House prices
You gotta admit that would be a pretty sweet gig being a chief risk officer and like Luke's shot on the death star there is a certain rare scenario that blows you up and no one sees it so you just continue to bank coin.
OK, is this the fix coming in?
https://www.macrobusiness.com.au/2023/03/how-the-us-bailed-out-the-bank…
shoutout to Flollo, who said this would keep happening. So quickly!
Oh yeah it says they euthanised another NY bank as part of it.
Feeling euphoric now, so I'll link this. Not so much because of the title (although it's having big moves) but more so the bit about always believing in yourself (ie - be confident! Things are good!):
They didn't mess around. Even backed all uninsured deposits. Being able to pledge collateral at par (face value) in the new financing facility is interesting.
And HSBC has agreed to buy SVB's UK arm for a whopping £1. Would love to see some more details of the UK arm's financials.
The 18th biggest bank is too big to fail? Actually, scrap that… Signature bank is also too big to fail… and it’s 29th biggest.
I am certain if the profile of the depositors was different, this would’ve played out very differently. This is gfc 2.0. My god they’re crooked.
What I don't understand is how can they (US Gov) say that all deposits will be covered and this won't cost the US taxpayers a cent? Are they just creating the $200B out of thin air?
donweather wrote:
What I don't understand is how can they (US Gov) say that all deposits will be covered and this won't cost the US taxpayers a cent? Are they just creating the $200B out of thin air?
Good explanation here: https://wolfstreet.com/2023/03/12/silicon-valley-banks-uninsured-deposi…
To start with the FDIC guarantees all deposits up to $250k by operating as a US government run pretty stock standard insurance company. So its funding is insurance premiums paid by member banks and other institutions. This covers a very large portion of depositors.
Secondly, in response to SVB the govt just set up a new funding facility called the Bank Term Funding Program (BTFP) which enables banks and other institutions to take out 1yr loans with the Fed (what they call the discount window) via pledging as security bonds, mortgage backed securities and some other eligible instruments. The Fed does just create money out of thin air for this, just like QE. Borrowers have to pay interest on these 1yr loans though.
This will pretty well cover all deposits. There may technically be some that are still not covered, but it seems that things are “all good” for now.
Edit: The specifics of the handling of SVB and Signature are well detailed in the Wolf Street article.
For instance Circle (Crypto stable coin USDC) had well over $250k of deposits, so I don't understand how they're covered without taxpayers forking out something? Interesting that the US Gov would just print to cover these significant USDC deposits (talking billions here).
This is specific to the winding up or sale of SVB.
The FDIC is basically acting as an administrator and liquidator of SVB, is still trying to find a buyer for it, and runs it as a “bridge bank” pretty well as per normal in the meantime.
Any loss incurred by the FDIC in the process of making all depositor funds available while resolving the issue will be recovered by a “special assessment on banks” which basically means charging the banking sector higher insurance premiums in its role as a deposit insurance company.
https://www.fdic.gov/news/press-releases/2023/pr23019.html
https://www.wsj.com/articles/fdic-planning-another-svb-auction-d63c8929
https://www.federalreserve.gov/newsevents/pressreleases/monetary2023031…
gsco wrote:
This is specific to the winding up or sale of SVB.
The FDIC is basically acting as an administrator and liquidator of SVB, is still trying to find a buyer for it, and runs it as a “bridge bank” pretty well as per normal in the meantime.
Any loss incurred by the FDIC in the process of making all depositor funds available while resolving the issue will be recovered by a “special assessment on banks” which basically means charging the banking sector higher insurance premiums in its role as a deposit insurance company.
https://www.fdic.gov/news/press-releases/2023/pr23019.html
https://www.wsj.com/articles/fdic-planning-another-svb-auction-d63c8929
https://www.federalreserve.gov/newsevents/pressreleases/monetary2023031…
So other banks fork out the bill essentially to pay for a fcked up bank
Interestingly the FDIC invests in Treasury Notes...oops.
I'll try to find the link but they dont have enough cash to cover all the deposits because of the losseson the treasury notes - lots of banks, money market funds and so on in the same position.
The FED is offering loans to cover these losses until such time the bonds mature.
Its not good.
yes correct Don. It's not a bad solution really.
And since the FDIC is continuing to operate SVB as a going concern (for the time being), with all deposits fully backed and everyone's accounts open and fully accessible, not everyone will necessarily feel the need to withdraw their deposits.
Not sure of the numbers here in terms of how many people have stayed put. Lots of articles reassuring people that their money is safe:
https://time.com/6262567/money-safe-silicon-valley-bank/
https://www.cnbc.com/2023/03/13/what-the-svb-and-signature-crashes-mean…
https://www.sfchronicle.com/bayarea/article/silicon-valley-bank-1783490…
@monkeyboy, as per the FDIC's financial report, it has a large holding of US treasuries (as per its function as an insurance company):
but all of which are relatively low duration (relatively short maturity), with half maturing within one year, and they have only a relatively very small unrealised loss:
gsco wrote:
yes correct Don. It's not a bad solution really.
but all of which are relatively low duration (relatively short maturity), with half maturing within one year, and they have only a relatively very small unrealised loss:
Plenty of losses there. I imagine many insurance companies are in the same boat, remember this is exactly what happened with the UK Gilts albeit temporarily. Its not enough to cover all the insured deposits in the US banking system. It shouldnt have to be as you'd assume not all the banks would go broke.
There will be repercussions.
I removed my money from Schwab US a few months back because of the state of the US banking system. Not out of any paranoia just a general trend in the US to lock people out of their funds (like being unable to sell any holdings in Russian companies).
This is a good one, some of these numbers are strong. No major crisis yet.
‘The APRA publication also reports on the volume of housing loans that are non-performing (or 90-plus days past due), as well as loans where payments are late by 30-89 days. In the December quarter of 2022, the total portion of loans with late repayments sat near record lows of 1.01%. This increased from 0.98% in the previous quarter, led by a slight uptick in the volume of loans that were 30-89 days past due (from 0.3% to 0.4%).’
https://www.corelogic.com.au/news-research/news/2023/apra-release-shows…
flollo wrote:
This is a good one, some of these numbers are strong. No major crisis yet.
‘The APRA publication also reports on the volume of housing loans that are non-performing (or 90-plus days past due), as well as loans where payments are late by 30-89 days. In the December quarter of 2022, the total portion of loans with late repayments sat near record lows of 1.01%. This increased from 0.98% in the previous quarter, led by a slight uptick in the volume of loans that were 30-89 days past due (from 0.3% to 0.4%).’
https://www.corelogic.com.au/news-research/news/2023/apra-release-shows…
I think mortgage repayments (or lack of) are one of the last things to be gauging a crisis on. First signs are radical drop in discretionary spending along with a surplus of second hand items going up for sale. Such as second hand cars, caravans etc, toys like jet skis, slowing of holiday bookings particularly overseas, and even things like big Fck off second hand tvs. People will flog off a lot of things and not book future holidays etc before they start missing mortgage repayments.
Check out the very interesting graph in this article.
https://thenewdaily.com.au/finance/2023/03/16/rate-hikes-households-ban…
Makes it all the more clearer now why US banks are feeling the pinch way more than Aussie banks.
https://www.abc.net.au/news/2023-03-16/credit-suisse-stock-slump-trigge…
Another crack in the banking system
Dead Cat Bounce IMO.
https://thenewdaily.com.au/finance/finance-news/2023/03/15/property-pri…
Key here is current stability in prices is being led my lack of supply. Once supply goes up prices will continue to drop even more so once people coming off fixed mortgages into huge jump in variable rates will have no choice but to sell the air bnb or holiday house or investment property.
Also a very well written and articulated article on how SVB died.
https://www.abc.net.au/news/2023-03-13/why-the-collapse-of-silicon-vall…
All is well.
ZH
Breaking from a Credit Suisse employee: “panic, meltdowns, people crying.”
Then SNB bailout.
But
" this is a last-ditch liquidity infusion, and all it does is prevent forced asset liquidations (a la SVB). Meanwhile it does nothing to halt the depositor flight because once trust is broken, it rarely returns."
Contagion risk ....
donweather wrote:
Key here is current stability in prices is being led my lack of supply.
And continuing high demand.
freeride76 wrote:
Key here is current stability in prices is being led my lack of supply.
And continuing high demand.
Plenty of demand in my area. One of the neighbours put their house on the market and it was sold a week later. Other one also put it on the market and had an inspection last Saturday. The street was full of people.
my mate in RE reckons 5% down to flat here and we are at the bottom, will bump along prob this year but if RBA drops a rate cut he reckons will go ballistic as FOMO buyers trying to time the bottom of the market and high demand from immigration in the cities combine.
we'll see.
barely skimmed the cream off the pandemic rises, that's for sure.
He's saying another 5% drop max?
Ex-neighbour is selling in the mid to high 2's.
Down a bit from the crazy peak but he's had heaps of interest in the past three weeks since it's been on the market with a few genuine non-tyre kickers.
This guy says 15-20%
https://www.realestate.com.au/news/property-prices-fall-after-zac-efron…
Who to believe?
"“Last year there were six properties listed below $700,000 across the shire’s main towns and villages."
What, pre-fabs in van villages?
Believe the local knowledge Kaiser.
my mate is still up there 3 days a week cheffing for the Hemsworths. They're going nowhere.
And the 3 bed brick and tile lego box just around the corner that last went to market in 2019 for 800000 just sold for 1.3 million.
These things I definitely know to be true.
Spec homes made by builders for price on tiny blocks on the wrong side of the hill are easy enough to come by but if you want a house on a nice block you'll be in a queue with cashed up Boomers paying overs.
Averages in Northern Rivers, of course, have been dragged right down by massive floods where anything underwater has to be sold at a discount. Still over what it was pre-pandemic.
Even the most flood prone Lismore dumps are getting sold to investors looking to cash in on high rents and housing shortages.
Nothing has changed in the fundamental equation: high demand, not enough supply.
Backpackers have now returned at pre-pandemic levels and they also need a roof- not all can live in their vans because the demand for labour is still so high.
Fair enough FR, was more of a ‘opinions are like arseholes’ jibe. Personally I’m noticing an uptick in props for sale (funny how our own little bubble shapes our macro view). As you say, the good ones have a queue lined up for them. But most of what’s coming on is not A grade stuff. Usual flight to quality or at least sticky demand for good product that happens at this part of the cycle. Will see how it goes from here, but the impact on lending capacity will have to come to pass eventually, once all those with cash dwindle down.
TBH, I think the RBA has played it pretty well- they were late to move and have raised much less than our peers (NZ for eg) which has kept full employment and just taken some steam out of demand until supply issues are resolved.
If they cut later this year it'll go bang-o again, but this time with more capacity in supply and labour.
Just my opinion, we'll see.
FR…You don’t need to be to be a boomer to be cashed up, but you know that.From what I observe plenty of cashed up media personalities and yuppy(if that’s still a term) types in the queue as well.Queue the Painters and Dockers.
kaiser wrote:
Fair enough FR, was more of a ‘opinions are like arseholes’ jibe. Personally I’m noticing an uptick in props for sale (funny how our own little bubble shapes our macro view). As you say, the good ones have a queue lined up for them. But most of what’s coming on is not A grade stuff. Usual flight to quality or at least sticky demand for good product that happens at this part of the cycle. Will see how it goes from here, but the impact on lending capacity will have to come to pass eventually, once all those with cash dwindle down.
This is a good observation. Although I follow the market regularly I often don’t even look at the property unless it’s high quality (and there’s a fair bit of subjectivity here though). One thing I definitely did notice is that it’s is much harder to sell a crappy property for outrageous amounts of money. Those shittier ones have definitely come down in value. Part of it could be the realisation that getting labor/materials to conduct upgrades and fixes is very expensive and hard to come by.
[quote=gsco] - "But they're doing the restructuring right now when we may possibly be close to the top of the interest rate cycle"
Like many it seems, we're looking to lock in our mortgage (not too big luckily) so i've come to Swellnet for clear thinking and honest opinion on global finance.
iheartSN
GSCO - top of the cycle? We've decided on 2 years but it's like playing lotto. Do you think we would get a better deal in 2 years time? Complicated question I know and I won't hold you to anything just curious if you or anyone has any intel that might help? Seems folk are expecting another finance roller coaster sometime soon
freeride76 wrote:
TBH, I think the RBA has played it pretty well- they were late to move and have raised much less than our peers (NZ for eg) which has kept full employment and just taken some steam out of demand until supply issues are resolved.
If they cut later this year it'll go bang-o again, but this time with more capacity in supply and labour.
Just my opinion, we'll see.
I don't have a perspective on this other than that it's really hard to swallow that RBA millionaires make decisions that ruin lives, and generally all we do is take a big picture view of it and decide whether it was good or not. Rate rises have been a nightmare for my friends and family with mortgages - full cliche things like kids not getting new shoes or winter uniforms, not going on excursions, sleepless nights, third jobs, relying on charities, stealing from supermarkets. I've been hit up more for money in the last two months than in the last 10 years. Conversely I've listened to wealthy losers talking about how they're making more money now than before rate rises. Australia is a fucking nightmare.
Havn't you heard the news dandandan.
The wealthy are the winners!
Every one else is a patsy.
Is the $2b funded by their central bank at all? Otherwise who’s gonna pay $2b for a failed bank? UBS have shares? If so will be interesting to see their shareholders reaction to this bailout.
https://www.abc.net.au/news/2023-03-20/ubs-backed-by-swiss-authorities-…
It’s actually $3b or maybe that’s AUD in the article above?
The global derivatives market is a $2+ QUADRILLION (2,000+ TRILLION) ticking time-bomb. When banks fail, derivatives won't just unwind in an orderly fashion. Few people understand this.
— Gabor Gurbacs (@gaborgurbacs) March 19, 2023
These are some of the top U.S. banks ranked by derivatives exposure (double-digit TRILLIONs). pic.twitter.com/cS23fazqZH
Still For Sale..First listed Dec 2021
https://www.realestate.com.au/property-residential+land-qld-caloundra+w…
udo wrote:
Still For Sale..First listed Dec 2021
https://www.realestate.com.au/property-residential+land-qld-caloundra+w…
I think they’ve lowered their price expectations at least haven’t they?
Pretty obvious why it hasn't sold, who'd want to live in the Aura.
These developments look very soul-sucking to me, I would never buy a house there.
Sprout wrote:
Pretty obvious why it hasn't sold, who'd want to live in the Aura.
Clearly some people do!!
Could this be the 'choose the form of your destructor'?
https://www.macrobusiness.com.au/2023/03/how-us-finanical-crisis-contag…
Interesting points on bank exposure, A-REIT exposure, and super fund exposure. Anyone remember 1990-4?
donweather wrote:
A long read but very interesting.
Thank you Don, what a great read. He takes complex events and structures and makes them easily understandable and does so with consecutive logic. I might physically print a handful of articles a year, and this is one of them.
It's a great wrap-up of what just broke.
To charty people, have a gawk at the US 5yr, US 10yr and gold in AUD...
velocityjohnno wrote:
A long read but very interesting.Thank you Don, what a great read. He takes complex events and structures and makes them easily understandable and does so with consecutive logic. I might physically print a handful of articles a year, and this is one of them.
It's a great wrap-up of what just broke.
To charty people, have a gawk at the US 5yr, US 10yr and gold in AUD...
Twas wonderfully articulated and explained easily hey!!!
House prices - going to go up , down or sideways ?
Opinions and anecdotal stories if you could.
Cheers