So were down 98, looks like I win the sweep If anyone wants some hot tips just pm me, I'll give you my account details lolhere comes some dribble from sydneyBlight
Well you asked for it - there was a nice bounce today off intra-day lows, so you may have been correct in your call for today being a good bottom fishing day. The frequency of your posts today looks like a clear signal the markets will be up tomorrow!
PS - I didn't buy today - did my buying a few weeks back when we were lower than today (when I posted here I was going to). Have plenty of dry powder left still - if we correct harder, my next buy point would be around 4700/4800 where I reckon the next support level would be found. But I remain unconvinced this is currently likely, although concede the possibility, hence my strategy. But by Christmas the market will be 5500 or higher I think you will find.
For Aussie property bears, "denial", is not just a long river in North Africa.....
The banks assets are NOT based on housing valuations. They are based on the value of the loans they have issued! APRA and the RBA have full visibility of these assets. The housing values underpin the loans as collateral - the average LVR across most of the big banks books is something like 50 or 60% (will have to check for exact current number), so it would take something far more catastrophic than even you are envisaging for any of them to get into real trouble across the board. Remember the bank doesn't lose on a loan until is a) defaults and is foreclosed on, and then b) the bank cannot recover the outstanding loan amount after disposal of any collateral, and claiming on any mortgage insurance policy if there is a shortfall even then.
And besides, their position is currently only getting stronger, not weaker, at the moment, with respect to capital / asset ratios, the quality of new loans etc - in case you hadn't noticed investor lending is currently being rationed! And as you mentioned, they have also been RAISING capital in order to meet APRA/RBAs enhanced requirements flowing out from the Basel III rules. There is also a LOT of other stuff going on behind the scenes in terms if tightening of other regulations, increasing of the visibility of interest rate swap derivative positions to the regulators, requirements for central clearing of such derivative positions and so on, that you are probably unaware of.
You are stuck in a 2007/2008 paradigm I think with respect to how you view AU banks systemic risk etc. A lot has changed since then - for the better. They survived then - so why would they all fall in a steaming heap now when there is so much more awareness, tightened regulation and so on? Loan default rates are currently at multi-decade lows!
If it makes you sleep better at night, I'm all for it
The banks assets are NOT based on housing valuations. They are based on the value of the loans they have issued!
Bullshit. Prove it!
"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Stuart Mill
Did you really just write that? My statement is 100% correct. Banks assets are the LOANS - ie the VALUE of loans, plus any other financial or physical assets (bonds, cash reserves, physical currency, bullion, actual property that the bank owns, like their branch offices maybe, and so on), never the collateral that secures housing loans. A bank NEVER has any ownership of the collateral posted to secure a loan - ever! Even during the foreclosure process. If you believe otherwise, then you are just proving once again what an idiot you truly are and how little you understand about the financial and banking system.
The banks assets are NOT based on housing valuations. They are based on the value of the loans they have issued! APRA and the RBA have full visibility of these assets. The housing values underpin the loans as collateral - the average LVR across most of the big banks books is something like 50 or 60% (will have to check for exact current number), so it would take something far more catastrophic than even you are envisaging for any of them to get into real trouble across the board. Remember the bank doesn't lose on a loan until is a) defaults and is foreclosed on, and then b) the bank cannot recover the outstanding loan amount after disposal of any collateral, and claiming on any mortgage insurance policy if there is a shortfall even then.
And besides, their position is currently only getting stronger, not weaker, at the moment, with respect to capital / asset ratios, the quality of new loans etc - in case you hadn't noticed investor lending is currently being rationed! And as you mentioned, they have also been RAISING capital in order to meet APRA/RBAs enhanced requirements flowing out from the Basel III rules. There is also a LOT of other stuff going on behind the scenes in terms if tightening of other regulations, increasing of the visibility of interest rate swap derivative positions to the regulators, requirements for central clearing of such derivative positions and so on, that you are probably unaware of.
You are stuck in a 2007/2008 paradigm I think with respect to how you view AU banks systemic risk etc. A lot has changed since then - for the better. They survived then - so why would they all fall in a steaming heap now when there is so much more awareness, tightened regulation and so on? Loan default rates are currently at multi-decade lows!
Sydneyite
The only reason the banks survived back in 2008 was because more or less the entire worlds population was put on the line for whatever amount of taxes it took to keep them alive. Along the way the US has doubled the public debt and China created more new credit than the entire worlds USD banking system.
In the case of the UK the 2008 situation arose because some of the largest banks in the world drove a coach and horses thru the regulations so their leverage could be increased. Every bank in the world benefitted from this wrong doing, and today we are still in the same situation where the richer people are being supported by a very much broader but poorer taxation base.
If things were to now turn down from here it is going to get very messy.
The only reason the banks survived back in 2008 was because more or less the entire worlds population was put on the line for whatever amount of taxes it took to keep them alive. Along the way the US has doubled the public debt and China created more new credit than the entire worlds USD banking system.
In the case of the UK the 2008 situation arose because some of the largest banks in the world drove a coach and horses thru the regulations so their leverage could be increased. Every bank in the world benefitted from this wrong doing, and today we are still in the same situation where the richer people are being supported by a very much broader but poorer taxation base.
If things were to now turn down from here it is going to get very messy.
I'm talking specifically about the Australian banks. I don't think your statement is correct with respect to why our banks survived. And whatever the reason, if the risk is lower now and the same actions as then were taken again, why would they fail?
PS - hundreds of US banks went bust, the big ones were all famously bailed out (except for Lehmans) of course via TARP and QE and so on. The entire Iceland banking system collapsed, in the UK RBS had to be nationalised, so there were much more serious problems o/s than here. Our "crisis" was extremely tame by comparison.
PPS - what are your thoughts on TWTs and CreatedBy position that bank assets are actually the houses that secure mortgages, and that the asset values are based directly on property values? Surely you do not believe that cods-wallop do you?
Did you really just write that? My statement is 100% correct. Banks assets are the LOANS - ie the VALUE of loans, plus any other financial or physical assets (bonds, cash reserves, physical currency, bullion, actual property that the bank owns, like their branch offices maybe, and so on), never the collateral that secures housing loans. A bank NEVER has any ownership of the collateral posted the secure a loan - ever! Even during the foreclosure process. If you believe otherwise, then you are just proving once again what an idiot you truly are and how little you understand about the financial and banking system.
Let me know when you feel embarrassed about how wrong you are.
It is still the case that the banks are only very lightly regulated on capital requirements for housing loans because of the believe the valuations act to protect the banks in what is regarded as a safe asset where in the case of a systemic crisis causing falls in house prices across the boards the system is highly vulnerable unless the tax payer is called upon to prop the whole thing up.
Sydneyite
21 Sep 2015, 06:07 PM
I'm talking specifically about the Australian banks. I don't think your statement is correct with respect to why our banks survived. And whatever the reason, if the risk is lower now and the same actions as then were taken again, why would they fail?
PS - hundreds of US banks went bust, the big ones were all famously bailed out (except for Lehmans) of course via TARP and QE and so on. The entire Iceland banking system collapsed, in the UK RBS had to be nationalised, so there were much more serious problems o/s then here. Our "crisis" was extremely tame by comparison.
PPS - what are your thoughts on TWTs and CreatedBy position that bank assets are actually the houses that secure mortgages, and that the asset values are based directly on property values? Surely you do not believe that cods-wallop do you?
You should be able to realise if China alone increases credit in just their banking system by USD14 Trillion dollars it is going to be supportive of Australia. Then there is the doubling of the US debt, etc etc.
Sydneyite
21 Sep 2015, 06:07 PM
PPS - what are your thoughts on TWTs and CreatedBy position that bank assets are actually the houses that secure mortgages, and that the asset values are based directly on property values? Surely you do not believe that cods-wallop do you?
It would depend upon who you ask. If valuations fell the banks would say it creates no effect. The regulator might have another idea and an investor another.
The value of the assets is clearly dependent upon real property rather than only a somewhat theoretical income stream coming from decades into the future
It would depend upon who you ask. If valuations fell the banks would say it creates no effect. The regulator might have another idea and an investor another.
The value of the assets is clearly dependent upon real property rather than only a somewhat theoretical income stream coming from decades into the future
Are the banks assets the LOANS, or the PROPERTY? I'm pretty sure you will find the banks, the RBA, APRA and bank investors would all agree with me on this (simple!) point!
I'm not talking about how the loan assets are valued. I'm asking what the assets actually are! People here seem to have very strange ideas about this basic concept!
PS: Of course the value of loan assets may change based on a wide-spread fall in property values, but it would be due to increased risk of default, not directly related to the general property market value change at all. These are very different things! Ie a 10% fall in property values would NOT result in a straight 10% fall in bank asset values - surely you agree??? This is all I am trying to get across here.
Are the banks assets the LOANS, or the PROPERTY? I'm pretty sure you will find the banks, the RBA, APRA and bank investors would all agree with me on this (simple!) point!
100% in agreement here, although were the bank to securitise those loans to raise capital in a hurry it's unlikely they would receive face value for them in a falling market.
"It were not best that we should all think alike; it is difference of opinion that makes horse races." - Mark Twain on why he avoids discussing house prices over at MacroBusiness. "Buy land, they're not making any more of it." - Georgist Land Tax proponent Mark Twain laughing in his grave at humourless idiots like skamy that continually use this quip to justify housing bubbles.
Are the banks assets the LOANS, or the PROPERTY? I'm pretty sure you will find the banks, the RBA, APRA and bank investors would all agree with me on this (simple!) point!
I'm not talking about how the loan assets are valued. I'm asking what the assets actually are! People here seem to have very strange ideas about this basic concept!
PS: Of course the value of loan assets may change based on a wide-spread fall in property values, but it would be due to increased risk of default, not directly related to the general property market value change at all. These are very different things! Ie a 10% fall in property values would NOT result in a straight 10% fall in bank asset values - surely you agree??? This is all I am trying to get across here.
Hmmm ... mortgages seem to be a special case, but generally, any pricing model that marks an asset backed security to market, factors in the market price of the collateral asset.
Many mortgages are written with an collateral asset value of 100 and a security notional value of 80. Even those mortgages with a notional value higher than 80 have mortgage insurance (which exposes the mortgagee to credit risk via the insurer). In the case of mortgages, because the ratio of collateral asset value to notional value is usually greater than 1, small falls in the market value of the collateral asset have no effect on the value of the security.
If there were a large fall in the market price of the assets backing these securities, then a pure pricing model would mark the value of these securities lower, unless there was a corresponding increase in credit spreads to account for the new credit risk.
APRA could always raise the risk weighting for mortgage assets, in the event of the market value of the collateral asset fell below the notional value of the securities themselves. This would force the banks to raise additional capital or raise the rates paid on these securities. Either of these two courses of action can lead to a vicious cycle, so it is probable that APRA would keep the risk weighting constant, even though the loss given default had increased.
Regardless, if the collateral asset value fell below the securities notional value, the market price of RMBS would fall significantly (yields would spike) as these are traded in secondary markets, and are not subject to the whims of socialist central planners.
“Talk sense to a fool and he calls you foolish.” - Euripides
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