Some people make a living out of bullshit. Meet Kenneth Lay, recently convicted in all counts of fraud charges against him in the Enron collapse.
Here's a rant. The Media and statistics.
I get pissed off when the media misquote statistics to portray a completely different intent than the numbers show.
It's easy to do - ask yourself which burger you'll eat:
1. Hamburger - contains an almost whopping 20% fat....or....
2. Hamburger - over 80% fat free to say "Hello" to your heart.
I know that is simplistic, but one does sound a whole lot better....hell, OK, I'll eat both.
Anyway, I was having a debate today with a friend about whether the NZ property market is going up, down or flat right now. The last 3 years it's been cracking 15%-18% capital gain on average each year. What that equates to is 3 years ago a 200k house x 1.18 x 1.18 x 1.18 = 328k now. It's amazing what compounding capital gain can do in a short time.
The problem is, 100s of years of history has shown us that the market is cyclical and at some point it will correct to align with the average long term 7% per annum capital gain. Those people that have entered the market within the last five years for the first time (i.e. first home buyers) cannot believe their luck and how easy it is, and why the heck they didn't do it earlier.
However those that have been in the market a bit longer can remember the days in the early 80s of 20% mortgages and years of flat or declining house values.
When I bought my first house I was 23, the mortgage rates were 12.5%, and the market was flat for about 5 years after I bought it. Hardly a crisis at the time, but even the thought of those conditions now send some people into writhing heart attacks on the floor - they just don't believe it's possible.
Consequently, I believe in the cycle, and I reckon 15-18% capital gains are not sustainable for much longer and will ultimately get many people in a great deal of financial trouble when they correct soon.
Anyway, during this debate today, we referred to an article in today's NZ paper
PROPERTY INVESTORS STILL KEEN TO BUY - May 29, 2006
Many "hardcore" property investors believe now is a good time to buy investment property.
The finding comes from a survey by Kiwi Property Investor magazine and BankDirect - a member of the ASB Group - to try to find out what property investors are thinking and doing.
The 689 investors responding to the survey were divided into hardcore property investors - those with five or more properties now or with ambitions to have that many - and the rest.
Of the 203 hardcore investors, a net 30 per cent thought now was a good time to buy. But the rest leaned slightly the other way, with a net of (minus) -6 per cent thinking now was a good time.
ASB chief economist Anthony Byett said the bullish mood among the hardcore investors may be driven by perceived opportunities in a slowing market, or a confidence in their own strategies.
"Whatever their reason, these hardcore property investors are in the mood to invest - over two-thirds stated intentions to buy within the next 12 months."
BankDirect head Jim Anderson said there was an appeal to buying on price dips, and buying houses in the flatter stage of the cycle did work.
The key was to have a strategy, including a clear vision of cashflows under alternative scenarios.
Now, if you take a closer look at that article, it is pretty misleading - especially the headline. What does "Many" mean? Does it mean most? Nope. The majority? Nadda. A good proportion? No. What "Many" means is "more than a few", so out of 600 people, "Many" can actually be, well, the minority.
This is what annoys me. Even reading the article it's easy to believe the complete opposite to the truth as stated by the numbers. I am sure this happens all the time, it's just this time it's so blatant I actually noticed.
What the article should say is this (based on their own facts):
The majority of investors surveyed believe that property value will neither rise or fall over the next 12 months, and of those that believe prices will actually move, and incredible 93% believe prices will decline"
I reckon there should be a law against this sort of thing. I mean, if you're not going to represent the facts then it's blatant bullshit to mislead in such a manner.
I like conspiracy theories. It must be the government.
Who again carried out the survey? Oh yeah an investor magazine and a bank, both organisations make the most cash when investors buy property. I guess they can't just hide the results now can they - they've gotta dress them up a little.
Mutton into Lamb or something like that.
Wiki article on Kenneth Lay and Enron