Invest
A 30-year recession? ‘It could happen’
Record low interest rates around the world have created fertile soil for a 30-year recession, similar to what has been experienced in Japan.
A 30-year recession? ‘It could happen’
Record low interest rates around the world have created fertile soil for a 30-year recession, similar to what has been experienced in Japan.
That’s according to Learn to Trade’s Jeff Triganza, who told the Nest Egg podcast team the economy isn’t in as strong a position as it appears, courtesy of higher rates of credit default swaps.
He explained, “The credit default swaps were what caused the GFC last time, and the credit default swap market today is twice as big as it was then. So, we've got twice as much risk, if that was the risk.
“Secondly, we've got a really interesting time with interest rates. Interest rates at the moment are at historical lows pretty much in every Western country. And when we have a crisis the first thing the central banks do is cut rates.”
However, as Mr Triganza noted, it’s difficult to do that in the UK where the Bank of England’s official interest rate is 0.50 per cent.
Likewise in the European Union, the rate has been set at 0.0 per cent since March 2016. Canada’s central bank has the official rate set at 1.25 per cent, while the US Federal Bank has its rate at 1.75 per cent.
“Japan's had zero interest rates since 1988. What's going to happen? They can't stimulate the economy by cutting rates. And Japan was the case study,” Mr Triganza said.
“Japan did that [set the cash rate at 0.0 per cent] in 1988. They got to zero, and they've been pretty much in recession ever since then. That's 30 years. It could happen.”
Nevertheless, Mr Triganza said investors shouldn’t react to the current depressed prices by selling.
“Don't sell stuff. Selling stuff is silly. You sell when prices are going up not when prices are coming down,” he said.
Instead, Mr Triganza suggests investors enjoy a martini.
“If you're comfortable with your position today, there's no reason not to be comfortable. Just sit back and watch. Drink a martini. It's [market movements] an entertaining thing to watch,” he continued.
For investors who have seen recessions, and returned to the market following the GFC to find that their investments were about the same price, Mr Triganza said riding out the storm could be the way to react to potential returns to GFC-like conditions.
“Companies that are good companies today will be good companies in 10 years’ time. If they have some sort of a market force that's pushing them forward, there's no reason for them to go bankrupt,” he said.
“We don't have very many companies that are listed in Australia go bankrupt anyway. And if you're only talking at the top end, I'd be very, very surprised if any of the big four banks or BHP went bankrupt in my lifetime.”
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
Wrapping up an eventful 2021
Listen now
What Omicron means for property, and are units right for first-time buyers? What is equity crowdfunding? Are industry super funds tapping into member funds to save their skins?
Listen now
Will housing affordability improve in 2022? Will buy now, pay later become the norm? Why are Aussies staying in failing super products?
Listen now
Who really benefits from crypto ETFs? How will the RBA respond to rising inflation? Could a mandate help address unpaid super?
Listen now
Property
Property prices boosted by housing policies: RBA
The central bank has outlined the “pervasive” impact that policy has on property. ...Read more
Property
Labor’s ‘Help to Buy’ scheme not without its risks
With Anthony Albanese sworn in as Australia’s 31st PM, home buyers are excited at the prospect of accessing the new ‘Help to Buy’ scheme, but a property expert has warned that the risks may be g...Read more
Property
Australia's housing market is entering a ‘broad-based correction phase’
Westpac believes the housing market downturn is now underway. ...Read more
Property
ANZ now expects house prices will end the year lower
With higher interest rates on the horizon, the bank is forecasting larger house price declines than previously expected. ...Read more
Property
Which capital cities are most attractive to property investors?
A new survey has suggested that investor attention is shifting away from Australia’s two largest capital cities. ...Read more
Property
Market uncertainty fails to discourage foreign property investors
While interest from foreign investors in Australian property has remained strong, HLB Mann Judd warned that tax increases could see demand shift to other markets. ...Read more
Property
Regional renters forced to spend more of their income than ever before
Renters in regional areas are spending nearly as much on rent as home owners are spending on mortgage repayments. ...Read more
Property
Aussie home buyers now need to save for over 11 years for a deposit
Since early 2020, the time needed to save for a deposit has increased by more than two years. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
