I am not MLM. this is not my cup of tea.

wa lao...every project also need team work right? unless you are captain America.

Boss how do u know I'm in tis line???

Haha tats true. I do kok toking nia.

Soli boon gor. Just for fun tis time. Wkend ma.

Abstract from BIS conclusion;

Meanwhile for household debt, our best guess is that there is a threshold at something like 85% of GDP, but the estimate of the impact is
extremely imprecise.

As with government debt, we have known for some time that when the private sector
becomes highly indebted, the real economy can suffer. But, what should we do about it?
Current efforts focus on raising the cost of credit and making funding less readily available to
would-be borrowers. Maybe we should go further, reducing both direct government subsidies
and the preferential treatment debt receives. In the end, the only way out is to increase
saving.

Increase out put too. Productivity Increase GDP

This post has been edited by tikaram: May 4 2014, 01:40 AM

Argument 2)
Real Estate is relatively stable than stock / money market in long run, putting money (cash or leveraging) is safer (less risk) than other options (except FD).
- Mr.A spend $500K (90% loan) to buy a property and spend $500K to invest in stock market, let say recession hit :-
1) 500K property drop to 400K, buy Mr.A still able to serve installments
2) 500K shares holdings in hand drop to 250K (intrinsic value), still holding.

sinchew said majority ppl invest in share.

http://biz.sinchew.com.my/node/94056

Many people forgot real estate investment is highly geared.

More likely Mr A;
1) Bought 500k property with 50k downpayment. If property dropped to 400k, Mr A is underwater by 50k.
2) With 50k cash could only buy 50k shares, if dropped to 25K, still left with 25k.

If interest rate raised by 3%;
1) Mr A may not able to service 450k loan repayment, visited by repoman, loss all and more.
2) 50k share may become 45k but could place downpayment to buy previously 500k property for 400k or less.

In loan agreement, bank has the rights to recall the loan or ask borrower to increase collateral anytime without giving any reason. In 1997, banks did recalled loan (from those in npl) and told borrowers to increase collateral (from those in doubtful), and any reason why it won't happen again?

This post has been edited by icemanfx: May 4 2014, 05:10 AM

Oh isit.

Another thing i learn yesterday is gov learn from mistake. Things happen in 1997 should not repeat because foreign reserve have increase significantly for asian country compare to pre 1997. Expert say one ha...i dont even know what is foreig reserve.

Recall generally unlikely for good debt.

The reason, bank is looking for trouble itself, if they did.

Imagine bank sudden recall the car loan, housing loan, how many borrower out there can repay or increase collateral at anytime?
If they have the money to repay at anytime, they don't need to borrow in the first place.

So by doing so (recall and margin call), bank is looking for trouble for NPL, which hurt itself by doing so.
No win party.

If borrower willing to pay on time for any underwater loan, bank is happy to see the prompt monthly repayment instead for forcing borrow to repay or increase collateral.

Eg.
A borrow make a car loan 100K, repayment a few K each month, who is in the right mind to recall the loan?
Forcing borrower to repay anytime?
Increase collateral?

Highly bank need to tow tons of car out there. Banks want money, or make money with interest from loan, they do not interested on cars.

Same with property
if the property bought 500K, now valuation plunge to 300K
Forcing borrower to repay? Borrower mostly has no instant money to repay or any collateral, so if doing so, bank needs to foreclose it.
Wait, foreclose it, bank will be hit by 200K loss.
While borrower has prompt payment that for 500k, that bank doesn't need to hit by 200K loss and stuck with a property.
Same with car, banks do not interested in property at all, they want money, interest money, not property, be it worth or not worth.

As a banker, which one you choose?

Mostly term loan, car loan, property loan, that every month you need to make payment one, banks generally willing to see prompt repayment instead forcing suddenly repayment or sudden forcing borrower to increase collateral.

One is loss-loss situation (forcing repayment, forcing increase collateral in a prompt repayment loan)
One is win-win situation.

So the reason is obvious, although margin call, increase collateral, cut back credit limit etc issue may happen again,
generally they may enforce it on the loan they already see as dubious aka borrower has showed sign unable to repay, even as mentioned from above post as term NPL.

it is not GDP high or low is good.

is what the GDP numbers are used for.

example is lets say the GDP numbers are from foreign investor opening factories or high end industries providing high income jobs.

well our country is flooding our market with low level workers like bangala a lot.

and if the GDP is fueled by massive credit expansion, it wont last for long.
you are lending to expand, and have to repay back + interest

Nowadays, most countries have learn to borrow internally, instead foreign.
Reduce the risk of foreign exchange, as well as both borrower and lender have the common interest.

in the US case, actually the shiat is still happening , it's a corruption at the highest level actually

read this article below
http://www.reuters.com/article/2014/04/30/...EA3T0N020140430


US has a state owned housing mortgage company called Fannie Mae and Freddie Mac.
During the subprime thing, all of the bad debts from other banks were sold to the state owned company at the old face value (mortgage loan price, not the current housing market price).

so those big banks look clean from the outside because all the bad loans were forced down the throat of the state owned companies.

when the banks win, they win all. When they lose, they transfer the losses into government's pocket.



This post has been edited by AllnGap: May 4 2014, 07:42 AM

•Price to Rent Ratio (or Yield)
•Relative Prices
•Affordability
•Price of new builds


All these above are only accurate of how bubbles are formed, but not accurate in the sense of how it can maintain.

most important factor is

1. INTEREST RATE
2. EASY LOAN REQUIREMENTS

GOOD TIMES = LOW INTEREST RATE x EASY LOAN REQUIREMENTS
= very big amount of loans released ( Malaysia is RM 100 bil per year )

amount of loans China increased since 2008 is about USD 13,000 Billion.

that is how growth is generated.

GDP growth + credit expansion always come hand in hand.

The key is those credit expansion is used for improved productivity and not excessive.

Whether GDP number due to foreign investors opening factories that low value added using to low level worker or not, will be seen through the GDP.

GDP is output made.
Scenario 1
Foreign factories opened a factory with low value added product, employ cheap labour.
So factories import raw material RM1, low value added sell at RM1.20. Your output is Rm0.20

Scenario 2
While another country with factory import the same raw material Rm1, but high value added, sell at RM2.00, output is RM1.00

GDP is how much output, value added that your economy can induce.
So high GDP number will roughly tell us some story of state of economy.

While how much output you generate, how much potential the income can be generated by your population.

Japan is a classic one

Just to share with u all what I found last night.

Public debt/gdp 55%
Corporate debt 95%
Household debt 86%

Total debt = 236%
Latest gdp = 1000b

If interest rate = 6%
Total debt installment per yr = 142b

If gdp = gross profit = 1000b
14.2% goes to interest installment.

household income = rm5000/month x12 x 6 mil household = 360b
Household interest installation = 1000b x 5% x 86% = 43b = 11.9% of total household income

Wow.

bank fat cat lo

142b/20bank each 7b

Whack whack whack bank share.