Last year we resolved to sell the property but three months of marketing drew one offer amounting to thousands of dollars less than we'd paid. I took it off the market to await a turn for the better. This year that is exactly what happened, and after a few days of marketing, an offer arrived that gave us a very acceptable (and profitable) outcome.
The Hawke's Bay property market had changed in a remarkable fashion in a year and I got lucky. I certainly don't regret my many visits to the Bay over the last five years. I reconnected with my blissful childhood and many old mates.
Studying American history for a master's degree at Auckland University, I became fascinated by market instability and, in particular, the great stock market crash of 1929. This was one of the causes of the Great Depression of the 1930s which spread around the world and heavily impacted New Zealand.
The aspect of this huge market turnaround that interested me most was the fact that almost no-one saw it coming. Indeed, many were saying that stocks and shares had reached a new and sustainable "plateau". This is, of course, exactly what is being said and written about the Auckland property market right now.
It is, however, worth retelling the story of one investor who did see the great crash coming and emerged an extremely wealthy man.
This gentleman, a stockbroker, left his New York apartment one morning in July 1929 and, as was his habit, read the newspaper while he had his shoes polished. The shoe shine boy engaged him in conversation and told him of the killing he'd made trading in shares in the previous year.
The stockbroker reasoned that if a complete amateur was gambling his life savings on the share market and doing well, then the market was a bloated bubble and it was time to get out.
He shared his insight with no one, went to his place of employment and, over the next three days, turned every stock and share he had into cash. This was cash of the folding variety. He, wisely as it turned out, trusted banks no more than he trusted the share market. He was right again. By 1933, nearly half of America's banks had failed and by 1932 stocks were worth only a fifth of their value in the middle of 1929
Within three years, unemployment in America was approaching 15 million people, nearly a third of the workforce at that time.
Our wise stockbroker spent the 30s buying up cut-price treasures including fancy properties, artworks and assets like cinemas and (after prohibition was repealed in 1933) liquor outlets.
I know of someone who did something like this closer to home.
When I was a kid growing up in Ellison Road, Hastings, a lovely old bloke lived opposite us. His house was a fascinating museum, packed with antiques and curios which he'd been able to collect at knock-down prices during the Great Depression. He'd kept his job as a tram driver in Wellington while others suffered years of unemployment.
The stock market crash of 1929 was not the only cause of the Great Depression, but it did act to accelerate the global economic collapse of which it was also a symptom.
Something similar happened very recently with what we now call the Global Financial Crisis or GFC.
Again, virtually no one saw this coming. Optimists will tell you that such a sequence of events cannot happen again because governments and central banks have the tools to avert such crises, but history tells us that human nature doesn't change much over the centuries. When another GFC or a 1929 happens, cash will again be king.
-Mike Williams grew up in Hawke's Bay. He is CEO of the NZ Howard League and a former Labour Party president. All opinions are his and not those of Hawke's Bay Today.
