Monthly Archives: September 2017

Everything You’ve Ever Wanted to Know About Valuation

Should we get into the market?What can we do to protect ourselves if and when this happens?Steve The only way to protect yourself from this sort of thing is to reduce your leverage.That’s all. If this happens and you’re levered, then you’re wiped out. If it happens and you’resold out of the market or you’re not levered, then if you still have properties, the fall doesn’t bankrupt you and you still have cash flow.

But if you’re levered and it goes down, then the cactus. So the only individual thing can do is to get out of debt.Ryan Okay. So, basically, you’re saying if you get out of debt or if you own your properties outright, if they go down in value, well, you still own your properties. 

the rears by % of what the house used to be what happens after house valuations worth.Steve Yeah, yeah.Ryan Which could potentially lead to the banks calling your loan and making you bankrupt, is that what you’re saying?Steve That’s right. People think it’s only going to happen if unemployment rises, you know. And they, therefore, say, well, as long as the employee’s okay, there won’t be any problem. But the whole dynamics of credit, drive, everything in.

the economy, including employment and this, is what people don’t have their heads around. I’m about to share my screen again when I get the graph up to show the American data.Ryan While you do that, can I ask you one question? In America, when their house crashed- or across the world, when.

7 Things About Valuation You’ll Kick Yourself for Not Knowing

Talking to each other on the opposite sides of the world. Unfortunately, there are some areas where the audio cuts out or it’s not too strong and the video can be quite pix elated. So just beware of that, I do apologize for that, but there wasn’t much I could do. But this definitely an interview worth watching.Steve Okay. Let’s see if it works with me calling you.Ryan Okay, cool.Steve Share screen. Start. Let’s see.Ryan Alright it’s just loading.Steve Yeah.Ryan Okay. Yup, I can see it.Steve Okay.

That particular graph is what I’m calling a smoking gun of credit. So the red line is GDP. The blue line is GDP plus change in debt, which is basically credit- plus credit. And the black line is credit graphed on the right-hand side. Okay. Whenever the blue line’s above the red line, credit is adding to demand. When it’s below the red line, because people are paying off debt more than they’re taking on new debt, credits reducing demand – credit’s negative.Ryan Which basically never happens on this graph.Steve Well, it never happened in Australia so let’s take a look at the American, just give me a sec to get to the right part of it.

The right chart here. This is all charts for a book how do real estate agents value property I’m writing right now on the topic. I’ve got to change that. That’s the UK. Where’s the USA? This will give you just as Australian in private debt. This is when I started calling the crisis to understand why. So the dotted line’s the exponential fit to the Australian data and the American data in the ratio of private debt to GDP.Ryan Okay.Steve See the trends? Okay.

Ryan Yes.Steve So exponential increase ratio of debt to GDP. It’s not the actual level. So here the chart from America. Same when I showed you for Australia a minute ago.Ryan Okay.Steve Where you have the GFC maximum boosted demand coming out of credit being positive then it plunges. And for quite some time, it’s negative, so it’s taking demand out of the economy. So we side stepped that.