archive-au.com » AU » T » THIRDWAVEGROUP.COM.AU

Total: 356

Choose link from "Titles, links and description words view":

Or switch to "Titles and links view".
  • Tidal Report – 13 Mar 2010 – Too Big to Bail : third wave group
    they were due to file their earnings reports allowed Lehman unbeknownst to the investing public rating agencies government regulators and Lehman s board of directors to reverse engineer the firm s net leverage ratio for public consumption This was blatant cooking of the books with Andrew Sorkin of the The New York Times observing Executives including Herbert McDade who was known internally as the firm s balance sheet czar seemed aware that repeatedly using Repo 105 was disguising the true health of the investment bank I am very aware it is another drug we r on he wrote in an April 2008 e mail cited by the examiner s report At other times he is described as calling for a limit to the number of Repo 105 transactions The interconnectedness of the global banking system meant Lehman s eventual collapse affected the world Enron times a thousand effectively The significance of these findings however is not the past history of the Lehman Brothers collapse but the insight it gives into the financial manipulations banks use to portray balance sheet health This comes on the back of recent revelations that countries such as Greece and Italy have resorted to similar manipulations to disguise their levels of debt to bond markets and rating agencies Karl Denninger of The Market Ticker opines It has laid bare some very ugly facts relating to our financial system corporate governance and our government s active complicity not only in the Lehman collapse but in ongoing balance sheet shenanigans and the current investment picture Since the Global Financial Crisis US banks have effectively been given permission to cook their books particularly by the modification of the mark to market accounting rule Mark to market ensures that the assets you have on your balance sheet are valued at the current market price This accounting rule was removed in the US on the basis that there was in effect no market in the home loan market This has allowed huge quantities of home loan losses to remain unrecognised Diane Olick of CNBC suggests that if banks actually accounted for all the losses in the home loan market they would all be insolvent The Lehman report is a reminder that the US banking system is effectively in the same position it was when the Global Financial Crisis hit Nothing has changed except the accounting and there is every chance the books have been cooked more than first suspected Karl Denninger suggests the risks here are even more severe He believes current confidence is false and it is only a matter of time before the market comes to realise that these losses in the large banks are not only still present but being actively hidden If we apply the FDIC s own metrics to the expected losses from such a revelation that would immediately appear we get a number between 2 and 3 5 trillion that would have to be paid to depositors of the failed institutions equal to somewhere around

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-13-mar-2010-too-big-to-bail/ (2013-02-03)
    Open archived version from archive


  • Tidal Report – 6 Mar 2010 – The Kindness of Strangers : third wave group
    is the increasingly significant portion that is owed to overseas countries This makes the Australian property market vulnerable not only to simple over leverage but to the vagaries of the increasingly fragile international debt markets Australia s gross foreign debt of 1 21 trillion is about 100 per cent of GDP and net foreign debt at 638 billion or 47 per cent of GDP is one of the highest in the developed world Remember Paul Keating s concern over Australia s level of foreign debt in 1986 and the warning of the dangers of becoming a banana republic Well foreign debt as a percentage of GDP has tripled since then We are now approaching levels previously experienced only during the Great Depression To whom do we owe Our two largest overseas debt markets are the US and the UK which together account for 46 per cent of Australia s gross foreign debt Both the US and UK are in a precarious fiscal state Much has been said of the enormous US debt but the UK is in even bigger trouble Economists have estimated that the UK budget deficit this year will be more than 180 billion or 12 8 per cent of GDP To put this into perspective it is greater than Greece s expected budget deficit and Greece is currently facing a full scale fiscal crisis Yet apparently we have nothing to worry about In spite of the extraordinary figures above in lifting rates 25 basis points again this week the RBA governor Glenn Stevens dismissed any concerns about European financial trouble As The Australian s economics correspondent David Uren said this week Glenn Steven s nonchalance about the Greek debt crisis at the recent parliamentary hearings was stunning It had been no more than a marginal influence on the RBA s decision to hold rates steady in February he said There is a bit of uncertainty about how all of that is going to be resolved I do not think myself at this point that those issues will directly present a serious problem for Australia After all it is a sovereign debt issue for Europe Recent history however indicates just how vulnerable we are to overseas debt market troubles We need look back no further than 2008 when the Global Financial Crisis hit Australian banks were affected instantly requiring emergency Government guarantee assistance and our non bank lending industry went out of business overnight At an absolute minimum interest rates on wholesale debt are vulnerable to increase which will of course be passed onto home lenders There is evidence of this already occurring with the banks increasing lending rates outside the traditional RBA cycle While Glenn Stevens may be unconcerned there are those that see the pitfalls ahead Ross Garnaut Bob Hawke s former economic advisor has stated that following the Global Financial Crisis Australia s private sector and the banks are exceptionally vulnerable to any fall in the Australian dollar or rise in international interest rates With

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-6-mar-2010-the-kindness-of-strangers/ (2013-02-03)
    Open archived version from archive

  • Tidal Report – 27 Feb 2010 – Stimulus, what is it good for? : third wave group
    of the Herald Sun What more can be said about the multi billion dollar insulation debacle The basic stupidity waste rorting thousands of dodgy jobs the deaths the political and bureaucratic bungling have all been well and truly detailed So what else can be said Plenty actually For the insulation debacle raises much broader and deeper questions about the government s hurried even panicked fiscal pump priming to fight the Global Financial Crisis Indeed it poses the question whether such pump priming even if well designed and executed which this most decidedly was not would still be fundamentally flawed Because of the distortions it causes In setting out to save the economy the government has succeeded in destroying the insulation industry killing good businesses and real jobs It is becoming increasingly apparent that not only was the stimulus largely unnecessary but it has caused more harm than good What is astonishing is that the government and Treasury seemed largely unaware of the damage they were causing Terry continues Didn t Kevin and more pointedly Ken ever think In the most basic sense we insulate more or less every house in Australia right now and what next At the very best you ve just succeeded in bringing forward say 10 years of insulation into one year Well isn t it worth it if you ve kept people in jobs and spending into the broader economy Except that benefit if indeed it was lasted all too briefly But now all the people in the business are out of work And worse more of them are out of work because of all the people and resources sucked into the super charged spending spree The net effect could well be that not only have we blown 2 billion or so of taxpayer money but we ve actually made things worse in terms of the overall economy and jobs And that is what appears to have happened no discernable benefit to employment and an unnecessary government debt The Rudd Government has always defended the size and speed of the stimulus arguing that it prevented unemployment from increasing to very high levels Is there anyway to know whether this strategy has worked Sinclair Davidson professor in the School of Economics Finance and Marketing at RMIT and a Senior Fellow at the Institute of Public Affairs has done an interesting analysis that asks how much this strategy has cost us Sinclair graphed the size of the stimulus packages of various OECD countries relative to 2008 GDP and their subsequent increase in unemployment from 2007 to 2009 Looking at the graph it can be seen that the Australian stimulus was significant compared to most other OECD economies while our unemployment performance was average with an increase in unemployment of 1 per cent Sinclair concludes that The government panicked and spent far too much money money that we now know was poorly allocated on projects that were not carefully thought through So while the local political fallout for the

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-27-feb-2010-stimulus-what-is-it-good-for/ (2013-02-03)
    Open archived version from archive

  • Tidal Report – 20 Feb 2010 – Property Q & A : third wave group
    is quite unexpected and most welcome Peter O Malley agreed that property prices were 50 per cent overvalued and agreed with the article s criticism of government stimulus and fiscal policy especially in regards to the first home buyer market an unexpectedly downbeat viewpoint from a real estate agent The market is likely to trade sideways over the next five years Capital growth will be stunted by a lack of affordability for homebuyers A shortage of housing combined with population pressure will help protect the market from a dramatic collapse However if mortgage rates were to hit 10 per cent at any time during the next five years that would have severe consequences for the housing market The biggest mistake is when investors overlook the rental return yield a property offers and buy it purely hoping for an increase in price capital growth Negative gearing increases holding costs and capital growth should never be taken for granted in the short term when investing in housing As a typical example many apartments in Alexandria in Sydney are currently selling for less than investors paid for them in 2003 Any substantial capital growth in the next few years should be treated as good luck rather than good management The most pessimistic of the three Neil Jenman had this to say I believe once we are all finally convinced that property is invincible that the property market will face a cataclysmic collapse And then we all wonder why we didn t see it coming If Australia does not face a property crash it will be the only country in the Western world to have had a property boom without a bust Now that s more like it It affordability won t get much worse because already it has about reached its limit With nearly 50 per cent of recent home buyers suffering mortgage stress society cannot handle much more The limits of affordable endurance are almost reached The last of the three Louis Christopher is far more optimistic and thinks The Economist has it wrong Our forecast for 2010 is that Australian capital city dwelling prices will rise by 4 6 per cent with Sydney being an outperformer rising by 5 7 per cent Even our optimist however is guarded In order for our forecast to eventuate average home loan lending rates must stay under 7 25 per cent until at least the September quarter And loan to value lending ratios must hold at current levels Reducing the loan to value ratio has significant negative implications for a borrower s purchasing power As we have discussed before the banks are already showing signs of reducing loan to value ratios and are increasing lending rates ahead of the Reserve Bank of Australia with Westpac taking the lead Last One Standing This week it was the National Australia Bank s turn With the release of its earnings results Chief Executive Officer Cameron Clyne warned of the rising costs of finance There continues to be pressure

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-20-feb-2010-property-q-a/ (2013-02-03)
    Open archived version from archive

  • Tidal Report – 12 Feb 2010 – The Next Wave : third wave group
    above the announced stimulus measures which Alan Kohler calculates doubles the actual stimulus to 9 per cent making our stimulus the worlds largest Additionally it is only about half spent suggesting the Rudd Government will this year be pouring 40 billion of stimulus into an economy that the Reserve Bank is trying to hold back with higher interest rates It would appear the Rudd Government has gone too hard too early too households and lacks the political will to put the brakes on The concern is that Australia will find itself in a financially weakened position when the rapidly unfolding sovereign debt crisis visits our economy There is the very real fear that a defaulting Greece could trigger the second GFC wave Greece is the Lehman Brothers of this next crisis and there is no real winning solution The Greek economy is fast being considered the first domino of many to potentially fall or fail This is leading to nervous lenders demanding a higher interest rate and uneasiness about lending in general In short the price of money is rising Why should this concern Australia With all the headlines focused on sovereign debt and the Greek crisis Australia s worrying levels of debt have seemingly slipped under the radar In As January Goes we mentioned how our total debt had just exceeded our total GDP Not only is the level of debt a concern but what it has been used for is even more disquieting While debt to fund future productive capacity can be a good thing in moderation the disturbing nature of our debt is the large percentage used to fund our housing bubble Australia s banks have been unable to fund these huge sums domestically and have had to borrow internationally These loans are naturally rolled over making our banks susceptible to international funding variability Australia s bank chiefs and others have warned that Australia s heavy reliance on foreign borrowing is making the banking system increasingly vulnerable Cameron Clyne CEO of the National Australia Bank has said that the domestic demand for credit is far greater than our capacity to save which means the majority of funding is sourced offshore His view is that Australia s reliance on offshore money is a far bigger strategic issue for the economy than mortgage rate rises What does this actually mean With the sovereign debt crisis gathering pace it will cost the banks more to borrow They will need to lend at higher rates and more worryingly credit may become harder to get so there will be fewer loans available We discussed last week that Westpac was showing signs of concern over its loan books This week it was the Commonwealth Bank s turn to hint at future issues The bank highlighted the possibility of rising wholesale funding rates indicating they may need to move rates ahead of the RBA and in another cautious move they announced a less than expected dividend It is an unusual move for a bank

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-12-feb-2010-the-next-wave/ (2013-02-03)
    Open archived version from archive

  • Tidal Report – 6 Feb 2010 – The last one standing : third wave group
    what a truly astonishing proportion of income services new mortgages Mortgage stress and defaults are not the only concern which is how the US sub prime crisis started it is the sheer size of this housing bubble The 6th Annual Demographia International Housing Affordability Survey shows Australia has the most unaffordable housing in the world with 22 of our 23 markets considered severely unaffordable House prices have been bid up by easy credit generous loan to valuation ratios LVR no deposit policies aggressive revaluations and refinancing resulting in owners using their homes as virtual ATMs This is the house of cards so terrifying the RBA and when the music stops the rush for the exits will cause a lot of heartache And there are certainly signs the party is coming to an end One of the most significant yet least understood signs is the steadily decreasing LVRs required by the banks Quite recently it was not uncommon for banks to lend 105 per cent of the value of a property Since the financial crisis banks have become more prudent and LVRs are more likely to be around 95 per cent This week however Westpac set a new record requiring an LVR of 87 per cent for new borrowers While this might not sound dramatic it significantly reduces the amount a prospective home buyer can borrow As Professor Steve Keen puts it if you have a 50 000 deposit and you can get a 95 per cent loan you are able to bid on a property worth 1 million but if the LVR is cut to 90 per cent your 50 000 deposit is only equivalent to 10 per cent deposit on a 500 000 property so the amount you can spend is halved Westpac s recent reduction from a maximum LVR of 92 per cent to 87 per cent means that buyers with a 50 000 deposit will see the maximum that they can afford to pay for a property slashed from 625 000 to 384 615 Somebody with a 20 000 deposit would see the amount that they could spend reduced from 250 000 to 153 846 The difference is extraordinary and represents a dramatic decrease in the purchasing power of potential home buyers It also clearly shows how leverage can bid up asset prices at a phenomenal rate but how tightening credit can be equally dramatic This does not bode well for continuing upward pressure on house prices There is the oft repeated argument that Australian real estate values are protected due to a housing shortage We do not agree with this theory The Facts Behind the Headlines but even if it were true it is a dangerously flawed argument The collapse of property prices in the UK in 2008 occurred due to the same tightening of credit even though the country was suffering from a massive shortage of homes A little over a month ago Westpac received widespread criticism for raising its mortgage rates more than the

    Original URL path: http://www.thirdwavegroup.com.au/tidal-report/tidal-report-6-feb-2010-the-last-one-standing/ (2013-02-03)
    Open archived version from archive

  • general posts : third wave group
    market has come in for some serious mainstream attention recently A recent report on Channel Seven s Today Tonight is not going to increase the confidence of potential buyers The report title Property Price Plunge gives you an idea of the tone Whilst hardly a detailed analysis of the real estate market in Filed under general posts Tagged with australia philip soos prosper real estate today tonight The Australian Government s wilful blindness Posted by Tracey Watts on July 16 2011 1 Comment We recently published an article by Liam Halligan chief economist at Prosperity Capital Management who opined that the US and Europe are in real economic trouble and although separate the dangers are intimately related He argued that both have their roots in grotesque and utterly unsustainable levels of government debt The view that the world Filed under general posts Tagged with australia carbon tax global financial crisis henry ergas oliver marc hartwich sovereign debt Real Estate a new paradigm Posted by Tracey Watts on July 12 2011 2 Comments One of the most interesting things about any market is the almost measurable ebb and flow of sentiment It is easy to see how sentiment and the psychology of market participants forms the basis of just about any type of cyclical activity whether it be fashion fads business cycles or the price of real estate Filed under general posts Tagged with australia mike shedlock real estate united states Grotesque government debt Posted by Tracey Watts on July 11 2011 3 Comments The latest end game crank to argue that the world economy or more specifically Europe and the US is in dire straits has hit the newsstands Liam Halligan chief economist at Prosperity Capital Management has written an article in The Telegraph clearly describing the precipice upon which the world s economy is standing The piece is reproduced Filed under general posts Tagged with europe sovereign debt united states The Tragedy that is Greece Posted by Tracey Watts on July 5 2011 1 Comment The latest in an unending line of fixes for the Greek debt problem proposals carefully crafted by French banks which are the biggest foreign holders of Greek debt under which banks and insurance companies would roll up to 30 billion of their debt maturing between now and 2014 into new Greek bonds The participation Filed under general posts Tagged with alan jones bailout debt greece The Technical Big Picture Posted by Tracey Watts on June 5 2011 1 Comment Tim Wood a well renowned technical analyst is a proponent of the view that the US stock market rally that has occurred from the March 2009 low is a bear market rally That is after more than two years of generally upwards movement the major trend of the markets is still down a view Filed under general posts Tagged with market history stockmarket technical analysis tim wood Irish Misery Posted by Tracey Watts on May 23 2011 2 Comments Ireland hasn t made the headlines

    Original URL path: http://www.thirdwavegroup.com.au/category/general/page/2/ (2013-02-03)
    Open archived version from archive

  • brisbane flood : third wave group
    of one s possessions and most significant assets however the resulting financial burden or more likely devastation has yet to be played Filed under tidal reports Tagged with australia brisbane flood david llewellyn smith delusional economics real estate 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 japan jim chanos karl denninger kevin rudd leith van onselen louis christopher market history mike shedlock oecd psychology real estate recession robert prechter sentiment sovereign debt steve keen stimulus stockmarket super profits tax technical analysis terry mccrann undersupply united states archives November 2011 September 2011 August 2011 July 2011 June 2011 May 2011 April 2011 March 2011 February

    Original URL path: http://www.thirdwavegroup.com.au/tag/brisbane-flood/ (2013-02-03)
    Open archived version from archive



  •