Since I have had quite a few questions about it, the Aussie property market - Mini-thread

- I know I go on about this a lot, but I can scarcely emphasize enough how much stock on the market has collapsed. We are well over 20% below the pre-Covid seasonal decade lows.

1/ - New listings on the other hand are at their lowest seasonal level in at least 15 years, probably longer.

- Its worth emphasizing that the population has grown by 22.3% since the data set I have began. So its actually significantly worse in per capita terms.

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SVB and a potential bank run - A Thread

- Prior to Ackman and others talking up the possibility of a bank run, the threat was minimal in the immediate term. Now who knows it's in the hands of the animal spirits come Monday.

- Over a period of weeks/months, different story.

1/ - Insured SVB depositors will be absolutely fine, those who aren't it's a lot more complex

- The FDIC can attempt to use existing assets/tools to provide liquidity for depositors, but it may (I emphasize may) end up in the hands of Congress. Which could turn into a crap show

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Fixed Mortgage "Cliff" - A thread

- There has been quite a bit of debate about this issue in recent days, so I thought I would try and put into perspective with some data.

- Around 46% of fixed loans will expire in 2023, which accounts for ~18% of mortgages overall.

1/ - Depending on when these loans were written, fixed rate borrowers face an increase in rates of up to 3.9%, with the average closer to 3.5%.

- Almost all fixed loans expiring face an increase in rates significantly larger than the 2.5% or 3.0% buffer imposed by APRA.

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Russia Developments

- Putin has declared a "partial" mobilization of the Russian armed forces. Order only covers reservists.

- As it stands there are an estimated ~300k active duty soldiers in the Russian Army.

- This order would activate up 2 million reservists for duty.

1/ - Putin claims the West has engaged in "nuclear blackmail" and that Moscow will use all means at its disposal including nuclear weapons to defend itself.

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https://twitter.com/Liveuamap/status/1572473914030452737

ABS Lending Data (July) - Some big changes, so thread time 🧵

- Housing overall -8.5% MoM, -11.3% YoY

- Owner Occupier (OO) housing -7.0% MoM, -15.9% YoY

- Investor housing -11.2% MoM, 0.0% YoY

It is however worth noting that OO lending is 39.6% higher than pre-Covid.

1/ In terms new loans for owner occupiers, it varied considerably by state (MoM):

- Victoria -14.4%
- NSW -7.5%
- QLD -12.6%
- Tasmania -21.9%
- ACT -7.1%
- NT -6.3%
- SA +3.2%
- WA +0.4%

Very much a disparate set of outcomes, similar to housing prices.

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Aussie household spending and broken monetary policy - A thread

- As I laid out yesterday fixed loans and changed consumer psychology have combined to blunt the short term impact of rising rates

- But there is another factor, the idea that rates will soon be reduced.

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https://twitter.com/AvidCommentator/status/1564157632273055745

- Whether this is realistic or not, I dont know, but it appears to be a very widely held narrative.

- This comes in spite of the market telling us the complete opposite, a cash rate peak of 4% & no rate cuts until 2024.

- But this & high inflation data doesnt seem to matter

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My theory on the Aussie economy/rates - A thread

- As it stands Aussie retail is well above pre-Covid trends, as is NZ. In time this will run out of gas as household resources are exhaust and rising rates bite.

- In New Zealand this took 9 months even with housing tanking.

1/ - But even when retail volumes in NZ started falling, it was in things like electrical goods, furniture and hardware supplies.

- This is more exhausted demand than anything in my view. Dept store sales surged at the same time, as did travel, so hardly a normal contraction.

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The RBA has broken monetary policy - A thread

- For many the expectation was that today would deliver news that Aussie retail was growing below the rate of inflation, but instead the figures delivered shockingly strong growth (+1.3% MoM vs +0.3% expected).

1/ - Aussie consumers continue to spend despite consumer confidence near multi-decade lows & some households already driven to the wall.

- But in aggregate that is overridden by the well off continue to spend, as well as others simply saying "F*** it" and buying what they want.

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1970s Oil Crisis - Historical Story Time - Mini-thread

- When oil prices rocketed in 1973 due to the Arab oil embargo following the Yom Kippur war, they stayed high for years to come, long after the embargo ended

- What is at times overlooked is one of the reasons why?

1/ - As rocketing energy prices fed into broader inflationary pressures the cost of pretty much everything including food rocketed higher.

- This left the Saudi's and the oil exporters in a challenging position, the cost of their key imports were skyrocketing.

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Australia Politics - A thread

In theory the Liberal party is underpinned by values of:

- Small govt
- Personal responsibility
- People standing on their own two feet wherever possible
- Prudent fiscal management
- A responsibility to those less fortunate

1/ In the last 2+ years of the Morrison govt we had none of those things.

Fiscal conservatism dropped dead after $40bn was blown on JobKeeper

Meanwhile the govt threw billions at vested interests, to the point where they created such a huge boom, it could break some industries

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Falling Aussie housing prices, exaggerated commentary & Monty Python - A Thread

- In recent months the idea of rising rates and falling housing prices has been compared with a living hell by some

- Yet anyone who has experienced any real hardship knows this to be hyperbole

1/ - I've always maintained that even crashing housing prices is not the end of the world, life goes on & challenges are confronted

- Yet there is this idea that it's this insurmountable issue that must be avoided at all costs

- It's also painfully Western centric

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Aussie Housing - A Thread

- Between 2017-2019 housing prices fell by up to 15% in some capitals, some suburbs dropped 25%. This was due to a tightening of lending

- The RBA/Govt has long feared a disorderly U.S style housing crash, but the pandemic changed the game

1/ - Even as early as 2010 U.S banks stopped repoing homes because it was pointless, why realize the loss

- Here in Australia the pandemic drove the banks/Govt to come to a similar conclusion, better to leave borrowers alone in a major broad based economic downturn

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Aussie housing - A thread

- For over a decade economists have been warning of overvalued Aussie property, yet it has kept going up on continued intervention

- We blew past U.S GFC era levels of household debt.

- We blew past Japanese housing bubble levels of prices to GDP.

1/ - Govt/RBA intervention has been the X-factor many including myself at times have underestimated

- Want to give $200bn in near free money to the banks for 3 years to create low bait rate loans? Sure, why not

- This has led to unparalleled levels of confidence in the market

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Why the elite prefer recession over inflation - A thread

- In the modern era 3 Western major powers effectively collapsed, revolutionary era France, WW1 era Russia and Weimar Germany.

- All 3 were brought undone by inflation and the cost of living undermining their govts.

1/ - 2 of these ended especially violently for the elite in question in France & Russia

- Meanwhile if you look at the past 200 years of history recessions have come and gone many times, but not even the great depression could rival the upheaval protracted high inflation brings

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Before I get any more DM's/tags about this.

I dont write the headlines.

The article concludes that far more is being spend on takeaways in % of GDP over the last 40 yrs.

I provide a graph and data points throughout the period covered.

1/ I conclude that this is broad based and much of the growth occurred before most of Gen Y were even adults as of 2002.

But the fact remains people are spending more on takeaways/eating out as a % of GDP.

Some of this is driven by people spending imprudently.

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Aussie Interest Rates - A Thread

- There is a theory that high levels of household debt and falling housing prices will prevent rates getting past 1.5-1.65%

- Its a possibility, but lets look at some of the data

- 40% of variable rate borrowers unimpacted by 2% rise

1/ - Including borrowers on fixed rate loans, over 50% of borrowers will be unimpacted by a 2% rise before April 2023

- Yet despite rising rates and even collapsing decade low (ex-pandemic) consumer confidence retail is roaring ever higher.

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Oil prices, persistent high inflation and interest rates - A Thread

- Chinese oil consumption is currently down 1.8-2m barrels a day due to lockdown

- SPR releases are adding another 1m bpd to the market

- Yet oil hit $120 yesterday

1/

Full article 👇
avidcom.substack.com/p/a-new-peak-i… - Despite these factors placing downward pressure on oil prices, gasoline prices are hitting record highs around the world.

- A major factor in this is the continued depleting of U.S transport fuel inventories (diesel, gasoline etc), as distillates are exported to Europe.

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Thoughts on the Aussie housing market - A thread

- In the Top Gear Polar Special where Jeremy Clarkson and James May drive to the North Pole, Clarkson asks not can it be done, but how easily could it be done.

- This is a question that should define the Aussie housing market

1/ - Rather than the market and prices being defined by what is the absolute maximum someone could borrow or get as a gift from their parents.

We should be asking how cheaply can we house our populace so they can dedicate their spending toward other endeavours.

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Aussie Federal Election - A Live Tweet Thread

Currently it's looking very close in the contest between the LNP and independents in North Sydney, Mackellar, Wentworth, Bradfield and Kooyong.

Currently feeling pretty confident in my hung parliament, but a long way to go. The early signs arent looking good for Labor's Kristina Keneally in her battle for the seat of Fowler with independent Dai Le.

This is a seat Labor really need to hold to have a shot at majority government.

China Property Sector - A thread

- Currently there is a major battle going on within the CCP. Xi wants to continue to rein in excess, while local govt & vested interests want to reopen the taps full blast.

- Every day this stand off continues more damage gets done.

1/ - In recent months both new and existing home prices have been falling in a large majority of cities.

- This has some local govts to buy their own land to keep revenue coming in, with others starting offer subsidies and incentives for potential buyers.

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Omicron variant, Covid restrictions and Government - A thread

- When Covid first emerged in China I knew it was serious from the start, not because I know about virology/epidemiology, but because the CCP panicked.

- Since then govt's have continued to periodically panic.

1/ - During Delta most govt's didn't see the variant as warranting significantly greater action, despite record case loads & major economic damage.

- Yet now some of those same govt's are panicking over Omicron, a variant where our understanding is seemingly in its infancy.

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