Links 10 July 2018

Global Macro / Markets / Investing:







Unconventional Economist
Latest posts by Unconventional Economist (see all)


  1. NEW ZEALAND: Govt criticised (by Pavletich) for moving slowly on Auckland growth boundary | Michael Daly | Fairfax /

    The Government is being criticised for moving slowly in its efforts to remove Auckland’s urban growth boundary – which, before the election, Labour suggested was crucial to fixing the city’s housing crisis.

    Hugh Pavletich, co-author of the annual Demographia international housing affordability survey, accused Housing and Urban Development Minister Phil Twyford of doing what he was told by Auckland Council planners.

    “To date there has been no progress on the abolition of urban limits and the appropriate bond financing of infrastructure,” Pavletich said. … read more via hyperlink above …
    Governments pathetic performance since Christmas – Hugh Pavletich
    … November 2017 …

    Speech from the throne pledges that Auckland’s urban limit will be removed and density controls will be freed up in this term of Government |

  2. Pepper Group becomes the latest lender to raise mortgage rates

    Non-bank lender Pepper Group has become the latest financial services company to flag an out-of-cycle mortgage rate rise, due to higher funding costs. An alert to mortgage brokers, obtained by The Australian Financial Review, showed changes across Pepper’s mortgages for construction which came into effect July 6. The memo said the increases applied to new business. The increases ranged from 20 basis points to 55 basis points depending on the type of mortgage and the quantum of deposit provided by the borrower, known as the loan to value ratio (LVR).

    1 in 3 Millennials unable to refinance.

    A recent survey by online lender State Custodians revealed one in seven home owners were unsuccessful in refinancing their mortgage in the past because the value of their property had fallen.

    The situation was worse for young home owners, with a third of 18 to 34-year-olds having trouble refinancing due to falling values. State Custodians general manager Joanna Pretty said these figures weren’t surprising. “Property prices have been stagnating and falling across much of Australia for some time now, especially in the major capital markets of Sydney and Melbourne, which has made refinancing a bit tougher for some,” she said.

  3. Food waste is due to oversized packs. A loaf of bread should be no more than 500 grams. Arnott’s biscuits come in massive 250 gram packs. They should be 100 gram packs.

  4. Cyclone Ranger

    “You can’t love mass immigration and hate costly housing, Jess Irvine”

    Yeah, well, you can’t support across the board wages growth and hate costly housing either, Houses and Holes.

      • Debt servicability (and hence house prices) are linked to both wages and interest rates. i.e. it is a multivariate equation. Attempting a direct correlation to wages alone is too simplistic.

      • I’m not correlating and In a normal world I would agree Freddy, but you know that debt serviceability has only recently re-emerged into that equation. Loan to valuation rather than loan to income was the mantra.

        The link between house prices and debt serviceability is to be (sorely) tested and this is where the lack of wages growth is particularly worrisome. Loans will actually have to be serviced now, and with the swathe of interest-only resets added in, is particularly worrisome.

        The lack of house price growth also exposes the negatively geared loans – that gamble is entirely predicated on capital gain.

        it is possible to have strong real wage growth and dwelling prices remaining within a range of, say, 3 to 5 times household income.

    • Yeah, well, you can’t support across the board wages growth and hate costly housing either

      Seems like a problem a lot of us would like to have.

    • drsmithyMEMBER

      Yeah, well, you can’t support across the board wages growth and hate costly housing either, Houses and Holes.

      Why not ? Wouldn’t that be fundamental aspect of any real increase in living standards ?

  5. Cold Calling:
    Guys you all know that your phone conversations are recorded by at least ASIO, the Chinese, the FBI, MI6 and who knows who else.
    There are going to be a few conversations recorded which go like this:
    Ring Ring, Hello
    Ah Hi,Bert, this is Earnie from Leo Liability and Co, Stockbrokers to the rich and famous.
    Ah,,,,, we are raising cash to keep the turnstiles spinning and the management in a job at some of those theme parks up on the Gold Cost, up there in Queensland
    Queensland, that back water, NO,,,, Joh died some years ago.
    I heard Terry Mackenroth is running the place now
    This is for Village road shoe, on the ASX, they have some theme parks up there that need a bit of a hand up.
    NO, they are not the ones who had the fatal incident, that mob are across the road,,, and they are NOT the ones who the greenies are protesting about dolphins in captivity and want to free the lot back into the ocean, that mob are further down the coast in NSW
    Sea world’s dolphins and killer whales are perfectly happy, at the moment.
    No it wasn’t a sea world helicopter which crashed,it was a sightseeing aeroplane where the wing came off.
    No they are no related to the white elephant airport, that is over near Toowoomba
    No the GC council has not been sacked, that is Ipswich, over near Toowoomba
    No Alan Jones is not involved, he is involved in some joint over near Toowoomba
    This mob are struggling cos the crowd from the Commonwealth Games didnt turn up and they spent a little too much on a golfing thingy no one is interested in, at the moment.
    NO, Sea World is not a surfing wave park, at the moment.
    Wave parks haven’t taken off. Cant make a break
    Is Mark Latham involved,
    Er not yet.
    Who is this again,???
    My name is Earnie, im with Leo Liability and Co, Stockbrokers’ to the rich and famous

    • Leo Liability :Leo Liability is Pierpont’s stockbroker. Leo’s financial advisory record is impeccable. Never once in his career has he knowingly put a client into a good stock. He normally advises clients to buy whatever dodgy stocks he’s trying to unload. And if you ever see Leo buying a stock, it’s a good idea to sell. Straight away.

  6. IN short : How short-sellers can help retail investors avoid dud stocks (AFR rewrite)
    Good investors are rewarded not just for what they purchase but what they let pass. Could it be that much-maligned short-sellers could actually help investors avoid some of the sharemarket “bombs”?
    Short-selling is defined as the sale of a security that is not owned by the seller or that the seller has borrowed. Short-selling profits when the value of an asset decreases in price, enabling it to be bought back at a lower price. Examining what short-sellers typically look for as their targets can help retail investors avoid investment traps.
    Short-sellers are sophisticated investors looking for weaknesses in businesses and business models. AFR says there are 4 characteristics that make a great short.
    Structural decline at industry level. These are structural problems within an industry that are likely to last for years, not quarters. Technological obsolescence is a good example, such as video rental stores being disrupted by online content providers.
    Divergent expectations. This exists where market expectations built into the share price are overly optimistic. Domino’s Pizza is one of the most heavily shorted stocks in the Australian market as short-sellers question whether future growth may be at a lower level than is reflected in the share price.
    Asymmetric risks. This is when the downside risk is unequal to, or greater than, the upside risk. These characteristics can lead to waking up one morning and seeing a share price down 30 per cent. A stretched balance sheet is a good example of this, where one day the business is fine and the next day the business fails to meet a debt covenant or refinance commitment. Centro Properties was a high-profile case.
    Misperceptions. These are instances of aggressive or creative accounting. There are numerous ways in the accounting world that a business can be portrayed in a manner that is more flattering than the reality. This can commonly occur during acquisitions where adjusting items such as goodwill can result in overstating future earnings. Fraud is the ultimate misperception. The Dick Smith IPO, which was labelled the “greatest private equity heist of all time” by Forager Funds Management, is a classic example of a misperception.
    activity. This could allow them time to reconfirm (or otherwise) the investment case for a stock they own, or intend to buy, that is subject to material short interest. As they say in sport, the team that makes the fewest mistakes wins, and maybe short-sellers can help retail investors make fewer mistakes.
    WW and Chanos in a more direct approach say”
    “Put it this way,” Chanos said. ” If you wouldn’t be short:
    A multi-billion-dollar loss-making enterprise
    In a cyclical business,
    With a leveraged balance sheet,
    Questionable accounting,
    Every executive leaving,
    Run by a CEO (managers) with a questionable relationship with the truth,
    What would you be short?

    • Wow. 2000 ha, 2500 herd, 30 million litres of milk, 3461-megalitre water entitlements + 650-megalitre dam storage.

      I was in South Tyrol a few years ago, the average dairy herd was ….12.

  7. Hey AFR, capital W for Wolf if you don’t mind ! WW
    Australia hasn’t had a recession for some 27 years. But through that time there has been a hardcore cabal of Aussie economy bears who have insisted that disaster was just around the corner.
    The “tech wreck” to the global financial crisis, the European debt crisis, occasional Chinese “wobbles”, and the prospect of the domestic house price “bubble” bursting.
    As none of those dire prognostications have yet eventuated has led to notions of “crying Wolf”.

    However, as I’ve often been reminded, the boy who cried “Wolf” was right in the end.

  8. WW that comment is begging for the stopped clock being right twice a day. Still, I think this time trouble may not be able to be postponed. The can is now at the end of the road.

  9. Melbourne builder Bayside Construct, which won a national award last year for the country’s best medium-rise residential development, collapsed under debts of about $20 mill , 49 punters no longer contributing to the daily commute chaos
    The builder’s collapse follows a string of earlier failures, triggered by fixed-price contracts entered into by companies keen to grow their order books at a time when costs are rising, triggered in part by the demand for skilled trades on Victoria’s slew of public infrastructure projects.
    Victorian builder Project Group went under in March. Its debts more than doubled to $45 million by May from the original estimate. A month earlier, in February, builder Watersun Homes also went into voluntary administration, with the loss of 90 full-time jobs.