cambridge who went like researches do through the entire history of civilisation. And found that nothing changes in the world here, that is important.

        Ahah! The crux of the issue. We live in interesting times, the first time in history that pyramidal population structure that we are used to no longer exists (and probably will never exist again). Moreover we had a period of high dependancy ratios which are reverting now.

        Always is not always ….

        http://www.businessinsider.com.au/matt-kings-most-depressing-slide-ever-2012-12

      • flyingfox says:

        BTW, your posts are verging on financial advice, something that is not allowed on MB as far as I am aware. Moreover they are definitely blatant advertising.

        Happy to have a discussion about the facts without the force-feeding … Mods …

      • Peter Fraser says:

        flying fox – financial advice not allowed on MB?

        What do you think David Collyer does in every post.

      • @ Peter Fraser January 5, 2014 at 4:03 pm

        You would do well to reconsider your claim that somehow I offer financial advice. If anyone shared your perspective, you could easily crowdfund a lawsuit from members of the FIRE sector. They can certainly afford to drop a few lazy dollars on silencing me.

        If your income as a mortgage broker is affected by FHB’s failing to present themselves for sacrifice on the debt-altar in orderly cohorts – breaking the pattern of several generations – and you elect to link my modest contribution to this phenomenon, then I am flattered and it is my pleasure.

        I note your inordinate interest in my personal affairs on the Australian Property Forum David Collyer thread, where you are a consistent contributor of invective and bile. Your ad hominium attacks do you no credit.

        I invite you to re-read my post that heads this comment thread. It is about land economics, a matter of importance to anyone wanting somewhere to sleep tonight. It seeks to examine the facts. It may string them together wrongly. It may leap at false conclusions. There is an awesome collective intelligence actively following the macrobusiness site that is unmatched in Australia. Why do none of the distinguished economists dispute my conclusions, just you and the professional trolls?

        If you think property is a buy, and have a fact or two to support this, please enlighten us. In the absence of such a contribution, I move you be no longer heard.

      • Escobar says:

        David

        “Why do none of the distinguished economists dispute my conclusions, just you and the professional trolls?”

        Because most economists are wrong or blinded by theory.

        Real world….. The government domestic or foreign interfere directly and indirectly. Price is no longer a precise signal.

        Something most economists often miss.

        You will be proven right eventually. But I’m afraid you’ve cost people money with your advice…. so far.

        I’d prefer you advise “when to sell” rather than “don’t buy now”.

      • So, Escobar, the economists are wrong or trapped by theory. Shortcomings not exhibited by anonymous paid trolls. How refreshing.

        “I’d prefer you advise “when to sell” rather than “don’t buy now”.” Yes, I know you would. But one is not the obverse of the other.

        This is the worst time to buy in 70 years. That does not necessarily make it the best time for every holder to sell. I observe many smart players have already sold down or out.

        “You will be proven right eventually. But I’m afraid you’ve cost people money with your advice…. so far.”

        Thank you for confirming the correctness of my opinion. If you are implying the rent or buy equation has swung against renting because of recent gains, you overlook the reality that the giant mortgages and irrational risk-appetite needed to buy at these income multiples offer a world of pain and overshadow these gains.

        Don’t Buy Now!

      • Escobar says:

        I’m not a troll.

        I’m a commercial manager that deals in reality and statistics.

        You will be proven correct eventually.

        But that could be years away.

        If business operated based on your recommendation, nothing would get done.

        And businesses / people are kicking goals after a lackluster few years.

        Unemployment is the key (as you know).

        Multiples you mention only matter when interest rates are high (and where inflation is low).

        But you will be right…. perhaps you’re right for some markets right now.

        But it’s better for home owners to do their own research and buy if it’s right for them.

        I have a friend in the mortgage processing centre and they tell me the trends they measure point to house inflation.

        Obviously I’m not talking Sydney which has had its run.

        The recession of the 90′s didn’t drop prices by more than 20% (from memory).

        Unless you think we’re in for a depression…. Then I don’t consider a 10- 20% drop (which will be well telegraphed) a big deal. Some one once wrote on this site that a 20% correction is fine after experiencing a 100% gain.

        During recessionary periods People will save once more. Minimum wages will grow during a recession, interest rates will revert low again and government will assist home owners and businesses.

        The problems will be irrecoverable when we’re at Greek debt levels. Which is a while away. 10-15 years away.

        I’m no troll. I just have a different take.

        You’re right…. but not right now.

        Enjoy the rest of the day.

      • Peter Fraser says:

        @ David Collyer – don’t worry David there is nothing that you could say or do that would affect my income stream. You’re really not that influential. Neither of us are.

        But your slogan is a command, not a helpful suggestion and it doesn’t take into account the financial position, or the needs and wants of the person reading the advice.

        I’m surprised that you are not embarrassed by it.

      • Gunnamatta says:

        Gee Peter, you make it sounds like he was telling people

        ……..’there has never been a better time to buy real estate…..’

      • meltfund says:

        Flyingfox.

        Close but still no cigar.

        We consider Blackrock as incredibly timid investors lacking confidence. They are typical. With a huge capital fund, but pussy footing around, dabbling with the arbitrage, and worst capital sin of all, acting as landlords which has massive hassle costs for looking after tenants and keeping the properties in good nic. We laugh when we seem them proudly talking about this. They are clueless. I was staggered a couple of years ago when Warren Buffet said this was “a good idea” too. Hedge funds are also in general lacking enterprise and bold action, under a veil of the opposite. All of these guys are doing toll booth economics or ‘ticket clipping’ which is fine but… clearly none of them have balls to take something good to the ultimate extreme and really make a mint. We estimate hedge funds make about 10%, and forego another 20%.

        We will be using ALL our client fund, directly, to shift pieces of paper, never taking delivery of a single property. There are plans of CFD’s in the pipeline, futures contracts etc, REITS and other things to help here when the timing is right and of course to avoid tax as much as possible.

        AVOID TAX, AVOID WORK, AVOID INVESTING OWN MONEY, AVOID REGULATIONS

        Are you getting the picture yet?

        You keep declaring boldly “You are wrong”, yet not once have you shown me how and when I point this out you never concede it. I did ask that people avoid demands for infinite evidence originally for their own benefit. I dont mind, but how many times before you feel embarrassed? Would it not be a better approach to clarify what is being said before making unilateral declarations that don’t stand basic tests of scrutiny?

        For example, your idea about historic change is a classic. You say things are changing for the first time, when actually what is happening is that nothing at all has changed IN KIND. All that is happening today is what has always happened is growing in intensity. And this is always how things have developed, due to the increasing power of the economy to produce wealth over time and how that gain is ALWAYS distributed to those who own the property, land, whatever and collect the ever increasing rents, while all the rest struggle a bitter life. I mean recently a “name” boldly went on tv in an attack on one of our partners and declared that “rent no longer exists, things have changed now”. I wonder if he’s asked the 15 million mortgagors and tenants in the UK alone if they were aware next months installment would be $0?.

        Finally, its not at all about timing the property market. I’m not sure you have been reading with that much care. PROPERTY ALWAYS GOES UP IN VALUE. Do you understand the meaning of the word ALWAYS? How many times shall I say ALWAYS for you? Sure one can wait for the idea timing. But given its already rising anyway only fools would await the bottom, foregoing the interim gains.

      • flyingfox says:

        @meltfund

        Firstly I never said you’re business plan was wrong. You are clearly targeting the business cycle, in fact the success of your venture is reliant on the business cycle and there being a large amount of discounted repo’s available that you can flip.

        In the situation described above, you have a brilliant business idea and it should work. Of that I have no doubt.

        My comments were more related to your other claims.

        We consider Blackrock as incredibly timid investors lacking confidence.

        Perhaps. But on the other hand, with the amount of capital they have, they can’t do what you do because they would never have enough buyers. In fact their strategy is much better, with risk of course, because they are getting big returns (8-20% per annum gross) via rent and distorting the market in their favor ala land bankers in Oz.

        For example, your idea about historic change is a classic.

        I provided you with evidence, can you disprove my claim?

        Ofcourse rent is not dead. I may be idealistic but I am not stupid. I invest in property. My parents have. It is a great investment in many circumstances. Is it the only way to get rich? NO! Would I follow the Oz investment model of NG and cap gains? Nope! Would I invest if the scenario, especially returns changed? Sure.

        PROPERTY ALWAYS GOES UP IN VALUE. The Sydney property market went nowhere in the ten years from 2002-2012. 2% annualized returns. The majority of “investors” who flipped property in the last 5 years to 2013 lost money after accounting for holding costs. This during a time of TD yielding ~6-7% on average.

    • dumb_non_economist says:

      Robin,

      For me to invest in a fund such as yours would require me to take a huge leap into the unknown, while I don’t require infinite evidence I do require more than you’re given. You mention 30% yr on yr gains, well 3 yrs of that is pretty much a 120% gain and I just don’t see that happening and if it did I’d rather sit on the sidelines and wait until it collapsed as I don’t see what will hold your pyramid up over the longer term.

      I know some people who are buying from troubled homeowners and then doing a rent to buy scheme, I see a moral issue there depending on what protection the renter has over the property’s title if the title owner gets in the shit.

      • meltfund says:

        dumb_non_economist

        Awe, I thought you really were not trying to be an economist :)

        Lets do a deal. A fair one, quid pro quo? If I show you the 30% y/y gains, observed in fact, will you concede it. And make that concession a trigger for new confidence in how you now choose to invest?

        Hint: Checkout the increase in UK house prices 2002-04. Sure the next 3 years were *only* ~10% as were the previous 7. And true, the bubble burst bang on time. And the result for the property owner was?

        DO NOT WORRY – about the inevitable collapse that you correctly point to. In case you hadn’t noticed that is all underwritten by the tax payer, on wages, sales, tariffs and capital returns. By government of all party’s. The property owner NEVER pays. UK rents held out very well this time round due to all the mortgage assets being bailed out. Look at bank balance sheets which are 80% mortgage assets. The mugs who chose to work for a living and invest in non monopoly based stocks coughed up. The property owner sat back and smoked cigars.

        With all due respect, you are starting down a path of ‘infinite evidence’. Having a prior belief clarified as untrue, not conceding that, instead moving on to the next belief, which then is also proven false, and so on. Danger!

        Our mantra is AFFIRMATION OF REALITY. Because we are certain that by boldly doing that, we can see exactly how the system works, compared to those in denial who are ‘blind’, so that we can exploit it to the maximum extent for our valued clients. That affirmative action is a matter of personal commitment and not even our excellent training classes can help one make that executive decision.

        All it takes is plenty of confidence, to hold out against all the negativeness and galling protectionist ideals, while persistently pitching the idea. I hear you, that kind of action is harder than probably most things. But who by rights deserves all the gains? The bold and enterprising, or the lazy and timid?

      • PhilBest says:

        Meltfund, in my long comment above that has NOT gone to moderation, I start by saying,

        You are right MOST OF THE TIME, OVER THE LONGER TERM. However, in the short term of episodes of mass mania, quite a LOT of money WILL be lost completely by everyone who entered the market near the top and were “leveraged”.

        And genuine first home buyers who did not wait for the crash, will sorely miss the hundreds of thousands of dollars too much mortgage repayments they have to make over their entire lifetime, or declare bankruptcy.

        I will add now, to all the comments I have made so far, that the system you are describing, of land rent Ponzi with socialised losses on the downside, is simply the end of western civilisation. It is extraordinary how people who are smart enough to see the racket, simply join it instead of fighting it. It is like you are engaging in a game using the planks of the hull of a boat everyone is sailing on. You’ll drown “owning” lots of planks that should have stayed in the ship’s hull. That is, the “capital” that should have been devoted to production, not sunk in zero-sum Ponzi.

    • Peter Fraser says:

      Robin, why is the CFO of a UK property fund looking to raise funds and their profile on an Australian website?

      • PhilBest says:

        Logical; their “UK economy” boat is pretty much sunk now by the very racket they are part of over there. So the looters are moving on to economies that still have some productive capacity left to loot.

      • Pfh007 says:

        Property fund? Despite the content of the comments (which are focused on the joys of property ownership) the business of melt fund appears limited to buying repos cheap and selling as quickly as possible with as few expenses as possible.

        Which is all good – providing there really is a large supply of underpriced repos and not a bunch of copycats eager to compete.

        I could not see any reference to a buy and hold strategy. They don’t seem keen on being landlords etc.

        Plus if they are using cheap London money to fund the flipping why would they want any investors anyway.

        Perhaps I have missed something.

      • PhilBest says:

        Exactly my impression too, Pfh007.

  7. PhilBest says:

    I can’t resist this (once again):

    Quadrant Magazine, April 2013

    Peter Ryan, on “The Land Boomers” by Michael Cannon
    Melbourne University Press, 2013; revised, print-on-demand edition, 409 pages, $34.99

    It was my privilege, over almost half a century, to have followed in intimate detail the triumphant “best-seller” course of one of the most remarkable Australian books of all time: The Land Boomers, by Michael Cannon. No full understanding of the concluding decades of the Colony of Victoria, nor the subtler character even to this day of its jewelled city Melbourne, is possible without some apprehension of the land boom era, and of its appalling “bust”. For reasons which escape my understanding, the publisher over recent years has ceased to put copies into the bookshops – “Out of print”. More reprehensibly, the author himself seems to have been left in the dark about the intended future fate of his great work.

    No matter. The publication last month of a fresh edition, liberally illustrated and with a new Author’s Introduction makes us look ahead rather than backward, not so much a happy ending to The Land Boomers as its resurgent continuation. Michael Cannon tells his absorbing, often scandalous story with verve and clarity. We see the respectable middle classes hurling their money away as madly as any drunken sailor, frantic to “get rich quick” through wildly inflating land prices and “development”. We see supposedly upright and conservative bankers and other business leaders throwing caution overboard out of similar breathless greed. Some of these were themselves dupes of the delusion. All too many others were mere brigands in shiny silk top hats consciously setting forth to swindle humbler citizens of their lifetime nest eggs. The Melbourne mood was all wild optimism: “We’re all going to be millionaires! Every blessed one of us!”

    Came the bust. Proudly independent “comfortable” families dismissed their troops of long-serving retainers, and then themselves became dependent on the dreaded “paying guest” to meet their own grocers bills; ordinary workers were simply sacked in their thousands, starving with their families as they tried to beg bread on the streets, or scavenge among the scraps in Melbourne’s garbage cans. Lacking any system of organised state relief, churches, charities and citizens of good will tried to sustain them. For example, it was recorded that “200 souls were Maintained at Werribee Sewage Farm at an average cost of Sevenpence ha’penny a week”. (One forbears to inquire what they were eating.)

    The land boomers themselves seem to have included a remarkably high proportion of what poet Rabble Burns would have called the “uncommon good”: stern teetotallers, wowsers, sabbatarians, churchgoers, vestrymen, pew-renters, puritans of every Stripe. Their mortification when their bubble burst was extreme, and their efforts to suppress the story strenuous and largely successful. Victoria’s bankruptcy laws were shamelessly rigged so that outrageous defaulters could escape in secret. Honest judges were threatened with removal. Eighty years later I knew two Melbourne scholars of high achievement and blameless academic reputation who would almost blush if the land boom were mentioned; their well-known grandfathers had played an equivocal role in that boom so long ago.

    When Cannon sought help with his researches at the Public Library in 1963 that vast repository could point to no more than a single chapter in H.G. Turner’s conservative History of the Colony of Victoria published in 1904. Only that trace remained about a trauma which had rocked the colony to its foundations!

    The arrival at the State Archives of a series of wooden crates from the Crown Law Office transformed Cannon’s resources. The crates contained dust-coated original records of the Bankruptcy jurisdiction, court transcripts of evidence, old company files and indeed most of the bare facts needed to piece together the tales of horrid fascination which The Land Boomers tells.The feat of analysis and reconstruction of all this material would have been a challenge to any mature and hardened research scholar; it was brilliantly performed by a young man who lacked a single hour of research experience or university training.

    The outstanding quality of this “amateur” manuscript was testified by two impeccable authorities: Sir Hugh Brain, after nearly a lifetime experience in the Collins House Group of companies, a familiar with the powerful magnate William Lawrence Baillieu and the Baillieu family interests. Brain said that Michael had got the business side right, and furthermore helped him with additional rare documentation. Then Australia’s pre-eminent historian Geoffrey Blainey pronounced it to be sound and important history.

    With such distinguished support, the manuscript was swiftly adopted for publication by the Board of Management of Melbourne University Press: this despite the unease of the Vice- Chancellor, and murmurs of the risk of the Baillieu family withdrawing its support for the university library and the nascent archives department.

    The book was published in 1966 to sensational acclaim, and a fresh printing was required within days — and then promptly another one — to satisfy exuberant demand. It almost seemed as if the sedulous cover-up of the Edwardian years had bottled up latent curiosity under pressure.

    Hundreds of copies were sold to lawyers summoned to advise upper-crust families on whether they might sue for defamation, or otherwise put Cannon’s “vile book” out of circulation. Over the teacups at Darren Baillieu’s Toorak mansion, council of war was held by the family over how “The Land Boomers” might be silenced or smothered.

    Not one writ was ever issued by anyone, and for about the next forty-six years, through at least ten different impressions and various editions, The Land Boomers has continued to share with its readers its rich freight of wisdom and warning, and the entertainment of a lively, racy yarn.

    The author’s new introduction to the fresh edition enables him to do not only the usual minor corrections and tidying up, but also to deal with one new matter of substance. A Melbourne academic (encouraged by the Baillieu family) last year published a scholarly volume entitled William Lawrence Baillieu, Founder of Australia’s Greatest Business Empire. Says Cannon, the book “seems to me to worsen the case against W.L.’s boom-time activities, making his financial recovery after the crash even more astonishing”. Clearly The Land Boomers still surges with active life. To help modern minds grasp the immensity of the disaster of the 1890’s, Cannon cites the example of Benjamin Fink: when that super-boomer went bung for 1,800,000 pounds, his debts would have been worth some $300,000,000 today…….

  8. PhilBest says:

    I posted a long excerpt from an excellent review and narrative by Peter Ryan in Quadrant Magazine April 2013

    HERE:

    http://www.macrobusiness.com.au/2013/06/bouris-property-to-boom-for-five-years/#comment-250115

    Well worth a look. I tried to post it again here but it has gone to moderation.

  9. mikeinnz says:

    “Over the long term it ALWAYS goes up. All other assets – capital – ALWAYS fall relatively. Investing in stocks is for fools, the blind and the dead.”

    meltfund, I for one have been far more successful with equity investment than I ever have with property. Investing in stocks is foolish only if you’re a fool.

  10. meltfund says:

    Mikeinnz, thanks for your courteous reply.

    I do not know you, nor any of your affairs. But am I not correct when I say you lost in property because you were highly leveraged under mortgage. That is, all of your investment, or more than all of it, went nominally in mortgage interest, de facto rent, to your creditor the bank. Or worse you re mortgaged on top in a negative equity personal ponzi and due to bad timing got the margin call. Or some derivative of that? What matters is YOU made an investment where you were not collecting the rent and appreciating selling price for some reason and someone else was. This has to be so because where else can an increasing asset value go? Try to get your head around this and affirm it. I sympathise with your misadventure. You now know exactly why. There is no excuse for doing it again.

    My boiler room buddies tell me there are some crazy folks who enjoy losing in the city. I trust that is not you.

    How else can you possibly have found misadventure in property, when it always rises in value compared to all else, particularly stocks.

    Here’s something to ponder which the experts will desperately attempt to blind you to. All performing stocks over the long term are not rooted in capital goods and services at all. They are based in property value and mortgage by a large margin. Or the profits of the smaller monopolies gained by cornering a market through special pleading and privilege. So any stock that does well does so by collecting indirectly an economic rent. THESE are the only stocks that do well. And this observesation reinforces the point yet more intensely. The stock market is just another channel for rent seeking. There is no enterprise in successful stock trading. But so what, those affirmative and bold traders know all this and ignore the experts and get very wealthy, while laughing at the rest. They recognise rent for what it is without making moral judgement.

    Am I right, or am I?

    I’m doing some training soon on this ‘forbidden knowledge’. Its pricey, and in the end makes all other cheaper advice a false econony. By all means call to discuss.

    • mikeinnz says:

      So now you claim that some stocks do well and now refer to economic rent instead of property rent. What is your position? Sounds like more flip flopping form a property evangelist to me. You sure know a lot for someone no one’s ever heard of.

      • Janet says:

        Let’s not forget about those unexpected property prices falls that occur ‘when things change’. There’s that whole town on New Zealand that’s for sale. Lock stock and barrell. Sure, it’s an old gold mining town. But that’s the point. The gold ran out – things changed – and the property ? It was worthless. No one wanted to buy it, and only opportunists that see ‘the glory days’ returning, bought it back in 1998(?). I remember going to Lourenço Marques back in the 60′s. It was beautiful. Then, civil unrest arrived and the properties fell into disrepair – the whole city . Today it’s called Maputo. I’ll bet there were those who bought there just before ‘the change’ who thought ‘property always goes up’. Does Maputo have a property price future today? Sure! But for those whose lifetime was trapped by the 40 years in the meantime, only financial ruin came their way. Failure to anticipate, or worse – contemplate, change was their downfall.

      • Escobar says:

        Janet
        “Let’s not forget about those unexpected property prices falls that occur ‘when things change’.”

        In my simplistic view, isn’t that housing market price reduction akin to a company’s share price re-evaluation?

        One company’s demise or re – evaluation does not make a market or stop others investing in other stocks.

        Won’t stop me investing in a well researched and reasoned housing location.

        Not all housing locations are created equal.

      • meltfund says:

        mikinnz

        Easy now, you are starting to cast aspersions when I place a belief I suspect you have long held under serious scrutiny. Why not clarify what I’m saying instead. Like you would expect others to do for you. Quid pro quo?

        I’m not sure if you have noticed that monopoly profits are EXACTLY economic rents.

        “The profits of monopoly are a tax or rent on the production of goods and services”

        Any stocks vested in monopoly profits, therefore, are a good thing, because they are rent seeking too and do not waste time messing around in the productive part of the economy, where hard work and tax paying rule.

        We can advise on which stocks rent seek and which tax seek.

        Try and get your head around this. If you do not like what you see, try not to project it onto me. Ask why you do not like it first.

      • PhilBest says:

        Meltfund: I will tell you why I do not like it, and that is that it is an economy-killer. You have it well sorted out in your mind what is rent and what is actual production and you are cynically working out how to profit as the ship goes down with all hands.

        Maybe our civilisation deserves it. Maybe that is all that is left now. No-one will listen anyway, so just make yourself comfortable as you can and hope the end of civilisation occurs in your children’s lifetime and not yours.

        Everyone positioning themselves as rent-seeking parasites as they “see the light” like you have, is hardly a recipe for survival of the host system.

  11. Gunnamatta says:

    Gidday all, just spotted the MeltFund contribution to this thread.

    For anyone wondering about Robin and MeltFund, as someone who has spent a few weeks cruising vineyards around Melbourne with London based investment bankers I have just asked who is MeltFund or Robin Smith (and if they/he had any street cred).

    Street cred aplenty……..(could be some of us in another guise – indeed just watching makes me feel like a beer with him) but one remains to be convinced about investment credentials.

    http://www.youtube.com/watch?v=AS_9_Kj8AiY

    • Janet says:

      “Using City of London private equity, we buy repo’s at up to 60% discount directly at source from banks. Cutting out the wasteful network of property investment middlemen
      We re-sell these assets at full rate on the open property market. Cutting out the wasteful network of estate agents, lawyers and surveyors
      Our mantra is aggressively pro tax avoidance and avoidance of financial regulation. Our innovative Partners are constantly on the lookout for loopholes to exploit in both….Our Cambridge based think tank partners have gained knowledge over the past 7 years about precise timing of the property governed business cycle, its root cause and inevitable effect. And affirm this. All other property investment firms, bankers, professors and other experts do not know about this nor do they understand it. “

      The problem for Robin is that the middleman that he is trying to subvert are part of the system the banks need to keep the ponzi going. Does he think they are about to let their market go? Yes, banks want impaired assets off their balance sheet, but not at the risk of destabilising the entire market! His and his Cambridge based experts’ endeavours will be watched with interest, as ‘the good stuff’ is already farmed out to vested interests at a discount. It’s only the remnants that he will have ‘discounted’ access to.
      (NB: Of course, this could all be a giant wind-up, designed to do no more than bring the real problem to the public fore :) )

      • Gunnamatta says:

        There are some reasonable refs in his street spiel though

        Mason Gaffney and The Corruption of Economics

        http://books.google.com.au/books/about/The_Corruption_of_Economics.html?id=1Yo7PgAACAAJ&redir_esc=y

        looks as though it would be a good read… (and the person strolling by at the 12.16 mark in a purple mini skirt adds to the ambience)

        …..in simple terms we would say we would abolish all taxation, except for that on the monopoly rents, the economic rents….25.20

        Mainly good and interesting stuff. Why he is dressing it up here as MeltFund I dont know, unless he is of the view that the bubble needs to be blown up a tad more, he should offend people with real estate speculation to get the punterariat fired up, has seen the light and converted, etc etc etc….

      • dumpling says:

        Thanks, Janet.

        You know what is funny?

        The description of his fund (you provided above) looks like nothing other than that of a new business. And probably a profitable one, too.

        Stocks are fractional ownership of (listed) businesses.

        Then, what does Robin mean by “Property is the only investment that delivers a profit, over the long term guaranteed” or “investing in stocks is for fools, the blind and the dead”?

        I think fractional ownership of great businesses is highly profitable, but I would not claim that that is the only way to make good money.

        Perhaps, he is trying to attract attention by making outrageous claims?

      • meltfund says:

        Janet, exactly correct and well spotted. And still some way to go…

        You may be confusing us with an enterprise trying to “subvert” the banks (de facto government). We are ignoring them, as much as we are the taxman, regulator and nominal government.

        Think about this. If… IF… what we are claiming about the systemic function at the root of the economy is true… if. And, if, the vast majority of experts, politicians, public, professors etc are in a deep state of denial about this reality, what exactly is standing in our way?

        Over the past year we’ve been staggered at how easy it is, all due to this system wide denial. We can see them coming miles out. They never see us coming.

        Not wanting to sound mystical, its totally about affirming the psychology of the collective. Very simple, but goes very deep. This is why the intellect (experts) is clueless. They concentrate on the rational and moral. But the entire system is neither.

        We don’t even need any regulator protections, like say banks, hedge funds and monopolies. And we pay zero tax in the end, so the ultimate tyrant cannot touch us either.

        Am happy to talk more over skype – toplard

    • dumb_non_economist says:

      Thanks for that Gunna, I was thinking the thread all a little bit loony.

    • meltfund says:

      Gunamatta,

      Thanks for your observant response.

      Do not worry about my credentials. Credentials are only required if one submits to the regulator, taxman and pays for a license to trade with timidity under the system, as do the hedge funds.

      We ignore them and the tax collector as a first duty, except where we need to make special pleadings for property price boosting policy. Its turning into an exciting ‘arms race’. The thing is, we have ‘the nukes’, they ‘the machetes’.

      p.s. St Pauls was a fascinating experiment. We saw how even the poorest and most desperate kind of people living on the street, some within sight of death, aspire to rent seeking as much as the great Mr’s Ponzi and Madoff. Potential clients!

  12. aj. says:

    Funny discussion thread. While we are talking historical constants might i suggest:

    ‘A fool and his money are soon parted’ ;)

  13. Turnitup says:

    Perhaps I’ve been watching too much Law and Order, but could meltfund and escobar be one and the same? They make similar grammatical errors and don’t post simultaneously. Cue Law and Order sound effect http://www.youtube.com/watch?v=-8lDYrvTILc

  14. Pfh007 says:

    A couple of short observations on Meltfund.

    They seem very tuned into the economic importance of property and that governments bend over backwards to protect the interests of existing property holders. Hard to argue with that but there were a few things on the site that caught my eye.

    According to the website they are urgently seeking ‘Partners in the city with control of bank’s mortgage repossession books.’

    How do they propose to enter into a partnership with people who have control of the bank assets that they are seeking to buy at the lowest possible cost? Any potential partner would have a conflict of interest.

    It makes sense to sell the acquired repo with as few 3rd party ticket clippers as possible but that means that Meltfund must have an internal conveyancing department and real estate sales capacity.

    Why would a bank allow Meltfund to recover a 60% return if disposal of the repo is as simple as Meltfund implies.

    For example: Why would a bank sell a repo to meltfund for $500k knowing that meltfund can easily immediately sell that property for $800k (60% return).

    Banks flog off repo properties all the time – sure they might prefer to leave that to others on the basis it is not a core function but would they really give up an additional 60% of the value of the repo?

    Needless to say, if Banks really are ‘giving away’ repos Meltfund will find itself competing with a host of eager copycats before long.

    Perhaps this is why they urgently want to form partnerships with people or entities who control or are able to influence the decisions of banks regarding their mortgage repo books.

    Plus how many underpriced repos are there in the UK?

    One other thing – I was a bit puzzled by the claim that anyone suggesting a role for LVT’s is a communist. Perhaps that was merely in jest.

    Surely, if you accept any role for govt (and perhaps that is the issue) a tax levied on property is hardly communist.

    • PhilBest says:

      Something similar is going on in California, “cash buyers” are scooping up distressed properties.

      • Pfh007 says:

        Yes, but those cash buyers are paying the current depressed market prices and their strategy seems to be buy, act as landlord and then perhaps flog when the market recovers. All funded by the cheap money made available by central banks to the big end of town.

        Meltfund appears to dismiss this approach and claims it has a solid supply of banks keen to offload repos at very low prices, which it can immediately flip without the involvement of lawyers, re agents etc.

      • PhilBest says:

        Whatever is in it for the bank, then? Not being identified as the “vendor”?

        The bank’s shareholders might be interested to know about this failure to moderate losses.

    • PhilBest says:

      Land Taxes are usually proposed from the libertarian Right, as a replacement for income taxes, sales taxes, and company taxes; not the Communist Left.

      The libertarian Right is usually the clearest about the difference between economic rent and actual wealth creation.

      The Left are absolutely hopeless on this; what happens is; “the top 1% have got richer..!!!! Right, GET those rich prick employers of labour…..” And the rentiers in property and finance are laughing all the way to the Cayman Islands, even as the same lefty politicians support QE and Smart Growth and crony capitalism.

      • Pfh007 says:

        Yes, considering that Meltfund articles read as the work of aggressive free market small government supporters, that may explain the weird hysterical comments about LVT and communism.

        They know that LVT would be a very hard tax to avoid or minimise. And for the Meltlife crew that may be the real issue. There is of course still a major need for close scrutiny of government policy and expenditure if LVT becomes a more substantial revenue raising tool.

        As for LVT being an impossible concept they should tell that to the many places that already use LVT to some extent.

        Considering the extent to which the private debt inflating asset values strategy has become exhausted (and thus the transaction based taxes beloved of govt) the likelihood of government turning to LVTs would seem more likely than not.

      • drsmithy says:

        Land Taxes are usually proposed from the libertarian Right, as a replacement for income taxes, sales taxes, and company taxes; not the Communist Left.

        You must listen to a different Libertarian Right to me.

        Insofar as the Libertarian Right are prepared to accept taxation at all (and most are not), they seem to prefer regressive taxation – particularly consumption taxes (because those have the lowest impact on the wealthy) and low, flat income taxes (because they are relatively easy for the wealthy to evade).

        I struggle to see many Libertarians supporting land taxes even in concept, let alone practice. Firstly, and most significantly, because they effectively mean you never fully own your land – about as antithetical an idea to Libertarian philosophy as one can imagine – and secondly because they will substantially target the wealthy (ie: are progressive).

      • PhilBest says:

        DrSmithy; You and I definitely are in touch with two totally different “libertarian right” movements.

        Yours is a leftwing straw man caricature.

        All the libertarians I know, are about maximum opportunity for the little man to succeed and rise. Ayn Rand said that crony capitalists should be hung. It is crony capitalism that causes wealth transfer upwards in society and enriches the rich while impoverishing the poor. Free markets do not.

        In the USA, the crony capitalists, especially the rentier ones in property and finance, are not in the slightest afraid of the Democrats in any guise. Not Obama; not the Clintons; not Gore; not any of the Kennedys. The ONLY political development they are shite-scared of, is the possibility of the Ron/Rand Paul – Paul Ryan – Tea Party libertarians getting too much clout in a future Republican administration.

        There is not really any equivalent of this anywhere else in the world to use as confirmation. There is, however, abundant cosy symbioses between crony capitalists and rentiers, and socialist governments (and Tory in Name Only ones) all over the world. There is not one socialist government that accepts the basic principle of competition keeping any business honest. For example, everywhere that housing affordability is an issue, there is not one socialist government that would remotely consider freeing up restrictions on urban sprawl and “pricing” land and resource consumption to resolve the conflict between sprawl and housing affordability. For them it is always about “building State housing”, subsidising home buyers, and imposing mandated lending quotas “to minorities”.

        But in the USA, it is the parts of the USA where libertarianism is in the soil, so to speak, that they DON’T HAVE an affordability problem in the first place, because urban planning advocates get run out of town tarred and feathered before they have a chance to do any damage. I note also in a recent “Economist” article that these regions have a localised “lower cost of fossil fuels” too. This is due to absence of “centralised control” over extraction on private property.

        This and many other factors correlating to locally strong libertarianism, all add up to lower cost of all categories of cost of living. They do tend to rely on land bearing a higher proportion of the taxation burden in Texas and ideologically similar States.

        Land taxes are never a prelude to or a substitute for nationalisation and compulsory acquisition. Sufficiently leftist regimes always go straight to those latter things.

      • drsmithy says:

        Yours is a leftwing straw man caricature.

        No, it’s from observing how people who call themselves Libertarian speak and act.

        This is the type of comment I usually hear from Libertarians about land taxes. Generally accompanied by a “on top of all that, paying tax on it each year means you don’t even really own it” (this is where the classification of LVT as a communist idea comes from).

        All the libertarians I know, are about maximum opportunity for the little man to succeed and rise.

        Unless of course that little man needs some assistance. Say, an education. Or healthcare. Or protection from negligent or abusive employers. Then he’s at the mercy of luck.

        I’ve never met a libertarian whose primary goals were not to
        a) stack the system (more – as if it weren’t already) massively in favour of the wealthy;
        b) minimise or eliminate restrictions and regulations on their behaviour; and
        c) abolish publicly funded services – especially those that facilitate class mobility like education, healthcare and welfare

        If there’s one class of person who would rarely prosper in a Libertarian utopia, it’d be the “little guy”, because they’d all be getting stomped on, or caught in the crossfire of, the “big guys”.

        Ayn Rand said that crony capitalists should be hung. It is crony capitalism that causes wealth transfer upwards in society and enriches the rich while impoverishing the poor. Free markets do not.

        Ayn Rand also spent a lifetime railing against government welfare, then took a social security pension.

        Every capitalist dreams himself a “crony” capitalist.

        Unconstrained free markets are completely and utterly in favour of institutionalised wealth and power.

        In the USA, the crony capitalists, especially the rentier ones in property and finance, are not in the slightest afraid of the Democrats in any guise. Not Obama; not the Clintons; not Gore; not any of the Kennedys. The ONLY political development they are shite-scared of, is the possibility of the Ron/Rand Paul – Paul Ryan – Tea Party libertarians getting too much clout in a future Republican administration.

        Pretty much anyone who isn’t a Tea Party libertarian is “shite-scared” of Tea Party libertarians “getting too much clout”.

        There is not one socialist government that accepts the basic principle of competition keeping any business honest.

        Without knowing what you mean by “socialist”, “competition” and “keeping any business honest”, it’s difficult to respond. However, I’m not aware of any remotely major political parties in the Anglosphere that could be described as “socialist”, nor any that do not support competitive private industry in principle, let alone any with those views that are actually running countries.

        If your argument is any government that doesn’t support the idea of an unconstrained free market as “socialist”, then your idea of “socialism” is absurd and it’s pointless to try and have a discussion about it.

      • The Claw says:

        In my opinion the word Libertarian should describe a person who tries to leave other people alone to do their thing, and wants to be left alone to do his thing – as much as possible.

        The trouble is that Libertarian thought has been taken over by extremist nutters. Ayn Rand, Doug Casey, Mises.org, etc. These rich elites tout a fantasy that would not work in the real world.

        I have a Libertarian bent and understand the value of competitive markets. However the free market is a nonsensical concept. There is no such thing. There never has been a free market and there never could be a free market.

      • drsmithy says:

        Exactly.

  15. PhilBest says:

    I told Meltfund I would post a longer comment on the strong connection, almost universally ignored, between the productivity of the urban economy, and the urban planning system and “land rent”.

    The UK urban economist Alan W. Evans (University of Reading) may have been the first to insist that there was a connection. The following is from his “The Land Market and Government Interventions” (1999):

    “……With respect to the UK, Monk et al. (1996) observe that, because planning constraints reduce the elasticity of supply, the land-use planning system in the UK exacerbates cycles in house and land prices (p. 509). It has also been argued that they have significantly slowed the growth of the UK economy (Evans, 1988), and although this would be difficult to prove, nevertheless, given that local authorities have deliberately set out to restrict the growth and movement of firms (Evans, 1992), it would also seem difficult to deny. We have already noted that, in any event, Cheshire and Sheppard (1997) estimate the static costs of containment in southern England as equivalent to a 10% tax on incomes. The oddity is that because macroeconomists have little interest in town planning, planning controls are rarely cited by economists as one of the causes of the slow rate of growth of the British economy…..”

    While the above work was in progress, a McKinsey Institute paper was published in 1998, “Driving Productivity and Growth in the UK Economy”, in which they suggest that a high proportion of the UK economy’s low productivity (lagging comparable nations by 20% to 40%) is in fact due to the UK’s all-pervasive urban planning system. There are a few basic reasons for this.

    Firstly, increased congestion; secondly, by businesses inability to afford “space” for efficient processes (eg workers crowding each other, stock on shelves being less accessible, aisles narrower, production lines too cramped); and thirdly, by “anti-competitive” effects: including not just a reduction in new business start-ups, but also that most potential participants in spatial “agglomerations” of the Silicon Valley type are excluded very soon after such an agglomeration has even started; there is either no spare land at the location, or it is far too expensive.

    The findings of the McKinsey Institute were built on by Alan W. Evans in a book published in 2004, “Economics and Land Use Planning”. And to date there is a whole series of excellent papers from Paul Cheshire and various colleagues at the LSE. There is a good summary paper, “What we Know (and Don’t Know) about the Effect of Planning on Economic Performance”, by Max Nathan and Henry Overman. It includes references to the LSE’s research over the years. Further ongoing research is constantly discussed on the LSE’s “Spatial Economics Research Centre” blogspot.

    A fourth significant effect is that liquid capital is lost to productive capital in favour of being sunk into zero-sum land price inflation.

  16. MickyG says:

    Ok… without having read through the entire thread… can someone confirm whether this Melt Fund mob is one big parody? The website looks appropriately humorous! No… wait… I retract that. I just got to the section on ‘The Game Allegory’. It’s not humourous – it’s downright hilarious!!

    Well done Melt Fund. You brought a smile to my face.

    • MickyG says:

      I only know one person dedicated enough (read: insane enough) to set up the website, persona etc.

      Handle starts with an ‘R’.

      Am I right?

    • PhilBest says:

      That was exactly my impression – when reading Meltfund’s first long comment, I was fully expecting it to end with “and then I woke up”, or something like that.

      I thought it might be one of the enlightened doing a parody……..

  17. meltfund says:

    Here’s another example for the wide awake, bold and confident investor.

    “Good News! – UK car sales highest since 2007 means property investment will take all the gains”

    http://www.meltfund.com/2014/01/good-news-uk-car-sales-highest-since.html

    Remember: ignore the experts, and anyone who believes non rent seeking stock ever delivers a profit.

    Get property, live long, and prosper.