Weekend Links 28-29 March, 2015





United Kingdom

United States


Terra bubblius

Capital Markets/Investing


Global Macro

…and furthermore…


  1. Hilarious.

    The MSM has to run the story before the elephant in the room squashes them.

    Let’s see how long the Domain division lets this one sit.

    Btw there’s a vote button…

    • I must confess it has been surprising how long they have taken

      But I think the major media outlets are coming around, and they are coming around because they have been exposed on house prices, and I think a large part of their exposure has come from Macrobusiness.

      • Come on Gunna – all the major news services are effectively real estate spruiking businesses with a tiny news division on the side. The conflict of interest is huge.

        The debate is definitely being driven from MB.

      • I’m not sure that’s entirely accurate @aj.

        Take a property I own.

        Rent exceeds interest payments plus expenses but I still get a decent tax return from it. If it treads water for 20 years (in terms of capital growth), I’ve STILL made money. It hasn’t cost me a cent, the rent has probably risen (during 20 years), I get a tax return every year. If I sell it for what I paid for it in 20 years, I repay the loan and pocket all the benefits along the years. It’s nuts and is probably why prices have exploded. People want in on this scam.

      • [email protected]

        existing property Rich I guess?

      • The point is not that there are income yielding investments out there that were purchased for producing assessable income, it is that the majority of investments are speculating on capital gains almost completely and should be taxed the same way an antique car or gold bullion is whereby interest expense should be capitalised into the cost of the asset, not deducted on revenue account.

      • rich,

        Not sure I’d agree that having a 500k investment sitting still for 20yrs is coming out in front. I guess that restricts you by 500k in gaining another investment loan that may actually provide a decent return, so in essence you are behind. Lost opportunity.

      • @dennis. I agree dennis. However, I wouldn’t loan money for too many investments at the moment. It cost me dearly during the GFC, and in my opinion is dangerous and unnecessary. I own lots of shares and managed funds all bought via super. Anything outside super, I bought with cash and would never again gear into such investments.

        People love housing because they apparently understand it.

        Don’t get me wrong, I’m no advocate of this BS. Most of Australia is in a hyper extended bubble. I’m merely trying to point out why people are still buying where return meets expenses.

    • Interesting that a vote button was included…. Could be career suicide… Let’s see how long the button stays up.

    • over 8000 votes and 74% asking to abolish it!!! did everyone suddenly take the red pill or something!

      • http://www.theage.com.au/money/borrowing/gearing-system-showing-its-age-20150327-1m7xpe.html

        Maybe being a bit harsh on Fairfax – they are into it this weekend.

        Also, interestingly Maiden says negative gearing is tax principle so getting rid of it would be an anomaly. However most properties bought using negative gearing have a speculative purpose, the ‘income’ component is there only for form because it’s meaningless in the purpse. If these properties don’t increase in capital value it is a pointless investment. In this sense property speculation through negative gearing is an anomoly, one the ATO has turned a blind eye to for political reasons.

      • You are spot on aj., the principle of negative gearing is to derive a capital profit, which logically is a “profit making scheme or undertaking” which is taxable in full.

        Therefore if the ATO were up to their game, there would not have been the rush into the NG mega store in the first place.

        And the joke of all this is the FIRB suggest the ATO as being the ones who are competent to ensure no foreign buyers of pre existing housing stock. Yes, the jokes are on us!!!

      • Also, interestingly Maiden says negative gearing is tax principle so getting rid of it would be an anomaly.

        This is the common and disingenuous misinterpretation that “get rid of negative gearing” means “get rid of tax deductions”, when it really means “quarantine tax deductions”.

        (No idea if this will appear in the right spot with the new system…)
        (EDIT: Woohoo, it did !)

    • Quite a blunt vote? Where’s “should it be grandfathered?”

      Poll: Should negative gearing be abolished?
      Total votes: 8956. CAST YOUR VOTEPoll closes in 2 days.
      Disclaimer: These polls are not scientific and reflect the opinion

      • You’d have to explain what you mean by ‘Grandfathered’, which might be a bit much for MSM newspaper poll. Maybe ‘Phased Out’ would be better for a simple poll.

      • What the poll proves conclusively is that these articles are mainly read by housing obsessed bears and the general public don’t bother with them.

      • And by ‘housing obsessed bears’ PF means people forced into debt servitude or the ignominy of grovelling to a little landlord, or disgusted that we are selling our country to fund this absurd non-productive speculation, or even just a little cheezed-off that our taxes are being wasted propping up non-economic investments to allow the fee feeding frenzy in the FIRE sector to continue.

    • I’m sure Treasury has prepared advice on this, almost certainly recommending changes. The politics is the problem. I think articles like this are about testing the waters. If there is a strong negative reaction, Hockey will drop it. If industry lobbyists cry foul, Hockey will drop it. If there is a muted response or some support, it might happen. If you think it is a good idea, write to Hockey and to your MP.

      • probably not too much outcry. accounts above $2.5 million probably amount to less than 30,000 members

  2. What’s with all the Tiffany jewelry spam articles? The new Macrobusiness site already getting attacked by a bot?

    • Nice podcast.

      For lovers of podcasts, another one:

      Two of the world’s top climate scientists talking about the severe challenges we face right now, and in the future. From the United Kingdom, we have Dr. Kevin Anderson, who pulls no punches. Then Rutgers distinguished scientist Alan Robock tells us why geoengineering might not be a good idea. Open your ears and your mind to what’s coming next.


      • On the same theme, the Australian government is planning to play a wrecking role at the Paris talks later this year.

        But the LNP’s 19th Century greed, ignorance and horse-and-buggy policies are no longer acceptable to an ever-growing number of voters. They will always have their faithful ‘base’ made up of knuckle-draggers, religious maniacs and the mega-rich, but they have systematically pissed off every other demographic, exhibiting a political deathwish that will lead to their consignment to the political scrapheap, and a well-merited place as a mere footnote on the wrong side of History.

    • I’ve no wish to sound anarchist this saturday morning but I got the distinct impression that man was suggesting almost anybody in a managerial position in any organisation was an asshole

      • I found it interesting because it seemed like a cultural creation. The discussion highlighted that the assholes are immune to complaints, or punishment from other people. This would seem to be more likely in a society where their aren’t social ties. That is, if everybody knew the guy in the black bmw in a small town, and he cut in on everybody then he would be branded an asshole and treated by all as such. Whereas the black bmw driver in Melbourne is just an anonymous asshole, and can not be called out as such.
        Then there is also this attitude in the workplace. Where assholitude is rewarded. Not calling out the asshole at an early stage, and allowing them to prosper. Thus a culture is established and is self reinforcing.
        Could we be living in the age of the asshole?

      • All bank deposits upto $250,000 to be charged a 0.05% levy

        “The money would be put in a Financial Stability Fund and be used to protect depositors against the highly unlikely event of a bank collapse.”


      • Thanks.

        Excellent. Let’s use the people who have done the right thing to try and prop up the system so the good times can roll on for the speculators.

        Or are they trying to force the savers to jump into the idiocy for one last boost just to get it all. If you’re going to destroy the system you may as well take everyone with it.


      • Pretty simple MB, the Government will fuck over all depositors rather than hold to account any bank board or senior management in the “event” of a “market value recalculation”. One step closer but you’ve figured that by now. Cants.

    • Yeah – I almost drove my car into a set of lights this morning when I heard of it on ABC radio…

      !@@#$ing ar$3h*les! They really really are. It’s not *king enough that the DBags at RBA are lowering the interest rate every f*king time, now they’re about to legally help themselves to my already f**king taxed through the ar*e savings account.

      AGHH! Lying, thieving scum!

      • Welcome to -ve nominal interest rates.
        Most standard savings (transaction) accounts (not the online high interest versions) pay currently 0.01% p/a.
        so -0.04% here we come!

    • An admission that they know something is seriously wrong with at least one of the banks.

      The trick is working out which one…

    • This is beyond disgusting. I don’t even care about the paltry interest anymore, I want f*cking out of Australian banks. I’m sick of government/banks not only helping themselves to my money and effort but handing it back out to investors. What’s the best way to offshore my money? Get me out of here!

    • Imagine if everyone withdraws all the money they have in the banks in protest. Wouldn’t that be ironic.

      • truthisfashionable

        My first thought is NAB – they could easily just change the name to Nationalised Australia Bank…

        My reasoning is based on Ubank, They had been agressive in offering the highest interest rate to savers for a long time, then the Home loan product popped up, and they are being aggressive marketing that.

        From reading around (Whirlpool especially) and talking to others I know who use(d) Ubank, the website is almost purposely designed to make it difficult to get your money out, and now that the saving interest rate is equal or lower than two to three other places, I suspect alot of people are fleeing to these better offer’s.

      • I use Ubank. Its very easy to move money in and out, no limits like with other internet banking services.

    • The problem here is that I, and many others I assume, have my mortgage account entirely offset by a very large bank deposit. I have done this because it is free, and provides some flexibility should I need access to cash (without having to go through bank paperwork)

      If there were a levy imposed on the deposit component, I would simply close the loan, and the liability but also the deposit would completely disappear materially worsening the bank’s overall leverage position.

      • But UBank can take your money and ‘redistribute’ it without your authorisation – take a look at page 45 of the Ubank T&C’s


        We may without prior notice combine or set off the whole or any part of your UBank account towards satisfaction of any outstanding debt that you may have with UBank or NAB – for example a debit balance in another bank account held with NAB. This includes accounts held by you in a different capacity or joint accounts. If we need to do this, we’ll notify you promptly after doing so.

        This includes the combining of any of your accounts, and applies whether or not the account is subject to notice, or whether the account has matured or the amount is due.

  3. Anyone got any informed thoughts on the NSW elections?

    Are the ALParatchiks in with any sort of chance? Are the State Torynuffs as bad as their federal counterparts? are any decent policy changes likely to results from the election either way?

    • Centrebet.

      LNP $1.02

      Labor $15

      IMO, those prices are way out. We’ll know in about 10 hours. I hope LNP get fucking smacked for their arrogant asset sales with entirely inadequate infrastructure. Then again Labor’s offering less and people are way too busy to number them below the line to get rid of both these horrid parties.

      Spend an hour and a half too long in traffic every day is far better use of their time.

  4. Gold hoarded by China is hugely increasing:
    “Year to date total withdrawals have reached a staggering 561 tonnes, up 7.3 % from 2014, up 33 % from 2013. When using the basic equation for the Chinese gold market to estimate import, we learn that up until March 20 China has net imported 412 tonnes. Add to this India has net imported about 230 tonnes over the same period, that’s 642 tonnes combined. I wonder how long the Chinese can keep up this pace of importing before physical supply from Western vaults runs dry.”


  5. Thomas Piketty’s theory of income equality wrecked by 26 year old … Breitbart


    Wealthy tech founders and the automation of middle-class jobs are often blamed for increasing concentrations of wealth in fewer hands. But a 26-year-old MIT graduate student, Matthew Rognlie, is making waves for an alternative theory of inequality: the problem is housing [PDF]…. Read more via hyperlink above.

    Much more housing related material on earlier MB thread NEW ZEALAND ECONOMY BOOMS …


      • I must confess I am at the point of cheering it on all the way these days mate. I dont believe in slow melt and think the only way of ending the phenomena is to have the whole thing blow up – though I understand that will be immensely painful – so when I see 88% in Sydney and 80% in Melbourne I am inclined to cheer it on.

        Though having said that i suspect that the long term game plan will be to inflate prices as high as humanly possible now and then just hold them there, and they wont give a damn about the economic distortion behind that or the suffocation of the economy to come – and to really push the envelope in terms of discovering what Australians will tolerate – in the presumption of getting as many babyboomer specufestors through heavens gate without having come to terms with what they have been party to [many of them unknowingly perhaps] and leaving someone else to clean up the mess. Though I am not sure they will pull that off, and that at some point they will have to sacrifice some of their own for the greater glory of the specufestor elite.

      • it is becoming more sport-like. I just hope that we’ll one day in the not too distant future be able to put a wager on down at the local on Saturday auction clearance rates. that’s the Aussie way. Think about it. there’ll be a dedicated screen between the trots and the dogs, your favourite re agents and vested interests on screen all offering expert opinion on each individual house up for auction on the Saturday forthcoming, so on and so forth. it’s a mass FOMO orgy and will of course serve to add to the coffers of the FIRE industry and the gaming agencies, while doing its best to delay any negative price growth in re assets. and it gives the horny punters another chance to ‘win’.

      • Welcome to the dark side Gunna, you’ve become a crashnik. It will be the end of the game the day Lorax et al become crashnik, I tells ya!

  6. A young Australian singer called Courtney Barnett has appeared on the Ellen show in America and sung about the problems of looking for affordable shelter in northern Melbourne.
    This song has aged quickly because most people I know have given up on buying in Preston and are moving out to Reservoir.

    • Wow.. the lyrics should make every OZ ponzi little landlord (i.e. most baby boomers), real estate agent and merchant of debt (hello mortgage Pete) cringe. But I guess greed is getting in the way.

      You said we should look out further, I guess it wouldn’t hurt us
      We don’t have to be around all these coffee shops
      Now we’ve got that percolator, never made a latte greater
      I’m saving twenty three dollars a week

      We drive to a house in Preston, we see police arrestin’
      A man with his hand in a bag
      How’s that for first impressions? This place seems depressing
      It’s a Californian bungalow in a cul-de-sac

      It’s got a lovely garden, a garage for two cars to park in
      Or a lot of room for storage if you’ve just got one
      And it’s going pretty cheap you say, well it’s a deceased estate
      Aren’t the pressed metal ceilings great?

      Then I see the handrail in the shower, a collection of those canisters for coffee tea and flour
      And a photo of a young man in a van in Vietnam
      And I can’t think of floorboards anymore, whether the front room faces south or north
      And I wonder what she bought it for

      If you’ve got a spare half a million
      You could knock it down and start rebuildin’

    • So when does it all start? Can I keep downloading ‘Better Call Saul’? Will it come in post ‘Game of Thrones’? What is the most affordable VPN? These are the questions that we, the people, need answered.

    • While your talking about the cricket, I’m going for New Zealand. I’m hoping it might be a case of much better team management and much, much better team leadership that wins the day over individual talent and individual ability.

      Now where have I seen other examples of this over the last few years …

  7. “All bank deposits upto $250,000 to be charged a 0.05% levy. The money would be put in a Financial Stability Fund and be used to protect depositors against the highly unlikely event of a bank collapse.”

    It’s not deposits that will cause collapse though is it? Can this get any worse? The disparity within our society should have caused a revolution long ago.

    Instead we’ve got this;


    • Savers are going to continue to be smashed. Forcing people to look for yield in increasingly desperate places.

    • Would it need to pass the senate though?

      Labor originally proposed it but let’s see what they say now.

  8. What a great result for NSW.

    What we’ll now get is more people with inadequate infrastructure. Yay. Well done NSW voters.

    In 12 to 24 months we’ll do the same federally and either vote Labor or Liberal and we’ll get more people with inadequate infrastructure. Yay. Well done Australia.

    73% of Australians (and I assume NSW) don’t want more people. It’s their number one issue, and yet we get LNP or Labor. That can only lead to one conclusion. Australians are fucking dumb.

    • Who would you have put first in Coogee? Last?

      Personally, I’m generally in favour of a land tax, and I can’t support religious wack jobs…

  9. The Baby Boomers, have taken it all,

    No longer the Country of a ‘Fair go for all’,

    The Australian Dream, a home and some kids,

    Now just a Nightmare, you will be outbid!

    Negative Gearing and Capital Gains Tax

    Who gets the benefits? How long will this last?

    Is it the young, the families, the poor?

    Or is it the old guy I rent from next door?

    The land of the Banks that are too big to fail,

    The Country of Landlords, who know they’ll be saved,

    No matter the cost, to the generations that follow,

    We will Fuel this fire, until the economy is hollow.

    The warnings are there, the alarm bells are ringing,

    But too many vested interests aren’t listening,

    Our financial system is broke and in trouble,

    When will we learn to stop blowing bubbles?

    The political system is paralysed by FIRE,

    The future of Australia is really quite dire,

    So batten the hatches, and prepare for the storm,

    This Bubble will pop, it’s nearing a thorn.

    Nobody knows where, when, or how.

    My only advice is ‘Don’t Buy Now’

    • Great poem.

      I think your time would be better spent organising a protest though. Crash every auction. Drown the FW auctioneer out. March across the Harbour Bridge. A million people locked out of housing bringing traffic to a halt. Fix it LNP, or we cripple the city.

      • Now we’re talking. What can we do to make the biggest noise with the smallest numbers?

        Please, no online bullshit… something that’ll get the things that matter to us on the news.

      • I’ve got a million ideas Tim.

        I think my easiest, most effective and best is, get people locked out of housing to drive in Sydney traffic at 25klm/h.

        It’s anonymous, it would take 5 people each day to cripple the city. It would work.

        They’d have no choice but to address it.

        Sydney’s entire population immobilised, crippled would demand action against;

        1. anonymous drivers.

        When 1 above becomes impossible,

        2. high house prices.

      • @tim,

        do like the No Land Tax party at the latest NSW election.
        From watching the coverage i reckon they at least got 2% of the primary vote and they had a rep in each electorate..
        @ $7 per vote at 2% of 6Mill = $840K.

        Surely people can get together on MB and form a party and challenge at the next fed/state election.

        I’d do it for nix.

  10. Gunna are you a bit confused about the Michael Spence article? His point is that if the risk free rate has been halved(sort of) then PVs must inflate. And although he didn’t say so that simple logic makes it worthless to look at historical PEs-at least without making an adjustment.
    Of course if you believe that the risk free rate will revert to the good old times 4.5%, then yes equities look over- priced. So it all comes down to Larry Summers I’m afraid.

    • Yep, dont have a problem with any of that, or Spence’s piece. My comment was mainly reflective of chewing that piece over (with other editors on Friday eve) the first question [sort of immediate reaction] was do bears shit in the woods?

      The only observation I would make would be that if the risk free rate has been halved (and Summers is right) then what are the other implications of that [for financial markets and investment banking/financing as well as at an economic level) and over what timeframes they manifest themselves, as well as the potential for the dynamic to either attempt to revert to a previous setting or move to a new one.

  11. Sydney median of $1m.

    No government will ever let it fall more than 40%. Even with a crash, it’s still out of reach of most people.

    It’s been left too long to be affordable within twenty years. Well done lazy GenY.

  12. Yes Gunna I fully agree they are the critical questions-are Summers et al right-and what are the implications? Lots of bones for MB to chew on in that lot!

  13. I cleared 6 figure bank account in protest – withdrew 5K at a time & had to make special request for greater amount. The largest single with-drawl ‘granted’ was 30K and I had to wait 5 days.The teller was indignant at my initial request to close the account informing me it was not possible to provide a six figure sum except in bank cheque or transfer. I commented that it was loose change (sarcasm intended) given the average price of houses and weekly asking rents. In any case I emptied it over six weeks and bank (big four) couldn’t care less for my custom. Its all about debt. In response to bank runs – can’t see it happening due to apathy, fear. If clearance rates are anything to go by anyone who can put a few dollars together have turned it into debt so they have the freedom to put picture hooks into walls they ‘own’

    • Yeh I want to clear at least half my 6 figure account and divide the rest among other less risky ADI’s with less than 30 bill deposits….but where do you safely store 6 figures in cash? Bullion vault?

  14. Anyone up for a good old bank run in WA? We choose the time/place/location and try to bleed a local branch dry…

    I want to be last in line, get police, media involved… Make big drama out our of it…
    Exhibit A:

    Any who 0.05% on big savers? Sickening when you think if the dynamics of such a thing. Why not charge where the risk is involved? In the lending sector… That about 100 times the value than all the deposits are worth….

    Anyway, 0.05% means in 20 years (if the capital lasts that long) they will be able to back up 1% of today’s money “for free” mean while they are bleeding a juicy tax base… Idiots…