Ignorance or bliss?

[Lucas]

"Ignorance IS Bliss"

Indeed

"Ignorance IS Bliss" for the one who started this thread and his devoted followers who thanked his post.

Is unbelievable how some people still trying to cover the sun with their fingers denying the reality of the facts.

 

[earlyretirement]

The point is no one likes to think they are wrong. No one. I remember back before the stock market crashed I presented very clearly how and why the financial sector in the USA was going to crash. So many people that it wouldn't happen and things would keep going up. Those that short sold the financial sector in 2007/2008 made insane amounts of money. Insane. I know lots of people lost money but they never thought they could be wrong and they closed their eyes pretending all but be well. This including some really big financial firms. Guys like John Paulson and other visionary investors that knew the score made billions and billions of dollars. I have personal clients that made 8 or 9 figures short selling the financial sector as I advised.


Totally agree. I lived in Dublin through all of the celtic tiger years up to 2002 and at times felt I was part of a circus, with crazy money being spent on eating out, foreign holidays 4X4, brand clothing, summer houses etc...by that sector of the population benefiting from the boom - mostly IT, real estate and financial services - whilst "ordinary" people I knew who worked as firemen or in the public service continued grinding away for the same salary without the inflated bonues, stock options and struggled to live, never mind buy property. That 12+ years of 6-11% growth with <5% inflation was touted as the economic model to follow with the boom being attributed to state-driven economic development, solid relations between government and unions, increased women in the workforce, long term investment in education, a low corporation tax rate making us so attractive to foreign investment...and now Ireland`s slow demise as one of the pigs is the news of the day. Here I am living in another bubble, different country without half of the advantages that made Ireland successful for that period of time and enjoying the best of the country (the people) whilst cautiously cynical that all of this growth is making Argentina an economic powerhouse for the long term.
I`m not a doomsady person screaming the sky is falling - just a realist who knows that all good parties have to end...so best to stash the really good quality booze in a safe place for the next one!

Fifs,

Well real estate here isn't anything like the bubble phenomenon like the situation in Ireland, USA, Spain, Portugal and a ton of other places experiencing tremendous pain. In those countries, you had banks and lending institutions that were giving a loan/mortgage out to anyone that had a heartbeat. Often times 0% down. Heck, with many in Ireland they allowed them not only to buy 1 but 2 or 3 all with not much equity. That's why you have a TREMENDOUS number of properties around the world where the owners have absolutely NO equity in them. Heck, I know a guy in London where the bank gave him 110% of the value so he could go out and buy furniture too!

That simply isn't the case in Buenos Aires. Mortgages are almost non-existing here and even when they do have them (which is only 6% off the market) it's 50% down payments over shorter periods of time.

So you can't call it a "bubble" when everyone is paying cold hard cash. I actually always loved the fact that you can't leverage here because it's a true market. Not being able to leverage keeps the pikers out and most speculators out. Those that have the cash don't have any risk of foreclosures. No subprime junk here. So you have to really understand the dynamics of the real estate market here. It's not a bubble when everyone is paying cash, no one has the risk of foreclosures. IMHO.

There simply isn't any other fundamentally sound and safe investment in Argentina besides real estate. Sad but true. Until that dynamic changes I'm very comfortable continuing to add to my portfolio here. In fact I just bought another place a few weeks ago in Soho.

The PIGS countries and the USA is probably the biggest PIG of them all was really horrible. I sold short the financial sector when I saw what was going on there. They were giving out money like candy. I still don't think prices are done falling there. However, I'll start buying there in the USA in 2011 after watching some areas fall as much as 60% from peak. I hope they fall another 10% or more there. There are still over 7 million houses in the USA that really need to be foreclosed on. So many Americans not only have NO equity in their homes. They have NEGATIVE EQUITY in their properties. That simply isn't the case here. All my friends that own here all own free and clear. All the business associates all own free and clear. I love that part of the market here. It's darn tough paying 100% cash but the lesson is you save up and you buy when you have the money. Novel concept. Until then...rent.

 

[fifs2]

Bubbles come in many shapes and sizes my dear and yes I can agree that it is refreshingñy straight that banks aren`t throwing out 110% mortgages nor easy credit which means this bubble won`t pop in the same way as Ireland..but Ireland wasn`t alienating itself to foreign investment with sharp pay rises and union entrenchment. If CFK can get a grip on inflation as well as the unions Argentina`s bubble could potentially float for many a year. We shall see. Whilst you scour through the US for bargain properties I will focus on Spain - what opportunists we are!

 

[jaredwb]

Indeed

"Ignorance IS Bliss" for the one who started this thread and his devoted followers who thanked his post.

Is unbelievable how some people still trying to cover the sun with their fingers denying the reality of the facts.

Since you are taking a swipe at me and most of the others on this thread, why don't you tell us what "reality" and "facts" we are denying??

 

[earlyretirement]

Bubbles come in many shapes and sizes my dear and yes I can agree that it is refreshingñy straight that banks aren`t throwing out 110% mortgages nor easy credit which means this bubble won`t pop in the same way as Ireland..but Ireland wasn`t alienating itself to foreign investment with sharp pay rises and union entrenchment. If CFK can get a grip on inflation as well as the unions Argentina`s bubble could potentially float for many a year. We shall see. Whilst you scour through the US for bargain properties I will focus on Spain - what opportunists we are!

Absolutely I agree with you that bubbles come in all shapes and sizes. I do see problems with Argentina. You know the drill ...the crises every 10 year cycles or so. The thing is that I don't know any locals foolish to keep much money in their bank accounts here. And now after 9/11 and the Patriot Act it's not so easy for the locals to open up bank accounts in the USA. True they can go to Europe as many have a EU passport but it's not that simple anymore. And many of them are leary about continuing to keep their funds in Uruguay. The banks in Uruguay are great but there is some talk about Uruguay cooperating with Argentina. I really think the days of "offshore accounts" are essential dead. Most banks are cooperating with taxing authorities around the world.

So that leaves locals to put their money literally under their mattress or buy real estate that is safer than keeping their cash under their mattress.

So while I do see problems with inflation, etc. I think this time in times of crises, it might make real estate here even more attractive. Until there is a viable safe investment here in Argentina (locals really don't invest in the stock market, start up companies, businesses). So the safest place for them is the real estate market.

Besides I'm still making great % renting my properties out. Even accounting for rental taxes to AFIP, utility bills, annual asset/property tax I can't make these kinds of safe returns on anything else. Also, that doesn't even add into the mix that many of these properties I bought after the crash have all doubled in value.

For the locals it all comes down to the standpoint of ...."if I sell what do I do with the money??".

While I do see Argentina experiencing some pains I don't see real estate prices falling significantly. Then again I don't see it going upwards significantly either. But the real estate market even with the worldwide crises has done quite well here, especially in solid areas like Recoleta and Palermo. The reason for that is these properties aren't leveraged. They are all paid in cash.

And when it comes down to it...there isn't an alternative safe investment here for locals. This is something I said would happen since 2003. My only regret is I didn't load up even more on real estate after the crash.

I guess some on the board would call us "vultures". I just call it smart investing.

You made a good point about Spain. The properties there have fallen tremendously! But in Spain keep in mind the banks are more protected because people that stop paying their mortgages the banks can go over for decades. It's not the ponzi scheme type situation where you have "jingle mail" in the USA with people just sending in their keys to the banks. I think it's good to hold some of these people accountable for their poor investment decisions and buying a house that wasn't worth it. I also think banks should suffer as well making idiotic decisions to give so many loans to deadbeats or people that should have never bought in the first place. So many people scammed the system in the USA.

 

[jazrgz]

Im local and all I have to say is that most ppl here (despite k´s followers belief) are as much in shock or even more with these clowns running the government. Just a bunch of low life blood sucking creeters intersted only in money and power.
We dont mind the inflation ?????????? only union (mafia) ppl and K´s "friends" dont mind it. they just steel more and that way they compansate. Im helpessly watching my salary decresing every month to the point i can litteraly barely get by.
Poor ppl is not affected ????????????????????????????
20 + inflation rate is normal ?????
btw, i dont recall the current econmy minister being part of the team that got us out of the crisis when K first got elected, the guy i remember got kicked off the team when he started questioning the criminal plan K and friends were starting to execute. this Bozo Bodou is just the latest puppet Ks got.
It amazes me how some ppl here can defend these criminals, they all have the same speech rehearsed and it basically goes like this:

Everything here is great, no inflation (well, it turns out now that there is but it only affect the middle/upper class bastards), no crime (just a sensation), no poverty, social justice, wealth distribution, human rights (real ones), moyano is a hero, budou is a visionary, moreno is a decent hard working human being and so on.
and of course, whoever disagrees is either an oligarc pig (locals) or a neo liberl imperialist looser (foreigners).
Needless to say a mayority of Argentinians are disgusted by these lies and next year we can all kiss Kirchnerismo good bye, until then it´s all lies and deception. After that, something waaay better....any of the above !

 

[Bajo_cero2]

Are you joking? What's the point of giving all this salary increase and give money away if the money isn't worth anything in 4 years?

Well, you are missing the point. Prices rise, salaries rise, prices rise, salaries rise. And so on.

So, you have 2 ways to see it. If you see the numbers this seems to be worst that it really is. So, the monetary economy school cannot explain properly how inflation works in this country.

The proper way to see it is the old way to account it: "the canasta familiar". It means the relationship between the minimum salary and the real cost of living of an standar family (2 adults and 2 children).

So, I don´t say the escenario is great, I say: "heeeelloooooooo, this is Argentina", a poor country in south america with very high expectation where 2 different project of country are fighting. One more alike Chile with almost no middle class and another more alike the US with a wide middle class.

Regarding jazrgz comment, intolerance and the lack of respect for pèople who thinks different is an issue in this country, no doubt about it.

Regards

 

[jazrgz]

Im not being intolerant per se, i am though being disrespectful, im sorry but i cannot respect someone that defends the Kirchner model. It´s so sumerged in obvious scams, theft, deception, bullyness and lies and it´s all for the benefit of a very few and in detriment of the rest of us that I cannot believe that whoever is defending it does not know these facts (in which case I would not be mad at the person but probably feel sorry).
I gotta admit it though, you are probably the only kirchnerista i know that is always respectfull and willing to dialogue

btw: "Prices rise, salaries rise, prices rise, salaries rise. And so on" - really ???

it´d be more like this i think:
prices rise, prices rise, prices rise, the salary of a selected group (union thugs) rises, prices rise, prices rise, the salary of the same mentioned before rises and so on.

My salary, which a couple of years ago was considered good has not been raising much though prices to everything I consume has (several times over). I can assure you that im not the only one in this situation and can definately tell you there´s huge amounts of ppl doing worse

 

[Bajo_cero2]

I don´t understand why you associate price rising with the government. As far as I remember, there was a price control system going on until the conflict with the farmers began. In fact, some months before they made a power demostration rising tomatos price from 1.5 pesos to 15. Am I wrong?
When the farmer`s conflict began prices rise about 50%. Who did that? Farmers.
Do you remember this guy who was saying that we should pay $80 pesos for lomo???? Doesn´t it sound like he was doing some kind of lobby for that...or besieging the capitol city.
So, after the food prices rised %100 inflation began. So, you can go to Sociedad Rural to complain for you salary.
Regards

 

[mini]

Well, you are missing the point. Prices rise, salaries rise, prices rise, salaries rise. And so on.

I'm sorry, this is just not correct. Salaries do not raise at the rate of inflation for everyone. Only encargados & truck drivers. We are not in these professions. Now because our salary doesn't rise but all costs rise I will no longer be able to pay my cleaning lady. So now my cleaning lady not only does her salary not rise but she now has less hours work per week. So she doesn't buy anything besides canasta familiar and so on & so forth.

So, you have 2 ways to see it. If you see the numbers this seems to be worst that it really is. So, the monetary economy school cannot explain properly how inflation works in this country.

No. I'm sorry but frankly you have your head in the sand.

The proper way to see it is the old way to account it: "the canasta familiar". It means the relationship between the minimum salary and the real cost of living of an standar family (2 adults and 2 children).

That's just silly. We are basing the whole of the Argentine economy of the canasta familiar? I can't take that seriously. Is this CFK's plan?? Printing money and making sure everyone can afford the "canasta familiar"? This sounds like a good plan to you?

My salary, which a couple of years ago was considered good has not been raising much though prices to everything I consume has (several times over). I can assure you that im not the only one in this situation and can definately tell you there´s huge amounts of ppl doing worse

Don't worry. You & I will soon be poor enough so that the K's will give us subsidies.