House prices
Hold on to your hats folks, the Ponzi scheme/ developer dictated neoliberal multiverse still has 5 dimensions of rorting up it’s sleeve.
Ala Crocodile Dundee:
“ That’s not a laughably corrupt siphoning of taxpayer money detrimental to the good of the public …..THIS is a laughably corrupt siphoning of taxpayer money detrimental to the good of the public!
https://www.independent.ie/irish-news/politics/taxpayers-to-fund-new-12…
Roystein wrote:
Thanks for your detailed explanations flollo.
Can I ask what’s you do? Academic?
I have a Bachelor of Economics followed by an MBA from UNSW. I'm not working in academia full time but I love to do a lot of research. Also, I get involved with a bit of Alumni stuff with UNSW + mentor a few people here and there. Currently, I'm in services infrastructure (water, telco, power, transport) at a corporate level. Prior to the current business, 5 and a half years with Lendlease + a few other good positions and projects prior to that. Also, a bit of startup action and a few private projects on the side with my wife.
I watched Bloomberg on Friday and in one of the conversations someone mentioned: 'Are we seeing the resurgence of the Phillips curve?' And then they went into a discussion about it enthusiastically. The context here was more about the current state of the global economy, so not just Australia in isolation.
I thought that was quite interesting, I didn't even think about the Phillips curve in a long time. For those interested, the below link explains it nicely.
https://www.econlib.org/library/Enc/PhillipsCurve.html
Basically, it represents a relationship between the rate of inflation and the unemployment rate. This relationship is far more important than the housing vs interest rate discussion. Although we mainly discuss interest rates in terms of housing it is important to remember the broader implications of rate changes. If the Phillips curve holds and the central bank is raising rates aggressively, the outcome will be an increase in unemployment (through reduced inflation). This might bring the housing prices down but it will also reduce the number of people who are able to buy them. So, one needs to be careful with wishing for high-interest rates. What we have now is definitely not normal but what we need to wish for is a modest equilibrium rather than system-wide destruction.
Hmmm, we might need more data.
Has velocityjohnno plotted a mullet curve?
We wont get high interest rates - well not High as in double figures. We may get 6 or 7% home/business loans with RBA at 3 perhaps 3.5%. What will have a bigger impact is siphoning off the incredible QE. Recall 2018 when QT was in effect - a 6 month bear market, the FED could stand it no more and reversed course.
There was a window last year to pull the brake on; it wasnt taken, I can understand why. I see a slow down, a pause and then off we go again later in the year, perhaps once the US elections are out of the way, who knows really.
I agree Flollo.
People sometimes forget part of the RBA charter is to maintain/aim for full employment.
Mortgage rates in the US: https://wolfstreet.com/2022/05/07/so-the-fed-gets-ready-to-walk-away-fr…
freeride76 wrote:
I agree Flollo.
People sometimes forget part of the RBA charter is to maintain/aim for full employment.
There’s some conjecture over this part. What is full employment? It used to be a smidge under or over 5% was considered full employment. Others say it’s the lowest level of unemployment possible that also doesn’t cause inflation to become a problem.
In any case we’re well past the target.
Feels like they’ve reacted quite late, almost like they’re wanting to see just how low they can get the unemployment rate. Just for shits and giggles. Might be some consequences in that.
Mullet curve would be something shaped like a J curve. I note Dusty is shortening the back so this might be tempering the amount of recession, if it gains widespread traction.
Going through the weekly video call throwing chart ideas around with the kids, the 90 day bill has continued its precipitous falls (ie yield up) and is a bit above 98.5 now.
kaiser wrote:
[quote=freeride76]
Feels like they’ve reacted quite late, almost like they’re wanting to see just how low they can get the unemployment rate. Just for shits and giggles. Might be some consequences in that.
They said that specifically didn't they?
That they wanted to experiment with maximising employment.
from Wolf's article, US figures:
"In 2021, a home bought at the national median price at the time of $326,300, with 10% down, and financed at the average 30-year-fixed mortgage rate at the time of 3.09%, came with a monthly payment of $1,251.
In 2022, a home bought at the median price of $375,300, with 10% down, and financed at 5.27% came with a monthly payment of $1,869.
In other words, the mortgage payment jumped by nearly 50%, and related expenses of property taxes and insurance also increased. This 50% jump in cost of homeownership at the current price is going to wipe out demand from big layers of potential buyers.
Most people, when they apply for a mortgage, get a rate that is guaranteed for a certain period of time, such as three months. Many current buyers still have rate locks that were obtained in prior months, and they’re not fully feeling the spike in mortgage rates. But people who get their mortgages today are feeling it.
The volume of purchase-mortgage applications has already dropped substantially as has the volume of home sales. And over the next few months, the new reality in the housing market will become more apparent.
Interest rate repression, including through QE, caused the biggest housing bubble ever. Interest rate increases, including through QT, are going to unwind it. It’s the Fed’s effort to get the housing bubble under control before it tears up the financial system again."
The Ms saw a similar news story on Ch9 I think which outlined what increases per month look like in Melbourne suburbs. And Philips curve article was good too. If only I was better at paint and visual stuff and linking pics, I would gladly illustrate the mullet curve for you all.
Yeah seems like an experiment on an experiment. Start with MMT, then push everything hard.
There were some references to hyperinflation earlier in the thread. The circumstances that can foster Hyperinflation are pretty limited, but I must say the principles of MMT seem like a decent incubator to a layman like me.
A story of raising standards and rates from NZ:
https://www.macrobusiness.com.au/2022/05/ardern-throws-lifeline-panicke…
The Phillips curve was debunked by the FED itself no less some time back; I'll try to find some links but it was a few years ago. Mind you, there's an academic theory for everything which is ok - it works until it doesnt I guess. Most of these girls and boys dont live in the real world or get paid real world salaries so they have to use theoretical models; not criticising just commenting.
With the fallout from the Reserve Bank's interest rate rise expected to ripple through the property market for some time, some economists are drawing comparisons to the US housing crash that sparked the Global Financial Crisis in 2008. #9News pic.twitter.com/4h6EIs0iUg
— 9News Australia (@9NewsAUS) May 6, 2022
Don't worry Australia...this is totally normal...
— Santiago Capital (@SantiagoAuFund) May 4, 2022
h/t @grahamsbenj pic.twitter.com/06JodmqFVQ
To American followers, you absolutely have to see this. pic.twitter.com/JvJELoDHAy
— Martin Pelletier (@MPelletierCIO) May 6, 2022
Oh Canada.
That's the monday morning chart porn done for now.
velocityjohnno wrote:
https://twitter.com/MPelletierCIO/status/1522704947556483073
Oh Canada.
That's the monday morning chart porn done for now.
I saw this on OECD website, Australia is not looking any better.
monkeyboy wrote:
The Phillips curve was debunked by the FED itself no less some time back; I'll try to find some links but it was a few years ago. Mind you, there's an academic theory for everything which is ok - it works until it doesnt I guess. Most of these girls and boys dont live in the real world or get paid real world salaries so they have to use theoretical models; not criticising just commenting.
Its weakness was shown in the 70s as both inflation and unemployment grew. Hence, the commentators were asking the question 'are we seeing a resurgence of the Phillips curve?' as the current landscape looks quite similar to the Phillips curve environment. It might hold, it might not, it will be interesting to see.
Yep flollo, the twitter account was trying to get Oz data for that one at time I linked.
OK this link is mint (and a bit foreboding), did you guys discuss it before? The dollar 'milkshake' theory.
It's nothing new - I've seen this happen before in markets. My allegory is that NY/City are the 'core' of the body of the world financial system; like when a body gets cold, the blood runs back from the extremities (think: isolated mining outposts, haha) to the 'core'
We've already seen AUD devalue from 0.74 levels to 0.71. It's also for this 'milkshake' reason that I can see an external forcing that may require RBA to hike higher than the 1.25% level CBA analysts suggested - with markets pricing 3.6% by mid 2023 - this is to keep relative value of currency as the Fed goes fighting 8.6% domestic inflation. If RBA don't, import inflation will add to present scene here in Au, I would think.
The snarky takeaway would be 'who runs Bartertown? USD runs Bartertown."
here's that markets prediction, note this stuff can change over time, too
https://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf
This topic is well outside my area of expertise, but I thought this GIF was pretty interesting.
velocityjohnno wrote:
Nope - nothing like the GFC. No liar loans or ninja, no CDOs or CDOs squared in Oz. A lot of Home Loans here are made from deposits via good old fractional reserve lending. Plus we cant just walk away from our mortgages....
and if the MSM are printing it, it aint gonna happen, it'll just scare people. Ok thats opinionated, sorry.
velocityjohnno wrote:
OK this link is mint (and a bit foreboding), did you guys discuss it before? The dollar 'milkshake' theory.
It's nothing new - I've seen this happen before in markets. My allegory is that NY/City are the 'core' of the body of the world financial system; like when a body gets cold, the blood runs back from the extremities (think: isolated mining outposts, haha) to the 'core'
We've already seen AUD devalue from 0.74 levels to 0.71. It's also for this 'milkshake' reason that I can see an external forcing that may require RBA to hike higher than the 1.25% level CBA analysts suggested - with markets pricing 3.6% by mid 2023 - this is to keep relative value of currency as the Fed goes fighting 8.6% domestic inflation. If RBA don't, import inflation will add to present scene here in Au, I would think.
The snarky takeaway would be 'who runs Bartertown? USD runs Bartertown."
This is EXACTLY why Bitcoin was invented. To ensure no central bank can ever rule the world. Fck the USD I say!!
monkeyboy wrote:
https://twitter.com/9NewsAUS/status/1522708286306349056Nope - nothing like the GFC. No liar loans or ninja, no CDOs or CDOs squared in Oz. A lot of Home Loans here are made from deposits via good old fractional reserve lending. Plus we cant just walk away from our mortgages....
and if the MSM are printing it, it aint gonna happen, it'll just scare people. Ok thats opinionated, sorry.
monkeyboy, there are liar loans - link above in thread suggests 38 to 41% on average, higher at one bank in recent survey.
The BoC has raised rates 75bps and housing has already hit a brick wall. We are still running real negative interest rates of 6%. Let that sink in.
— Steve Saretsky (@SteveSaretsky) April 25, 2022
A bit more from Canada
velocityjohnno wrote:
[quote=monkeyboy]
https://twitter.com/9NewsAUS/status/1522708286306349056monkeyboy, there are liar loans - link above in thread suggests 38 to 41% on average, higher at one bank in recent survey.
oh really - sheeeettttt ! I pity the regional and so called digital "banks" (every frikkin' deposit taking institution became a bank after 2008 !) that took these on to grow their book..
Bitcoin !!! Noooooooooooooo. (love the idea, not a fan of the mania that surrounds it but its fun being an observer: https://mishtalk.com/economics/as-bitcoin-breaks-support-bulls-and-bear…
I too love the idea but have noticed it seems to be behaving like a risk asset - maybe try correlation with QQQ.
Anyone see XPJ this afternoon? It got fcking pwned. Anyone familiar with things like head and shoulder formations? I feel I saw a couple within it.
Oh yeah - closely watching DXY, will it overcome the ceiling from 2016/2020 area it's currently up at? If it does...
My favourite byline of the evening from the UK Telegraph:
"Traders have ploughed into tobacco and pharmaceuticals stocks at the fastest rate since the Lehman Brothers crash, as part of a wider move towards "safe haven" investments...."
I know nothing about Bitcoin but the chap who runs microstrategy lost a bundle in the dotcom smash and anyone who advertises they have a margin call at a certain price is begging to have it hit (Hello Bill Gates and that half a billion Tesla short) :)
Pride cometh before a fall.
Very interesting about the BTC margin call for that firm. In the bitcoin thread some time ago I asked an open question about loans taken in the legacy financial system to speculate on BTC, and wondered if it would be a mechanism whereby calls on those loans could transmit contagion from the crypto universe and make it a bomb in the legacy system, if the loans could not be repaid. We may get to witness such an event.
velocityjohnno wrote:
Very interesting about the BTC margin call for that firm. In the bitcoin thread some time ago I asked an open question about loans taken in the legacy financial system to speculate on BTC, and wondered if it would be a mechanism whereby calls on those loans could transmit contagion from the crypto universe and make it a bomb in the legacy system, if the loans could not be repaid. We may get to witness such an event.
Absolutely. The total amount of leverage "out there" is supposed to be "known". Changes were made after the GFC to identify who held what and who had collateral with whom. But this has all gone to shit somehow - look at Archegos for example and this year we had the LME having to bail out its largest trader at the expense of other participants or the LME would have gone under. It's like warning signs.
https://mishtalk.com/economics/lme-violates-number-one-cardinal-rule-ne…
I've gone off track sorry.
So a quick search reveals the current crypto market cap is 1.53 trillion. And how many of us knew there’s more than 10,000 crypto currencies in the market?
1.53T - That’s an economy bigger than Australia. And of course people borrowed cheap money to pump it into speculative instruments that had grown and everyone swore would continue to. The irony of the theory that Bitcoin was the antidote to US$ dominance is that it will eventually suffer as everyone is forced to convert their Btc back into usd. The further irony is as those are forced to abandon BTC, they will push the usd higher yet again
Leveraging crypto is outside my risk appetite. I can see potential in it, especially as younger generations spend more time in the metaverse (sadly). But from an investment perspective, I stay out of it. So many coins are in circulation that it's impossible to stay on top of it. I'm old school, I like assets that provide some sort of income. To me, crypto seems like a gambling game with a risk of developing serious addiction. Mind as well gamble on soccer, I would probably do way better,
kaiser wrote:
So a quick search reveals the current crypto market cap is 1.53 trillion. And how many of us knew there’s more than 10,000 crypto currencies in the market?
1.53T - That’s an economy bigger than Australia. And of course people borrowed cheap money to pump it into speculative instruments that had grown and everyone swore would continue to. The irony of the theory that Bitcoin was the antidote to US$ dominance is that it will eventually suffer as everyone is forced to convert their Btc back into usd. The further irony is as those are forced to abandon BTC, they will push the usd higher yet again
You’re assuming that USD will remain king. I’m not convinced it will.
flollo wrote:
USD is surging. It is very likely AUD/USD will go below 0.7
Short term yes but Medium to long term it’s gonna die.
donweather wrote:
https://thefreethoughtproject.com/80-of-all-us-dollars-in-existence-hav…
Crazy !!
Here is another blog worth subscribing too - this one is free, the author is Australian and works in the USA for Google. Even if you dont trade the markets or have an interest in them on a day to day basis his writings are very clear about whats going on and likely to occur.
monkeyboy wrote:
Very interesting about the BTC margin call for that firm. In the bitcoin thread some time ago I asked an open question about loans taken in the legacy financial system to speculate on BTC, and wondered if it would be a mechanism whereby calls on those loans could transmit contagion from the crypto universe and make it a bomb in the legacy system, if the loans could not be repaid. We may get to witness such an event.Absolutely. The total amount of leverage "out there" is supposed to be "known". Changes were made after the GFC to identify who held what and who had collateral with whom. But this has all gone to shit somehow - look at Archegos for example and this year we had the LME having to bail out its largest trader at the expense of other participants or the LME would have gone under. It's like warning signs.
https://mishtalk.com/economics/lme-violates-number-one-cardinal-rule-ne…
I've gone off track sorry.
That's OK it's all fascinating. A cursory look at the numbers on that BTC link showed a 2.2Bn loan?! What could possibly go wrong? I also note a headline today about a stablecoin 'breaking the buck' with a 25% fall (I know not a great deal in this sphere so perhaps there's a reason for it) - but back in 2008 when the money market funds broke the buck (went down to 0.996 or was it 0.96?) anyway that was a near death experience for the financial system and that's when sheet got real, huge action to shore that one up.
And also on that loan and speculation, who the hell tells everyone where their stop/margin call level is? I've noted a theme of people in high levels of tech being very, very trusting. It often doesn't end well - as evidence I present what happened when they gave Melbourne free bikes to use.
kaiser wrote:
So a quick search reveals the current crypto market cap is 1.53 trillion. And how many of us knew there’s more than 10,000 crypto currencies in the market?
Me! Even my bro created one, to use in his blockchain games. I've been told I'm gonna own real estate on a space station! Rent, please, pay up now :)
Consumer confidence gets a kick in the nuts
https://www.macrobusiness.com.au/2022/05/mortgage-holders-fearful-of-so…
If it weren't for the 2020 fracas, it would be at decade lows.
(They use the term 'fearful'. Might be prudence. One strategy on Swellnet that never fails is, if you are arguing with someone, label them 'fearful', then abuse them for being 'fearful'. This can render the others' points invalid in an instant. Me? It is what it is, that's the mantra.)
velocityjohnno wrote:
So a quick search reveals the current crypto market cap is 1.53 trillion. And how many of us knew there’s more than 10,000 crypto currencies in the market?Me! Even my bro created one, to use in his blockchain games. I've been told I'm gonna own real estate on a space station! Rent, please, pay up now :)
Will you accept quatloos, or does it have to be spondoolicks?
At the end of the day, most will have to follow FED. We all have to follow the USD, if it gets too strong compared to AUD we will be in all sorts of shit. Good for exports, people like that narrative but the fact is, all the consumer goods we use daily are coming through imports. And if AUD is low we will see even bigger inflation where it hurts the most. RBA will have no choice, they will need to keep following FED, even at the risk of recession. Will they strike some sort of balance? Not sure, it looks way too volatile right now.
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Cheers