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  • The Australian Government’s wilful blindness : third wave group
    GDP before the crisis several times higher than official debt figures The Greek crisis which first erupted in late 2009 was the moment when markets realised the real extent of Europe s debt problems and were no longer prepared to give Greece credit at interest rates it could afford Unfortunately Europe s political leadership did not draw the correct conclusions from this Although it was obvious back then that Greece would never be able to repay its debt EU leaders decided a Greek default would be politically too embarrassing to let it happen And of course they were afraid that panic might spread to Ireland Portugal or Italy So they kept Greece on life support with an extra E110 billion of emergency loans while establishing a E750bn safety net for the rest of the euro zone They also allowed the European Central Bank to purchase Greek treasuries killing off both the bank s credibility and independence in one go The result of these rescue measures is a complete mess After 1 1 2 years of saving the continent Europe is a scene of economic devastation Its central bank is overloaded with toxic papers Portuguese Irish and Greek debt is officially rated junk and markets are seriously wondering whether Italy could be next Meanwhile the euro is at risk of imploding with unforeseeable consequences for Europe s financial system The implications would be so severe that last year s EU banking stress test did not even attempt to model such a doomsday scenario The European debt crisis alone has the potential to derail the world economy But it is not the only trouble spot on the world map The US s economic recovery is stalling while the Obama administration is trying to stave off insolvency Japan already the most heavily indebted country in the developed world just had to pass a second emergency budget since the tsunami Instead of preparing for the aftermath of the next and more severe phase of the global financial crisis Australia has been wasting its energies Domestic debates pale into insignificance in comparison with the financial storm that is brewing on the horizon Why are we even contemplating new taxes that damage our international competitiveness at a time of the utmost economic uncertainty Australia may have been an island of tranquillity post Lehman but for how much longer With the wall to wall coverage of the Carbon Tax what has attracted virtually no media attention is the fundamental risk in the assumptions Treasury has used in its modelling Henry Ergas however has nailed the issue the vulnerable international environment has been completely ignored as a risk THE one thing you need to know about Treasury s modelling of the carbon tax is this it assumes that by 2016 the US and all the other developed economies that do not have carbon taxes or emissions trading systems in place will have them up and running This implies that in next year s US presidential election likely to

    Original URL path: http://www.thirdwavegroup.com.au/general/the-australian-governments-wilful-blindness/ (2013-02-03)
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  • Real Estate – a new paradigm? : third wave group
    Many seem to thing that housing will plateau and there is no fear of a real slump At the top of the list in believing the permanently high plateau theory is David Seiders the chief economist for the National Association of Home Builders According to Seiders single family starts numbered about 1 6 million in 2004 He expects another record this year even as the industry begins to hit the plateau we ve been watching and waiting for Also chiming in on the permanently high plateau theory is Erik Bruvold of the San Diego Regional Economic Development Corp in the San Diego News article Housing economists raise yellow flag over San Diego Mr Bruvold predicted a flattening in prices rather than a dramatic falloff Already the inventory of homes on the market is growing and sales prices are lower than asking prices I think we ve hit a plateau Bruvold said I would not refer to it as a turning point David Berson chief economist of Fannie Mae and David Seiders chief economist for the National Association of Home Builders also seem to be giving some credence to the plateau theory Prices are so high that at some point there is the possibility people may simply decide it s too expensive to move there Berson said Alternatively prices may simply slow for a period of slow or no price gains No one seems to be as optimistic as the Toll Brothers according to the New York Times article Closing Ground At the moment Toll controls enough land for nearly 80 000 houses Its competitors which tend to build lower priced houses on smaller lots have even larger accumulations K Hovnanian has land for more than 100 000 houses Pulte Homes holds 350 000 sites Still others Lennar Centex Homes D R Horton KB Home control hundreds of thousands as well And all of them are in ferocious pursuit of more The company expects to grow by 20 percent for the next two years and then will strive for 15 percent annually after that Those estimates suggest that the company s expected production of around 8 600 houses this year will expand to at least 15 000 houses by 2010 Individual Toll developments now range in size from a few dozen to 3 000 houses Why can t real estate just have a boom like every other industry Why do we have to have a bubble and then a pop asked Toll This cycle will not be any different I do expect some home builder bankruptcies out of this mess but it is not easy to predict which ones Here is what the housing evidence suggests Homebuilders are clearly ignoring business cycles affordability issues tightening credit and liquidity concerns Money has been too easy for too long for anyone to understand what might happen in a liquidity crunch Homebuilders will keep buying more and more land and adding more and more to housing inventory in a foolish attempt to grow 20

    Original URL path: http://www.thirdwavegroup.com.au/general/real-estate-a-new-paradigm/ (2013-02-03)
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  • Grotesque government debt : third wave group
    are off Worries over Italy caused the euro to fall against the dollar The greenback gained against the single currency despite an incredibly bleak US jobs report which was alarming in itself but also likely to complicate the already tortuous negotiations over America s debt ceiling Obama s current fiscal plan forecasts that the tax share of US GDP will rise by 2 2 percentage points in 2012 with spending falling by 1 7 percentage points as earlier tax cuts are phased out and America s 2009 fiscal stimulus comes to a close Meanwhile a deadline of August 2 looms on raising the federal government s debt ceiling from 14 3 trillion to 16 7 trillion 10 4 trillion Under intense pressure from the Tea Party Republicans are pushing for deep multi year spending cuts as a pre condition for allowing more debt If the Democrats don t deliver the US may be unable to raise the finance it needs to honour its obligations which could see the government having to choose between refusing interest payments to the Chinese or stopping US welfare cheques Obama is negotiating with Congressional leaders in the White House But while there are deep divisions to be overcome a solution can surely be found The fact that the US economy generated only 18 000 jobs in June down from 25 000 in May and having plunged from 70 000 new jobs monthly between February and April shows the fragility of the US recovery One senses that the Republicans having made their point and having made sure everyone understands it s been made will then conclude that the implications of a US default are simply too cataclysmic to contemplate Similarly one assumes that the eurozone bigwigs will ultimately bang their respective heads together and come up with a burden sharing plan that spreads the pain between taxpayers and governments marking down Greek debts and extending payment schedules but not so much that the eurozone s bloated banks are plunged into a crisis anew This may be informed optimism Or it may just be wishful thinking Whatever the outcome one thing is clear Westerners who think our massive sovereign debts are someone else s problem are in for a rude awakening Yes the so called emerging markets led by China and the big oil exporters are the biggest holders of our sovereign debt I often hear savvy observers argue that such countries wouldn t dare stop lending to us because that would undermine the value of the Western debt they already hold This is a staggeringly complacent view While the big emerging markets are fiscally sound running relatively small annual deficits and with rather low debt stocks the Western world not only the US and the eurozone s usual suspects but the UK too is in great fiscal danger The only reason we are still able to roll over our sovereign liabilities is because for the most part the true extent of the fiscal risks we face

    Original URL path: http://www.thirdwavegroup.com.au/general/grotesque-government-debt/ (2013-02-03)
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  • The Tragedy that is Greece : third wave group
    debts S P however has taken the view that the debt rollover would be a distressed transaction which would leave lenders worse off and therefore would probably lead to Greece being declared in selective default The S P warning has likely rung the death knell for the French plan and has made the task of coming up with a second bailout for Greece by mid September all the more difficult How can these rescue attempts possibly be taken seriously Mike Shedlock agrees The plan is to suck Greece dry not to bailout Greece but rather to bailout the banks that lent to Greece That plan is still not finalized However the plan will backfire Greece will default anyway and the ultimate cost will be higher to Greece and the banks that lent to Greece European taxpayers will be asked to foot the bill Notice how silly this has gotten Had Greece simply defaulted a year ago the cost may have been haircuts of 50 billion or so Now 282 billion and counting has been invested to save Greece Does Greece look or feel saved The debacle that is Greece is now so obvious that prominent talk back radio identity Alan Jones dedicated his latest comment to it Click the link to listen to his commentary which is actually a very good summary of the European debacle Category general posts Tags alan jones bailout debt greece Comments One Response to The Tragedy that is Greece Trackbacks Check out what others are saying The Greek people never learned to pay their taxes third wave group says July 26 2011 at 4 23 pm news We ve spoken at length about the country s raging debt and deficit problems see The tragedy that is Greece and Europe crumbles budget Reply Leave A Comment

    Original URL path: http://www.thirdwavegroup.com.au/general/the-tragedy-that-is-greece/ (2013-02-03)
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  • The Technical Big Picture : third wave group
    worse it will be Because the 2009 low occurred only 17 months after the 2007 top that low falls far short of the normal one third relationship that has historically been seen Therefore based on these historical relationships I do not believe that we have seen the bear market bottom According to Dow theory each bull and bear market period has three separate phases This phasing is an important aspect of the Dow theory that is most often over looked The 1966 to 1974 bear market is a perfect example of a bear market its three phases and the rallies separating each of the phases Therefore I will use that chart to illustrate this concept After analysing the various phases of that market he continued But once again the Dow theory phasing prevailed and Phase III took the market down 45 into the final Phase III low This low marked the bottom of the second great bear market This time those who understood the Dow theory were able to recognize this bottom for what it was as did Richard Russell History tells us that the public was so beaten down by the time the Phase III low had occurred that once again they did not listen to the Dow theorists Bearish sentiment was sky high and anyone pushing stocks at this point again needed counselling Who in their right mind would buy stocks after suffering through these declines However the Dow theory phasing was proven correct and the third great bull market that ran until the 2007 top was born at the 1974 Phase III bear market bottom This brings us to our current chart below From the 2007 top the Industrials dropped some 53 over a 17 month period into the bear market Phase I low in March 2009 This decline is marked in blue on the chart below From that low the typical rally separating Phase I from Phase II began Just as with the 1966 to 1968 rally the longer this rally lasts the more convinced the public will become that this is a new bull market I know from my research what this bear market rally top will look like because I have identified a common DNA Marker that has appeared at every major top since 1896 I m covering these details and developments in the research letters and updates at Cycles News Views This rally will top in accordance with those DNA Markers and will allow me to identify it as well Therefore based on my knowledge of Dow theory phasing and the historical bull and bear market relationships I do not believe that we have seen the bear market bottom or that the advance out of the March 2009 low is a new bull market Let s now look at value which is another historical marker of secular bear markets Historically the dividend yield will be roughly equal to the price earnings ratio at secular bear market bottoms I have used the S P

    Original URL path: http://www.thirdwavegroup.com.au/general/the-technical-big-picture/ (2013-02-03)
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  • Irish Misery : third wave group
    of the papers the failed Irish Experiment is still attracting some attention A riveting documentary has just been released by the slightly eccentric Max Keiser which takes a rather sober look at the fallout from the collapse of the Irish economy The boom bust and bailout of the banks has left Ireland with debt equivalent to 170 000 euros per head of population As Max Keiser observes The people of Ireland have been carpet bombed with debt The Irish story should be a cautionary tale for pretty much every western economy however many are already past the point of no return We were borrowing loads and loads of other people s money and putting it into housing a documentary well worth watching Australia Category general posts Tags ireland max keiser Comments 2 Responses to Irish Misery The Mainlander says May 23 2011 at 7 54 pm Peter lucky Australia is just soo different I think it is the Wallabies that makes it so Reply peter forrest says May 23 2011 at 6 31 pm the placed is fucked Reply Leave A Comment Click here to cancel reply Name required Mail will not be published required Website subscribe Have our blog posts delivered straight to your inbox categories general posts tidal reports latest posts The story silver tells Is the end game in sight for Greece Descending the Slope of Hope Australia s sugar daddy stalling What housing undersupply Australian banks vulnerable still Chicken or egg the unemployment effect The recovery that isn t McKibbin you ve done it again What does this chart tell you tag cloud alan kohler australia banks ben bernanke britain china commodities currency debt deflation deleveraging demographia report economy employment europe first home owners global financial crisis great depression greece interest rates international monetary fund ireland

    Original URL path: http://www.thirdwavegroup.com.au/general/irish-misery/ (2013-02-03)
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  • Economic bust in Australia obvious : third wave group
    local currency tumbling and stocks lower The number of full time jobs declined by 49 100 in April the most since February 2009 and part time employment rose by 26 900 today s report showed Australia s participation rate which measures the labor force as a percentage of the population over 15 years old fell to 65 6 percent in April from 65 8 percent a month earlier it showed Last month s decline in jobs brings to 26 300 the number of net new positions created in the first four months of the year the weakest January through April period of employment growth number since 1999 Economists in a Bloomberg News survey forecast a 17 000 increase in April according to the median of 21 estimates The jobless rate held at 4 9 percent The RBA said in its May 6 quarterly policy statement that most leading indicators point to further growth in employment over the months ahead although at a slower pace than in 2010 It also predicted the jobless rate would fall to 4 25 percent by December 2013 RBA Calls For Unemployment Rate to Drop What the hell is it that the RBA sees that I don t The property bust is underway and going to accelerate retailers are going under and consumers are tapped out How exactly does that translate to lower unemployment rate I certainly have to laugh at the economists in that Bloomberg survey because the employment report came out after the reported rise in corporate bankruptcies Here is one more piece of the puzzle to consider Rise in Bad Home Loans The Age reports a Rise in CBA bad home loans Commonwealth Bank s decision to aggressively grow its mortgage market share at the height of the financial crisis is starting to cause indigestion after it revealed an increase in the number of housing loans starting to turn bad Further stress in the housing market could emerge with CBA chief executive Ralph Norris predicting the Reserve Bank could issue as many as two interest rate increases by October We re obviously expecting the Reserve Bank to increase rates and there s possibly one or two rises to come in the next six months Mr Norris told an investor briefing Mr Norris was speaking as CBA confirmed it was on track for a record profit result after it reported third quarter earnings of 1 7 billion Even with demand for credit expected to remain subdued until after next month the latest performance so far should see the bank deliver cash earnings of 6 8 billion This will comfortably beat last year s profit result of 6 04 billion But CBA s experience with an 11 per cent jump in the number of missed payments on housing loans in the March quarter follows a similar run up in arrears by ANZ and Westpac Usually such a sudden increase in lending arrears would be a cause for concern in the banking sector given their large

    Original URL path: http://www.thirdwavegroup.com.au/general/economic-bust-in-australia-obvious/ (2013-02-03)
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  • Denial is not a river in Egypt : third wave group
    affect consumer confidence We expect the strength of the rest of the country particularly the mining boom will lead to even higher interest rates particularly next year My feeling is that those higher interest rates will meet falling house prices which will have its own impact on confidence in the market and in the housing sector He suggested home owners fix their rates The art of fixing is to wait until the market becomes too unrealistic and take advantage of it he said If you are looking to buy wait because I think prices nationally are going to come under pressure There has also been widespread coverage of house price data that shows there has been a surge in listings together with falling prices Property research group RP Data Rismark reported that capital city house prices posted their worst slump in 12 years in March with the index falling 2 1 per cent for the March quarter The worst falls were in Brisbane and Perth falling 4 6 per cent and 3 4 per cent respectively Basically there are more people putting their properties on the market than there are people buying them RP Data research director Tim Lawless told BusinessDay Until we start to see that effective supply being absorbed I really don t think we ll see any upward price pressures Property data from SQM Research showed that the stock of houses and units on the market has increased rising 45 5 per cent in the year to March We have repeatedly commented on the fallaciousness of the housing shortage argument maintaining that the calculation for housing demand is fatally flawed and that the perceived housing undersupply seen at the height of the bubble was actually a temporary demand phenomenon not a shortage of supply In SQM s May 3 newsletter managing director Louis Christopher accurately sums up the situation and significantly the word oversupply makes an appearance The housing market s downturn is now happening at pace and there is no imminent recovery in sight These may appear to be some very bleak words however it is important that the facts are acknowledged so one can make better decisions for the future Stock for sale levels are now approaching the 2008 highs housing finance commitments are at ten year lows though there is likely to be a statistical rebound next month house prices on every measure are recording falls for most capital cities and as we reported here a little while ago those holiday regions are being smashed due to an oversupply of real estate a deterioration in their local demographics and of course a rise in the Australian dollar Why is the downturn happening nationally The answer is simple We have a housing market that has a very high level of housing debt behind it A highly geared housing market is highly susceptible to the price of debt And the more geared we become the lower the price of debt has to be in order for

    Original URL path: http://www.thirdwavegroup.com.au/general/denial-is-not-a-river-in-egypt/ (2013-02-03)
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