Links 13 February 2015

Global Macro / Markets / Investing:

North America:






    • Mining BoganMEMBER

      Ha! Just finished reading that.

      Has anyone done a chart like that for Oz? Would be interesting.

    • There was something in the wealth composition survey about six months back. Can’t find it. But Australians and Canadians high net worth were very heavily weight in property (40-45%) vs about 20% in the US fro memory.

    • The voices in my head are suspicious of the others and I keep moving my stash every few days, but with rock bottom prices like these they are in furious agreement about one thing 😉

      • The Traveling Wilbur

        To coin a phrase… BOOM Baby! Yeah…

        ASX is storming. Go you good thing!!! Finally… Greek whatnow? Mr H is going to have to come up with a new term to describe Iron Ore miner over-pricing. After today, “idiocy spread” just won’t cover it. PS is the ASX like Oz Re? Can it only go up too?

        Your humble index-hugging-monkey servant.

    • The Traveling Wilbur

      1/3 of CEOs are, by clincial definition, sociopaths – so take your pick I guess (between this CEO and holding gold). I’d provide some really clear and stunning examples, except I really, really don’t want to be sued. And I’ve read enough issues of Private Eye to know that the word “Allegedly” just doesn’t cut it anymore. Allegedly.

  1. More sensible commentary from Christopher Joye.

    The Reserve Bank of Australia has screwed savers by giving them negative “real” interest rates that do not cover their cost of living (after tax, they’re miles behind). It has annihilated retirees who cannot earn anything remotely like the 2 to 3 per cent real return above inflation they’ve become accustomed to since the RBA started targeting consumer prices back in 1993.

    With the cash rate set at depressionary levels, main street and conservative retirees are being forced to take complex risks (hybrids anyone?) they cannot fathom in a search for yield that will end in tears.

    What is less appreciated is that the RBA, and its myopic political co-conspirators in Canberra, are also emphatically screwing home buyers pouring their life earnings into five-times leveraged assets that are grossly overvalued. My current mark-to-market is Australian housing is trading at least 20 per cent above fair value.

    Edit: But don’t worry, it would take a “black swan event” (for some incorrect definition of “black swan event”) for bank prices to collapse.

    “No, the question you should be asking is: how does a $148 billion bank (the 8th largest in the world) translate a tiny 1.1 per cent gross return on assets into a stunning 18.6 per cent return on equity? The answer lies in CBA’s complex Pillar 3 disclosures. Here CBA reveals its real common equity, tier-one capital is just $32.6 billion compared with total credit (or loan) exposures of $903.7 billion. Measured as most companies do, CBA only has true equity of 3.6 per cent. That means it is leveraged an amazing 28 times (not the circa 10 times implied by its “risk-weighted” common equity capital ratio)! Bankers play games by risk-weighting loans, which allows them to assume a big chunk are completely risk-free. How convenient.”

    • “Here’s a simple fact which hasn’t been discussed a whole lot. We have been brought up with the premise that if we can somehow obtain a large enough fortune, then we can sit back and live off the interest risk-free without ever touching the principle, pass that principle on to our children and they can do the same into perpetuity. This is a false premise, even if it has worked for the last 40 years.

      Yes, you can put your money to work and, if you are successful, live off of only the yield while growing or not touching the principle. But you can’t do so risk-free, and that’s where millions of Savers have been misled. In reality, you save during your working years, and later live off of those savings by running them down. There’s no such thing as a risk free return on capital, an old lesson that old money knows all too well, and the rest of us will learn soon enough.”

      From a comment on FOFOA’s blog.

      • The Traveling Wilbur

        Oh, come on… that’s implying that the Australian Government’s bank guarantee for retail deposits for the big 4 banks isn’t worth the paper it’s printed on. Oh, wait… yeah, I get it now.

        Just a thought… what would the national debt be when all 4 collapse (due to overleveraging) at the same time? And, seriously, wouldn’t that be a cheaper way for government to nationalise the country’s housing stock that to try and buy any of it directly? Maybe Kevin had a plan for social housing in Australia for 2050 after all? Keating would be proud. Hawkey would be confused. But happy.

    • Seriously though who gives a crap, we all know generations of pollies screwed the pooch on heavy manufacturing in Australia. It’s not coming back…

  2. Imagine the damage Shorten could do to Abbott if he sat down and read pieces such as this one from Greg Jericho:

    “The truth about ‘bludgers’: welfare dependency in Australia is falling”

    The latest figures on welfare recipients reveal that contrary to the scare campaigns, the level of people in Australia on welfare has fallen dramatically over the past decade, and that rather than those on disability pensions, the big increase is those going onto the aged pension.

  3. Thanks for the return of the egg article. You’re brain, the solid bit, is like 80% cholesterol. It’s good for you…

  4. I love technology, and in spite of my bearish bent, I am a huge technology optimist and futurist. I was foaming-at-the-mouth bullish on Facebook back in 2008, when it was not yet public, at a $20 billion valuation. I said it would someday be worth $100 billion. People threw rotten eggs at me. It is now worth twice that.

    I said it would be worth a trillion. It’s not there yet. Back then, in 2008, in the middle of the gosh-darn financial crisis, people were already talking about the bubble brewing in Silicon Valley.

    Seven years later, I think that is a more reasonable discussion to have.

  5. Calls for tax reform heightened by Australia’s deepening debt projections

    With our governments – at the Commonwealth, and state and territory levels – facing a growing fiscal challenge, the need for major tax reform is reaching critical stages.

    Australia’s net debt is currently estimated at $345 billion (or around 21 per cent of GDP). While this may not raise any alarms for some; it sits within a context of rapidly increasing expenditure on health, education and infrastructure and no measures for addressing weak government revenues.

    Taking into consideration projections regarding population growth, along with rising expenditure on critical services such as health, education and welfare, PwC forecasts total net debt across all Australian governments will exceed $1 trillion within the next 15 years (equating to almost 28 per cent of GDP). By 2037-38, the Commonwealth

    Government’s net debt levels alone are expected to exceed $1 trillion.

    Looking further ahead, PwC forecasts Australia’s net debts levels will reach over $12 trillion by 2049-50 – which equates to over 138 per cent of GDP.