Links 3 December 2018

Global Macro / Markets / Investing:






  1. … AUSTRALIA & NEW ZEALAND: How degraded is mortgage lending ? …

    Chris Joye climbs aboard the Big Australian Short – MacroBusiness Australia
    … behind paywall …

    … extract …

    … In our due diligence, we told mortgage brokers and bank managers that we required a 95% loan-to-value mortgage at 10x our gross household income to buy our dream house, and we were consistently told it was not a problem at all. All we needed were two payslips and mortgage insurance. We asked if the bank would call our employer, and both reputable and disreputable brokers said banks rarely verified payslips. Also, “most of the people checking documents are in Indian call centres.” Furthermore, we were told that as long as the payslips had the right Australian Business Number (ABN) and the business checked out, that was enough. …

    … concluding …

    … It should come as no surprise that lending standards have fallen as third-party origination of mortgages has risen. This was typical of standards in the US in 2005-07. Today, almost half of new housing loans are originated by third parties.

    But our biggest surprise came when we visited a building society (a thrift). The bank manager told us her lending standards were conservative compared to the big banks. She would check our income more thoroughly. She then encouraged us to take a 95% loan to value ratio at 10x our gross income because, “It isn’t worth saving another 5% when house prices will rise more than 5%. By the time you save the 5%, prices will rise exponentially.” Those were her words, not ours.

    Needless to say, John Hempton of Bronte Capital and your dumbfounded analyst from Variant Perception wandered around Sydney in shock and amusement after every meeting.

    Melbourne will follow in due course.
    Unnatural Acts From New Zealand’s Reserve Bank … Martin North with Joe Wilkes … Digital Finance Analytics
    … Of necessity … lending must mirror the Median Multiples of specific housing markets.

    Finance in all its forms (equity; bubble equity; mortgage debt) is simply the ‘fuel’. Artificial scarcity with strangled land supply and inappropriate infrastructure financing is the ‘bubble trigger’.

    To degrade the finance sector, it is essential to degrade the property market first … with poor quality regulatory governance and administration…

    The housing market is in the process of being degraded if house prices exceed 3.0 times gross annual household incomes (Median Multiples) …

    Demographia International Housing Affordability Survey: All Editions

    • AUSTRALIA: House prices record fastest falls since global financial crisis – ABC News (Australian Broadcasting Corporation)

      Australia’s housing market has taken another leg down, with Sydney, Melbourne and Perth continuing to lead the declines.

      CoreLogic’s monthly figures show prices fell 0.7 per cent nationally last month, with a 0.9 per cent slide in the capital cities and a 0.1 per cent fall in the regions.

      Sydney prices dropped 1.4 per cent in November, bringing the city’s total peak-to-trough decline to 9.5 per cent — almost on par with the previous record fall of 9.6 per cent between 1989 and 1991, when interest rates were in the high teens, unemployment was rising towards double digits and Australia was entering recession. … read more via hyperlink above …

      • interested party

        I understand the angles, but draw attention to the historical side of it.
        You have evidence of this claim? I would appreciate the info to help reconcile what is going on over there.

      • Evidence? Who has the most to lose if countries all over the world emulate France and slap taxes on FFs? And France is already saying there are bad actors and instigators behind the violence; blind Freddy can work out who that is: the biggest and most profitable business in the world: fossil fuels.


      • interested party

        While I agree with your concerns, there is something else going on here.
        This has little to do with FF taxes. That may have been the spark, but it is not the underlying reason. Do you think that the french citizen is happy with the globalist agenda of flooding their county with migrants?
        You ask about who has the most to lose. Could it be the globalist elite who sit that seat? Who controls the narrative? MSM? Who owns the MSM? Globalist elite?………. 1+1=?
        While I do agree with your concerns, I suspect that FF will have to sit this one out. It is a pawn on the board.

      • Sorry, I’m not big on conspiracy theories (“globalist elite”). As I said elsewhere to you, it may be time to stop reading ZH and other rwnj blogs

    • Very interesting development. Thanks for posting.

      My understanding is the initial riots were related to fuel prices. R2M may have some validation with that. But I otherwise agree that is more of a last straw. Middle class around the world cannot afford a house or a family of their own, do not have a stable job, can never retire. Asking them to continually cough up even more money for higher energy prices, and to provide housing and healthcare for someone else will result in a revolution.

      • interested party

        Freddy, I think we are at the cusp of massive change…..

        Another thought…….fuel prices ( in time ) are certain to rise regardless of added taxes or no taxes. Finite world kind of thing.

      • We are at the definitaly at the cusp.

        I don’t necessarily agree that fuel prices will rise substantially. There will be a shift toward electric vehicles that will reduce demand. Big car manufacturers are getting ready to enter the EV market in 2019, and IMO this shift will happen a lot quicker than people expect.

      • interested party

        yeah….EV’s are a factor ….that’s just a side show to what’s happening at the moment. Germany next?

  2. interested party

    Here is a little context on the riots in France…

    A study by Ramboll Group for the EU on migration and asylum seekers.
    The link below is the final report. If you take the time to go through it, have fun….but the interesting bits are the actual numbers on people they have modelled according to certain parameters ie: population densities etc.
    To make a long story short……they modelled Germany to take 274million [ 2008 pop 82million ].
    Austria……..75M [ 2008 8M ]
    France……486M [ 2008 63M ]
    and on it goes.

    Page 112 of the PDF gives the table that I reference…. but I do suggest to go back at least to the start of that section to get some context to the numbers.

    Some colour on the authors of this group who put it together…..a quick search for partners and funders brought me to this page.
    A quick scan down the list shows a few questionable players….particularly the Clinton Foundation. It is not difficult to join this to Soros…. and we all know he likes open borders….or none at all.

    Now……..revisit the riots in France and ask yourself ……Why is this happening? Then ask yourself…….could the migrant issue in Australia somehow be linked in some way? After all… seems every western country is being flooded at the same time. We just don’t share a common border with any other country, so we fly them in.

    Consider the above….and come to your own conclusion.

    • So they want to add. 274m to Germany! WTF
      Hi they lived in Very crowded city, I like visiting places like Tokyo… Beijing etc but I wouldn’t want to live there. I’m all for open borders in an equal world, but we will never be equal so we need border enforcement!