Monday 30 January 2012

Queensland Is Number 1!!


In October I asked Is Queensland Going Under? which had a fair bit of data that indicated that things were getting nasty in QLD Real Estate.

I ask again "Is Queensland going under?"

The population of NSW is over 7.2 million; Victoria around 5.6 million; and Queensland 4.6 million.

So why has Queensland got more houses for sale than the more populous southern states? Why is that number increasing (graph courtesy of RP data)?

81,199 listings for sale compared to 68,646 last year and 76,968 in NSW.






Rats and ships?


Sunday 29 January 2012

Greece Is The Word

I solve my problems and I see the light
We gotta plug and think, we gotta feed it right
There ain't no danger we can go to far
We start believing now that we can be who we are

Greece is the word

They think our love is just a growing pain
Why don't they understand, It's just a crying shame
Their lips are lying only real is real
We start to find right now we got to be what we feel

Greece is the word

Greece is the word, is the word that you heard
It's got groove it's got meaning
Greece is the time, is the place is the motion
Greece is the way we are feeling

We take the pressure and we throw away

Conventionality belongs to yesterday
There is a chance that we can make it so far
We start believing now that we can be who we are

Greece is the word

Greece is the word, is the word that you heard
It's got groove it's got meaning
Greece is the time, is the place is the motion
Greece is the way we are feeling
This is the life of illusion
Wrapped up in trouble laced with confusion
What we doing here?
 


Reading Bloomberg this weekend, I have to laugh. The positive spin sans alarms and sirens is breathtakingly amazing.

Greece, Bankers Expect Debt-Swap Deal Next Week; and,
European Officials Said to Discuss Veto Powers Over Greek Budget Decisions
That offer equated to a loss of about 69 percent on the net-present value of Greek debt.

Bondholders agreed with European officials three months ago to implement a 50 percent cut in the face value of more than 200 billion euros ($263 billion) of debt by voluntarily swapping bonds for new securities. A worsening economy since then has made it more difficult to achieve a goal of cutting Greece’s debt to 120 percent of gross domestic product by 2020. 

69% Loss? Isn't that a default? Is this going to initiate a 'credit event'? If not why not?
Private investors hold about 60 percent of Greece’s 350 billion euros of debt.
Greek GDP is around €230B, so its debt is around 152% of GDP. That fits evenly between basket case Japan's 200% Debt-to-GDP and the USA's 107%.

But...
Greece now requires 145 billion euros for the second bailout, 15 billion euros more than was agreed in October, Der Spiegel reported today, citing an unidentified official from the troika in Greece.
So it has 152% of Debt-to-GDP and needs a further 63% of GDP worth of debt to maker it a round 215% of Debt-to-GDP.

Needs? Needs? Can you imagine if Australia urgently needed $880Billion AUD to stay afloat (half that may be so when the property market goes down the shitter, but thats a Feb blog update)?

Laughable. But its not over yet. Anyone remember Sudetenland in 1938 from history classes?
European policy makers are discussing plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit, two euro-region government officials said today.

Under the proposals, European institutions would have powers to implement austerity measures agreed under the terms of Greece’s bailout agreements, said one of the officials, who declined to be identified because the talks are confidential. The plan would accelerate decision making and strengthen the power of officials overseeing Greece’s budget as part of the so- called troika of the European Commission, the European Central Bank and the International Monetary Fund, the person said.
Who is driving this?
Germany is proposing the creation of a commissioner with the power to veto budget decisions by Greece, the European Commission said that executive tasks must remain the full responsibility of the Greek government. 
9 out of 10 Greeks oppose the surrendering of sovereignty. They go to the polls in April. A hairy taxi driver who hasn't shaved or bathed this millennium would get a vote if he proposed telling the German's et al to 'fuck off'.


Tuesday 24 January 2012

The IMF Has A Peek At Australia




First Moody's waving warning flags and now the IMF. In The Australian, Australian banks should hold more capital: IMF.

A STUDY by the International Monetary Fund is urging Australian banks adopt tougher capital requirements in case of a collapse in the country's property market. (aren't we different here?)

"Combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital. Therefore, it would be useful to consider the merits of higher capital requirements for systemically important domestic banks," said the IMF paper made public today.
Banks continue to face concerns from global investors about the prospect for Australia's mortgage market after a broad decline in home prices last year.

According to the IMF paper, the banks' main vulnerability is their exposure to a highly indebted households through residential mortgage lending. Together, Australia's four largest banks hold more than 80 per cent of Australia's mortgages on their books.
Even so, the IMF paper said a stress test of the banking system based on the Irish experience showed banks could withstand "sizeable shocks to their exposure to residential mortgages". 
The IMF is now comparing Australia to Ireland?

The document is embedded below. I love this bit...
“The full recourse nature of mortgage lending also helps limit strategic loan defaults.”
If you are wondering where Crockett and Tubbs fit,  Florida has full recourse loans, a sought after location and people flocking their in droves. They were resilient in the midst of the downturn  right?

Miami's Vice


 Bank Capital Adequacy Australia 2012

Australia Now Driving On The Negative Equity Super Highway, Route 1 To Financial Perdition


Take the next right and let the journey begin...


Lots of articles appearing  in the media about negative equity and shattered housing dreams.

Local owners looking at negative equity 

The latest RP Data National Equity Report indicated that almost the entire area located to the east and south of Perth, effectively from Perth down to Albany and across to Esperance, was experiencing some of the nation’s highest levels of negative equity.

Report authors and RP Data researchers Tim Lawless and Cameron Kusher said that almost 5 per cent of homes nationwide were in negative equity.

“4.9 per cent of all Australian homes are currently valued at less than purchase price,” the report said.“The negative equity figure has risen from 3.7 per cent at the end of the last quarter.”

The report cited far north Queensland, the Gold Coast and the Sunshine Coast as having the highest instances of negative equity at 20.2 per cent, 14.0 per cent and 13.5 per cent respectively.
20.2% of Far North Queensland homes are in negative equity? 
14% on the Gold Coast?
13.5% of Sunshine Coast Properties? 
4.9% Nationally?

Thats a train wreck.

And, it will only get worse. Unemployment is still under 5.5%, wait until its over 10%. And, it will go there as the domestic purse strings tighten with falling home equity and the spiral begins. I wrote Smells Like? as the first evidence of retail contagion started to surface last year and it appears that indeed its not different here.

More Links: 


Jesse's Holiday Season Award For A Journalist Putting 24Karat Gold Coating On a Dog Turd:

1770 prices step back in time as beach towns await boom 
The reality is the banks are dumping their foreclosures.

According to Ms Skinner, the once $1.5m-$1.8m asking prices for beachfront penthouses at Loka Santi have slumped to a more realistic $350,000-$600,000. The average median house price in Agnes Water has slumped 20 per cent compared with the same time last year, according to RP Data.

Ms Skinner should know. Two years ago she paid $900,000 for a garden unit in the same block in which the penthouse was surrendered by the bank at a knock-down price. "It brought tears to my eyes," she said.

And, The Nice Try But Fail Award (One can still smell the odoriferous tang of dog faeces despite appearances):

Chinese lead increase in foreign investment in Queensland residential property in 2011

And buyers from China once again topped the list, according to new research by Colliers International.

The figures on buying patterns during the 2010-2011 financial year have shown 733 residential sales to foreign buyers.

In all, 506 of those sales were investments with 277 for owner-occupiers.
While overseas buyers eased back on spending, it was not at the same level of decline as local buyers.

Buyers from China actually stepped up their spending. They forked out $106.8 million on Queensland property - an increase of 50 per cent on last year.

733 sales to foreigners out of  over 100,000 sold across the state? Whats that under 0.7%? Not even 1% of QLD property goes into foreign hands and its a story? Of that 733 minutae, the Chinese bought 32% or 234 properties worth $106.8M or, $462K a property. Wow, we are saved.

Its worth following Michelle Hele at The Courier Mail, she is hilarious. Tasmania Real Estate Trouble first outed her in Yes, we are open!. This country badly needs an Australian Real Estate "Shill Tracker".

So where to from here?

Lets look to those silly Americans who nothing about exuberant bank lending and real estate crashes.

14.7 Million (19%) Of US Mortgages Have $770 Billion In Underwater Equity, $2.4 Trillion In Total Debt Impaired (This article is 18 months old but you'll get the picture)

I don't understand why Florida and California lead the pack, wasn't there a housing shortage there in 2006?
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

Hows it going 5 years on?
Case-Shiller Report… Housing Pain Remains

The Case-Shiller indices indicate a couple of things. First, the impact of foreclosed properties still weighs on home prices. And as more foreclosed properties hit the market now that lenders are ending their self-imposed moratorium on foreclosures, more pressure is expected on home prices.

As we take the exit, I check the NavMan to see exactly where we are...


Whats on the horizon to turn this baby around? Nothing.

If anything, external factors (China and Europe) will add a Nitrous Injection to the engine.

Wednesday 18 January 2012

Apologies

Haven't posted for a while. My mother passed away and have been away dealing with it. I just got home and have a lot of stuff to post on banks and real estate and will back on deck in the near future.

Saturday 7 January 2012

Jobs On the DebtStar, Be Quick!


So in last night's news the USA added 200,000 jobs last month and the spruikers cheered that the USA was in recovery but the market said "f*ck you". And, the spruikers scratched their heads and wondered why (Euro meltdown countdown nothwithstanding) as they bullshitted on about 'value' and a forward looking 'market'.

Here is the problem in a few lines.


US Jobs added in 2 years 2,283,000 (Great!!)
US National Debt added in 2 years $3,066,000,000,000 (Whoa!!) 
Borrowings per job $1,083,392 (See a problem?)
 

Average US wage is $47,000 so by borrowing $1,083,392, the US Govt has borrowed 23years wages per job.
 

US National Debt increase in 2 years 25%
US National Debt increase in 4 years 64%
 

US National Debt in January 2000 $5.774 Trillion
US National Debt in January 2008 $9.257 Trillion
US National Debt in January 2012 $15.201 Trillion (tripled in 12 years!!)
US National Debt in January 2015 $23.920 Trillion (estimate based on current growth!!)
 

12 years as a percentage of the USA's 235.5 year history is 5.1 % of the said nation's illustrious existence and in that short period the debt increased 163%. (Congratulations Dubya and Barack!).


Recovery my arse.

Unsustainable!
(but its OK, its an election year)

http://www.usdebtclock.org/

Tuesday 3 January 2012

Euro-zone Credit Implosion Secret, ECB Cannot Stop Collateral Contagion Collapse!


An excellent, well researched and compelling piece of analysis from Gordon T. Long.

Article Collateral Contagion

What Will 2012 Bring?


So, now the hangovers have abated, what will 2012 bring?

Marcus Padley
I'll start with a broker I thoroughly respect, Marcus Padley (writes for Fairfax etc), who appears who made some predictions whilst having a few beers pre-Christmas.

Headlines you may see in 2012 
  • ANZ raises interest rates 100bp at monthly monetary policy meeting. Declares interest rate settings “appropriate for our shareholders” and “profit margins within target band”
  • RBA closed. Glenn Stevens joins Macquarie
  • Westfield charges Retailers $10,000 per square megabyte on New Westfield Virtualand website
  • Gerry Harvey declares the internet a ‘fad’
  • Mercedes Benz prices jump 218% on euro break up. German exports fall 98% Greek Drachma jumps 14% to 0.0002374 Deutschmarks as faceless EU plant retires from post as Greek Prime Minister aged 45 on seven eighths of his final two years salary plus benefits
  • German taxi driver earns 10 times as much as new Greek PM
  • Rogue Trader at Goldman Sachs makes $US100bn profit shorting euro. Joins Cramer’s White House Administration as US Treasury Secretary
  • Berlusconi releases second Love Song CD “Don’t cry for me Angela Merkel, you know the truth is, I never loved you. All through my wild days, my mad existence, I knew the euro, wouldn’t go the distance”


...etc. Read the rest in the link, its quite amusing.


His 2011 predictive history sans beer (I assume) is worth a read, he is rather good... Let's share the financial obvious with hindsight. If you like what you read you can sign up for a free weeky newsletter at the bottom of this page: Marcus Today. Also a free end of day report here.

Art Cashin
Art is a 40 year trading veteran on the floor of the NYSE working for UBS.

Art Cashin of UBS

Europe Rumbles Continue Beneath More Upbeat Headlines - Ever since last week’s liquidity operation, most headlines out of Europe have leaned toward the reassuring side. Beneath those headlines, however, there are signs the strains remain and may, in fact, be growing.

European banks are making great use of the ECB’s overnight deposit facility. Last night they parked $590 billion at the ECB breaking the record they had set the night before. They are clearly unwilling to lend to other European banks, highlighting the distrust and fear in the interbank marketplace. While the ECB’s lending initiative calmed the markets somewhat, it apparently has done nothing to free up the logjam blocking interbank lending.

The distrust on the streets is said to be growing also. Barroom gossip says that safe-deposit boxes are in a demand that borders on frenzy. They allow you to take your Euros and covert them into something of value (gold, Swiss Francs, etc.) and sock it away in a safe place. Others are said to be buying property in London and elsewhere lest you awake one day and discover that your Euros have reverted to drachmas or lira.

Savvy bankers are said to be setting up personal and communal trusts domiciled in places like the Bahamas, the Caymans or the Isle of Jersey. Some banks are offering depository accounts denominated (and repayable) in alternate currencies like the dollar or the yen.

We think a Lehman-like event would most likely be triggered by a run on a bank or a series of banks. The scramble for currency (value) protection among the public could turn into that bank run in the same way that a crowd can instantly turn into a mob. Watch the money flows out of Greece and Italy very carefully. The pot continues to bubble.

Outflows From Italy and Greece


Max Keiser (the irrepressible!)




My Predictions
  • At least one Eurobank will fail as capital flight from the PIIGS increases in intensity. (Capital flight occurring now, banks insolvent and on ECB life support)
  • Credit contagion and freeze. (TED Spread, Euribor etc rising now)
  • Crash of various debt fuelled asset classes. (Stocks, property easing as credit freezes, economies stall and UE climbs are occurring now)
  • China's manufacturing sector continues to contract (now 2 months running), their housing and debt sector collapses. (happening now at a rapid rate)
  • Japanese economy on the verge of collapse as Yen reaches all time high.(happening now, this year they borrowed more than tax revenue for the first time)
  • ASX will see 2xxx (Eurobank failure - replay of 2008)
  • Unemployment in Oz 9% and rising (rising now as property prices fall)
  • Australian bank profits turn to losses ala USA, Ireland, Britain etc with abysmal outlook for 2013 as another 8-10% wiped off house prices.(outcome of Property Prices falling another 8-10% plus credit freeze)
  • 40% of Americans and 8% of Australians have 'underwater mortgages' or negative equity.(outcome of Property Prices falling another 8-10%)
  • US Debt over $17 trilion (thats a gimme)(based on last 3 years debt growth and Obama's debt addiction and election year)
  • Gold over $2500 USD as QE3 is triggered following a late 2008 NYSE -30% replay, which puts a boost under stockmarkets, but little else as US unemployment U3 nudges 12% . (based on late 2008, early 2009)
  • Australia's Deficit increases as tax revenues dwindle (outcome of Property Prices falling another 8-10% and UE rising, CGT and PAYG revenues falling)
  • Australian states get credit downgrades as the stamp duty money flow slows to trickle and their in massive deficits leading to massive cuts in state public servants. (outcome of Property Prices falling another 8-10%, Stamp Duty revenues dwindle)
  • If Ron Paul doesn't get GOP nomination, No Hope Obama hits the front. (coin flip)
  • AUD breaches 75c.(based on late 2008, early 2009 carry unwind, Risk OFF)
  • Coin toss on Iran invasion as China declares alliance. (historical friendship established a long time ago, google it)
  • Russia continues to take a more aggressive and militaristic stance towards the west with a possible China alliance (enemy of my enemy is my friend). (occurring now)
  • Civil unrest climbs in the PIIGS and UK - soldiers used to keep it under control as civil war draws closer as unemplyment climbs, credit is frozen and austerity creates a depression.(starting to occur now as austerity bites)
  • Le Pen and the far right take more dominant positions in France if not president Le Pen (starting to occur now)


On China/Iran and Russia/West (videos in links):
China to Protect Iran Even if Result Starts World War III

Russia Retaliates Against US: Puts Radar Station On Combat Alert, Prepares To Take Out European Missile Defense Systems




HAPPY NEW YEAR!!