A sell rating in Sunday's herald sun, page-185

All good ... so I think housing is obviously most vulnerable in Sydney and Melbourne... Perth is obviously somewhat depressed...so I dont see Perth really suffering, if anything they could recover a bit with the mining industry finding itself again.... Brisbane is already coming off.

The root cause is actually poor lending standards, mixed with extremely low rates - hence ASIC is now having an investigatory field day on all the big four, and obviously cheap debt... the RBA's last 2 cuts put the nails in the coffin.

People on basic $80k wages ( sorry if that is offensive) are getting $1m+ loans... 3-4 years ago, on that you'd be lucky to be able to borrow $300-$400k... auto loans are in arrears, we have 130% of GDP in private debt - 30% higher than the US was when it went boom...

Obviously we can now see the new neutral position for the FED is around 200bps up from current - all due to happen within 18 months... so with 60% of our big fours funding coming from the US, when you factor in hedging costs etc, youd expect mortgage rates to go up 200bps plus over the course of the next 18 months, irrespective of what the RBA do - remember they really only control the short term rates here.

The talk of the RBA standing pat in my opinion is probably flawed, as unfortunately as the US cash rate rises, our dollar comes off, but you'll also see a mass exodus in institutional deposits... afterall, who wants to hold their money in Australia, with a falling dollar and lower yield than say the US.

This has a compounding effect, because as APRA and basel are tightening the D/E ratios our banks can lend at, if you also dry up or cull their deposits, they all of a sudden will find themselves in a huge liquidity pickle... so theyll be winding down books and frantically raising bonds and notes to clog the equity hole.

Re the growth we have seen, It seems that no one wanted to recognize that most growth in property seen since 2010-11 pretty much mirrored the inverse delta in interest rates....

To me, the real long term effects of low interest rates on an aging population, like Australia was always going to be destructive... Most aged Australians,irrespective of how cash rich, like to live debt-free on savings and other annuities.

For me, the simplistic view of "dropping rates so people invest or borrow", is probably desperately failing here in Australia, because I believe low rates can only stimulate investment and spending in the short term... continual implementation will cull consumption as people start realising they will be seeing minimal returns on savings/rental yields for the foreseeable future and start conserving.


Maybe because my background is finance, the prospect of "blanket" extreme fiscal stimulation seems moronic, in the same way a financier wouldnt approach a struggling client, and say " ok, howabout we up your credit limit, and hopefully you can finance your way out of your hole". The financier would be out of business pretty damn quickly. Its definitely time for Federal reserves of the world to start looking outside their 1 dimensional models in order to address problems that are far more nuanced.

Hope that helps... but in a nutshell, you can see why there are a very high % of high net worth individuals flogging their resi and commercial properties... they know the prices are unsustainable and they are happy to go back in, within 18 months and buy up all they can... for cheap. This is what happened in the US in 08-09... and the banks - who were forced to tighten up, would only finance the rich... in the US, you need 50% LVR to get loans for the most part now.... fast forward 7-8 years you can see why the middle class over there are so disenfranchised, with stagnant wage growth, the inability to borrow, compounded by non-existent return on savings, all the while they watch the rich and wall street boom.... now you can see why Trump came in...