Saturday, November 6, 2010

Chris Joye exposes himself

Maybe we are closer to an historic housing bust than this blogger thought. The bulls have entered outright panic. From The Australian:
Christopher Joye, an Australian property market bull, yesterday offered US guru Jeremy Grantham a $100 million bet on house prices.

Mr Joye, managing director of property research group Rismark International, challenged his equally vocal sparring partner, GMO Capital founder and chief investment strategist Mr Grantham, to put his "money where your mouth is" on the issue of whether Australia really is in a property bubble.

Mr Grantham's downbeat views on Australia's home prices were "sensationalist and spurious", Mr Joye said.

He challenged Mr Grantham to bet the $100m over a three-year term, basing the outcome of the bet on movements in the RP Data-Rismark Australian Capital Cities Dwelling Price Index.

For every 1 per cent rise in the index, Mr Grantham would pay $1m, Mr Joye said. But for every 1 per cent decline in the index, Mr Grantham would receive $1m.

Jeez. Is making a ludicrous bet any way to convince people you're not in a speculative bubble?


The Lorax said...

Can Chris afford that kind of money? I guess he's loaded after Macquarie bought in...

The Lorax said...

Chris has been bragging that the RBA reads his blog. He really is an insufferable wanker.

The idea of Warwick, Rick and Glenn logging on to Joye's blog and nodding approvingly of every post sends shivers down my spine. I wonder what they'd make of H&H?

BTW, Peter Martin has amped up the cheerleading to ear bleed level today.

Anonymous said...

I read his 'challenge' to be an offer to find 'institutional counterparties' that will take the other side of the bet. So much for 'putting your money where your mouth is' as he taunted Grantham with.

Also, what about the pricing mismatch? Its Robertson vs Keen all over again. At a minimum the bet should be inflation adjusted. More likely, given how much Joye crows about the robustness of resi real estate, the deal should be struck under over a 9% real increase in the index.

Love your blog by the way!

David Llewellyn-Smith said...

Perhaps Anon, that make sense. It remains, however, shudderingly reckless...

Anonymous said...

Say what you like about Chris Joye, the man has a knack for self promotion, though he may accomplish this occasionally in a boorish and unrefined manner! Joye will naturally point to the Keen/Robertson bet, and claim a precedent has been set. Yet it must be acknowledged Keen and Robertson were 'of the same level'. Nevertheless, Joye my see this as somewhat of a David versus Goliath battle, and history tells us Goliath paid dearly for underestimating his foe! All eyes are now on Grantham. How will he respond. Perhaps Grantham doesn't care, and finds this bet beneath his dignity. Yet, the sheer volume of blog and media articles discussing Joye's challenge does suggest a strong level of community interest, in housing, in Joye, in Grantham, and in this challenge! I would suggest one important change to the terms of this bet. Base it on on the official Bureau of Statistics house price index (indeed as Keen/Robertson did). Now that would level the playing field!

Alex Barton
Australian Property Forum

Anonymous said...

The 'bet' is not that reckless David, in my opinion. Investors want exposure to the residential housing market, and he is trying to create a 'synthetic' market for that (much like the US housing futures market). For all of the investors wanting to go long, there must be speculators (and some hedgers) wanting to go short. As you know this is how a futures market must work.

What I am totally blown away by the fact that no-one has hit Joye with the fact that the terms of HIS BET, imply that he (or his 'counterparties') think the expected nominal return on resi real estate over the next three years is ZERO! In fact the 'true' implied expected return on real estate from the price he quotes is probably below zero, because there is more risk (or 'tail') in the upside given the zero bound of downside price movements (not to mention all the structural pressures for asset price inflation to run out of control).