It’s the recession you have to have, Gotti

Via Gotti today:

I have described previously how at the dramatic FINSIA regulators’ lunch in Melbourne it was clear that the Reserve Bank, APRA and ASIC, in their desire to quickly improve bank balance sheets, had little understanding of the downturn they would create and its implications.

But the share market now fully understands the dangers. And they were underlined by the OECD.

Somehow, some way, we have to explain to the regulators that they are going to cause a recession as consumers hold back and the home building industry contracts dramatically in 2020.

And someone needs to explain to the royal commission what happens if it goes too far.

Meanwhile, retirees who bought bank shares to gain income to overcome the low term deposit rates have seen their capital values slashed.

The regulators are finally doing their job inhibiting criminal behaviour. That is obvious progress.

If it brings on a recession that impacts greedy old farts then that’s just too bad. They didn’t have to take the bank bribe. Such excesses always end in tears.

It’s called a market, Gotti. Look it up.

Comments

  1. ErmingtonPlumbingMEMBER

    “And someone needs to explain to the royal commission what happens if it goes too far”

    Fk off Gotti,…you can stick your threats up your Ar$e.
    I vote for a Public banking option and millions of other consumers/Australians would vote with me.
    Where is our democratic and Market “Choice”.
    Lets bring on a biff with your banker mates, you weedy git and let the people decide your fate.

    • Too right. There really is a big group of greedy buggers who think that the Royal Commission is the thing that is causing markets to fall…..the same types who are happy to speculate on the Ponzi, take big capital gains and tax perks when it suits them, and say funny things with a serious face like “the government won’t let house prices/share prices fall, Australia isn’t America/Ireland/Spain/Greece” and then later “someone should do something!!” and then later “whocoodanode?!”

      Why isn’t the only option to let them wear their capital losses and re-set the market?

    • And all the Royal Commission has done is ask a bunch of questions, and point out that relevant laws already exist, that are neither adhered to, nor enforced.

    • johnwilliamsmithMEMBER

      Sorry Gotti. I know it’s hard but there is no Santa Claus. Welcome to the real world ..smack.

    • haha well said, but this got my goat..

      Meanwhile, retirees who bought bank shares to gain income to overcome the low term deposit rates have seen their capital values slashed.

      Oh those poor retirees, living off income via assets! Unlike those young Australian’s saving for a housing deposit, continually screwed by “Lower Teh Rates” at all costs and not to mention taxed at full rate of tax on interest… What are those folks supposed to do? Allow MegaBank to continue to screw them?

      Cry me a river..

    • EP. I read into your post where you spoke about your local high school and how you would take your vote at a federal level to a party that will best serve working class interest. I read the grief in your tone (I have been there too) I also wondered if/when the anger would follow. And here it is, welcome to the sunny side where votes are decided on merit over emotional and historical attachments. Good choice.

  2. A special sort of old fart breed want a free market that delivers risk free gains into their preferred tax-lite havens.

  3. “Meanwhile, retirees who bought bank shares to gain income to overcome the low term deposit rates have seen their capital values slashed.”

    Booohoo! Boofknhoo!

    You forgot to add the whinge about franking credit refunds, ya goat.

    • proofreadersMEMBER

      And completely overlooked depositors/savers who have got it up the anus to the tune of about 350 basis points over the last 6 years. Oh, what’s that you tell me Gotti – banks don’t need depositors/savers?

    • Luckily for those retirees who were after income those shares are still paying out record dividends. And you can buy more of them even cheaper now for even greater tax free income.

    • It’s ok. There won’t be any franking credits anymore from bank shares once the banks all suspend their dividends to try and stay afloat.

  4. A nice mix of self-serving bias and attribution bias:

    https://en.wikipedia.org/wiki/Self-serving_bias
    https://en.wikipedia.org/wiki/Attribution_bias

    Boo hoo Gotti. When engaging in speculation, if you haven’t spent any time considering the potential for loss, if you don’t have a strategy in place for dealing with a losing trade, then you shouldn’t have become a speculator in the first place.

    What I find crazy is that many people entered housing speculation as their very first experience in asset market speculation. A hugely expensive asset with poor liquidity and large transaction costs. Of these people, many probably didn’t even consider what they were doing to be classed as speculation and had no plan for what would happen if they ended up on the wrong side of things.

    Inexperienced junior traders at major financial firms don’t get to run straight into the game and make large trades with the big boys. There’s a probationary period where they’re actively supervised and have to trade following company rules.

    That we don’t have some kind of probationary system for RE specufestors is something that we’ll come to regret.

    • Yeh I have this theory that to become an effective speculator/trader you have to get wrecked once first. That way you go through that mental carnage which forces you to start building an effective system that protects you from your own worst tendencies.

      Problem is.. leveraged losses in housing are not small bets. There’s no learning.. Just generational wipe out.

      Most in the “housing market” are sitting ducks. I’d argue, that aside from crypto, it’s the one asset class where people are highly undereducated about markets generally and their own position in the market. Let alone having an exit strategy.

      It shouldn’t be like that. Should never been allowed to become an asset class that could wipe out so many, so quickly. Anyway, I’m sure there’s a few out there gonna profit.

      • Yup! Housing should have remained a consumer item – as it was in the National Accounts many decades ago. It’s a place you live in with your family not a damned ‘investment’.

      • It could almost be considered a violation of Duty of Care from the higher ups who enabled and encouraged this bubble. Housing shouldn’t even be a speculative asset class in the first place, due to the highly negative social impacts of both soaring then collapsing prices.

  5. My grandma invested in pyrimad in late 80s because she went on a tour of Egypt and receiving interest at 17%
    I was at school and I even said 17% is very high !!!!
    Then she got a letter from John Cain or Joan Kirner that she’d get all her money
    I saw the letter
    Not sure why they were bailed out ??

    • I worked in Geelong about a decade after that crash. It hit Geelong really hard,as it was seen as”their” bank, almost as though it was patriotically Geelong to invest.
      It destroyed so many people- retirees with most of their money in it,people investing divorce settlements,housing savings and on it went.
      A decade later people ( previously comfortably middle class) had old cars,houses they couldn’t maintain( or often sells or enough to buy something smaller),good clothes become shabby from prolonged wear. They weren’t starving l know, but they were poor,relying on younger family members to pay their utility bills(a friends mother in this position).
      It was tougher than many people realised,and it went on for longer than most people realised- quiet,silent,grinding poverty.

    • And the cos of that bail out (after an initial bail in) was the loss of the money making state Bank Victoria likely Victoria’s biggest bank. Tards

  6. TheRedEconomistMEMBER

    Did anyone notice the University of New England running this ad during the Cricket?

    Keating and “the recession we had to have” gets a run

    https://www.youtube.com/watch?v=yyyRTci5jZA

    I remember this and I was always pushed toward Tertiary education which I completed in the early 90’s

    Even back then there was a push for Offshore students.

    Back then I thought I would be financially secure in mid 40’s, with little debt and a great lifestyle.

    In reality…. feel like a working poor, pretty lumpy debt and always stretching to make ends meet due to housing being seen as a speculative asset since the late 90’s/early 2000’s.

  7. proofreadersMEMBER

    “And someone needs to explain to the royal commission what happens if it goes too far.”

    Someone needs to explain to Gotti that the RC has addressed the irresponsible/cowboy lending sanctioned by banks, regulators and government on which calling time is long overdue. It’s bit likely having endless government deficits. Oh, but Gotti is probably a “party animal”, so the party must go on?

  8. Gotti has always been a wannabe insider, and has come to the aid of the Bankers, Murdoch, BCA, etc even without them asking, but has he been deaf an blind for the past 12 mths? As I said elsewhere, Govt policy is to protect the Big 4’s credit rating at all costs, and the RBA abets. Until recently APRA, ACCC and ASIC also obliged. Here’s what real regulatory action in a real competitive banking services market looks like now:
    https://www.americanbanker.com/news/fed-wont-lift-wells-fargo-cap-until-deficiencies-are-fixed-powell
    see also
    https://www.federalreserve.gov/newsevents/pressreleases/enforcement20180202a.htm
    It will be necessary to make an example of at least one of the Big 4 ( as happened to Lehmann Bros and AIG, in 2008) before this is over. Arguably we would not have required the Haynes FSRC if Macquarie Bank was not bailed thru the GFC.

  9. Lenny Hayes for PMMEMBER

    “if it goes too far”

    God it is so depressing to read stuff like this in the mainstream press, our country is really going down the tubes fast…..

      • Nah! 36 years minimum. Keating floated the A$ because the ship was already sinking and couldn’t be fixed. The float was to postpone the inevitable and every year we are in a worse position.

  10. Just to be clear, you are complaining that preventing criminal behaviour might be going ‘too far’? Wow. No wonder the greed of your generation sticks in the throat of the young. You’ve had a fantastic run over decades, but now moan when it doesn’t go your way. Get over yourself. Investment is about choice. Live with your decisions, good and bad. It’s a market, remember.

    • Precisely. Markets 101.
      The unquenchable avarice has made an entire generation paper wealthy and now it’s all unravelling. Here’s the world’s smallest violin, and it’s playing just for you.