Links 27 September 2018

Global Macro / Markets / Investing:





Leith van Onselen
Latest posts by Leith van Onselen (see all)


  1. First? Is that still a thing?

    I guess its time to buy a home based on
    I’d rather fly the med, buy a yacht spend 1-3 years sailing that back to Australia and then buy a home or lean too. At least ill be used to minimal space by then.


    … Note the massive interest in the Digital Finance Analytics and Macrobusiness Australia items … accessible below …

    Do the Aussies have the capacity to withstand about a $A3.5 trillion hit to its $A7 trillion bubble housing market ?

    Do the Kiwis have the capacity to withstand about a $NZ600 billion hit to its $NZ1.1trillion bubble housing market ?

    Will Australian property repeat the Irish crash? … Digital Finance Analytics / Macrobusiness Australia

    … Pavletich comment on thread …


    The unweighted average median multiples of its metros in 2007 was 4.7, which crashed to 2.8 in subsequent years … putting all its Banks to the wall and requiring bailouts of in excess of 70 billion euro … about $NZ109 billion.

    Currently the average Median Multiples for the Australian and New Zealand metros overall are about 5.9 and 5.8 respectively … refer …

    Demographia International Housing Affordability Survey: All Editions

    Research by the Central Bank of Ireland found high lending multipoles was the greatest problem (more so than loan to value ratios) … and subsequently imposed a general mortgage cap of 3.5 times annual household income. A year earlier the Bank of England had capped at 4.5 times annual household income … VIEW & READ MORE via hyperlinks above …

    • Foreign Real-Estate Buyers Get Told to Go Home – WSJ … behind paywall …

      In a bid to make homes more affordable for the locals, some countries are imposing taxes and other barriers to stifle overseas purchases …

      If you dream of buying a home in New Zealand, you better be a kiwi. This summer, the country introduced new rules to limit foreign ownership in hopes of making homes more affordable for the locals.

      Starting later this year, nonresidents (other than those from Australia and Singapore) will be restricted to buying newly built homes. … read more via hyperlink above …

  3. The changing nature of work. All that glitters is not gold. & Iron Pyrites.
    A LEADING industrial relations expert has slammed the slashing of circa 1000 jobs at the $1.5b Jewel development at Surfers Paradise, saying it was a sign of things to come.
    IR expert Dr Jane Coffey said the subcontracting of the workforce meant such sackings would become increasingly common.
    “This means as we go forward that less and less people will be in secure work.
    ‘This is going to be the future of the work and there will be little security for people now and how unions will deal with it will be a major problem.”
    So how do the be Jeweled tradies and approx 3x indirect pay off their expenses??
    They cant.
    And for the GC postcodes multiply by 20X as the shake out trickles down.

    • Send those tradies down south WW! I’ve got a few jobs to be done at the moment – concreting, solar and fencing. You reckon anyone’s interested? Decent sized jobs to boot. Concreters not interested, solar guys snowed under with the Vic Government rebate and I’ve got fencers telling me they no longer do removals as there’s more than enough work in new estates where they don’t have to. Where are the skilled immigrants when you need them?

      • In driving around rockhampton, I noticed those billboard electronic road signs outside of some businesses seeking auto sparkies and diesel fitters, also software and hardware technicians
        then I drove past UGL’s depot there and maybe 200 company utes parked up.
        Cant work it out.
        Those Jewel tradies are X multiplex pussycats.
        take yr man hour rates and multiply by 3 for them.

    • So where is Ermo??
      ALL workers at the $1b Jewel site have walked off the job until their future is made clear.
      Work has ceased until next week when Multiplex, union CFMEU and developer Yuhu Group can tell tradies if they have a job.
      Yuhu Group has refused to speak with the CFMEU.
      And for those with financial calculators,
      What is the holding cost of a 1.5 bill project-per day @ say 4.5% to be repaid in USD?

      • Mining BoganMEMBER

        Meh, they’ll soon make it up with the employment of a fully flown in Chinese workforce on $5/hr and living 20 to an apartment.

        Mate bought a tyre store on the Goldy thinking luxury car rubber would be his way to unfeasible wealth. Hasn’t quite worked out…

      • J
        Irun a holden Calais and to me tyre noise is the key
        I used to run Michelins
        Recently did a full survey of tyre tread profile and came up with bob jane all rounder
        a full set of them, balanced was less than the price of 1 michelin.
        and on the new asphalt pavement, they are almost silent.
        If I had an old type of dash clock,eg Jaguar, you could hear it ticking.
        Note: the tyres are made in Vietnam

      • Mining BoganMEMBER

        Jimbo, the expensive tyres with the bigger margins don’t seem to be getting replaced as often as they should. Punters are getting their last bit of canvas out of them. And those who are changing are going for ones like Mr Wolf above where the margins aren’t that great.

        This country isn’t built for a public that counts the pennies and budgets accordingly.

  4. From this morning’s “Letters Fairfax Won’t Publish File”:

    26 September 2018

    Ross Gittins (“What we do and don’t know about politicians and corruption”, The Age, 26 September) refers to the role of corruption commissions.

    The history of state anti-corruption commissions is pretty dismal. They pick up only the most egregious “brown paper bag” corruption which falls within their narrow legal definition. Anyone who doubts the existence of corruption in the broader sense should spend some time working in the private infrastructure business.

    Harking back, the first such commission (NSW ICAC) was established by the newly elected Greiner government in 1988 largely in response to public disquiet over the awarding of non-tendered public works contracts. Older readers will no doubt recall the controversy surrounding the Sydney Harbor Tunnel (and the five-fold increase in toll on the Sydney Harbour Bridge) which was awarded without even the pretence of a tender.

    And yet, in the 30 years since such non-tendered contracts have become the norm. State Treasurers fall over themselves in their eagerness to show how many supposedly “innovative” contracts they have awarded without the inconvenience of a competitive tender. Sometimes the “innovation” is nothing more than to suggest that a road be widened and the cost hidden off-budget using a PPP. That’s hardly innovation worthy of subverting the tender process[1].

    What was once “vice” has been re-defined to be “virtue”, and as virtue it doesn’t fall within the ambit of corruption commissions.

    In retrospect we can see that the death-knell for state corruption commissions came in July 1994 when ICAC abandoned its attempts to have the Sydney Airport Rail link put out to tender. The project was originally proposed as a private undertaking with no government support and therefore no need for a tender. In November 1991 the Greiner Government encouraged the two competing consortia to merge, and almost immediately thereafter announced that there would be public funding after all. When details were made public in January 1994 it became apparent that almost the entire cost ($500 million of $650 million) would in fact be borne by taxpayers, and if the deal wasn’t signed immediately it wouldn’t be ready in time for the 2000 Olympic Games.

    In February 1994, ICAC recommended abandoning the project and starting again with a competitive tender. The Fahey Government responded by enlisting the former Chief Justice of New South Wales, Laurence Street, to produce a report approving the deal without tender, and in July 1994 ICAC rolled over. The disastrous history of that project and its cost to taxpayers does not need re-telling here.

    Meanwhile Laurence Street went on to establish a profitable business, using his title to grant legitimacy to any non-tendered transaction the politicians wanted. For a suitable fee and an indemnity he would sign on the dotted line that any project was tikety-boo and above criticism. The details could be kept hidden behind a veil of commercial-in-confidence secrecy and the public would have only his word that they were not being gouged. In effect, he privatised and monetised the prestige associated with the title “Former-Chief-Justice-of-New-South-Wales-Sir”. At his State funeral in July 2018, the Great and the Good all spoke very highly of the valuable services he had rendered.

    Transparent, competitive, price-based tendering had been subverted across the board. Where “tenders” do occur (for example in the current **** **** project) they are often done initially to pick the winning developer, and only then are the terms negotiated . . . . in secret. It’s a bizarre tender system that picks the winner first and asks for the prices later! And yet that is the world politicians now ask us to regard as “normal”.

    At the same time we see senior public officials – including Ministers and even Premiers – retiring from public office and taking up chairmanships, directorships, and consultancies with the very people they have helped to enrich. The State corruption commissions may be good at the old-fashioned “brown paper bag” type of corruption but they are helpless when it comes to tacit offers of future reward in exchange for subverting the competitive tendering system.

    Corruption is global problem and it is getting worse – not better – in developed countries as the line between public and private is steadily erased. It will not be solved by corruption commissions.

    In economic terms the problem is one of “adverse selection” of political agents as succinctly described by Economics Nobel laureate, the late James Buchanan[2]:

    “[S]uppose that a monopoly right is to be auctioned; whom will we predict to be the highest bidder? Surely we can presume that the person who intends to exploit the monopoly power most fully, the one for whom the expected profit is highest, will be among the highest bidders for the franchise. In the same way, positions of political power will tend to attract those persons who place higher values on the possession of such power. These persons will tend to be the highest bidders in the allocation of political offices. . . . Is there any presumption that political rent seeking will ultimately allocate offices to the ‘best’ persons? Is there not the overwhelming presumption that offices will be secured by those who value power most highly and who seek to use such power of discretion in the furtherance of their personal projects, be these moral or otherwise? Genuine public-interest motivations may exist and may even be widespread, but are these motivations sufficiently passionate to stimulate people to fight for political office, to compete with those whose passions include the desire to wield power over others?”

    The solution lies in removing the adverse selection arising from purely elective government. And that means some form of more direct democracy to hold politicians accountable [3].

    Without that you’re just whistling in the wind.

    Stephen Morris

    [1] The irony of privatisation being used to justify elimination of price discovery is discussed in Section 7 of Submission 165 to the QTPWC Toll Road Inquiry:
    [2] James Buchanan and Geoffrey Brennan, “The Reason of Rules”, Cambridge University Press, 1985, p64

  5. A short story: Significant risk, Analysts are warning of the potential for double-digit falls in the share prices of major banks like CBA.
    “The risk is the impact of the implementation is significantly larger than we and the market expect,” Citi analyst Brendan Sproules said. Professional Investors are more reticent about making such big calls, but they agree that this is no time for complacency.
    Looking longer term, Tadgell also wonders whether this will be a watershed moment for the banks, a tipping point of sorts.

  6. interested partyMEMBER

    How about the Kavanaugh debacle in the states……. grubs coming out of the woodwork with decades old suspect stories to derail his nomination, or is he another swampy?

    Lets dig and see what comes up.
    To place some context here there are several angles to consider. First up, the nominee judge is a constitutionalist. He also is an adherent to precedent. Remember these….they are important.

    Now think why the intense attempts to destroy the nomination to the supreme court. The answer is in a large part tied to the FISA declassification and what is expected to be found in there, and what it will lead to in time.
    In the clip below, during his questioning, he ( the nominee ) was specifically asked about military vs civilian tribunals for certain crimes.

    One would be right to think that this is a curious line of questions…..until you look at it through the lens of the soft coup attempt to remove trump from office. Now….here is a bit of speculation. What if somewhere in the texts, emails, and other comms that the NSA have gleaned about / from this coup just happened to include a plan to assassinate trump. I have read that this is actually the case, but cannot confirm it….that is the speculative component.

    Enter precedent.

    ” From May 12 until June 29, 1865, a military commission sitting in Washington City (as Washington, D.C., was then known) heard evidence against seven men and one woman. All were charged with conspiring to murder President Abraham Lincoln. All were found guilty. ”

    To put it all together, it goes something like this.

    The democrats and deep state are going all in to save themselves because there is a very high probability that some of them…maybe many of them……will be facing military tribunals and may very well face execution. Trump is loading the supreme court with conservatives that will adhere to the rule of law and this nominee represents a clear and present danger to them.

    The precedent exists. The evidence supposedly exists. All that is required is for the balance of the supreme court to favour applying the law as precedent suggests it be applied. And that, my friends, is why we are witnessing the spectacle that is unfolding in the US. Popcorn all round.

      • interested partyMEMBER

        Mate…no matter which way you cut it, it is an incredible time to be alive.
        Historical events unfolding around us.

      • interested partyMEMBER

        Flawse, did you get this bit…
        “Trial by military commission—rather than in a civilian court—was assured after U.S. Attorney General James Speed issued a legal opinion stating that the conspirators not only could be, but MUST be, tried by a military commission. ”

        Ok…..AR15’s and popcorn it is.