House prices

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Blowin started the topic in Friday, 9 Dec 2016 at 10:27am

House prices - going to go up , down or sideways ?

Opinions and anecdotal stories if you could.

Cheers

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velocityjohnno Saturday, 22 Oct 2022 at 6:16pm

thanks gsco great explanation.

A term I read long ago to describe what Japan is doing

'Monetary Bukkake'

to which I lol'd

Now, if the Japanese Govt and the BOJ look into each others' eyes and 'wink-wink' - nobody goes bankrupt and shitshow continues? What's to stop that? Also, the more they sell UST's the more the market pricing of US interest rates rise, no? Surely that cannot be helping.

They really should have just allowed their debts to go bad after 1989, written them off, and then started afresh and actually had decent growth for the last 30 years. That's like a whole generation! #savingface

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velocityjohnno Saturday, 22 Oct 2022 at 6:24pm
DudeSweetDudeSweet wrote:

In 1922 the British Empire controlled the futures of 480 million people. That represented over a quarter of the worlds population at the time. They also had extreme influence on many other peoples including the Chinese. The British Empire was not controlled by the 40million British citizens at the time. It wasn’t controlled by bakers in Cornwall or Secretaries in Wales. The British Enpire was controlled from the top down by an amazingly few people. Only the top few dozen of the hierarchy could be considered to have serious power over the direction of the Empire. From a few square kilometres in London, the fate of an Empire upon which the sun never set was decided.

If you've ever done the tour of London, one thing which is profound is just how close all the important offices are to each other, and Westminster. You literally walk over the road to call on the people running Navy or Army, the Foreign Office, to send a bill to the parliament, to see the Health Minister etc etc. All bomb proof after the Luftwaffe, too! For a pre-internet - or even pre-telephone - system of communication, it's very fast and efficient.

London is actually two cities, The City and Westminster. I particularly like all the gargoyles atop street signs at the perimeter of The City, as if they are defending it. The river is big enough to sail an old-school fleet into, so it's a port too... There's also an Egyptian obelisk outside a big law building on the Thames, so tin foil hat on...

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gsco Saturday, 22 Oct 2022 at 8:30pm
velocityjohnno wrote:

thanks gsco great explanation.

A term I read long ago to describe what Japan is doing

'Monetary Bukkake'

to which I lol'd

Now, if the Japanese Govt and the BOJ look into each others' eyes and 'wink-wink' - nobody goes bankrupt and shitshow continues? What's to stop that? Also, the more they sell UST's the more the market pricing of US interest rates rise, no? Surely that cannot be helping.

They really should have just allowed their debts to go bad after 1989, written them off, and then started afresh and actually had decent growth for the last 30 years. That's like a whole generation! #savingface

To answer your 2nd question first, yes selling US govt bonds puts down pressure their price and hence up pressure on their yields, so they are in a way making life harder for themselves in the currency war.

Re your 1st question, the happy little relationship between the Japanese govt and the BoJ can last only in the low inflation (particularly a cheap energy) and hence low (well <0%) interest rate environment they’ve been able to enjoy up to now.

If inflation occurs, the BoJ will have to stop quantitative easing and raise interest rates and hence Japanese govt bond yields. Plus quantitative tightening, also to counter inflation, involves the BoJ selling bonds to reduce the money supply and pushes yields higher.

But if yields go to say 5% then at a debt level of 2.5 times GDP, the annual interest pmts would eventually (as bonds mature and are rolled over by the govt) be 12.5% of GDP, which is incomprehensible.

Where would the Japanese govt get the money from to pay these interest pmts…?…from taxes…?…from borrowing more money...?

The Japanese govt could consider paying back the debt (by say letting it mature and not roll over), but again where would it get the money from at that scale? Paying off the debt will take decades, and in the meantime it would have to make massive interest pmts.

So the concern now is if Japan was to run out of US bonds to sell (which will eventually happen) in order to keep propping up the Yen, then inflation might (more than certainly will) occur.

The other concern is that the BoJ is starting to lose the battle with yield curve control anyway, so yields are edging up no matter what…

The Japanese govt is insolvent if interest rates go up. It can only exist in a low inflation, 0% interest rate environment in which it doesn’t have to pay off the debt, but instead roll it over and even keep borrowing more, like it has been.

Note that the BoJ holds about 50% of the Japanese govt debt that’s outstanding, with the market holding the rest.

We all know what would happen if Japan defaulted, even if it was just to the BoJ.

They should have stopped worshiping at the neoliberal altar a couple decades ago.

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velocityjohnno Saturday, 22 Oct 2022 at 8:46pm
gsco wrote:

Where would the Japanese govt get the money from to pay these interest pmts…?…from taxes…?…from borrowing more money...?

Ah, that's where I can help. I suggest they mint a Trillion Dollar Coin, in platinum or something impressive, and make the sucker big, like about 4 or 5 feet wide. The coin can be used to repurchase the bonds, or as security to do so. If they need more, mint more.

We came pretty close to sending a Trillion dollars* to the ECB during the Greek debt crisis, but when Draghi said he would do anything it takes, we kept our powder dry.

*Zimbabwean

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Craig Saturday, 22 Oct 2022 at 9:03pm
DudeSweetDudeSweet wrote:

This should really go in the Daily Good news thread

Holy shit…a win!

https://www.abc.net.au/news/2022-10-21/scotts-head-development-withdrawn...

That's huge!!

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Island Bay Sunday, 23 Oct 2022 at 11:36am
gsco wrote:

NZ house prices have nearly identically tracked the money supply:

Bingo.

And thank you Stu and flollo for the LM comments.

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donweather Monday, 24 Oct 2022 at 11:26am

An interesting read:

https://thenewdaily.com.au/finance/2022/10/24/deficit-debt-economics-koh...

"If deficits were an economic problem rather than just political, Australia would be in serious economic trouble, and Japan would be in worse trouble, having had nothing but huge deficits for 30 years.
But they’re not, and we’re not.

“Deficits” and “debt” are actually the wrong words – the number simply represents the amount of government spending financed by bonds instead of taxes.

The “deficit” is not a loss, like a company’s, but represents the money the government is injecting into the private economy. The bonds are private savings to be returned later rather than taxes that citizens only get back as government services and pensions."

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flollo Monday, 24 Oct 2022 at 11:28am

Yeah, I agree with that.

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gsco Monday, 24 Oct 2022 at 12:02pm

I noticed that Kohler seems to have lost the plot over the past few years and turned into a borderline crackpot.

Japan actually is in trouble and is consequently having to frantically prop up its currency and maintain yield curve control in order to keep interest rates at 0% since with a debt to GDP of >250% it doesn't have the ability to make interest pmts at positive bond yields without racking up more debt or getting an IMF bailout.

Australia is nowhere near that situation of having a debt problem because ours is only 36% of GDP, so we have a lot more borrowing capacity left. We're miles away from facing economic trouble due to excess government debt.

An actually accurate statement that Kohler made in that article is it's where the borrowed money is spent that's important.

Nations should only spend borrowed money on investments in infrastructure, education, technology and productivity, etc, in order to build up the productive capacity and future taxation base of the nation enabling the country to safely pay back the debt.

No different to any business.

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flollo Monday, 24 Oct 2022 at 12:23pm

I remember Kohler being extremely critical of the government for not borrowing more money and allowing large deficits to run around 2018/19 from memory. Listened to his podcast back then and I remember it quite well. Always promoted big debt and deficits.

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velocityjohnno Monday, 24 Oct 2022 at 2:52pm

article has Sydney at 10% decline

https://www.macrobusiness.com.au/2022/10/rba-forecasts-biggest-ever-hous...

so it can stop now as that was my throw at the dart board, that and 'cats and dogs living together': of which I'm sure we've all seen a bit this year.

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flollo Monday, 24 Oct 2022 at 3:03pm

Is Sydney at 10% really that surprising or 'shocking'? I think this is quite normal, it was always more volatile compared to other cities. Horrendous yields too, nearly impossible to achieve positive cash flows in Sydney (at least in the good areas).

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velocityjohnno Monday, 24 Oct 2022 at 4:06pm

Only shocking in terms of 'Australian House Prices Never Go Down' which might sound silly now, but seemed like gospel recently. Agree, it's a normal correction. And not even approaching covid gains.

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flollo Monday, 24 Oct 2022 at 4:33pm

Can someone help me with something? It caught my eye that among European countries Switzerland actually has very low inflation levels. It's around 3% while the rest of Europe is in the high singles or double digits. I didn't really have the time to look into the details but I'm quite curious about this. How did the Swiss avoid inflation? Would anyone be able to do a bit of digging, I think the findings would be interesting.

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velocityjohnno Monday, 24 Oct 2022 at 4:35pm

That's a good question. I imagine Switzerland as a land of sound banking, armed population, and chocolate. Less inflation probably cos they didn't do this:

https://www.afr.com/politics/federal/daniel-andrews-will-pay-a-quarter-o...

dafuq

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velocityjohnno Monday, 24 Oct 2022 at 4:39pm

unlocked with details

https://www.news.com.au/national/victoria/politics/premier-daniel-andrew...

"Treasurer Tim Pallas said the scheme was aimed at getting prospective buyers into the market faster.

“The Victorian Homebuyer Fund has been popular for a reason – it helps people get into their own homes quicker with help from a secure partner,” he said.

“Thousands more Victorians will now be able to realise their dreams with this new injection..."

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gsco Monday, 24 Oct 2022 at 4:56pm
flollo wrote:

Can someone help me with something? It caught my eye that among European countries Switzerland actually has very low inflation levels. It's around 3% while the rest of Europe is in the high singles or double digits. I didn't really have the time to look into the details but I'm quite curious about this. How did the Swiss avoid inflation? Would anyone be able to do a bit of digging, I think the findings would be interesting.

I'd say it's predominately because "Switzerland currently relies on hydro and nuclear power to meet the bulk of its energy demand." (from this McKinsey & Co report). So it hasn't had the energy price shock that a lot of countries have had that has set off inflation episodes.

Also, its composition of imports is pretty harmless in terms of not really experiencing supply chain issues and other import price shocks:

But from another perspective, Switzerland has had historically very low inflation and for the past 15 yrs or so lots of deflation, so its current level of inflation is actually relatively high for Switzerland and is at a like 25 or 30yr high:

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DudeSweetDudeSweet Monday, 24 Oct 2022 at 5:21pm
velocityjohnno wrote:

unlocked with details

https://www.news.com.au/national/victoria/politics/premier-daniel-andrew...

"Treasurer Tim Pallas said the scheme was aimed at getting prospective buyers into the market faster.

“The Victorian Homebuyer Fund has been popular for a reason – it helps people get into their own homes quicker with help from a secure partner,” he said.

“Thousands more Victorians will now be able to realise their dreams with this new injection..."

Totally not a Ponzi.

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velocityjohnno Monday, 24 Oct 2022 at 5:36pm

It's so interesting as you have perhaps international buyers becoming more scarce, and then interest rate rises see approvals through commercial banks fall in size, so perhaps there could be price falls; but then you have this extra 150K or so deposit now co-entered with government, so prices ain't gonna fall.

Now will the market arbitrage an extra 25% in their asks as a result of the intervention?

Dunno why he's doing it tbh - perhaps they see recession next year.

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flollo Monday, 24 Oct 2022 at 6:02pm
DudeSweetDudeSweet wrote:
velocityjohnno wrote:

unlocked with details

https://www.news.com.au/national/victoria/politics/premier-daniel-andrew...

"Treasurer Tim Pallas said the scheme was aimed at getting prospective buyers into the market faster.

“The Victorian Homebuyer Fund has been popular for a reason – it helps people get into their own homes quicker with help from a secure partner,” he said.

“Thousands more Victorians will now be able to realise their dreams with this new injection..."

Totally not a Ponzi.

Another interesting piece of information from the article:

'Mr Andrews also pledged to invest a further $1.6bn in upgrades for schools, kindergartens and sporting facilities if re-elected next month.

More than $25m of these funds would be put towards planning for more than two dozen new schools across Melbourne.'

So there you go - $25m for planning. That's a nice job for someone, you would think they already have planning resources!? Wouldn't this just be business as usual work?

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flollo Monday, 24 Oct 2022 at 6:04pm
velocityjohnno wrote:

It's so interesting as you have perhaps international buyers becoming more scarce, and then interest rate rises see approvals through commercial banks fall in size, so perhaps there could be price falls; but then you have this extra 150K or so deposit now co-entered with government, so prices ain't gonna fall.

Now will the market arbitrage an extra 25% in their asks as a result of the intervention?

Dunno why he's doing it tbh - perhaps they see recession next year.

And I thought we are living in a free market?

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sypkan Monday, 24 Oct 2022 at 6:13pm

"I noticed that Kohler seems to have lost the plot over the past few years and turned into a borderline crackpot."

was always seemingly a knowlegeable, moderate commentator, ...then a few years ago he started flirting with MMT...

many were advocating how 'harmless' it was... academic advocates getting a run nightly on the tele for months and months, seemed to be a big concerted push...

doesn't seem so harmless right about now though... unless you're in the assets class and trying to preserve your 'wealth' I guess - like alan...

I know it's a bit of a cliche, some might protest a furphy.... but the left generally love the debt, and the right like the balanced books, through ruthless cost cuttings etc...

all through the near zero interest rates period the left had their time... and then when abbott came out with his 'debt and deficit crisis' he got little traction, and ruthlessly ridiculed basically...

with the argument being '...now's the time to borrow, with interests rates so low...'

sounds reasonable... until it's not... until you see a less than six months dramatic turnaround in interest rates, like we have...

now chalmers is rattling on about '...the massive debt we inherited' ...and its one of his main priorties / obsessions...

probably rightly so, I read yesterday just the interest is now in our top five expenses, up there with medicare, ndis and social security...

hardly insignificant

all just shameless political point scoring and sort sightedness... from both sides...

and dumb, oh so dumb...

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velocityjohnno Monday, 24 Oct 2022 at 6:29pm
flollo wrote:

And I thought we are living in a free market?

Ah, you see it's been this way to an extent since the original First Home Owners' Grant and the Greenspan Put. More appropriately, it's a clown show.

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velocityjohnno Monday, 24 Oct 2022 at 6:34pm

Further, I do remember when FHOG went up from 7K to 25K then to 50K, watching the house and land packages go up a similar amount soon after.
Facepalmed then.

So, pop quiz: if you own a property in the targeted price/area, did you just raise your theoretical 'sell' price by a triple figure amount?

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flollo Monday, 24 Oct 2022 at 6:44pm

Absolutely. We discussed this many times, the subsidy (especially sudden, preelection one) will push the demand curve to the right which will result in higher prices. You can't just scale up the supply of housing overnight.

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flollo Monday, 24 Oct 2022 at 7:03pm

Here's a basic theory demonstrated in the ice cream example.

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RiderJake Monday, 24 Oct 2022 at 7:26pm
DudeSweetDudeSweet wrote:

This should really go in the Daily Good news thread

Holy shit…a win!

https://www.abc.net.au/news/2022-10-21/scotts-head-development-withdrawn...

Bravo! Now the locals will breathe easy :)

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gsco Monday, 24 Oct 2022 at 8:12pm
sypkan wrote:

"I noticed that Kohler seems to have lost the plot over the past few years and turned into a borderline crackpot."

was always seemingly a knowlegeable, moderate commentator, ...then a few years ago he started flirting with MMT...

many were advocating how 'harmless' it was... academic advocates getting a run nightly on the tele for months and months, seemed to be a big concerted push...

doesn't seem so harmless right about now though... unless you're in the assets class and trying to preserve your 'wealth' I guess - like alan...

I know it's a bit of a cliche, some might protest a furphy.... but the left generally love the debt, and the right like the balanced books, through ruthless cost cuttings etc...

all through the near zero interest rates period the left had their time... and then when abbott came out with his 'debt and deficit crisis' he got little traction, and ruthlessly ridiculed basically...

with the argument being '...now's the time to borrow, with interests rates so low...'

sounds reasonable... until it's not... until you see a less than six months dramatic turnaround in interest rates, like we have...

now chalmers is rattling on about '...the massive debt we inherited' ...and its one of his main priorties / obsessions...

probably rightly so, I read yesterday just the interest is now in our top five expenses, up there with medicare, ndis and social security...

hardly insignificant

all just shameless political point scoring and sort sightedness... from both sides...

and dumb, oh so dumb...

thanks Syp.

It's exactly what I thought - he seemed to be advocating MMT in the article.

Here's the breakdown of expenditures from the last budget.

Interest pmts were $28b out of $589b in total expenditures.

If govt debt was 100% of GDP (about $1,600b) at 6% interest, the interest expense would be $96b (2nd largest component of expenditures).

That would be placing a large debt burden on the nation, and put us up there with the basket case economies.

But at currently 36% of GDP, Australia could run some budget deficits and increase govt debt a bit more, provided the money was well spent (invested).

So I agree with Kohler that Chambers would be making a mistake by adhering to a belief that he needs to rein in government spending, balance the books and reduce debt.

(I think Australia should make a large public/government investment in renewables based energy independence.)

Yes MMT sounds (and works) fantastic in a 0% bond yield environment, but it's not so good when yields start to rise, as Japan is now finding out.

But did anyone on this planet really actually think that interest rates and yields would stay near 0% forever...?:

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flollo Monday, 24 Oct 2022 at 9:00pm
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donweather Monday, 24 Oct 2022 at 10:54pm
velocityjohnno wrote:

article has Sydney at 10% decline

https://www.macrobusiness.com.au/2022/10/rba-forecasts-biggest-ever-hous...

so it can stop now as that was my throw at the dart board, that and 'cats and dogs living together': of which I'm sure we've all seen a bit this year.

This is the same RBA who said interest rates would not rise until 2024!!! Laughable if they think the housing bubble is gonna stop bursting at 20%.

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donweather Monday, 24 Oct 2022 at 10:57pm
velocityjohnno wrote:

That's a good question. I imagine Switzerland as a land of sound banking, armed population, and chocolate. Less inflation probably cos they didn't do this:

https://www.afr.com/politics/federal/daniel-andrews-will-pay-a-quarter-o...

dafuq

5% dep combined with gov paying for your house is a recipe for disaster.

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velocityjohnno Tuesday, 25 Oct 2022 at 1:41pm

Surely is.

Have a squizz at the Hang Seng chart if you can :0

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gsco Tuesday, 25 Oct 2022 at 8:33pm
flollo wrote:

What do people think about this?

https://www.ft.com/content/cff42bc4-f9e3-4f51-985a-86518934afbe

The Lowy Institute report published earlier this year is really good and detailed expression of the same ideas.

My view is there's two general themes at play here:

(i) China's chosen development model and alternative path to modernisation that focuses on common prosperity (equality, a socialist economy), and

(ii) the continued centralisation and consolidation of power of the communist party and its unique style of "whole-process democracy" (as apposed to representative democracy).

Both of these themes point to China preventing private sector/corporate concentrations of wealth and power and preventing a powerful private sector media, which may not bode too well for things like economic growth, productivity, corporate profitability, private enterprise, increasing earnings and share prices, etc.

More generally, China genuinely believes that it presents a valid alternative to western style representative democracies with market economies in the form of a "whole-process democracy" led by the party and a socialist economy focused on equality (as apposed to pursuit of private sector wealth).

China believes that it can overcome the problems we complain about every day in our democracies (they're largely just corrupted, chaotic laughing stocks dominated by corporate interests and the private media) and neoliberal capitalist economies (that just result in significant unequal concentrations of elite wealth and power, and shaft everyone else). China is trying to prove to the world that it has a better way forward.

I'm not so sure that their experiment will work too well but I think it's one of the most important and fascinating events to witness that is taking place right now in our own lifetimes.

But China's path to modernisation is built on economic strength. Actually I think a nation's political power is largely a function of its military strength which in turn is a function of economic size and control of resources.

So I don't see how China can or will turn away from economic growth. It's possibly most likely that China will just (continue to) pursue economic growth via its own "unique" means and styles that we in the west will (continue to) never really properly understand.

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etarip Wednesday, 26 Oct 2022 at 12:38am

Always get something from your takes on things gsco, especially China related.

What’s your read on Xi’s confirmation for life? Do you think the ‘stability’ will be positive for markets and the economy? My sense was that the recent economic decline was in part due to his policies.

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flollo Wednesday, 26 Oct 2022 at 9:19am
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flollo Wednesday, 26 Oct 2022 at 9:49am

That’s really good @gsco. It’s hard to tell if their plan will work or not, I’m finding it hard to find reliable information for a proper assessment.

I remember a time when I had an interesting discussion with a Chinese work colleague. She was showing me pictures from her 1m people ‘village’ back home. It looked nice and we ended up having a lengthy discussion. She kept repeating that ‘the government’ takes care of this, that…And then I started asking questions about who this government is? She would answer in vague language like - you know the government. But I pressed on asking questions about who these particular people are, how do you get a job in the government, if I was to get a job in this government how would I go about it… She couldn’t answer any of them, the only thing she could explain to me is basically centrally planned hierarchy that you can learn from textbooks. She kept blaming the western media for an unfair portrayal of China (I don’t necessarily disagree with this). I agreed with her but also added that modern media can be unethical to anyone in their hunt for fame. I also added that in the West we ridicule our government officials on daily basis and media is quite happy to pass on the message. I asked her if the same is possible in China? And also, can I as a citizen walk around the town with banners portraying government officials as devils and asking for their resignation (I think this was around the time when people protested scomo on climate change, calling him cunt, walking with evil caricatures of him so I used that as an example). She laughed to all this and said there is no way that would be allowed. It would never even cross her mind to do such things and she never witnessed anyone else doing these things.

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gsco Wednesday, 26 Oct 2022 at 11:46am

@etarip regarding Xi's confirmation for life, I noticed an interesting tweet from the legend Michael Burry, one of the central characters in The Big Short:

But yes a lot of the market jitters are related to Xi's policies to date and his strengthening grip on power, as well as things out of one's control like demographics and global economic conditions. But also don't forget the economic/political/information war against China the US is continually upping the ante on. A concern I have with Chinese politics now is just wholesale groupthink errors.

@flollo here's a link to a South China Morning Post article explaining how to join the Chinese communist party, and I'd reckon you'd be most welcome to...!

Not sure if you're aware but I've spent a little bit of time in China. From the article, about 1 in 15 people in China are members of the Party. And they're everywhere, permeated all throughout Chinese society, involved in every aspect of daily life, at all levels, all occupations, etc. It's nearly impossible to separate China from the Party, they're kind of the same thing. You have to be very mindful of your behaviour every waking moment in China - the Party is always there watching.

Yes I've said this a number of times, the China we see in our western media is not the same nation that's a short flight away, for a number of reasons, including the fog of the western media's full blown information warfare and propaganda, and just plain misunderstanding of China and its history, culture, society, politics and people. China is very impenetrable in many ways for the western mind.

My experience is no you can't say anything negative about the Party, but you can very tentatively and carefully engage in discussion and debate about general topical issues in Chinese society. For example, you could ask questions about and provide your ideas for solutions to China's property market concerns.

As a journalist in China, you certainly can't build a career off completely bagging the government like you can in the west. You actually need to have something positive to say.

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kaiser Wednesday, 26 Oct 2022 at 12:05pm
flollo wrote:

A good analysis of the current US housing market

https://www.bloomberg.com/news/articles/2022-10-10/here-s-how-weird-thin...

Good points raised in that link. It’s hard to get one’s head around the fixed dominated mortgage market of some of these countries. Surely it must affect the lender’s (bank’s) profitability? Eg they wrote heaps of loans last year at circa 3% - fixed for term of loan. Now with inflation at 7%+ and Fed Funds Rate pushing mortgages to about 7%, the bank can’t see it as a good use of their book, especially with medium term view of inflation.

Also, they allowed heaps of people refi and lock in at 2% in last year or two. There must be penalties to refi to a lower rate, just as we have here, but people did it anyway, so maybe there isn’t?

5 years is the longest you can fix with aus banks, and current 5 year rate is about 2.5% above current basic variable rate.

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kaiser Wednesday, 26 Oct 2022 at 12:52pm

Correction… you can get 10 yrs fixed if you look for it. Add another half a % for the privilege

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gsco Wednesday, 26 Oct 2022 at 1:12pm

kaiser

the short answer to your question is US banks/lenders manage that long-term lending risk by structuring the financing of those loans to lock in/hedge their interest rate spread and hence profits (often via complicated derivative securities) and/or by packaging up the loans into mortgage backed securities (MBSs) and offloading them roughly at the time of origination. It's part of a bank's interest rate risk management activities within its asset-liability management.

Banks will even structure their balance sheets to speculate on, ie take advantage of, changing interest rates and the shape of the yield curve. They're particularly good at making profits in increasing interest rate environments.

Actually MBSs were the main cause of the GFC: The super low interest rates post the tech boom resulted in banks wholesale packaging the loans up into MBSs and offloading them into the market. They packaged up good credit quality loans with bad (sup-prime) ones, to be able to offer an attractive interest rate on the MBSs. The MBSs seemed low risk since they contains lots of loans and people weren't expected to default on them all at once (low default correlations), but then the property bubble burst, the economy went into recession, everyone started defaulting, and the ponzi scheme fell over.

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flollo Wednesday, 26 Oct 2022 at 1:21pm

CPI is out @ 7.3%. I reckon we are looking at another rate hike @ 0.5%

https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/co...

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donweather Wednesday, 26 Oct 2022 at 1:57pm
gsco wrote:

Actually MBSs were the main cause of the GFC: The super low interest rates post the tech boom resulted in banks wholesale packaging the loans up into MBSs and offloading them into the market. They packaged up good credit quality loans with bad (sup-prime) ones, to be able to offer an attractive interest rate on the MBSs. The MBSs seemed low risk since they contains lots of loans and people weren't expected to default on them all at once (low default correlations), but then the property bubble burst, the economy went into recession, everyone started defaulting, and the ponzi scheme fell over.

Gee and who would think history can repeat itself in 2023 and beyond!1

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donweather Wednesday, 26 Oct 2022 at 1:59pm
flollo wrote:

CPI is out @ 7.3%. I reckon we are looking at another rate hike @ 0.5%

https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/co...

"The most significant price rises were New dwelling purchases by owner-occupiers (+3.7%), Gas and other household fuels (+10.9%) and Furniture (+6.6%)."

To me most of these are all supply shortages driving up material costs and fuel cost increases. Not something interest rate hikes can typically control too much of.

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kaiser Wednesday, 26 Oct 2022 at 2:55pm

Thanks gsco. The wonderful world of derivatives… nuthin suss going on there…

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flollo Wednesday, 26 Oct 2022 at 4:20pm

@gsco that's a wonderful insight on China, thank you. It explains the situation very well - if Party is so involved in day-to-day life and its members are literally your neighbors, people you know the attitude towards it would be quite favorable. However, for outsiders that sounds like a nightmare, you really need to watch what you do and say but for normal people, it's business as usual and they probably don't see any issues at all.

Do you have any ideas about what to do with Covid over there? They still seem to be keen on the 'zero covid' policy, how will they get out of it?

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freeride76 Wednesday, 26 Oct 2022 at 4:21pm

Exactly Don: fuel and energy/electricity costs.

This is an energy shock like the 70's.

Making mortgages more expensive is not going to change the amount of fuel people use or lower electricity bills.

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flollo Wednesday, 26 Oct 2022 at 4:36pm

Sadly, they are very keen to hit it with the interest rate. Now, some here will argue that our global overlords are keen to cause the recession so the stubborn low unemployment finally goes the other way and weakens labor rights. That will bring things back to normal for the 'elite' so their businesses can get cheaper labor and very importantly - force people back to the offices which will increase the value of city properties. Higher unemployment will enable them to buy distressed assets that will return x10 once they bribe the government to push for another economic stimulus once things go downhill.

The best way to achieve all of this is to crush everyone with a big interest rate. So, workers and regular citizens need to unite and fight this demon.

Interestingly, this chain of thought could unite some very opposing individuals within this forum.

I don't know why I wrote this, I felt this surge of creativity to throw speculations out there. True or not?

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freeride76 Wednesday, 26 Oct 2022 at 5:09pm

No idea, but it's a compelling piece of rhetoric.

With permanent migration levels lifted to 195000/yr there'll be downward pressure on wages and likely an increase in inflationary pressures.

Assuming these people will need goods and services and be in the job market.

And I've still seen no logical or coherent explanation how we can cut our emissions by 2030 with this amount of extra population pressure.

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velocityjohnno Wednesday, 26 Oct 2022 at 5:53pm

What if regular citizens are savers? Will they go into battle against their money being able to purchase more, and receive more in interest?

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velocityjohnno Wednesday, 26 Oct 2022 at 5:56pm

https://www2.asx.com.au/markets/trade-our-derivatives-market/derivatives...

30 day interbank cash rate currently Nov 97.155, Dec 96.935, Jan 96.87
You can click on each month and bring up a monthly chart to interpret at your leisure.