Friday 23 March 2012

An Epic Australian Bust


A link well worth a read from Seeking Alpha. Some superlative graphs and analysis.

An Epic Australian Bust

The reality is starkly different: Australia has a very vulnerable economy where upcoming bad news has not been "priced in" at all. The country suffers from an epic real estate bubble that greatly exceeds those of US, Ireland, and Spain. The average Australian consumer is completely tapped out. Take out a "consumer credit" punchbowl and reduce the Chinese voracious appetite for iron ore and coal, and the Australian economy will collapse like a house of cards.
Australian manufacturing has been declining in relative and absolute terms at a faster rate than it is in the USA and Europe. Today, it imports most of its manufactured goods.At first glance, exports are only a modest 21% of GDP compared to over 30% for other G20 countries such as Germany, China, and Canada. About 57% of all exports are minerals and agriculture, a highly sensitive sector prone to wild supply/demand and price fluctuations

On Final Approach To Land



Last year I wrote  China's Imminent Landing and The Reasons For China's Imminent Bust

Please review the links above and the other China links.

Is the crash gathering pace?

Chinese Economy Already in ‘Hard Landing,’ JPMorgan’s Mowat Says

“If you look at the Chinese data, you should stop debating about a hard landing,” Mowat, who is based in Hong Kong, said at a conference in Singapore yesterday. “China is in a hard landing. Car sales are down, cement production is down, steel production is down, construction stocks are down. It’s not a debate anymore, it’s a fact.”

Read the rest in the Bloomberg link.




The Ponzi



last month I wrote  Jobs On the DebtStar, Be Quick! where each US job costs over $1M.

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.

Here is a financial snapshot of the USA's last 5 years and the cost government's attempts to keep the US stock market from melting down.






















Monday 5 March 2012

Checking On the Sick Tiger



I love drawing parallels with the Celtic Tiger and Australia ( eg  To be sure, to be sure Acceleration, Irish Property - DAFT Report Q2 2011)

Finally The Kerryman catches on (h/t Max Carnage)...

House prices down 17.4% over year

House prices are continuing to freefall with average homes now up to 59% cheaper than during the height of the boom, latest figures show.

In January alone, average prices dipped 1.9% around the country, bringing the overall drop in house values down nearly a fifth (17.4%) since the start of last year.

In Dublin, where the plunge has been even sharper, prices came down another 4% during last month.
Prices of both houses and apartments in the capital have now plummeted more than 21% over the past year, and are down 57% since the peak of the property boom. Apartments alone have fallen by 59%.

With average prices in Dublin around 431,000 euro in February 2007, widely held to be the height of the bubble, which translates to around 246,000 euro wiped off house values.

From €431k (~$700k AUD) to €185k (~$230k AUD) in five years. I think we can declare the Tiger dead. Nothing like having a credit fuelled property bubble as the cornerstone of the economy. Before some git emails me with 'we are a resource economy', stop. Australia's total exports (Coal, Wine, Iron Ore, Ear Implants etc etc) are $216B or roughly 16% of GDP, the Commonwealth Bank's mortgage book alone (excluding Westpac, NAB and ANZ) is $340B. 70% of Australia's economy is 'services'. Don't be fooled, the train is coming.

$799,000 buys a dog box in Sydney, what can it get you in Ireland? What about a 55 room hotel?

Donegal hotel goes for a €650,000 song


A 55-bedroom hotel overlooking Donegal Bay, which was once on the market for €4.5 million, has sold at an auction of distressed property for €650,000.

The Sandhouse Hotel in the popular seaside resort of Rossnowlagh had been billed as the star lot in today’s Allsop/Space auction in Dublin’s Shelbourne Hotel.

However, the hotel, which was put on the market by direction of its liquidator KPMG, attracted considerably less interest than expected.

After a short bidding race, the property sold for its reserve price of €650,000, a fraction of what its former owners thought it was worth at the height of the boom.

The picturesque property was bought by the hotel’s current manager Paul Diver, who has managed the hotel for the last 20 years. “I just can’t believe it. It’s a total adrenaline rush. It’s been a long, long road but we’ve made it.”

When asked if he was surprised by the lack of interest, Mr Diver quipped: “No, I was delighted”
Delighted. A €3.85m loss or 85.6% 'haircut' after the bubble burst and he is delighted. Where will we see 85% haircuts in in Oz in 2016? Who in Australia will we be delighted?




Friday 2 March 2012

Real Money vs Printed Money


Printed Money
The world's central banks printing and dumping paper to create the illusion of economic growth:






In the end printing money failed in the Weimar Republic, Zimbabwe and Japan. It will eventually fail in the Eurojoke and USA. The equity markets are like junkies and now addicted to their cheap money fix, printing has to resume or markets will tank. As the Dow passes 11,000 down, QE3 will be discussed and 'Real Money' will prepare for liftoff.


Real Money
The barbarous relic.

 

Who is buying if the plebs aren't?


Supply vs Demand.