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sabretoothed

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I can't find it now (I think I have it on the work computer, I'll try to dig it up) a picture a few years old showing the Aussie bank's derivative position...

 

We all know (or if you don't you're plain dumb... sorry, I'm not sorry for being blunt) that these crazy housing investors are using equity. How else do you explain the $12billion given back to -ve gear'ers, yet their portfolio keeps growing... So these little fools themselves are running synthetic CDO's as such.. Put down $50k, believe the market says it's gone up $50, pull that down for the next deposit etc.... So you can end up with multimillion dollar debts, all off a $50 down payment.... But when you have say $2,000,000 on the hook...and the market drops just 2.5% you wipe out your initial capital... and remember over 50% of all investor loans were/are Interest only, so I'm not BS'ing when I say that. A 2.5% drop will wipe out a $2,000,000 portfolio... Or, a hit on one property brings the whole thing down....

 

Blah....

 

But, just as we seen in USA, UK, Japan, Ireland, Iceland, France etc. etc. it WILL take rate rises to burst this bubble.

 

Notice in the youtube clip linked that it was 'rising defaults' that was the key. Years ago I stupidly put a stop loss on CBA at $52 or something similar, it never got that low, but I didn't understand how crazy the debt market, Canberra and the states would be on keeping this racket alive.

 

There's no doubt it's a house of cards, I'm not even sure the upper layers are being held up by cards, but rather bags of wind blowing upwards..... Very, very frightening.

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"ASIC and APRA have failed to protect borrowers from predatory and illegal lending practices,ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ÂÂ

Oh dear, poor little diddumses. Watch them run and bleat when it all turns bad. Privatise gains, socialise losses.

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Australian Banks Sitting on A$500 Billion of 'Liar Loans,' UBS Says

By Emily Cadman

September 11, 2017, 12:33 PM GMT+10

HereÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s something else for policy makers to worry about as they attempt to engineer a soft landing in AustraliaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s property market.

 

The countryÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s lenders could be sitting on A$500 billion ($402 billion) of ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“liar loans,ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ or mortgages obtained on inaccurate financial information, according to an estimate from UBS Group AG.

 

A survey by the firm of 907 Australians who took out a mortgage in the last 12 months found only 67 percent stated their application was ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“completely factual and accurate,ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ down from 72 percent the previous year. The most common inaccuracies were overstating income and understating living expenses, the survey found.

 

These findings ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“suggest mortgagors are more stretched than the banks believe, implying losses in a downturn could be larger than the banks anticipate,ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ analysts including Jonathan Mott wrote in a note to clients dated Sept. 11.

 

UBS is underweight bank stocks. And ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“liar loans,ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ the analysts say, was a term coined in the U.S. during the financial crisis. An ominous moniker for Australian lenders.

https://www.bloomberg.com/news/articles/201...-loans-ubs-says

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It seems that the local property market / bubble is attracting a bit of attention in the US. Following on from the Bloomberg article that blacksheep posted here is today's reading list from Barry Ritholtz's blog.

 

http://ritholtz.com/2017/09/monday-reads-37-4/

 

In it is a link to a news.com article about how local banks will lend on unrealised capital gains. The article itself is worth reading - clearly a house of cards which will collapse with any price correction - but for me it is interesting that it got a showing on the Big Picture blog. I've been keeping an eye on Mr Ritholtz's writings for a decade now because I think he is tuned into Wall St thinking and sentiment. Nonetheless I find him to be extremely New York-centric: he hardly ever talks about anything to do with anywhere other than New York. So for him (or his staff) to think there is merit in linking to an article about Australian real estate is quite surprising.

 

I doubt many of his readers would be personally exposed to Australian residential real estate but they may well have an interest in how Australian banks are faring (Aussie banks rely heavily at the margin on loans from foreign sources and of course have massive exposure to residential real estate).

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The Property Ladder after the Financial Crisis: The First Step Is a Stretch but Those Who Make It Are Doing OK

 

http://rba.gov.au/publications/rdp/2017/2017-05.html

The global financial crisis (GFC) focused attention on household debt in dramatic fashion. While Australia escaped much of the immediate fallout, concerns over the level of household debt have become more entwined in policy deliberations in recent years. Parallel concerns, flowing from the rapid growth in housing prices in Australia and focusing on first home buyers, have also emerged. Some are concerned that this rapid growth is shutting a generation out of the home ownership market. Others are worried that those who do manage to buy a first home are taking on inadvisable levels of debt to do so.

 

This paper investigates how things have changed since the GFC for those stepping onto the property ladder. Is 'generation rent' an important trend? Are people buying first homes taking on 'too much' debt? And what implications does this have for our understanding of the growing level of aggregate household debt?

 

We find that fewer people are making the transition from renters to owners than prior to the crisis. Those that do, however, are more financially stable than earlier cohorts. Thus, 'generation rent' is an important trend but a consequence is that those who do step onto the property ladder are, on average, better placed to pay off their loans. We attribute much of this change to the increase in housing prices and the associated hurdle that deposit requirements represent. While saving a deposit is a stretch, it is also a sign of financial discipline that is associated with fewer subsequent difficulties

 

http://www.afr.com/content/dam/images/g/y/e/y/1/d/image.imgtype.afrArticleInline.620x0.png/1505100430389.jpg

 

 

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so the rba need to publish a report to work out those that have borrowed into an asset class, before record price growth, at record low interest rates, are better off than those who are saving and getting historically low interest returns........

 

Doesn't it make your mind spin?????

 

As for the world noticing, Australia, Canada and China's housing markets are definately on the radar of the world's bankers. they're just waiting for the rising default rates before they take action

 

Twisted Minds

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