Saturday 24 September 2011

Ozzie, Ozzie, Ozzie! Oi! Oi! Oi!



Kris Sayce and Murray Dawes came out this week with some great analysis on the South Pacific Peso. I read it on Money Morning (daily newsletter and its free)

Australia: The World’s Investing Casino

That’s one of the things we love about the market… especially free markets. Its habit of making fools out of fools… especially those who think they can manipulate the market as they see fit.
Of course, there’s every chance the market will lose its senses again. And the mainstream clowns will once more crow, “You see, the Aussie is a reserve currency… it is a safe haven.”

That last gem came from The Pascometer (what the Pascometer indicates, do the opposite).

(click on chart to expand)



As an aside... 
Things Bogans Like #238 – The Australian Dollar


Golden Gravity


Gold got hammered last night. Many reasons put forward (the Comex Margin hike a few days before Option expiration has been used well before):

Gold Daily and Silver Weekly Charts - Liquidation Panic - Martian Gold - Comex Hikes Margins

When Hope Fades

Case Closed: CME Hikes Gold, Silver, Copper Margins

Did Schaeuble Break The Precious Metals And Force Everyone To Raise Cash?

Europe Closes On 'Bailouty' Hope As Rumor Of Major Fund Liquidating PMs Grows Louder

The Bullish Argument

Is Gold No Longer A Safe Haven? Not According To Capital Economics: "Gold Will Surge When Euro Crisis Escalates"

Marc Faber: On Operation Twist, The Dollar, Gold, And The Greeks(Marc is calling for a repeat of late 2008 and 2009 ie the US Fed eventually hits 'print' when the stockmarket is thru the floor)

Some key facts (for calm and perspective):
When Lehmann Bros filed for bankruptcy in Sep 2008, the US stock market fell about 30% and along with everything else (except Swiss Franc, Yen and USD) that was being dumped, Gold fell just over 20% in a month.

Once all the margin calls were rung out and a calm sense of doom descended after the panic, approximately a month after Lehmann, Mr AU Gold cut his traditional relationships and ran [as a safe haven].
  • Between October 2008 and March 2009 (March is when the Fed hit 'print' the first time) Gold added 25% (in USD) whilst the Stockmarket fell another 30%.
  • Because the Australian dollar was falling Australian gold holders picked up 40%.


Why the $1580 (US) level in Gold is important (to me).



Weekly Gold Chart (my platform and my analysis).

I’m thinking the April high of $1580 as support which coincides with:


1. Line of trend support drawn from January low of $1308 .
2. Red 30 week Simple Moving Average line which has been defining support since January 2009.
3. Yellow Weekly RSI (7) in its historical turn zone (45).

Every time parameters 1 to 3 have lined up above she has bottomed PLUS, as a bonus $1580 was the level of April resistance

This could well overshoot in these crazy times, where the majority of world banks are insolvent (not just Lehmann) and the governments are in debt up to their eyeballs but its already corrected a healthy 15%. With the banking sector insolvent methinks there is real need for a 'real' safe haven

(click on charts to expand to see the nitty gritty)


Zoom in:




If your Super is NOT in equities (ie not in Growth or High Growth) and you aren't exposed to banks and/or companies that benefit from house construction, discretionary spending (eg Retail and Shopping Centres) etc, DON'T PANIC!* and have a look at opportunities in these times.



*if your Super is in equities (ie growth or high growth) and you are exposed to banks and/or companies that benefit from housing construction, discretionary spending (eg Retail and Shopping Centres) etc and/or you have geared (mortgaged) Investment Properties, FEEL FREE TO PANIC!

Which reminds me (things bogans like)...

#242 – Playing the Market
#227 – Banks
#85 – Residential Property Investment (my favourite of them all)

Tuesday 20 September 2011

Dove è L'amore?




O' Silvio vut izza appening il mio amico (In the world's 7th biggest economy)?

S&P Cuts Italy Rating on Weak Growth Outlook

Itta oza-lotta-da-money an she gotta pay uppa soon.


Alotta-da-money!!!

You gonna pay Silvio?





Monday 19 September 2011

Weekend Of The Zombies



Links from the weekend's global Zombie jamboree:

Europe

Is September 20 Greek Default Day?

Euro Declines as European Finance Chiefs Fail to Reassure on Greek Debt

DSK Says Greece Is Done

Euro Bulls Capitulate After Trichet Comments

Germany Rejects Geithner's Leveraged Rescue Fund Proposal; First Time Ever, Majority of Germans No Longer See Benefits to Eurozone Membership

European Leaders Remain Divided, Geithner Brushed Off; German Banks Need $175 Billion Capital

Interactive Infographic Of The Doomed European Financial System


USA

Obama Proposes $4 Trillion in Spending Cuts "Over 120 Years"
(that'll make a dent in the $15T deficit and $115T in unfunded liabilities)

More on the Coming Wave of Foreclosures

China

China Home Prices Rise, Challenge Curbs

Home Prices Rise in All 70 Monitored China Cities;Local Governments Rely on Ponzi Land Sales to Pay Mounting Debt;Tightening Concerns Hit China Stocks


China is in quite a pickle, a gargantuan bubblicious picle as outlined months ago, while everyone is staring at Greece...  and Double, Double Toil and Trouble .


Back in June it took 57 years income to buy an average apartment in the capital (Chinese Bears)


Calculations based on Soufun data show that in the opening months of 2006 an average-price new apartment in China's capital would cost around $US100,000 — the equivalent of 32 years' disposable income for the average resident.

By 2011, the average price had more than doubled to $US250,000, but relatively modest increases in income mean it would now take 57 years of saving for the average resident to cover the cost.


So does China cool the bubble or risk doing a Japan (?) while they are waiting for Europe and the USA to get back to buying junk with money they haven't got. I hope they can wait a decade or three.


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But the Winner Is...




This guy is amazing. I watched him a few days ago describe a 20% (or such like) property loss over a number of years as a sideways market. A wildebeeste in a suit...

Great Depression coming…Not!

For long-term investors worried about the unbelievable volatility on stock markets at the moment and wondering what their next money move is, there could only be one reason why you would want to change your general strategy - a Great Depression!

Do I expect it? No. Does anyone? Yes, Harry S. Dent, Jr. Is he right? Could be, but I doubt it.
If Harry, the author of The Great Depression Ahead, is right, then we all should go to cash and wait on the sidelines until we can guess the right time to get back into stocks. That would mean that we're choosing to take 5-6% on a term deposit until we're pretty sure that we're out of the woods, but is this the wisest strategy?
Hmmm. We've been sinking deeper into a swamp of foetid decay for 4 years and that swamp is so deep in the forest there is no fucking sunlight.

Anyone with half a brain should have been in cash 3.5 years ago. Lets look at Australian stocks over 5 years....


How is a loss over 5 years of -19.4% compared to that 5% in cash?

$100,000 invested in 2006:
  • Cash @ 5% is now worth $127,000; 
  • ASX200 is now worth $80,600.
50% needed straight up to catch up. Whats that story about the hare and the tortoise?

Indeed why would you change such a winning strategy when Capt Crack-Pipe says stay on course?

The 2007 highs were false highs and were created by the silliness of sub-prime loans and cheap money right around the world [but not Australia, no Housing Bubble from cheap money here], and what's happening now is that governments like in Greece, companies such as Centro and many financial institutions around the world are being given a reality check.

This is what the ‘muddle-through thesis' looks like on a day-to-day basis and it can be really scary and sometimes quite exciting but the long-term investor shouldn't be distracted by the daily noise.

Stay on course says the Captain!! No storm ahead.
This could take over a year but when the consensus says the worst is over, there will be a big bounce in stocks. Until then, I have faith that the collective wills of governments and the best economic minds in the world can avoid the policy mistakes that created the Great Depression of the 1930s.
Sure will be a bounce, expecially when the ASX has lost another 50-70%. And, a lot of bounces in between especially when one is Running Up The Down Escalator

(today the Nikkei is another 12% lower than above. Overall - 77.4% over 21 years)


Inhale deeply Captain and hold it, this shit is expensive.

I think a Goldilocks downturn is more likely where stock prices don't rise by much, unemployment doesn't go too high and house prices don't fall by too much. This view rests on my belief that the likes of Brazil, Russia, India and China or the BRICs, will give the global economy the grunt that was missing in the 1930s.

This is a tongue in cheek comment, but thank God for formerly underdeveloped and Communist countries that are now playing catch up in the materialism/capitalism game!

Great Depression? Not!

Ahhh The China Myth coupled with another DEEEP pull on the pipe. Stay on course.

Peter Switzer is the founder of the Switzer Super Report, a newsletter and website for self-managed super funds.

Is this a cunning anti-alzheimers plan to keep older minds active via keeping pending retirees in the workforce until they are 85?






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Gold Insights




The Dutch Ask Their Central Bank: "Where Is Our Gold?"

Central banks return as gold buyers  (video in link)

Analysis

Analytical 1
A Closer Look at the Gold Continuation Triangle, and the Coming Breakout to 2100

Analytical 2 (charts expand when clicked on)
Gold Daily and Silver Weekly Charts - Antics Abounding

Speculation

Ambitious?
Gold-Backed Dollar Puts ‘Fair Value’ at $10,000 an Ounce: Chart of the Day

Really Ambitious?
Stephen Leeb - Gold, Minimal Downside, $12,000 Upside



"Standby....Green Light! Go! Go! Go!" 

Saturday 17 September 2011

Meanwhile, An Envoy Is Despatched From the Debtstar...

"My Lord I will personally travel to Tattooine and put an end to it"

 

The boy who dearly wanted to be a Jedi, but found he was just a bullshit dispensing total fucking idiot.

This is brilliant. Imperial Banker Geithner has travelled to Europe to give them advice on getting their house in order in that corner of The Empire.

Geithner Warns Europe About "Loose Talk" and Infighting

US Treasury Secretary Tim Geithner flew to Europe and chastised European leaders on "loose talk" and infighting. 

Speaking at a closed meeting of eurozone finance ministers in Poland, he is reported to have told them that the divisions were "very damaging".

Some eurozone ministers seemed unhappy with Mr Geithner's comments.

They have also delayed a decision over Greece's next bailout loan [Until October when Greece runs out of money!]

Mr Geithner reportedly said: "What's very damaging is not just seeing the divisiveness in the debate over strategy in Europe but the ongoing conflict between countries and the [European] central bank."

He said that "governments and central banks need to take out the catastrophic risk to markets".

His presence at the meeting was measure of how concerned the US is about the danger of economic contagion from Europe's government debt and banking crisis.

Here is the kicker from Austria's Finance Minister Maria Feckter (Mrs ObiWan Kenobi?).

"I found it peculiar that even though the Americans have significantly worse fundamental [economic] data than the eurozone, that they tell us what we should do."

The quote of the day goes to Jamie Robertson of BBC World News:

"There may be a few people who still believe Greece will not default on its debt, but my suspicion is most of them also believe elephants can fly and the woods are populated by pixies."

In a sense, Geithner is correct. Infighting should stop. However, needs to with the bus in a logical spot, not in woods populated by Geithner loving Pixies. The logical spot is default, with further talk of a Eurozone breakup, not with everyone bowing to Geithner and Pixies.

The "Yes Minister" Indicator. Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied).

Angela Merkel, German chancellor, declared on Wednesday that “the euro will not fail” after the country’s powerful constitutional court rejected a series of challenges to the multibillion-euro rescue packages agreed last year for Greece and other debt-strapped members of the eurozone.

In a passionate restatement of Germany’s determination to defend the common currency, the chancellor welcomed the court’s judgment as “absolutely confirming” her government’s policy of “solidarity with individual responsibility”


Decoded:


First Rule of Politics

No, I didn’t misread the article. I just have a very different understanding of the logistics of a denial. Last year, for example, I wrote on my blog about ferocious denials by both Spain and Portugal that they would need any official help in funding themselves. But according to one of my favorite British television comedies, Yes, Minister, an official denial means something very different from what is intended.

“The first rule of politics,” Sir Humphrey, the wily civil servant in the show, insists is: “never believe anything until it is officially denied.”

I don’t want to sound too glib or too jokey, but I wonder if there has ever been a forced devaluation that wasn’t preceded by ringing assertions from presidents and central bank governors that under no circumstance would the currency ever devalue.

What is all the more interesting is that I recently discovered that the quote “never believe anything until it is officially denied” doesn’t originate with the writers of the British TV comedy. Apparently it can be traced to at least as far back as Otto von Bismarck, who was born not too far from where Angela Merkel grew up. Never believe anything until it is officially denied, the Iron Chancellor warned us.
----------------------------------------------------------------------------------------------------------------

Back on the Debtstar, Lord BerWanke can feel ructions in The Force which he thinks is caused by the growing number of soiled bottoms across the Debtstar and is under orders from his faceless master, as he continues to confuse the aromatic tang of decay that permeates the ship with that of faeces...


With this in mind on Tuesday and Wednesday he convenes his monthly meeting of fellow Sith Lords to decide exactly how much Toilet Paper is needed to be printed for the few months to keep the Empire's bottoms squeakly clean. He is well aware that Ponzi Participants need a clean arse.


Calendar Of Sith Lord Toilet Paper Supply Meetings

But what can we expect  to happen and how this will effect the Rebel Alliance's hordes of the Precious Matter AU-79 much despised and hated by Lord BerWanke and his Masters?

Forget Operation Twist: Rosenberg Says Bernanke Will Shock Everyone With What Is About To Come

"The consensus view that the Fed is going to stop at 'Operation Twist' may be in for a surprise. It may end up doing much, much more." Rosie continues: "Look, we are talking about the same man who, on October 2, 2003, delivered a speech titled Monetary Policy and the Stock Market: Some Empirical Results. I kid you not. This is someone who clearly sees the stock market as a transmission mechanism from Fed policy to the rest of the economy. In other words, if Bernanke wants to juice the stock market, then he must do something to surprise the market. 'Operation Twist' is already baked in, which means he has to do that and a lot more to generate the positive surprise he clearly desires (this is exactly what he did on August 9th with the mid-2013 on- hold commitment). It seems that Bernanke, if he wants the market to rally, is going to have to come out with a surprise next Wednesday." In other words, stocks are now pricing in not just OT 2, and a reduction in the IOER, but also an LSAP of a few hundred billion. There is, however, naturally a flipside, to Bernanke's priced in announcement: "If he doesn't, then expect a big selloff." In everything, mind you, stocks, bonds, and certainly precious metals. And, of course, vice versa.


Read the link above. Its good analysis.

  • The Fed would like to be out of the picture during the election campaign (especially if Richard Perry ends up winning the GOP nomination).
  • The Fed has cut its GDP forecasts at each of the past three meetings.
  • The stock market is actually little changed from where it was at the last meeting and we know based on that Washington Post op-ed, that it is equity valuation (specifically the Russell 2000) that Ben wants to see rally. Sanctioning lower bond yields is just a means to that end.
  • There is no fiscal stimulus to bolster the economy, with the odds very high that the Obama jobs plan — some in his own party object to the package as per yesterday's New York Times — will be dead-on-arrival on the House floor. The Fed is the only game in town.
  • Financial conditions have tightened nearly 100 basis points since the spring and deserve a policy response.
  • Bernanke announced at Jackson Hole that this coming meeting was going to be a two-day affair, not one day. The last time he did this was back in December 2008 and that was when he invoked QE1. There has to be a reason why it is two days, and it must be because he wants to build the case for three dissenters. The Board is being sequestered for a reason!
Hang on to your hats Wednesday night.


You may even get to see the Emperor's favourite toy.



PS If you want see just how bad things are on Tattooine, play around with this...
Eurobanks are Toast.


Friday 16 September 2011

Seattle



Some cities will be safe and quite immune from a property death spiral right? Take the beautiful US city of Seattle. An area of 3.4million people, prosperous and home to gems like Microsoft, Boeing Aircraft, Amazon, RealNetworks etc.

This isn't the America of the pick up truck resplendant with gun rack and a neigbour named Cooter or Bill-Bob. This is diversified manufacturing, R&D, savvy, smooth, scenic. The original homes of Hendrix, Quincy Jones, Nirvana and Pearl Jam.




Housing Market Looks Sickest in Cities That Once Seemed Immune

SEATTLE — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping.

The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained. 

In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.

“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”

Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off. 

Is this going to be SE QLD in 2014?

Megan and Ryan Dortch tried to sell their one-bedroom Eastlake condo for $325,000 two years ago. They rejected an offer of $295,000 as inadequate. A year later, they relisted it for $289,000, then $279,000, which was less than they paid. Without a sale at that price, they could not afford to buy a place big enough for them and their new baby.

They have given up on real estate. They are renting out their old apartment at a small loss every month, and living in a rented house. “I don’t expect the market to get better,” said Ms. Dortch, 31, a customer service consultant.

Neither does Gene Burrus, another frustrated seller who became a landlord. “Rent is so cheap it doesn’t make sense to buy now,” he said. He might reconsider if 10 or 15 percent more comes out of the market.

Note. Rents in Ireland have dropped by over 27%  from peak 4 years ago as house prices are down 50%.

And the definition of a deflationary spiral? Waiting (to buy anything) until prices drop next week, when next week comes waiting another etc etc

Maybe that is why belief in a bottom is as elusive now as fears of a top were in 2006.

“We would love to have a house,” said Dan Cunningham, a 41-year-old renter. “I have more than enough for a down payment. I’m preapproved for a loan. But I have to have confidence it’s not going to lose another 20 percent.” He plans to wait until he sees prices rising before making any offers.

In April 2008 Seattle's unemployment rate was still a low 4% as property prices were coming off their 2007 highs. But when the property crash started to bite, it started to climb, thats when the feedback loop starts.

Unemployment now sits at 9.1%, houses are down 30% with another 10% downside expected.


The sector that had the bulk of the job losses? You guessed it, Construction.


Refs.
  1. Bureau of Labor Statistics, Economy at a Glance, Seattle-Tacoma-Bellevue, WA
  2. Bureau of Labor Statistics, Construction, Seattle-Tacoma-Bellevue, WA


A free sample in every letterbox...


Taking Out A Dent



 (h/t Leith Van Onselen aka "Unconventional Economist" at macrobusiness)

Harry S Dent is a well known author and founder of HS Dent Investment Management, an investment firm based in Tampa, Florida. Dent writes a regular economic newsletter and has written seven books analysing demographic trends and their affect on the economy and asset markets.

Harrry is "downunder" and is stating the bleeding obvious IMO regarding a 50% house price correction BUT he has stirred up a hornet's nest.




Australia's best finance experts? Incredible. If they are our best, we are toast.

  • Bouris (an Aussie sub-prime home lender – founder of Wizard home lender now Aussie), 
  • The “Pascometer”* (The world’s No1 contrarian indicator) who is wrong 95% of the time (eg buy Westpac in May and Gold-is-a-bubble  in June 2010),
  • Craig “sandwich-board-for-hire” James, a spruiker with Australia's riskiest bank with the most exposure to the Real Estate Ponzi.
  • Ingrid Just from Choice, she should stick to comparing bogroll texture vs anus abrasion vs price on A Current Affair, a wannabe rocket scientist who just doesn't get it (halfwits who can't smell bullshit)

Some gems like "Australia doesn't have vast tracts of land" (hmmm Sandwich Board, get on a fucking plane in Sydney and fly to Perth and for all but the first 20mins and last 20mins of the 5 hour flight you are over the GAFA - Great Australian Fuck All).

"We don't have empty houses, we have a housing shortage" says Sandwich Board. Really? What about this and this?

More than two-thirds of the government’s shortage estimate arises by including people who can’t afford housing, such as the homeless or those living in trailer parks, Sayce said. Collyer at tax-reform lobby group Prosper Australia says there’s actually a surplus of more than 250,000 dwellings after 15 years of overbuilding, while Keen argues the shortage estimate is swollen by inflated demand from handouts to property buyers of as much as A$21,000 ($21,700).

Banks in Australia have more than A$1 trillion of housing loans outstanding, with the four-biggest lenders accounting for about 87 percent of the total. The Australian Bankers’ Association said it doesn’t have a position on the so-called housing shortage myth and declined to comment. 

More than 100,000 properties lie vacant across Australia, 46,220 in metropolitan Melbourne alone, according to Karl Fitzgerald, director of Earthsharing Australia, a subsidiary of Prosper. The group’s estimate is based on the number of homes that used less than 50 liters (13.2 gallons) of water a day between July 1 and Dec. 31.

Australia has the most unaffordable homes in the English- speaking world, Illinois-based consulting company Demographia said in January, with homes costing 6.1 times the average annual income.

And, "we have a growing population" yep just like in 2006 where  California had a housing shortage with a growing population (some parts of California are beyond 50% falls), and Florida, and Ireland, and Spain and....

“The Californian Building Industry Association (CBIA) continues to express alarm over what it calls an ongoing housing crisis in Southern California. Alan Nevin, the association’s chief economist, projected in a 2006 CBIA Housing Forecast that only 185,000 to 205,000 building permits will be granted this year, far short of the 240,000 new homes needed each year.”

“Southern California has been experiencing a massive population boom in recent years and it’s believed that 6 million new residents will be living in the region by 2020. The population increase, coupled with the housing shortage, has the CBIA worried that it will be increasingly difficult for first-time homebuyers to find a moderately priced unit.”

What about "Steve Keen's prediction's of 40% falls in the GFC were wrong". Prof Keen predicted 40% falls over 10 or 15 years. Yes, he was wrong IMO and looking at the data on my post acceleration we'll get those falls in under 5 years, we are waaaaay ahead of schedule.


Later that night, another video that is a little more circumspect with some good points regarding bank funding from oversees and mortgage rate resets from 2008 'fixing' (note Bouris' dramatic change of tune).




Now look at the video below with clips of Peter Schiff over 2006 and 2007 and note the ridicule he encounters in the similar vein to our own "experts'. Property specific begins at 2:34. This video is worth 10mins of your time. I've added Peter's blog to my list on the right.



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*Some Pascometer gems:
Gold price a bubble waiting to pop 
(when he wrote that, Gold was $500 lower @ $1255 and has since risen 40%)


Banking on dividends
(since he wrote that, Wespac shares have fallen 20%)

Instructions on using The Pascometer: 
  1. When Pascoe says buy you consider selling/shorting. 
  2. When he says sell you consider buying. 
  3. Whe he says fundamentals are good/sound, its possibly rooted.
  4. When he says buy gold, its time to dump it!



Thursday 15 September 2011

Wahnhaft

(Wahnhaft is German for delusional)


How delusional? The flapping gums in the Euro crack-den deem that Greece WILL NOT default.

Really? Lets look at loaning money to Greece over one year. Their one year GOVERNMENT bond.


A 141% return over one year? As an investor I would say there is no fucking way any institution can pay 141% over one year, particularly one run by corrupt muppets.

Oh no, its all good says the pump-and-dump talking heads. If YOU think Greece can meet THOSE obligations you are a fool. A default on debt is a matter of time.

But Greece has to stay on an Austerity path whilst growing its economy. Austerity AND growing? Austerity is working to great effect. Greek economy shrinks by 7.3%

Slashing spending, laying off workers and increasing taxes whilst trying to expand the economy. Thats a bit like trying to run up the down escalator.

Everything is ticketyboo.

Excerpts From EU Report Stating Euro Crisis Contagion Has Spread And Is Now Systemic

Deposit Flight at European Banks Means Risk Piling Up at ECB

Sarkozy, Merkel "Convinced" Greece will Remain in Eurozone; Market Convinced of Default; Gold Declines US Dollar Drops; Band-Aids and Rubber-Bands

Either Merkel and Sarkozy are attempting to buy time, hoping beyond hope to preserve their failing legacies, or are delusional.

I suggest a combination of the three.

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Its a Blip/Buying Opportunity blah blah blah

A Canuckistanian, Dave Rosenberg is very good is generally and on the money. I can't post his blurb direct for copyright but read the guts here:

David Rosenberg: "It's Time To Start Calling This For What It Is: A Modern Day Depression"

Please note: The French banks ARE NOT bankrupt, they just need to 'raise capital'.

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Gold at 10K? NO WAY!!

That can't be right. I know paper money was initially introduced to save folks lugging sacks of gold to business transactions as well as a sword, it (was) a promissary note underpinned by some tangible precious metal. Flicked by Nixon so he could print to pay for Losing War No1 (Vietnam) (have the Americans EVER won since Pax Americana?). But, what if we went back to backing paper money by gold(?)... The market for honesty: Gold at $10,000

When The Dow was 850ish in 1980 and someone told me it was going to go 1,450% in 20 years  to 11,000 in year 2000, I would have laughed.

Or 1,750% in 2007 AFTER the crash, all money printed and backed by nothing other than spin.

Hmmm, $10K Gold is ONLY 1,300% over 31 years.

Interesting times.



Tuesday 13 September 2011

What is going on here?


So Greek is bankrupt. Ok thats a given.

Euro getting smashed as a result thats a given particularly that Portugal, Ireland, Italy, Spain and the UK are not far behind. PIIGSUK indeed.

Germany is getting nervy and some officials believe that Greek should default and started taking defensive positions. Germany May be Ready to Surrender Over Greece.

France are not putting up the barricades and their stockmarket got smashed (-4.03%), particularly the banks on exposure to Greek debt. French Banks Slide as Greek Holdings Might Prompt Moody’s to Cut Ratings

Germany fell 2.27% and Britain 1.63% so they weren't totally spared either. 

And, then the Euro starts to rally on Chinese buying Italian bonds (they must rollover 60B this month) and the US Stocks rally on that rumour. Are the Chinese going to buy Portugese, Irish, Greek and Spanish as well? Short term saving of one "I" still leaves PIGS wallowing.

But why is Gold getting hammered? The penultimate safe haven? 

Goldman Head Gold Trader Speculates About "Authority" Intervention In Gold

Instead of spurring a further gold price rally on the basis that it was one of the few remaining safe haven “currencies” we saw a 50 usd collapse in minutes. The source of this flow seems hard to pin down with some speculating over whether  “authorities” were concerned about the signals of an accelerating gold price and its impact on other fragile markets.
  
And, Central banks and the gold price

Attempts to keep the price of gold down are unlikely to succeed for long. Westerners who buy gold may be unhelpful to the central banks, but you cannot stop a few hundred million Chinese and Indians from protecting their hard-earned savings. And the Chinese are busy developing their bullion markets, taking control away from the Western central banking cartel.

Sunday 11 September 2011

Its Your Fault


You can't make this stuff up.

As the shit hits the fan in Europe and its now widely accepted that Greece is cactus and G7 finance minister's gather to work out another ridiculous can kicking strategy.

America's financial officialdom [you  know, those folk that oversaw the development of the Credit Default Swap so folks/nations/any entity that shouldn't be lent money now could be allowed access to the cash trough (Greece, Sub-prime et al)] is now blaming Europe for the world's woes.

The star spangled nation whose own fiscal position rivals that of Greece, and, who has states that rival Zimbabwe in financial position, is now pointing fingers.



Eurozone blamed by US for world's economic plight

"Seventy-five per cent of the dark things happening in the world economy are because of the euro zone," said a senior US official after a round of talks ended in the early hours of yesterday morning.

Really? Last months US debt crisis never happened (BTW that debt ceiling has been breached).

And, from the crown prince of econowankers...


"It was the principal cause of the slowdown we had last summer, and it's been a significant cause of the slowdown we've had this summer," said Timothy Geithner, the US Treasury Secretary.

Repeat after me. The US DOES NOT have $14.7Trillion in national debt (100% of GDP) and it DOES NOT have $115Trillion in unfunded liabilities. The US DID NOT have a house price crash that has wrecked its economy from bubble that the Fed DID NOT create, nor does it have 15%+ real unemployment, nor does it engage in currency debasement.

This is NOT real: US Debt Clock

Like I said, you can't make this shit up.




Thursday 8 September 2011

Irish Property - DAFT Report Q2 2011


From 2007 Dublin has now officially halved in value. 50% down in 4 years (say -65% allowing for inflation?).

They had less houses to population than Australia (the shortage bullshit).

Interestingly you could and can get a mortgage for less than 4% interest rate since mid 2009. Did it help?

Go to page 5 (don't cry on your keyboard)...

http://www.daft.ie/report/Daft-House-Price-Report-Q2-2011.pdf

TIMBERRRRRRR!!





H/t to Super G for the link and heads up. Southside property slumps hard



Brisbane's southside has recorded a larger slump in house prices than any other region in all state capital cities, new analysis shows.

Prices in the city's inner southeast tumbled 8.1 per cent in the three months to June, according to figures released by RP Data yesterday.

Thats the beginning of a crash. A common pattern as has always happened throughout history. For anyone that thinks this is blip, some sobering previous posts:  
What a crash [that brings down the banking sector and spikes unemployment from 4.5% to 13%] looks like.

Unemployment data "surprised" many economists today with its increase to 5.3%. (edit QLD jumped from 5.7% to 6.2% - its on!)

Surprised? What do these friggin idiots get paid? I wonder if they'll be equally  'surprised' at 6%, 7%, 8%, 9%?

At 10% and above the fuckers won't be surprised as they'll be too busy waiting on tables, washing dishes and picking up stinky beer glasses.


To Infinity And Beyond



Wikileaks has dropped a couple of Holy Hand Grenades of Antioch onto the Gold supressors (the banks such as JP Morgan acting as Fed puppets). It reveals the reason behind China's gold buying spree.

Cables from the US Embassy in Beijing.

The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't  want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB.
 
The full cables for above:
Link1
Link 2 (in case Link1 mysteriously 'disappears')


This time the quick change of the U.S. policy (toward China) has surprised quite a few people. The U.S. has almost used all deterring means, besides military means, against China. China must be clear on discovering what the U.S. goals are behind its tough stances against China. In fact, a fierce competition between the currencies of big countries has just started. A crucial move for the U.S. is to shift its crisis to other countries -- by coercing China to buy U.S. treasury bonds with foreign exchange reserves and doing everything possible to prevent China's foreign reserve from buying gold. The nature of such behavior is a rogue lawyer's behavior of 'ripping off both sides': taking advantage of cross-strait divergences, blackmailing the Taiwan people's wealth by selling arms to Taiwan, and meanwhile coercing China to buy U.S. treasury bonds with foreign exchange reserves and extorting wealth from the mainland's people. If we [China] use all of our foreign exchange reserves to buy U.S. Treasury bonds, then when someday the U.S. Federal Reserve suddenly announces that the original 10 old U.S. dollars are now worth only one new U.S. dollar and the new U.S. dollar is pegged to the gold, we will be dumbfounded. Today when the United States is determined to beggar thy neighbor, shifting its crisis to China, the Chinese must be very clear what the key to victory is. It is by no means to use new foreign exchange reserves to buy U.S. Treasury bonds. The issues of Taiwan, Tibet, Xinjiang, trade, and so on are all false tricks, while forcing China to buy U.S. bonds is the U.S.'s real intention

The full cables for above:
Link1
Link 2 (in case Link1 mysteriously 'disappears')


ZeroHedge's analysis on the cables are a must read. Wikileaks Discloses The Reason(s) Behind China's Shadow Gold Buying Spree

Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar's reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool.

I thought of titling this piece, “Why $5,000 Gold May Be Too Low.” Because once fund managers enter the gold market in mass, this tiny sector will light on fire with blazing speed. 


Finally, a take on the recent clockwinder's central bank to join the beggar-thy-neigbour game. Thank You Swiss National Bank For $2000+ Gold


What happens when you take a rubber ball to the swimming pool and hold it (suppress it) a few feetr under water and finally you let it go because you can't hold it any longer as it seeks 'correct' environmental pressure?




"when someday the U.S. Federal Reserve suddenly announces that the original 10 old U.S. dollars are now worth only one new U.S. dollar and the new U.S. dollar is pegged to the gold, we will be dumbfounded."

That a classic line or what?

Tuesday 6 September 2011

Armageddon




This blog has been calling for this for a while. Its taken a while with a lot of can kicking.

As the DAX immolates and the PIIGS bailouts appear dead entities, UBS have wtitten a hypothesis on the breakup of the EU.

Under the current structure and with the current membership, the Euro does not work. Either the current structure will have to change, or the current membership will have to change.


Were a stronger country such as Germany to leave the Euro, the consequences would include corporate default, recapitalisation of the banking system and collapse of international trade.


The economic cost is, in many ways, the least of the concerns investors should have about a break-up. Fragmentation of the Euro would incur political costs. Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observing that almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war

Read it...


xrm45126



Classic Hugh Hendry, 26th May 2010 (yes this is how long ago all this shit started):

I would recommend you panic.



Friday 2 September 2011

Gordon Gekko - Wall St, Money Never Sleeps

The Speech.




You are all pretty much screwed. You do not know it yet, but you are the ninja generation. No income, no job, no assets. You’ve got a lot to look forward to.

Someone reminded me the other day that I once said, greed is good. Well it appears greed is not only good, it is legal. We are all drinking the same Kool-aid.

But it is greed that makes my bartender buy three houses, he cannot afford with no money down. And it is greed that makes your parents refinance their 200,000 dollar mortgage for 250,000 dollars. Now they take that extra 50,000 dollars and go to the shopping mall so they can buy a new plasma TV, cell phones, computers and an SUV. And hey, why not a second home while we are at it. (sound familiar?)

Gee Wiz, we all know the prices of houses in America always go up. Right? (just like Australia!)

It is greed that makes the government of this country cut the interest rates to 1% after 9/11 so we can all go shopping again.

They got all these fancy names for trillions of dollars for credit, CMO, CDO, SIV, ABS. You know I honestly think there are only 75 people in the world that knows what they are.

But I will tell you what they are, they are WMDs. Weapons of mass destruction.

When I was away, it seemed that greed, got greedier. With a little bit of envy mixed in.

Hedge fund managers came home with 50 to 100 million bucks a year.

So Mr. Banker, he looks around and says.

My life looks pretty boring.

So he starts leveraging his interest up to 40%, 50% to 100%. With your money not his.
Yours. Because he could.

You are supposed to be borrowing not them.

And the beauty of the deal is no one is responsible.

Because everyone is drinking the same Kool-aid.

Last year ladies and gentlemen, 40% of all corporate profits came from the financial services industry.

Not production, not anything remotely to do with the needs of the American public.
The truth is we are all part of it now.

Banks, consumers they are moving the money around in circles.

We take a buck, we shoot it full of steroids and we call it leverage. I call it steroid banking.


Thursday 1 September 2011

Acceleration


Acceleration is the first derivative of velocity (speed). If speed is constant then acceleration is zero (no change to speed), if speed is decreasing acceleration is negative (deceleration) if speed is increasing acceleration is positive. Gravity's rate of acceleration is defined as 9.8 metres per second per second.

On Mayday I wrote, What a crash [that brings down the banking sector and spikes unemployment from 4.5% to 13%] looks like.

Irish House Prices peaked in the period October 2006 to July 2007.
Changes in Irish House Prices QoQ.
Q4 2006 Flat (No Change)
Q1 2007 +0.7%
Q2 2007 +0.2%
Q3 2007 -1.0%
Q4 2007 Flat (No Change)
Q1 2008 -3.3% 
Q2 2008 -2.9%
Q3 2008 -3.2%
Q4 2008 -6.0% (The largest percentage drop)
Q1 2009 -5.4% 
Q2 2009 -4.9%
Q3 2009 -4.2%
Q4 2009 -5.0%
Q1 2010 -3.5% 
Q2 2010 -4.0%
Q3 2010 -2.8%
Q4 2010 -5.8%
Q1 2011 -2.9% 
----------------------
Changes in Irish House Prices YoY
Year 1 -1.5% 
Year 2 -11.5%
Year 3 -18.5%
Year 4 -14.5%
Last 6 Months -8.4% 
Total Losses -43.2% over 4 years and 5 months.
Quarter on Quarter and Month on Month those falls look insignificant with -6% being the biggest QoQ drop. But, string them together and you have a train wreck.

Where are we now?

From a QLD RE Agent: Queensland Property Market Free Fall.

If you think property markets are much less volatile than share markets, think again!  A recent sale in Brisbane is proof that the property market in Queensland is falling at a rate of nearly three per cent per month.  The property at 20 Lilley Street, Hendra sold for $955,000 on the 19th February, 2011 and again sold on the 6th of August for $800,000.  That’s 2.7% per month, or 16.2% in just 6 months.  And it was not a flood affected property!


Most sellers throughout South-East Queensland and the Gold Coast remain in denial of the current market conditions and live in false hope of achieving their dream price, but the reality is the property market is in free fall.  In some areas there is now more than ten years supply of properties for sale.  Sadly, it takes many sellers several years to gain an understanding of the market and by then, their property is worth far less. As real estate agents, we see very good offers being rejected or dismissed as ‘low offers’ almost every day.  A few weeks or months later we are asked to get the same offer again and by then it’s too late.
Hmmm denial not meeting reality; 10 years of supply (don't THEY know there is a 'shortage'); Thats ugly.

Maybe its isolated?

House prices sliding in Melbourne's suburbs

MELBOURNE'S median house price has lost more than $800 a week since the property market peaked late last year.

House prices have fallen 4.4 per cent from a December high and apartment prices are down 3.4 per cent after hitting their price ceiling in November, according to figures from property research firm RP Data.

Melbourne's median house price hit a record $521,000 in December and has lost about $23,000, or $818 a week ever since.
$800 a week up in smoke? Thats on ONE property what if you are an highly leveraged investor with say 2, 3, 4 or more?

Maybe its an East Coast thing.

Capital city markets feel the frosty winter chill

Perth recorded the largest fall in house prices during the quarter, down by 2.7 per cent, followed by Brisbane, down 2.1 per cent, and Darwin and Adelaide, which both fell by 1.9 per cent.

Maybe not. Maybe its Ireland early 2008.

How does minus 2.4% a quarter (split the diff between Perth and Brisbane) look down the track if we do that quarter on quarter?

Over 5 years, -38.5% raw or -67% adjusted for inflation. That second number could be either here or there if we follow the Irish, Spanish and US pattern and have spiralling unemployment and low inflation, disinflation or deflation.

A few days ago I wrote Down, Down, Deeper and Down.


In fact, I almost swerved into the D'Entrecasteaux Channel when cruising down Bruny Island, the radio station bimbo in a jubilant tone blurts out (as news) that in 'excellent' figures 'just out' - 45,000 of the states workers were employed in Real Estate and Construction and a third of the governments tax revenue comes from Real Estate transactions (ie Stamp Duty).
Is that a problem? Well, in census 2006 there were 216,000 Tasmanians in the labour force, its 5 year old census data but 45,000 in the RE industry is a number around 20% of the workforce. As for the govts gravy train via stamp duty slowing to a few brown spots on the table cloth, the govt of Tasmania is about to dump 1700 public servants and the shit hasn't really hit the fan...yet. With that level of the workforce in the Ponzi (Ireland and Spain like ratios) I see some dark times ahead not only for the apple isle but the whole nation...

Then a few days later I read from NSW, Revenue fall creates state budget crisis.

THE NSW financial position has deteriorated by hundreds of millions of dollars since April, the Treasurer, Mike Baird, has warned, as consumer spending tightens during uncertain economic conditions globally.

  
''The budget is under increasing pressure, as all government budgets are with the drop in revenues,'' Mr Baird told the Herald.

''Recent global events will hurt our budget, just as they are hurting every budget. And it's not a small amount. It's not in the tens of millions; we're talking hundreds of millions of dollars.''

It is understood the forecast drop in revenue is particularly sharp for 2011-12 and stamp duties have been hardest hit.

Australian Property is a Ponzi scheme, it needs a constant flow of 'greater fools' to keep it alive with the govt taking a cut ala a dealer on the Poker Table. No churn and no ponzi means no revenue.

In April I wrote History Never Repeats. Read it as its coming to fruition.

The authors present eight centuries of financial folly, demonstrating the common theme that excessive debt accumulation regardless of the source — government, business or consumer — poses greater systemic risks than it seems at the time of the boom. (MoneyWatch recently interviewed Reinhart for her views on the current state of the economy.)
  • Infusions of cash make a government look like it’s providing greater growth than is actually being provided. (Check - done)
  • Private-sector borrowing binges inflate housing and stock prices beyond sustainable levels and make banks seem more stable and profitable than they really are. (Check - done)
  • Large-scale buildups of short-term debt make an economy vulnerable to crisis of confidence. (Check - done)
They demonstrate that financial crises are protracted affairs that share three characteristics:
  • Asset market collapses are deep and prolonged. Declines in real housing prices average 35 percent and stretch over six years. Equity prices collapse an average of 56 percent over a downturn lasting three-and-a-half years. Thus, the most recent crisis seems quite typical.
  • The aftermath of banking crises is associated with deep declines in output and employment. Unemployment rises an average of 7 percent over cycles lasting more than four years on average. Output falls more than 9 percent over two-year periods, and it has taken about four-and-a-half years for output to fully recover.
  • Government debt surges an average of 86 percent in real terms. The main cause is not spending but a decline in revenues
  • The bottom line is that the aftermath of crises has a deep and lasting effect on asset prices, output and employment. Unemployment increases and housing price declines have extended for five and six years, respectively. The authors also note that V-shaped recoveries in equity prices are far more common than V-shaped recoveries in real housing prices or unemployment. (2009 is certainly not an exception.)
Historically:
  • Declines in real housing prices average 35 percent and stretch over six years. 
  • Unemployment rises an average of 7 percent over cycles lasting more than four years on average.
  • Output falls more than 9 percent over two-year periods, and it has taken about four-and-a-half years for output to fully recover.
  • Government debt surges an average of 86 percent in real terms. The main cause is not spending but a decline in revenues



Its 2005 and American but if the hat fits...