"Are you one of those American finance guys from Lehman Brothers or something?"
Your editor was eating pizza at a café on St. Kilda Road last night with a friend who works in the mainstream financial media. The owner knew our friend, but not us. And once he picked up on our accent, he had a few questions like, "What is wrong with all those people in Greece?"
We'll get back to that story in a moment. But this week's markets make for compelling reading - and the week is barely half over! In today's Daily Reckoning, we confess the things we don't know, look at the routine rigging of the global financial system, and discuss whether the People's Liberation Army of China is about to drop the big one on the United States of America.
Let's quickly dispel a rumour. There was a rumour on the Internet of secret emergency meeting in Sydney of the world's central bankers. We've been assured by sources that it was just a regularly planned retreat by the Bank of International Settlements. Rather than some extraordinary rigging of the world's financial markets, it was just regularly scheduled, ordinary rigging.
In the not so mundane world of markets, today is looking pleasant, if not totally rigged. The futures were up overnight, so Aussie stocks will probably follow New York's lead and have a big day out. The big report today is the half-year earnings for the Commonwealth Bank of Australia. And the big question: have bad debts peaked?
"Yes!", says CBA chief Ralph Norris. Last year the bank reported nearly $2 billion in charges for "bad and doubtful debts." This year, it's just $1.39 billion. The bank also reported a 13% increase in first half profit to $2.91 billion. Yep, doing it tough is the old CBA.
There's no doubt that the reduction in bad debt charges is a good sign for the banks. The "operating environment" (the real economy) appears to be less threatening. We'll see how it goes, but the rest of the market could take the CBA numbers as a sign the debt problem has well and truly peaked. A re-rating of the bank shares might take place and you'd see a mini rally.
Mind you it's not a rally we'd care to go to. There was another interesting note in the CBA's media release about the last six months. It reported a 49% increase in home loans to $1.19 billion. The CBA said the home loan growth was, "mainly as a result of increased market share and significant growth in outstanding home loan balances."
In other words, CBA had less of a bad debt problem in the last six months. But just you wait. It rode the FHOG to higher loan values and volumes and market share. If those borrowers struggle with higher interest rates or - horror of horrors - Aussie house prices grow less fast (or even fall) - we'd expect to see the bad debt problem again affect earnings growth and, ultimately, the valuations on Australian bank stocks.
But there is a lot about the world we don't understand. As our old friend Thom Hickling used to say when he visited us in France, "Je sais rien...I know nothing Dan. That's my motto." It's more or less our motto as well. That's why we ask a lot of questions.
And it's also why you'll find apparently contradictory statements and advice in the Daily Reckoning. Your editor thinks you should use any rallies in the market to gradually liquidate your stock portfolios. In other words, retire now before the government seizes your super assets or the market crashes.
Yet we work with experienced traders and analysts who've spent years in the markets finding great investments. We publish and sell their research and that contains buy recommendations on all sorts of Australian stocks. We publish that because fundamentally, we have no idea what will happen. It's what we're all trying to figure out.
The best strategy in that case is to surround yourself with people who are thinking hard and working hard to figure things out. And ultimately, you get to choose the ideas and editors you agree with or whose thinking you're interested in and whose track record impresses you. And even if you never take a punt on any of those publications, we'll keep reckoning every day for free! How good is that?
While we're still on the subject of debt, three cheers for Senator Barnaby Joyce! The finance spokesman for the opposition is copping it from all sides for suggesting that Australia is in hock "to our eyeballs to people overseas." He also said, "You have got to ask the question, how far into debt do you want to go? We are getting to a point where we can't repay it."
Even members of his own coalition have turned on him for suggesting Australia may not be able to repay its sovereign debts. But we say if Barnaby Joyce is fiscally incompetent, we need more men like him in government. He couldn't do much worse than the debt-first mentality of the establishment.
You can also judge a man by his enemies. In an article titled "Credit experts line up to rebuff Joyce" published by the ABC, we learn that experts from Fitch, Standard and Poor's, and Citigroup assure us that Australia is in no danger of defaulting on its sovereign debt obligations. Yes, the same people that nearly brought the global financial system to its knees and didn't see it coming are telling us there is nothing to worry about.
Irony aside, it's true that Australia's fiscal position at the sovereign level is better than a lot of other countries. As Michelle Grattan points out in today's Age, "Australian net debt is expected to peak at 9.6 per cent of GDP, or $153 billion, in 2013-14. In contrast, debt in 2014 in the US is estimated to be nearly 85 per cent of GDP. It will be nearly 92 per cent in the United Kingdom, 143.5 per cent in Japan and 93 per cent for the major advanced economies collectively."
Based on these numbers, it's looking pretty grim for the Senator isn't it? He does look a bit alarmist for warning of an imminent crisis in servicing Australia's sovereign debt. What's interesting is how vigorous the attacks on him are. What's going on there?
Well, there are certain interests in government and finance who want the debt to go higher. It's the business they're in and it supports their livelihoods and lifestyles. Some of the people criticising the Senator benefit tremendously from larger and larger government borrowing in Australia - whether it's the politicians who spend it or the bankers who arrange it or the ratings agencies who get paid to slap a triple A on it.
And in case these folks haven't noticed, the funding model for the welfare state is breaking down all over the world. It will catch up to Australia eventually. Indeed the very premise of the welfare state - that society can enjoy less risk higher standards of living through progressive taxation on a tax base that's getting smaller and less productive by the day and faces global wage deflation - is being exposed as bogus and fraudulent. That's why you should expect more measures that punish you for withdrawing your money from super or the banks - or restrict it outright.
But on this issue of debt, if only the Senator had spoken about Australia's net foreign debt as a nation, he would have made a better point. The net foreign debt is the sum total of how much Australians have borrowed from the rest of the world, minus what Australians have lent or own in equity. According to the ABS, "Net foreign debt is equal to gross foreign debt less non-equity assets such as foreign reserves held by the Reserve Bank and lending by residents of Australia to non-residents."
A simpler way of thinking about it is "how much of the world do we own and how much do we owe to the rest of the world." The facts on this matter clearly support the Senator's position. According to research published last year by the Statistics and Mapping section of the Parliament of Australia's Parliament, Australia's foreign debt was just $3 billion in 1976. According to the ABS, it's now $637.5 billion - or about 63% of GDP. That's a lot higher than the sovereign debt-to-GDP level of 9%.
Even without knowing how this compares to other countries, it's safe to say that number is alarming. Australia has $1.1 trillion in foreign assets. Half are in equities and half in debt securities. As always, there's the risk that asset values, especially equities, can fall.
On the debt side, Australia has $1.8 trillion in foreign liabilities. Nearly $700 billion of that is foreign equity ownership of Aussie stocks. The other $1.2 trillion is debt owed to foreigners by Australians. The odds are that if there's a double dip global recession this figure will increase. Domestic consumption of imports will rise with more stimulus while exports would presumably fall in a global slowdown.
But so what? Who cares if Australians firms and households borrow abroad to finance their consumption and investment? Isn't that a private or market-driven decision? Well, yes. But we think it exposes the country to several big risks.
First, the lenders might not always be so forthcoming. With massive borrowing needs in places like Japan, the US, and the UK, it's probably not safe to assume a ready supply of foreign capital. Even with a great credit rating, in a credit depression capital is going to be scarcer and the cost of it will inevitably go up.
The big risk, of course, is that you build an economy based on debt which isn't sustainable when the creditors turn you down. You have long-term liabilities you racked up when the currency was strong. But if they're denominated in foreign currencies and the Aussie crashes again (as it might in a global W shaped depression) paying back your debts gets more expensive.
Ultimately, it comes down to what you've down with your borrowed money. Have you invested in wisely? An increase in debt - or even net foreign debt as a permanent feature of Australia's economic landscape - wouldn't be so bad if it translated into an increase in productive assets. You'd be a capital importer. But you'd use it to build your asset base.
Those assets - especially capital equipment in the resource sector - would lead to higher exports, lower current account deficits (also as a % of GDP) and generally more investment led growth instead of consumption led growth. It would be a responsible use of debt.
But if the debt - as we believe the numbers show - has been taken on to finance a housing boom, or worse, to finance speculation by Aussie banks and financial firms in asset markets abroad, then it's not going to be what we call productive debt. So we'll see, won't we?
Tomorrow, we'll show you why borrowing your way to prosperity is not only a sure fire bet to national servitude, but also a recipe for political instability. Our case in point will be the United States of America and its main creditor, the People's Republic of China.
Finally, our waiter last night asked us, "What's wrong with those Greeks? Is there some sort of crisis or something? Is it like that Lehman thing you guys caused?"
"What's wrong with Greece? They can't pay their bills. Nobody wants to admit it. But they're living beyond their means. All of Europe is."
"So what will happen?"
"Probably some fake bail out. The bigger countries in Northern Europe will guarantee emergency borrowing by the Greeks. No one wants to admit that standards of living have to fall and government spending has to fall too. They're going to fight it...but it's like fighting the orbits of the planets."
"Hmm. Imagine that. Even in antiquity the Greeks were bad with money. But the Romans figured it out didn't they? They were good at collecting taxes. Not the Greeks. They had all the good ideas though."
Dan Denning
for The Daily Reckoning Australia
P.S. to get The Daily Reckoning direct to your inbox sign up to our free e-mail newsletter or if you prefer to use RSS, subscribe to the Daily Reckoning RSS feed.
Related Articles:
- The Bigger Debt Problem: China’s Local Government Debt vs. US Subprime Debt
- RBA Buys $780 Million in Residential Mortgage-Backed Securities
- European Governments of the Eurozone are Separately Responsible for Their Euro-debt
- A Look at Debt and Super
- Is Kevin Rudd Planning to Steal Your Superannuation and Bankrupt Your Retirement?
About the Author
Dan Denning is the author of 2005's best-selling The Bull Hunter (John Wiley & Sons). He began his financial publishing career in 1997 and has covered financial markets form Baltimore, Paris, London and, beginning in 2005 Melbourne. He’s the editor of The Daily Reckoning Australia and the Publisher of Port Phillip Publishing.
Comment by Bertie on 10 February 2010:
Howard gave Rudd the keys to the lodge debt free, imagine that, not letting a good crisis go to waste, the Rudd Wallys have run up a massive debt again(Keating left Howard 80 billion) under the guise of stimulus. Rex Connor would be proud. Labor governments cant help themselves, spend, spend, spend and the comes the inflation and higher interest rates.
Comment by geo on 10 February 2010:
Howards middle class welfare was even stupider in my opinion.
Comment by Biker Pete on 10 February 2010:
DD: "There was another interesting note in the CBA's media release about the last six months. It reported a 49% increase in home loans to $1.19 billion. The CBA said the home loan growth was, "...mainly as a result of increased market share and significant growth in outstanding home loan balances."
Nothing at all to do with Gail Kelly's fox paws, I suppose... ? Moi, je ne sais pas... but the CBA's comment they had less of a bad debt problem in the last six months would be grounds for litigation by shareholders if untrue. We can assume the CBA is not lying.
Dan's Catch 22 here is as follows:
a. "If those borrowers struggle with higher interest rates..."
(Didn't happen... May be half the expected rise in 2010.)
b. "If Aussie house prices grow less fast or fall... we'd expect to see the
bad debt problem..."
(Why? The 'negative equity' bogeyman is a ghost story oft told around
bears' campfires, but in reality, what Aussie household screams:
"Omigod! We're in NEGATIVE EQUITY!!!!! Sell! Quick, call a realtor!
Call 000!"
The greatest threat to banks was best modelled by Westpac. It cost them _big_ money, ignoring borrowers in order to excite and appease their shareholders. Greedy banks will simply find their key business disappear.
Comment by Ross on 10 February 2010:
The biggest threat is what the 4 pillars did in kiwi land with their AU balance sheets. Read the APRA 2004 report and it features as known risk that their fuzzy law constitution let them ignore. $1.1tr assets incl kiwi houses and there is no way to let the cross rate adjust to save the kiwi export business sector because the Aussie banks and their b/s currency swaps can't stand the devaluation. Add those extend and pretends to those of MAQ and Allco foreign assets with their of b/s claims of title on foreign assets and the 1.1 is under a cloud. The kiwi-AUD cross is the play during risk events but the rba & banks bite back when it settles.
Comment by Dan on 10 February 2010:
Yes, the worry in the end is if the game is up for banks and banking, they may elect to muddle up the board and force everything to start again - like a spoilt loser in a game of Monopoly.
Comment by Stillgotshoeson on 10 February 2010:
I agree with you 100% geo.. The Howard/Costello team were not the great ecomonic wizards that many believe them too be.. they just happened to be in government while we went Australia went through a huge resource boom giving the country a huge wad of funds which was not well spent, but merely habded back as middle class welfare for to keep them in government.
Keating was a far better treasurer than Costello.
People blame Keating for the 18% interest rates we had, but those rates flooded in from the world economy (US had similiar rates a couple of years earlier and we lag on the US economy, the old they sneeze we catch cold scenario)
Costello was in at the good times and never had to deal with a crisis..
Comment by Dan on 10 February 2010:
As much as I dislike debt, I have to say that insulating houses and installing solar systems are productive moves because they improve energy efficiency over the long term. They are minor interventions though, compared to the enormity of the rest of the Rudd govt's spending spree.
Comment by Stillgotshoeson on 10 February 2010:
Credit is going to get harder and more expensive to come by and the banks need to refinance or build deposit base to cover these billions of dollars of loans that are due to be covered by June 2011.. Deposit rates are going to rise to attract deposits... interest rates on mortgage, credit cards and business loans are going to rise regardless of RBA moves over the coming 12 months.. tighter credit and higher rates is going to put pressure on the mortgage markets.. those that have over commited or have poor savings discipline and just used the FHOG to get into a house could well find themselves in serious financial difficulties.. even more so if they furnished that nice new house with no deposit, no interest and no repayments for 3 or 4 years.. higher morgage rates next year plus the payments due on the stuff they bought 12 to 18 months ago = nastiness, then you have those that bought shiny new cars with the equity they have gotten over the last couple of years and the loan is now bigger than what they originally paid for the house.. equity markets at best have levelled off but I don't think so I think the world is going for a double dip recession...
Comment by Biker Pete on 10 February 2010:
You're assuming a lot here, Shoe-son: "...tighter credit and higher rates is (sic) going to put pressure on the mortgage markets.."
Yesterday's 9/02/'10 comment by Glenn Stevens: "...the bank could not stand by and let financial imbalances develop - as happened in the US housing boom, which then collapsed spectacularly, pitching the world economy into its worst recession for 75 years. But he also forecast that if Western governments give priority to cutting back their budget deficits sharply - as the Rudd government has promised - this would inhibit growth, and therefore could mean ''a lengthy period of rather low short-term interest rates'".
On one hand, Stevens is saying that the RBA won't permit a property crash. On the other hand, he's predicting a long period of low interest.
Ultimately, banks like Westpac will implode. Lots of cash deposits, but no borrowers. Banks like the ANZ, with low or no fees, lower interest rates and _no early withdrawal penalties_ will have to fight off borrowers... !
Australian rates being higher than the rest of the world's, I doubt our banks will have difficulty attracting money. And several, like Members' Equity, for example, have billions available through Super funds.
Not good news if your five-year-plan relies on a property crash for success... .
Comment by Stillgotshoeson on 10 February 2010:
50% of bank funds are from deposits, 50% from overseas markets, the rates from both these sources are set to rise.. these rises will be passed on to borrowers regardless of what the RBA does or does not do in the future in respect to rates.. Bank rates will move outside RBA moves as they already have at times... The reserve bank and the government have no control over the banks... Stevens and Swan can comment on the bank moves but can do nothing about those moves.
Don't forget to send a letter of thanks to P Keating for those Billions of funds in super
Comment by Stillgotshoeson on 10 February 2010:
forgot too add, I am not waiting for a housing crash.. of gone Gold instead more specifically Gold Mining. Bought another 50000 shares yesterday..
Comment by Fiscal Phil on 10 February 2010:
Dan,
I agree with making peoples houses more efficient users of energy, they may even be able to produce it. My question is does the govt basically subsidizing the entire process increase the price of the exercise.
I seriously investigated an opportunity to import insulation (not the foil type thank god) and found that the artificial demand created by the govt put the price of the product through the roof (pardon the pun)as demand outstripped supply. hence my interest.
I managed to secure a supplier from China but baulked at the last minute because it became apparent that my order would arrive at the same time as a lot of other people doing the same thing. All of it from China. As i was trying to turn a quick buck and had no interest in being a long term importer of the product I decided to cancel my order.
I believe the pricing has come down somewhat, however a) Australians (via the govt)are now apaying more for the insulation and b) much of this product is being sourced from China, where previously Australian manufacturers had the market. I'm all for overseas competition however without the govt inceasing demand so heavily Australians could have bought an Australian product to go in Australian houses.
Just a thought.
Comment by Stillgotshoeson on 10 February 2010:
First paragraph of an article in todays Financial Review...
RBA backs rate rises to prevent bubbles.
The Reserve Bank of Australia has signalled a tougher approach to reining in rapid rises in asset prices and credit and has warned that interest rates should not allowed to remain too low.......
Comment by Fiscal Phil on 10 February 2010:
I'll confess I've been a labor voter my whole life but i had a lot of sympathy for Barnaby J this week.
Basically he said what a great many of us think and was effectively turned into grilled cheese on toast for his efforts.
The last person to tell the truth was one P Keating, who's Banana Republic line was also a warning against excess borrowing. He too was placed on the foil and slid into position.
Two honest statements in more than two decades, what chance do we have.
We're getting the pollies we deserve, no wonder where looking down the barrel.
Comment by Ned S on 10 February 2010:
I'd consider emigrating to Holland then - Cause not much of it is "under water" I've been reliably informed recently!
Yap, Yap
Comment by Stillgotshoeson on 10 February 2010:
Fiscal Phil.. If Barnaby had articulated himself better he would not have got the roasting he did.. not so much what he said but how he said it...
Comment by Ned S on 10 February 2010:
I did say I didn't reckon he was the type to chuck a wobbly hey Dan? Leastways, not a SELF destructive one.
Comment by Ned S on 10 February 2010:
Last time I saw Coy "Roy" and "Fiscal Phil" and "Stillgotshoeson" gathered en masse was here:
http://www.dailyreckoning.com.au/aussie-stocks-tenterhooks-rba-decide-interest-rates-increase/2010/02/01/
And Yes, I definitely took note of what a flash trader "Stillgotshoeson" was at the time - Wow!!! (For anyone who feels to review same?)
PS: "Chunkton" mentioned he was putting up a Thai condo or two for sale, but I let that thought go through to the keeper at the time - That's just me I suppose?
Yap, Yap!
Comment by Biker Pete on 10 February 2010:
Shoe-son: "The Reserve Bank of Australia has signalled a tougher approach to reining in rapid rises in asset prices and credit and has warned that interest rates should not allowed to remain too low... "
If you re-read my post, I think you'll find we're referring to the same report. For whatever reason, the deletion of Stevens' prediction of "..a lengthy period of rather low short-term interest rates..." should stimulus cutbacks slow the economy, brings a little irony to the debate.
While DRA argues that stimulus and borrow should cease, now, Stevens warns that if there's any pain during that process, he'll lower rates.
Congratulations on your gold mining shares purchase, which I noted elsewhere. _What_ did you buy?
Comment by Stillgotshoeson on 10 February 2010:
If the RBA lowered rates to zero you will find the mortgage rate will still stay at around 5% simply because of the cost of funds from overseas markets and the rates on offer to attract deposits and the need to appease shareholders.. I believe the best we can hope for is rates stay around current levels but I beilieve that influences out side of Australia are going to cause them to rise.. ultimately they will come back down but the 64 million dollar question is how high and how much damage first...
The banks will act outside of the RBA in the coming 12 to 18 month period..
I bought more Citigold shares ASX CTO. I also hold Lihir Gold ASX LGL Gold One ASX GDO Goodman Group ASX GMG GPT shares ASX GPT Westpac Banking ASX WBC Atlas Mining ASX AGO and OZ minerals ASX OZL
Comment by Dan on 10 February 2010:
The banks are already acting outside the RBA by not passing on interest cuts and exaggerating interest rises.
Comment by Stillgotshoeson on 10 February 2010:
exactly...
Comment by Dan on 10 February 2010:
Well that's just evidence that government policies were directed towards supporting banks and not first home buyers.
Comment by Stillgotshoeson on 10 February 2010:
Ned S. I sold out positions on JB Hifi, Harvey Norman, Robust, and Rex last month for a nice tidy profit...
Comment by Ned S on 10 February 2010:
Good luck and good health - To ALL! And remember to take your financial pills under the MOST carefully considered of totally independant advice. Or what you reckon is a good idea regardless!
With the latter tending to be what I do.
Comment by Stillgotshoeson on 10 February 2010:
"Or what you reckon is a good idea regardless!"
Yep that's me...
Comment by Ned S on 10 February 2010:
Goodo!
Comment by SV on 10 February 2010:
Dan,
If the RBA lowers the rate to 0 but the banks are still unable to get deposit at 0.5%, then the government will mandate the super funds to allocate 50% of their assets to bank deposits.
The remaining 50% will be allocated to government long-term nation development bonds which will pay for school buildings and computers and second home-owners grant (for upgraders).
And if that is not enough, the RBA can buy more government bonds, US style.
Comment by Biker Pete on 10 February 2010:
Shoe-son: "If the RBA lowered rates to zero you will find the mortgage rate will still stay at around 5% simply because of the cost of funds from overseas markets and the rates on offer to attract deposits and the need to appease shareholders... the best we can hope for is rates stay around current levels but I beilieve (sic) that influences out side of Australia are going to cause them to rise.. ultimately they will come back down..."
Interesting, because that's not what happened elsewhere. We were offered 3% fixed, in Canada. What I'd give to be in the position of the Japanese. Our properties all close to zero percent for two decades... ! Unimaginable!!
Thanks for your gold tips, which I'm sure we'll _all_ watch with interest... .
Comment by Stillgotshoeson on 10 February 2010:
Most mortgages in Australia are variable rate mortgages not fixed rate..
That is another pending problem for the US of A this year and next, alot of Adjustable Rate Mortgages are due to be "adjusted" over the near term.. Will this add to delinquent mortgages.. probably.. as bad as sub prime, I hope not.
"Thanks for your gold tips, which I'm sure we'll _all_ watch with interest... . "
Not as much as me
Comment by Biker Pete on 10 February 2010:
Ned: "Last time I saw Coy "Roy" and "Fiscal Phil" and "Stillgotshoeson" gathered en masse was here:
http://www.dailyreckoning.com.au/aussie-stocks-tenterhooks-rba-decide-interest-rates-increase/2010/02/01/ "
Yeah, good point, Ned. Same cluster of bears, I see... all prophesying doom'n'gloom... DOW less than 5000, collapse of property markets 40%, same old sh*te. Figure you've found the common link (the MISSING link, actually.)
Where is Fluox Man, lately? "Houston to FM... is there anybody out there?!"
(With apologies to P. Floyd, whose cash registers are probing the DSOTM... .)
Comment by Biker Pete on 10 February 2010:
Shoe-Son: ""Thanks for your gold tips, which I'm sure we'll _all_ watch with interest... . " Not as much as me
"
I doubt that, S-S. It's one thing to announce what you've just _sold_ for a profit... and quite another to announce what you just bought. Blogsites are littered with the leaning posts of those who announced successful sales at high prices. It's quite another thing to disclose your recent purchases.
That stuff just doesn't go away... ever... .
I've done the same. I'm backing WA property. _Fortnightly_ dividends.
Good luck!
Comment by Stillgotshoeson on 10 February 2010:
I'm a bear in the current market, I am also a realist, it will go back up again.. I'ts a rollercoaster ride with it's ups and downs and twists and turns.. when it is all over I will look back and say I enjoyed the ride..
Comment by Stillgotshoeson on 10 February 2010:
"That stuff just doesn't go away... ever... . "
only play with what you can afford to lose...
Comment by Biker Pete on 10 February 2010:
You're using your own cash, of course... (?)
Comment by Stillgotshoeson on 10 February 2010:
of course....
Ralph Norris of Commenwealth Bank today......
"Overall, Mr Norris said rates were only likely to go higher.
"Our forecast is for higher cost of funding," he said.
That was because competition for funds was keeping wholesale funding costs well above pre financial crisis levels, and competition among banks for deposits were pushing up those interest rates, Mr Norris said."
Comment by Biker Pete on 11 February 2010:
Well, Ralph _would_ say that, wouldn't he? He's a banker... .
But you're using _cash_ so you don't need to worry. You 'only play with what you can afford to lose...' It's just 'play money', right?!~
Comment by christina on 11 February 2010:
So I can imagine this happening one day very soon. (warning- sarcasm is intended in the following paragraphs. If you are offended by sarcasm, please turn away now)
So, sll the angry Aussies will say to China and India and all the other emerging countries in the world "Hey, you lot, we know that you have been working very hard for like, 4 generations to try and get ahead, but now that you are all finally getting ahead, we Aussies would like you to stop it, because we really don't want you to have the money, even though you have worked hard for it working 18 hours a day and so forth, but we would like y'all to stop it now so that we can keep drinking beer and partying and acting posh in our designer label clothes.
SO this is the plan- you lot have to NOT get paid any profits or rewards what so everfor the hard work and sacrifice that you have all been doing for the past couple of hundres years while we partied on and drank beer, AND ALSO- please note we would like to keep all the profits and wealth here in Australia because as you know borrowing too much money to act posh, buying designer label clothes and buying flashy new cars with money that we borrow off you is actually the REAL road to weath, NOT working hard and sacrifing like you lot do. So we thank you in advance for your understanding that we would like the WHOLE WORLD to stop globalizing right now and step back and let us Aussies shine because we really are special and superior, and we really think that we should have all the money in the world, even though we don't produce anything or save anything, but the ads on tv said that 'we're worth it" and also because we look really good, like models, and we can pout and pose into cameras and we wear the latest "in" stuff. Plus everyone knows that looking beautiful is enough to get you what ever you want in life, after all the Australian media said so you know. All this silly hard work and sacrificing stuff you all do seems so silly when you can just, like, take your top off and flash your boobs at a camera and that is how you get rich.
Plus, we are not ready for a global financial crisis because we have not finished out beer. Here, hold my beer while I finish telling you this story. So, we know that you are all good people who go to Church and pray and who actually have MORALS, and family values, while we Aussies sleep in with hangovers from one night stands on Sunday mornings while you lot are all at Church, but we still feel like WE deserve all the wealth in the world and not you.
When we put it that way, that we would like all 2-3 billion of you to step back and stop working and earning, so that we Aussies can keep partying and keep acting posh, even though we are all in debt 156% of our incomes, we know that you will undersatnd. When we put it so well like that, we know that you won't mind eating just plain rice for every meal for another 3 0r 4 generations so that we can keep eating out in posh restaurants and pay for it on our credit card. After all, we must keep up with the Joneses and we can't be seen in last seasons fashions either you know.
We know that there are like 2 or 3 billion of you who work hard and have been yearning for a better life for 3 or 4 generations, and who work 18 hours a day to try too improve your lives, but we still think that us Westerners hould get the lions share of the worlds profits because we said so and if we don't get out own way then we are going to have a big fat tantrum. Because we're worth it.
Comment by Bertie on 11 February 2010:
Howard/Costello could of easily mismanaged Australia's wealth but they didn't. A healthy middle class is vital for any economy hence the focus on 'middle class welfare'.
Comment by Ned S on 11 February 2010:
I was thinking along similar lines as christina once. But figured getting in the road of a billion chinese and a higher standard of living sounded like a bit of effort - a tad risky even? So I voted for Plan "B" : Bring lots of the smart ones over here to work hard and pay tax so Kev can keep giving me my beer money.
I reckon it'll work out OK. Providing we don't do anything silly - like let THEM vote! Hmmmmm ... Hey Kev, I know we've already had the vote 'n all like; But I got another question for ya about Plan "B" mate ...
Comment by Ross on 11 February 2010:
Biker, this show by Ralph and John Schubert is a pantomine. They don't have anywhere near the global influence they had in the early nineties when they got the capital loopholes out of BIS to let them dress their balance sheets.
The Americans and the Brits have gone through all this pain and they won't accommodate our 4 pillars. Whining to APRA? What will that achieve? Hybrids are debt and will be treated like debt and nobody else is going to let little old Australia have another rule. And risk ratings & risk price is going to converge with measured inputs including a raw leverage limit well under what Aust banks currently have. Argue the toss on the risk but the rule must be the same because the capital pool is global and thats what got blown up.
And we must call Battelino's hypocritical comments for what they are
like (para) Australian households can take on relatively more household debt because of lower healthcare costs and property prices can keep rising .... in one breath .... and then in the next the Reserve can keep interest rates lower because disposable net income after mortgage and rent are constrained by the blunt affect of increases in interest rates on mortgages off a low base not likely to be revisited. The latter is the closest we have had to the RBA admitting that putting the consumer mortgage and rent into the CPI basket is exactly the thing to do, but doing so only after they structurally turned us into a basket case like Christina says. Granted Stevens finally found some asset bubble narrative the other day but he should be singing it from a birdey cage on George St.
SO for Australia ... exports with value add, too hard .. just do aluminium ingots on subsidised power. Commercialisation of r&d, too hard. And after a decent three card trick of working mums, more sensible IR, and less protectionism then we let productivity go to the dogs under Howard and now Rudd. There is only one thing I give Keating and that is that, the rest he was the laziest & sleaziest low road taker that ever was and so too all his cronies in the public and private sector that survive until this day.
Comment by Joe on 11 February 2010:
Bertie clearly didn't read Dan's report.
Sovereign debt is not the problem, it is private debt.
Howard gave Rudd the keys to the lodge debt free.
No he didn't .. If public debt is not an issue but private debt is, it is still debt we all (collectively) owe.
So how did Howard exactly hand over the keys debt free ?
Keep you politics to yourself please.
Comment by Nirvan on 11 February 2010:
Pete
Banks like Westpac will implode, ya right. I hope you are not suggesting Westpac will implode.
Comment by Biker Pete on 11 February 2010:
Ross: "...we must call Battelino's hypocritical comments for what they are
...Australian households can take on relatively more household debt because of lower healthcare costs and property prices can keep rising .... in one breath .... and then in the next the Reserve can keep interest rates lower because disposable net income after mortgage and rent are constrained by the blunt effect of increases in interest rates on mortgages off a low base not likely to be revisited..."
There's a certain irony about the RBA's statement, I agree. We're acting to prevent a bubble... but if things go pear-shaped, we'll drop rates again. Two bob each way.
Forty years ago I left the city because I couldn't (and wouldn't!) buy at those prices. I'm sure we're going to see the exodus of many of the young, for the same reasons. My investments, now primarily in the city, are based in the belief that most of those with money will buy there, regardless of rates.
If DRA is correct and paper currencies and stocks crash (and that's been the DR theme for a decade, now) we'll revisit low interest rates in Australia. And interest rates will be the least of our concerns... .
Comment by Biker Pete on 11 February 2010:
Nirvan: "Banks like Westpac will implode, ya right. I hope you are not suggesting Westpac will implode."
I like Encarta's definition, NV:
"implode: 1. transitive and intransitive verb burst inward: to collapse inwardly with ... The corporation imploded as a result of gross mismanagement..."
Westpac is highly unlikely to make public its loss of mortgage business.
In what may be the worst PR exercise the bank has ever employed (other than reneging on Ansett Flight points!) management initiated a shameless interest grab nearly double the RBA's recommendation. How many borrowers walked we'll probably never know... and the loss of _new_ business, now and in the next decade, is incalculable. Families remember this stuff...
Comment by Ross on 11 February 2010:
This is cool http://www.zerohedge.com/article/collapse-euro-insights-joseph-stiglitz-and-hugh-hendry-two-part-bbc-miniseries
Spain and 19th century socialist romantic claptrap on one side and hedge fund on a bet on the other.
Comment by 89peterg on 11 February 2010:
under Howard we swapped public debt for private debt, much of which has been squandered on speculation and luxuries, and could have been better spent on infrastructure (material and social capital), by public or private investment.
under Rudd, more of the same, with a little more public "investment"
Comment by Fiscal Phil on 11 February 2010:
Bertie,
as a fully paid up memeber of the middle class I was particularly angry when K Rudd (who i voted for)started giving out thousands of dollars to everyone except me. My ex wife got the cash splash largesse and i got zero.
I caused me to start examining what is the role of government in our daily lives.
I quickly came to realise that K Rudd, John Howard, Costello and whoever is likely to follow them are seen as being responsible for every thing that happens and as a result they get involved in and initiate activities that should by any measure be left to the private sector.
People are individuals who should be allowed to make decisions and live with the consequences of those decisions. I'm not talking about not assisting people who are genuinely disadvantaged, i'm talking about govt subsidies for big business, tax breaks for people who lose money on housing purchases be it for investment or to live in.
I'm against a baby bonus. Who the hell needs an incentive to have a child for christ sake? Sure if I had a wife who was expecting I'd be over the moon that the govt would give me money as well.
K Rudd gave a car company a heap of money to come up with alt energy designs, why the hell would you do that. I've got no problem with giving money to the CSIRO as they exist as a pure research organization, but a car company???????
We now have the ridiculous situation here in WA where the govt is under severe pressure to keep sporting events like V8 supercars. The organizers are a private company making money, the v8 are owned and sponsored by private companies, who i assume expect some form of return on their investment, the race is attended by people who pay for tickets and t shirts, the race is shown channel 7 who sell advertising space to clients who expect some comercial advantage by advertising during the race.
BUT FOR SOME REASON THE WA TAX PAYER IS EXPECTED TO COME UP WITH THE FUNDS TO MAKE SURE IT STAYS IN PERTH.
This is just wrong. The same scenario in WA with the AFL, the govt is thinking (the previous govt commited to) of spending between 400 and 900 million dollars on a state of the art facility. I love AFL but why does the govt i.e. taxpayer pay for it when other entities are gaining a very large commercial benifit.
I'm still more of a left winger than a right, but govt should concentrate on the absolute fundamentals of public responsibility and get the hell out of commercial practices. This way they'll get better at what they do and charge the country (via taxes) less.
Comment by Justin on 11 February 2010:
Citigold Stillgotshoeson!?
There's a penny stock if I ever saw one! My worst performer & I bought in pretty much at the trough in '08.
Don't be surprised if that one hasn't bottomed yet, though I'm thinking another 50000 at say, 1 cent, could be a good investment!
Comment by Deo on 11 February 2010:
Bertie clearly didn't read Dan's report.
Sovereign debt is not the problem, it is private debt.
Howard gave Rudd the keys to the lodge debt free.
No he didn't .. If public debt is not an issue but private debt is, it is still debt we all (collectively) owe.
In terms of problem for the whole economy excessive public or private debts is bad / risky but in terms of fairness and being an incentive / disincentive to the productive population...I much prefer private debt of Howard hands down against public debt prob of KRudd.
People with private debt at least can say it was their choice to accumulate debt, their choice of life-style and their enjoyment and it would be fair for them to pay the price. On the other hand, where's the fairness when KRudd distributed cash like drunken sailor in the name of GFC stimulus ... some people got windfall gains (which prob ones that never paid taxes anyway) and others who are unlucky (like me) have to endure the costs in future higher taxes.
This is not about left or right ideology...but this is about personal responsibility and public responsibility, i.e which government is prudent enough not to be wasteful and a greater burden to the citizens. Labor is quite famous in the big government, jobs for the mates kind of wastes and as a taxpayer this is something I truly resent.
Comment by FreddyC on 11 February 2010:
More "well-informed" liberal supporters that don't understand the relationship between Govt Debt and Foreign Debt.
Comment by Deo on 11 February 2010:
Well, it is easy just to comment on my "lack of understanding" but I doubt you could "enlighten" me with things that I don't know.
So, please try ...give me some lessons on relationship between govt debt and foreign debt and I want to see whether these lessons could somehow invalidate my previous argument.
Comment by Fiscal Phil on 11 February 2010:
Let's start a new party.
A coalition between disenchanted voters of left and right (i'm from the left) who see govt's role as one of provider of essential services and defence.
As a life time labor voter i almost puke now whenever I hear Kevin speak (or should that be kevinspeak, all one word) with his either needlessly over complicating of things or commenting on everything from sporting matters to noisy parties. just run the bloody country Kev.
I also used to get the same feeling in my digestive system whenever honest John the weasle or the Smirkenator used to treat us like fools and subsidized farmers so they could get out of what were essentially failed business enterprises. Or give people like me a health care rebate which effectively subsidizes health funds.
Let's call it the STOP THE HANDOUTS PARTY. No dogma, no ideology, no big end of town, no fast tracking for union buddies, no money to areas based on a "marginal seat" mentality, no lobbyists, no circuses in place of policy, just sound administration of the public purse.
Soon our Federal Parliament will be as corrupt as the state govt's as the state govt's move to the corruption levels once only seen in local councils.
Stop the rot.
Comment by Ross on 11 February 2010:
89peterg and freddyC, look at the figures and you will see that the first wave was with Keating and Costello later just jumped on the bandwagon with the same banksters and public service hacks that hung out with Keating, many of them cut over to the private merchant banking and economic advisory consultancies that grew as a result of the CAD and nothing else. Yes Keating took us into public debt as asset prices collapsed at the end of the 90's but he had already set the precedent with small public surplus and big CAD and had run the services economy fueled by debt and GST to capture it up the flagpoll for Howard, Costello and the cronies who didn't give a damn who was in power their play ... and our structural disaster. Keating pulling the levers remember ... all go .. nothing sustainable.
So liberal & labor hacks and academic economists and the public service can all take their medicine in turn.
Comment by Deo on 11 February 2010:
Let's start a new party.
A coalition between disenchanted voters of left and right (i'm from the left) who see govt's role as one of provider of essential services and defence.
As a life time labor voter
Fiscal Phil, are you sure you're not liberal party sleeper cell in the labor camp ?
Your preference of small government, less wastes, no hand-outs and only necessary services by government is surely taken from economic conservative book
Comment by Ross on 11 February 2010:
I meant "Keating had already run the GST up the flagpoll for Howard/Costello to later implement and capture it" (and put it on top of state property levies and stamp duties).
Comment by Fiscal Phil on 11 February 2010:
Fiscal Phil, are you sure you're not liberal party sleeper cell in the labor camp ?
Deo, I can see your point and up until now I may have harboured the same suspicions. But I can assure you my roots and my outlook is very much from the left, however my concern over the nature and extent of govt interference is that it is not based on any rational understanding of how our community and econmy work.
Why did Kevin give billions of dollars to people to spend on TV's and holidays to Bali (i didn't get it and I admit to being peeved at the time) when there are 90 + year old pensioners at risk of dying in 40+ deg temp in dilapidated public housing because the local authourity insists he obtains a medical certificate from his doctor before they'll put in a 500 dollar wall mounted aircon in his bedroom. but he can't get out of bed to get it.
Why Did Johnny and Peter c give millions to a lot of people who are multi millionaires in the form of a health care rebate, when you can go into 80% of aboriginal homes in regional areas and witness for yourself the conditions that young children are living in. Do it,you'll never have any doubts over our part in their downfall and continued oppression, yes oppression.
Govt's will build stadiums, hand out rebates and subsidies and bonuses to a huge part of the popul;ation either directly or indirectly to maintain the crippled and corrupt public system we now all see.
If you want to see what the future of Australian govt looks like, either conservative or labor then look no further than the most corrupt local council in your own state or just look at the NSW govt.
This process simply cannot be stopped with the two party system as it stands. The public service has become a huge sponge for inefficient and unmotivated workers who's only wish is to get through the day and their working life without a problem.
Its not their fault, its just the way it ends up (yes i was a public servant).
Govts are manipulated by businesses who use the media and lobbyists and donations to twist the arm of govt to help them maximize profit. It's not their fault, its just the way they operate (yes , i now work in the private sector)
So, i'm a radical minimalist when it comes to govt's intervention in all things commercial, however I'm a radical lefty when it comes to govt's role in providing services to those who GENUINELY NEED IT.
Comment by Stillgotshoeson on 11 February 2010:
"Comment by Justin on 11 February 2010:
Citigold Stillgotshoeson!?
There's a penny stock if I ever saw one! My worst performer & I bought in pretty much at the trough in '08.
Don't be surprised if that one hasn't bottomed yet, though I'm thinking another 50000 at say, 1 cent, could be a good investment!"
I think they are a bargain small cap under 10 cents..
Comment by Deo on 11 February 2010:
Well Fiscal Phil, it seems like you're an economic conservative but social liberal person. Nothing to be surprised, a lot of people have similar situation ...conservative view on social / economic areas and the opposite liberal in the other. You would understand yourself better if you google "Political Compass" and take the free test there.
I myself a little bit like you i.e. very conservative in economics area but more into middle ground in social area. The mass media call it "Little l - liberal"
Your situation is more unique though because you're very conservative econimically yet very liberal / leftie socially - which IMHO may create conflicts in your thought / feeling from time to time.
For example in political history there were times where a government welfare policy was set based on a noble goal to help those who need help (e.g. single parents, people from lower economical background etc) but then the policy usually also creates "moral hazard" e.g. welfare dependency on the relevant group of people, and/or creates huge wastes in government spending due to bureaucracy and red-tapes which in the end creates fiscal deficit and big govt debt and high taxes.
This situation must creates conflict in your head, no ?
Comment by Firebug on 11 February 2010:
I have to say that I disagree with Fiscal Phil on the spend on aborigines.
There are areas and people of genuine needs amongst aboriginal communities. However, widespread welfare has not been beneficial to them as people are not encouraged to stand on their own feet.
Suppose the same can be said about other ethnic groups too. Middle class welfare probably has similar impact on some people.
Australia is far too socialist. We need a smaller government, lower taxes, and wiser government intervention.
Comment by Justin on 11 February 2010:
Stillgotshoeson, Citigold do a lot of talking but very little producing, they also continually dilute existing shareholders with new issues, two since I've held the stock & now they propose another.
I'm not saying that you won't 'profit', as I see it the gold price has only one way to go & it ain't down. Just realise they haven't thus far proven they are best gold miners around.
Comment by Deo on 11 February 2010:
Australia is far too socialist. We need a smaller government, lower taxes, and wiser government intervention
Amen to that.
Comment by Bertie on 11 February 2010:
pinkbats that kill, a housing bubble, internet censorship that even google wont stand for, what is this government up to, Whitlam/Cairns/Connor reincarnate, spend, spend, spend. If Howard had all the skill of the Rudd Wallys he would of run up a massive, massive debt spending on who knows what. A strong middle class is vital to democracy and economically stablity. Howard made sure Australia's middle class was as strong as it could be, thus strengthening Australia.
Comment by Fiscal Phil on 11 February 2010:
This situation must creates conflict in your head, no ?
No, not since Kevin came to power, basically I see in KRudd everything that is wrong with a labor govt. I already knew all the shortcommings of John Howards approach.
There's no conflict when you hold the position that the govt's role is to take only what is needed from the broarder community in the form of taxes and distribute that that money to only those who need it in the form of essential services, defence and welfare to the obviously underpriveliged.
The rest of us will just be just fine going about our normal business and something very unusual will happen. Those industries that can make a buck, will. Those industries that can't won't all govt intervention in commerce does is stifle the evolution of commerce and prevent real and meaningful growth.
Money for the arts etc is generally welcomed and consumed by the middle class, well if there is a screaming need for say more Australian films then that need will be filled when some budding entrpreneur say's "I think I'd like to mak an aussie film" not when the SA, WA, VIC , NSW film commisions (can you believe all these exist??)go begging to the govt for money that should go to ...... fill in the blanks, take your pick, better submarines, better aged care, better whatever.
You don't need to be conflicted if hold to the truth.
As for Firebug, a lot of money has been wasted and will continue to be wasted in trying to improve the situation of aboriginals because the govt's won't spend a dollar more or introduce real reforms because there is no votes in it. We'll continue to pour money into ineffective programs for years rather than bite the bullet and introduce real change that may have a greater up front cost, but be more effecient in the long run.
Comment by Nirvan on 11 February 2010:
Pete
It sounds more like wishful thinking on your part about Westpac. Westpacs mortagage loan base swelled during the FHOG , now they may just want to shrink it down a bit, whats wrong with that. Maybe the capital adequacy requirements by BIS in the furture will favour Westpac who are increasing their deposit base. Westpac imploding not a chance ! ..and finally with high net immigration in Australia and ever increasing property prices if Westpac wishes to shift its portfolio it very well can ! because new Migrants dont remember a thing unlike Families.
Comment by Biker Pete on 11 February 2010:
Nirvan: "...they may just want to shrink it down a bit... ." Yes, I'm sure that explains the rush of 'mea culpa' ads which followed Westpac's management's realisation that they were out in the cold, alone.
"...new Migrants dont remember a thing..." Perhaps memory training will remedy that, NV. In fact, psychologists state that it takes around ten 'positive' actions to erase one 'negative'.
"It sounds more like wishful thinking on your part about Westpac." It's true. I'm no fan. When they failed to honour their flightpoints deal with loyal customers, we withdrew our custom. That cost them a great deal of money, amplified by all the other folk like me who sent them a blast!
I was quietly delighted when they jumped in and amped the interest rate.
It reaffirmed not only our perception of their culture, but also that we were right to quit them years ago. Our move has saved us megabucks.
Having said that, you're quite welcome to take out a housing mortgage with Westpac. You sound like a very loyal customer... and I'm sure Westpac values its loyal customers highly... .
Comment by Stillgotshoeson on 11 February 2010:
@Justin I have been watching Citigold for a while.. If I had bought at the high of 58 cents I would be extremely unhappy with their performance to date.. buying at 8.5 cents with good upside potential for gold and they are now producing I think is a good move..
The current share purchase plan is 12 cents a share, the share price has taken a tumble since the announcement of the SPP, a lot of share holders obviously are not happy with the dilutionary aspect so are selling down.. I am a great believer of Warren Buffets ideology.. be greedy when others are fearful and fearful when others are greedy.. the fundamentals of the company look sound, no debt, producing, and a good upside for the gold price.. 100% return in 12 months is in my opinion not a far fetched proposition.
I have $4200 in dividends coming from Goodman Group this month so I spent that on Citigold..
Comment by Firebug on 11 February 2010:
Fiscal Phil, I know what you mean about what needs to be done for the Aboriginals. Don't we all want the right things to be done ASAP?
But you know the necessary actions won't be done for a long time yet. I am not sure if this is an issue of cost. I think this is more to do with the mainstream society's cultural attitudes. I think the right things won't happen at all until we get rid of the political correctness madness that is so prevalent in our society. The socialists / leftists do even know the root cause of the issues.
We all know deep down, part of the solution for the Aboriginal issue is for them to adopt some cultural change and becoming more like the rest of the mainstream Australians. Yes, I am saying that unless
- Aboriginal kids start going to schools and get a decent eduction
- the adults become self dependent not live on the hand out from the rest of their countrymen
- stop having this victim mentality that is so paralysing
- be prepare to move to places where the jobs are etc
there will be no end of their misery..
Comment by Nirvan on 12 February 2010:
..and Pete you are welcome to withdraw.
Comment by Nirvan on 12 February 2010:
..and Pete maybe it was the right move for you but I know for some others Westpac has been good for them and have cash portfolios there or moved there recently. Keep wishing Pete.
Comment by Ross on 12 February 2010:
Here is a little gem of an exchange,
http://www.smh.com.au/opinion/politics/be-like-the-kiwis-says-abbott--but-they-cant-fly-20100211-nv6k.html
one that flushed out one of the most desperate 4 pillars with the NZ branch offices and their created housing bubble on their balance sheet. Abbott is right here except that the kiwi exchange rate is not being allowed to find its corrective point because the 4 pillar crims and their APRA mates can't be made to pay for their crimes. Even Smith publicly has bemoaned being stuck with his kiwi branch office liabilities. Pity he didn't call for his board (especially MacFarlane) and APRA to be given their pink slips.
What we have here is a defacto of Greece under the Euro but the risk to the Australian economy is far more direct. Yes, despite the self correcting floating exchange rate being hamstrung by the AU banksters, the kiwis are doing their best and rewinding to times when they had to be more bold due their lack of resources beyond dairy lands.
In calling for Australians to be more like the kiwis in "can do" and less excess in govt Abbott is right, but I am also one under no illusion that Abbott wouldn't sell his grandmother to gain power. Abbott has given statements that would have us believe he would commit us to a war with China if the Americans replace beggar thy neighbour, and the insistance of maintaining China drops it's relatively fixed exchange rate controls before the US reins in their bs and bottomless supply of USD's that are sent out as inflationary nukes that create bubbles and US citizen private ticket clipping fortunes with the perils they sew on assets in foreign shores.
So America (and little mate UK and former very little AU mates MAQ and Allco) must be cleaned up before floating rates can be anything but a bomb designed to blow up the Chinese state. And even when rate are said to float just look at the AUD-Kiwi to see what sort of games can be played with floating rates. With so much merchandise trade (it was 80% in air freight for instance) being trans tasman and so many Kiwi exports otherwise being in USD you can still pull off a stitch up because "the club" won't let a Soros get at the funny money readies to take them on. Not like the case of the hedgy on the video link I posted the other day where he was taking on Greece and Spain and socialist world govt fan Stiglitz'; the hedgy has plenty of US treasury & bankster support.
Comment by Biker Pete on 12 February 2010:
NV: "..and Pete you are welcome to withdraw."
Best you can deposit?! Phhewwww!
Comment by Lachlan on 12 February 2010:
I sold my Citigold a while back after being a true believer for too long.
I love their mine/geology/historical production etc etc. Looks a paper tiger. Maybe a change of management/higher AUD gold price etc could be the salvation. I have no idea where the stock market is going. We've had plenty inflation last ten years but unlike physical gold the stock market is no strong bull market over that period. Even in a high/hyper inflation scenario opinions vary on likely stocks performance. With a deflation scenario I would think that stocks could also price downwards even where companies are making profit and moving forward.
Comment by Stillgotshoeson on 12 February 2010:
After watching citigold for some time I think now is a good time to buy in so I trust my judgement and bought
No one has any idea where the market is going to go.. you can just take in information and form an opinion on what it is you think it will do and act or not act on that... Fear and Greed are the main drivers of the market..
Fear is keeping alot out of the market still, fear of capital loss is making investors have itchy trigger fingers on the sell button, It won't take much negativity in results/news to get a sell off.. need a lot more positive news/results to get a significant buy in.. my reading of the information at hand says a correction is more likely than not
Comment by Chris Y on 12 February 2010:
we expect governments to do whatever they can to keep down the price of capital (interest rates). But then we reserve the right to criticize the same government if we are thereby tempted to borrow beyond our safe boundaries. Well, if you were a consumer and borrowed up big on credit cards, you are doing it tough now, with typical card interest rates of 20% per year.
My biggest beef about the whole Rudd experiment- the great fiscal stimulus campaign- is that, in appearing to 'work', it has presented a very bad lesson in economics to the immature. "yes, you CAN spend your way out of trouble. " We are going to be getting this story repeated in lectures for years... about how good stimulus is and how…...obvious. Mind you, the Rudd experiment is only a local version of the global picture. Look at the Obama version and blush. (as Crocodile Dundee might have put it: "that’s not a stimulus!.. THIS is a stimulus")
If stimulus 'worked', it is not the stimulus in Canberra that counts, but the grand stimuli in Beijing and Washington.
Comment by Hossak on 12 February 2010:
Now you can take this anyway you like but personally I wouldn't touch Citigold with a 12 foot pole. The Lynch brothers are heavily involved in the mine and shall we say do not have the best of reputations in Charters Towers. They did manage to buy all of the old Rishton mine equpiment for about 80k 6 months ago so I hope that helps with their cause. We were looking at the feasibility of toll treating about 30k of gold ore through the nearest gold mills and were told not to go anywhere near them. I hope they succeed but just be careful with that one.
Comment by Ross on 12 February 2010:
Any of the WA reader bloc here got a take on the retained value left in Coote Industrial? I know Elphinstone got in there as a saviour and he's been no fool in the past but it hasn't done anything good since by way of price v market. I am not a holder at this time.
Comment by Stillgotshoeson on 12 February 2010:
@Hossak
I am always careful.. $4250 + Brokerage was not a significant stake.. I don't think they will go bust and if they do 2 weeks lost wages is no cause to be jumping of a bridge... I think over the coming 12 months they have more upside potential than downside.. I may even decide to sell in the 25 to 30 cent range, take an 8 to 10K profit and move on.. will watch the market to decide that...
Comment by Hossak on 12 February 2010:
Glad to hear it Stillgot. I am not saying that the shares wont go up, just that where there is smoke.......
Comment by Lachlan on 12 February 2010:
Its all about group stimulation Chris. If every government can stimulate in unison then the only suckers will be the productive sector who pay through higher taxes and inflation. Of course it wont work longer term.
Comment by Lachlan on 12 February 2010:
US stimulis clearly a desperate failure even now. Unemployment still worsening, mortgage defaults increasing again. And Aus walking the razors edge in my view. What did we get for our debt?
Comment by Biker Pete on 12 February 2010:
"What did we get for our debt?"
5.3% unemployment (half that of the US), for a start, Lachlan. Then, stability of our banks. And people were able to keep their homes. In fact over 200,000 families got _new_ homes, freeing up 200,000 rentals, so rents stabilised. Rumour has it that rents actually _fell_ in some areas...
Can't believe I'm sticking up for a Labor government here... they got some of it very wrong (insulation)... but unless you're actively _seeking_ the immolation of the Australian economy, so that gold will bubble higher*, I'm not sure you have a valid point here...
* and I'm certain that's NOT the case... .
Comment by Stillgotshoeson on 12 February 2010:
"What did we get for our debt?"
5.3% unemployment (half that of the US), for a start, "
Real uemployment is probably closer to 8 or 9 percent if you take in account under employed (those with reduced hours) and those that do say 4 hours a week... technically employed but with reduced spending power to service debt or be consumers
A proven inflation of the housing market via the increased FHOG, when has the government subsidising something made it cheaper.. child care..private health..house prices.., proven stats that around 1/2 those FHO's are now in financial stress.
"In fact over 200,000 families got _new_ homes, freeing up 200,000 rentals,"
Misleading because many were still living at home and not renting and brought forward their purchase of a house to take advantage of the so called "free" money. Mortgage applications have since fallen, yet we are supposed to have high demand, high immigration and low supply..
A supposed now booming economy that will nessesitate the raising of interest rates isolating more buyers and forcing those struggling closer to the edge....
Then, stability of our banks
Well that is a wait and see, yes our banks are in a far better position than most other banks of the world.. but stable, they are at the mercy of the economy and the economy could do anything...
Comment by Lachlan on 12 February 2010:
My focus is on real GDP. Property market growth should be a spin off from real GDP growth (ag,industry) not financial sector growth. The finance boys claim on radio they have not taken one cent of tax payers money to stay solvent (unlike US). What about pre-emptive bailouts..I mean FHBG's. What about the $8B RMBS recently?
Comment by Biker Pete on 12 February 2010:
Who said anything about property market growth, Lachlan? You asked what we got from stimulus... and I replied, citing an unemployment rate half that of the US (since you used the US as your lead-in); stability of banking (which even Shoe-son acknowledges); and cheaper rents. Yes, I realise that a lot of bears are now re-thinking the wisdom of declining FHOGs, but I find the position many here take (f*ck the economy... it has to die so gold will rise!) a little unAustralian. Ultimately I see ongoing disappointment for those who seek a crash to make gold cash. That's your burden, I guess. Carry that weight... a long time... .
Comment by Ned S on 13 February 2010:
Depends how one looks at it - I doubt Kev Rudd is gunna refuse to count residential real estate related activity in his "real" GDP. Any more or less than he'd decline to leave out bucks generated by health care. I guess the point may be that it seems inherently smart to be producing stuff we can export at a profit? But in Oz there doesn't seem to be too much of that right now except for minerals perhaps. Could be way worse ... At least we aren't Iceland trying to figure out how we pay off a really big per capita debt flogging off cod liver oil.
Comment by Lachlan on 13 February 2010:
Hi Biker.My reply was in response to "stability of our banks". They depend on their property assets retaining value.
Comment by Ross on 13 February 2010:
Ah Biker, I wish we were in a better position than the UK .. and the rest of the STUPIDs.
True the UK is running out of North Sea Oil & gas (which facilitated the iron lady's miracle moreso than her reforms) and the city is running out of ticket clipping opportunity in its two largest industries (finance and real estate), but besides those lesser negatives, we can only make comparative financial judgements by checking the financial fuel consumption and the financial fuel liabilities on a relative basis at both a national and a household level. On those we are sick puppies my friend.
And like everything else bubbles are made of the combined fuels of narrative and money and outcome sentiment.
I have got to concede that you are way ahead on the narrative side. So as an investor (with the wisdom of "as a mum" and pushing your Hummer tricycle pram) you have a sensational track record. The last time you were challenged was 1990/1 (remember & note the lag from the 87 crash) and that was a blip that Keating's debt and later Rubenomics funny money got you out of. But when you can blow into the bubble alongside the taxman, the politicians of all colours, every mortgage holder and property investor in the country you are surely on a good bet and you have been. "As an investor" all luck to you!
But lets go back to the other side of the fuel. Current Account Deficit, debt service ratio, nett national foreign liability, quality of the foreign assets we claim title to on our national balance sheet (has a familiar ring to it that one doesn't it), and lastly the household debt-to-income ratio.
And yes Current Account Deficit money could be used productively, and if you judge that global resources demand will hold at current levels you could say that some of ours in past decades has been spent wisely. But I remind you that the Australian banks have a done a small percentage of the lending into that sector and that they are the dominant feature of our offshore borrowing, and that leaves mortgages first and commercial real estate second as the backbone of their balance sheets and hence our current account deficit's collateral.
When the financial fuel comes from the fiat funny money creating balance sheets and is absolutely reliant on foreigners, rather than the Keating induced super racket, the "as an investor" with decades of track record starts to lose the security they have relied on these past decades.
Yes its going to be as ugly as you imagine and your support for the "do something!" appeal for Keynesian stimulus is understandable in terms of what we all face. And in a services economy built on people's false expectation of the worth of their assets there is no doubt that outcome sentiment and confidence is the greatest of drivers in releasing household savings and raising levels of personal borrowings. Oh but for a never ending spiral of underpriced credit growth on the supply side "as an investor" would always be so clever.
On the financial supply side and the balance sheet fraud it is all over red rover when any significant and rational financial discipline at all is brought to bear.
And to follow my continuous line, when the foreign assets claimed with USD funny money (bought by USDs and originated by undisciplined creationist leverage in the US) get liquidated after investors demand higher rates it all goes pear shaped for the AUD, our massive short term offshore private bank funding, and your portfolio's asset prices and because of the effect in the wider economy, the income you derive from them.
Don't worry about whether Greece is a Euro problem or whatever, because the USD is the global instrument any big negative at all, anywhere in the world, on debts and commodities is a "risk" event and can set off the big USD deleveraging calls on collateral and the explosion of the bodgy CDS that they are allowed to pretend has lowered their risk ratings and cost of borrowing.
And at the household level, Keynesianism always brings forward spending and there is a trough in front of the bow wave you go into when you stop spending, it displaces more productive private investment that puts you into a long term cycle of Soviet style productivity decline, and over any more than an action to prevent an immediate panic it is like giving a cough drop to a patient with throat cancer.
Comment by Biker Pete on 13 February 2010:
Ned: "I guess the point may be that it seems inherently smart to be producing stuff we can export at a profit?"
We'd all agree that would be ideal... yet we also expect that China's position may be stabilised by her own _domestic_ markets in the future...
That model served the US well for five or six decades... .
"I doubt Kev Rudd is gunna refuse to count residential real estate related activity in his 'real' GDP."
I'd be highly surprised if he identified that as a plus, Ned. A little too controversial, considering prices in some Australian cities. He'd be much wiser to point to 200,000 fewer Aussies renting; recent levelling-off of rents, which were getting out of control; the public housing programme; the re-emergence of shared equity programmes in some states; the health of the construction industry; and the falling unemployment rate, partly the result of the last three. Don't rule out tax deductions for _all_ mortgages, either. I doubt you'll hear too much about that until days before the federal election; although whichever party pulls that rabbit out of the hat first may end up governing Australia... .
As you say, our situation could be much worse, which Tony Abbott reaffirmed when rejecting the assertion that Australia couldn't beat our deficit. Many here seem to believe that's the case, that Oz will fold under its debts. I really can't think of too many other nations better positioned to climb out of the pit created by northern hemisphere bankers...
Comment by Biker Pete on 13 February 2010:
Ross: "...when the foreign assets claimed with USD funny money (bought by USDs and originated by undisciplined creationist leverage in the US) get liquidated after investors demand higher rates it all goes pear shaped for the AUD, our massive short term offshore private bank funding, and your portfolio's asset prices and because of the effect in the wider economy, the income you derive from them."
So, putting aside my 'portfolio' and rents for a moment, Ross (
) it really is Armageddon... the complete collapse of the Oz buck, our economy, our current high employment rate, our current tax base... the lot, really, I guess? And you truly believe the Brits are better positioned to beat this rap? A timeline would be helpful here... so I can liquidate my assets, you understand.... . 
Comment by Stillgotshoeson on 13 February 2010:
I didn't say our banks are stable.. I said they are in a better position than overseas banks, but that position could change...
tax deductible mortgages will come in at the same time as paying capital gains tax on the family home...
Comment by Ross on 13 February 2010:
Biker, I might be both brave & foolhardy fronting such positions after having been proved so wrong investor wise ever since I left Aust for Germany in disgust in 88, and then when I thought I was vindicated, and returned in 91 when I thought I could do something positive to influence a better sort of recovery, to be flattened in the court of economic & investment outcome for another 20 years.
In terms of influence on policy all I could do however was earn a living. Low roaders all had the more saleable pitch and the ticket clipping motivation. Policy doors were all locked up by the cronies. DITAC/DITARD were full of what were either correctly observed to be McEwen era relics or the lowest rung hacks Keating and the boys wonder transfer in there. Everybody who was anybody was at treasury or at Access Economics or filling out job applications at merchant banks.
We had the Button car plan to appease the industrial unionists, we had the CSIRO unfunded and spread all over the shop achieving litte, and we had commercialisation of research by all knowing public service hack and academic. Getting sector investment was by racket and what sector was all middle class and leftist politico appeasement politics.
Just one example, the one where the Keating cronies said they had a trick to capitalise the million places needed in childcare centres so the taxman could get at a bigger clip of wages, and at the same time appease the loonie left academics, and the soviet public service. The academics made all these rules that, when you put a P&L together meant you couldn't recover your investment in a private centre. The rules on floorspace of course didn't apply to existing centres so the leftists thought that their existing community based friends would all be fine and the capitalists would be squeezed out. But they didn't count on the Keating era cronies ability to make debt and rent play for over 15 years before it all caught up with defrauded investors with the collapse of ABC Learning. 15 years and never a cent of profit in it. Asset values ramped through the roof on totally bodgy earnings even the buildings and land underneath them were captured planning permission wise so your money was stuck in the sector. All the private players who saw they couldn't make a buck bought up by ponzi ABC. Beauty Newk! Keating and the cronies .... his hero Jack Lang revisited, I wish he was at my school, his lip wouldn't have had him escape the hiding of his life .. one that might have changed his life and those of our kids. And for Henry the wombat, a beautiful piece of work that, all on the never never and the dumb investor hung out to dry by his sycophant regulators.
And that is just one to make a point.
So you are talking to someone who has been proved wrong and couldn't pick the date of doom in the past. No doubt about it. Everything is marvellous now too ... all the figures say so! Except the ones that track the access to the debt that fueled it all.
Comment by Ned S on 13 February 2010:
It's the debt thing that keeps getting mentioned. Which is why on recent occasions I've quoted from the "Chartalist" school. With Keen, whose site is entitled Debtwatch having said: "if there is a genuine recovery not involving rising private debt to GDP levels, then Chartalism is the only theory left standing."
And a quote from a Chartalist in an article written by Keen being:
"We often read that the appropriate fiscal stance is to balance the federal budget over the business cycle. Some economists claim the goals should be to run a surplus on average over the cycle allowing for deficits in extreme downturns. Both goals would be fiscally irresponsible in Australia’s situation where our current account is typically in deficit. If the government balanced the budget on average and the current account deficit was in deficit over the business cycle then the private domestic sector would on average be in deficit (dis-saving) over that cycle. The decreasing levels of net private savings financing the government surplus increasingly leverage the private sector. The deteriorating debt to income ratios which result will eventually see the system succumb to ongoing demand-draining fiscal drag through a slow-down in real activity.
In other words, adopting a growth strategy that relies on increasingly leveraging the private sector is unsustainable. The only way the private domestic sector can save if there is a current account deficit is for the government sector to run deficits up to the desired private saving. Government deficits “finance” private saving by ensuring that aggregate spending is sufficient to generate the level of output and income that will bring forth the private desired saving levels."
http://www.switzer.com.au/the-experts/steve-keen-economy-expert/its-hard-being-a-bear-part-six-good-alternative-theory/
Not that I could or would pretend to have any idea about it. But am just noting that it says what it says. And that Keen does seem to be allowing for the possibilty that Chartalism may turn out to be "the only theory left standing."
Comment by Roy on 13 February 2010:
So interesting stories out there today.
A Flinders University associate professor, Dr Joe Flood, a housing economist, says: ''I am certainly not the only one who believes a housing correction is inevitable. Long experience with markets has taught me not to try to call [the peak of a bubble]. [The property price rise] will stop when banks stop lending, which almost always happens when some sort of scare ensures.
http://www.smh.com.au/world/stressed-out-waiting-for-the-bubble-to-burst-20100212-nxjf.html
http://www.smh.com.au/business/relax-the-greeks-are-doing-fine-20100212-nxh4.html
http://www.theage.com.au/opinion/society-and-culture/easier-zoning-would-deflate-home-prices-20100212-nxeh.html
Comment by Ned S on 13 February 2010:
"tax deductible mortgages will come in at the same time as paying capital gains tax on the family home" - It is the logical corollary.
With there presumably being lots of options in relation to any implementation. One possibility being:
Give the home owner the choice as to whether they claim the deductions - With those who do claim deuctions, exposing the property to CGT. And with those who don't, being CGT exempt.
Comment by Biker Pete on 14 February 2010:
Ned: "The only way the private domestic sector can save if there is a current account deficit is for the government sector to run deficits up to the desired private saving."
Where's the _incentive_ to save, Ned? If inflation is looming (and I believe it is, regardless of what happens abroad) how can 'savers' get ahead, particularly if they lose 30% in tax?
Ned: "Give the home owner the choice as to whether they claim the deductions - With those who do claim deuctions, exposing the property to CGT. And with those who don't, being CGT exempt. " Yes, that's viable. Already we do not claim for empty blocks of land, even though (having plans drawn up for them) we're entitled to do so. We just can't use any more write-offs (and if you're savvy, you'll know what _that_ means!
Ross, I've always been impressed by the breadth and depth of your knowledge, so I'm not discounting anything you've said. Your suggestion that interest will rise in Australia once the brakes are off in the NH is very likely. We'd suggest August 2010 as a likely date. Nothing new there.
That may present some dramas to those whose first priority isn't the servicing of their housing loan(s)... .
We're not in that group. Super has been a great boon to us. It now covers _all_ our debt. Cash reserves are a bonus, meaning that if values fall, we'll actually be in a better position to expedite our ten-year-plan. Remember we've survived 17.5% interest rates, two plateaus and a dip... .
I'm not sure we could ride out the apocalypse, but we'll give it our best shot!!~
Comment by nv on 14 February 2010:
I'm with Hossak re Citigold. It's apparent to me that Citigold is scheming new ways to take investments away from you rather than producing. I'm off overseas to countries trying to woo investment dollars that actually produce.
Comment by Ned S on 14 February 2010:
I think within the context of the full article he means "save" in terms of all the various ways one can choose to hold debt free assets Biker - Cash, property, stocks, bullion, bonds etc. With those various forms of "savings" just having different levels of risk and liquidity. Although, Yep, I know I'm on very shaky ground whenever I start reading any economist's musings.
Ken Henry seems to do much the same here, where amongst many other things, he discusses Australia's national saving rate and states that concern about it "was one motivator of the Superannuation Guarantee scheme." :
http://www.treasury.gov.au/documents/1643/HTML/docshell.asp?URL=QUT_Address.htm
The other bit that Henry says there that I assume might have a few wanting to ask more questions is "From a national accounting perspective, a current account deficit means that a country's investment exceeds its saving. It follows that sceptical people will tend to interpret a current account deficit as either a deficiency of national saving or an excess of national investment." With him going on to say:
"It would be reasonable to conclude, therefore, that Australia's sustained current account deficits reflect high national investment rather than low national saving. And, for the reasons I have detailed here today, national investment levels could remain elevated for several decades."
And the Chartalist who Keen gives a bit of a potential tentative plug (as the only school left standing, if he, Keen, should turn out to be wrong) is certainly discussing very similar stuff.
Comment by Dan on 14 February 2010:
If Henry keeps abusing the word "investment" like that, it will end as yet another word chewed up and destroyed by modern philosophy.
Comment by Ross on 14 February 2010:
Henry can pick up the post modernists from the nanny state socialist universities and take them with him after he sneaks out the door. They can read to each other in the catacombs they build in their wombat holes. Everlasting life to them, there is no better sentence.
Comment by Ned S on 14 February 2010:
Biker's point is a good one - Must admit I don't have an understanding (yet?) of what economists mean by investments versus savings. But I expect misunderstandings could very well arise from the fact that "The term "investment" is used differently in economics and in finance."
http://en.wikipedia.org/wiki/Investment
That issue aside, I figure the following chat by the IMF about current account deficits generally, might be worth a re-read if I should ever figure out what economists mean by the terms savings and investment:
http://www.imf.org/external/pubs/ft/fandd/2006/12/basics.htm
Comment by Ned S on 14 February 2010:
Another "Your comment is awaiting moderation." - Doesn't love the links I guess; So comment follows with a space between http:// and the rest in the links:
Biker's point is a good one - Must admit I don't have an understanding (yet?) of what economists mean by investments versus savings. But I expect misunderstandings could very well arise from the fact that "The term "investment" is used differently in economics and in finance."
http:// en.wikipedia.org/wiki/Investment
That issue aside, I figure the following chat by the IMF about current account deficits generally, might be worth a re-read if I should ever figure out what economists mean by the terms savings and investment:
http:// http://www.imf.org/external/pubs/ft/fandd/2006/12/basics.htm
Comment by Dan on 14 February 2010:
The question to ask in all of the transactions (savings / investment) is who benefits? One man's debt is another's investment using another's savings (sometimes multiplied through fractional reserve banking, hence debt can by far exceed savings, inflating money supply without much regulation).
Investment which benefits foreign entities (called foreign investment) is an euphemism for foreign debt. Using the double taxation rule, multinationals 'invest' in Australia to milk profits without paying taxes here (but instead paying them abroad, usually at favourable rates because money is flowing into the country in question). Loans are investments by banks, but they are a burdensome debt for the wage earners taking on the risk. All of it is a joy to Government, which makes money from anything that moves.
Politicians call everything investment because they don't want the people voting to think they are a bunch of losers. Banks call everything a loan because 'loan' sounds compassionate and charitable. I call everything 'debt' because it is a cause of lost sleep and overwork, and because it's generally all a rip off.
You can see already from this how much spin there is in all the talk, and what a load of crap the economists are talking most of the time - they are selling faeces to the public by calling it chocolate. It's the rare pollie (like Ron Paul) who at least backs up his statements with some kind of clear and logical reasoning.
Comment by Ned S on 15 February 2010:
Call me a silly billy by all means, but IF I'm correct in my understanding of the fractional reserve banking/money multiplier effect (think it's called such stuff?), it goes along the lines that $100 of savings/bank deposits is lent out at leverage at say 10 to 1, so effectively $1,000 can be lent for every $100 a bank holds in deposits. With the depositer getting maybe 5% pa interest from the bank as income (ie $5 on the $100 he ponied up) and the bank collecting maybe 7% pa from the borrowers (ie $70 on the $1,000 they lent out).
Now I know banks have a few overheads and a few risks (how many is pretty much up to them), but somehow as the depositor of $100 on which the bank makes $70 in a year, I'm starting to get the feeling they might be dudding me a bit by only paying me $5 ? IF that's how it works.
Comment by Ned S on 15 February 2010:
In fact looked at that way, there is no logical reason why a bank should/would need to pay depositors a lower rate than what they are earning - Which is what "we" traditionally expect and accept - Indeed the % the bank can pay its depositors could very well be much higher than the % they are charging on (for example) 10 times the deposited amount that they've lent out. Depending on just how much the bank feels it needs to operate (including covering any defaults - and I'll find a different bank if mine reckons its lending practices are such that they expect lots) plus what the bank figures is a fair and reasonable profit.
IF that's how it works.
Comment by Lachlan on 15 February 2010:
Fantasic post Dan but the faeces and chocolate..I was eating my brekky man!
Comment by Stillgotshoeson on 15 February 2010:
Here Ned.. this explains it in laymans terms...
http://video.google.com/videoplay?docid=-2550156453790090544#
Goes for 47 minutes....
Just as an addendum... ANZ Banks Cash reserves at one point were less than 1%
Comment by Ned S on 15 February 2010:
"Goes for 47 minutes ....." Thanks. But I doubt my dial-up connection will like that. So sticking to Wikipedia type words:
http://en.wikipedia.org/wiki/Fractional-reserve_banking#Example_of_deposit_multiplication
It seems that I CAN'T whinge about the bank dudding me as there are a bunch of "other" depositers who necessarily come into the multiplication process along the way; Who'll also have their hand held out for a bit of bank interest. That's my best take on it anyway.
Comment by Sambo on 15 February 2010:
Stillgotshoeson: That's a pretty good video, thanks for posting.
Comment by Stillgotshoeson on 1 April 2010:
Update...
@BP "Thanks for your gold tips, which I'm sure we'll _all_ watch with interest... . "
Comment by Stillgotshoeson on 10 February 2010:
If the RBA lowered rates to zero you will find the mortgage rate will still stay at around 5% simply because of the cost of funds from overseas markets and the rates on offer to attract deposits and the need to appease shareholders.. I believe the best we can hope for is rates stay around current levels but I beilieve that influences out side of Australia are going to cause them to rise.. ultimately they will come back down but the 64 million dollar question is how high and how much damage first...
The banks will act outside of the RBA in the coming 12 to 18 month period..
I bought more Citigold shares ASX CTO. I also hold Lihir Gold ASX LGL Gold One ASX GDO Goodman Group ASX GMG GPT shares ASX GPT Westpac Banking ASX WBC Atlas Mining ASX AGO and OZ minerals ASX OZL
Can not find where I posted that I sold 100000 Goodman Group Shares and bought even more Lihir Gold..
Any way.. purchased 30000 overall at an average price of $2.95
Just sold them for $4.02
15% CGT because I had them less than 12 months (Self managed SuperFund)
$88500 Investment returned me $32500 gross profit in less than 6 months
31.2% Nett Profit in less than months
Comment by Stillgotshoeson on 1 April 2010:
Citigod have now on paper given me a similiar return.. 8.5 cent purchase price
now at 11 cents.. Lihir will drop again, may buy back in under $3.50.. Newcrest may have another crack at them at a later date..
Will hold the Citigold for now as they are in discussions with a Chinese Gold Mining company in respects to a JV.. If that pans out (as I think it will Citigold should jump as well)..
Comment by Biker Pete on 1 April 2010:
Impressive, Shoes. Told Steven you were the likely fella outbidding him!
So I guess you retire next year?!~
Comment by Hossak on 1 April 2010:
Nice work Shoes! Maybe you should contemplate selling those citigold ones and banking the money as well. Only reason I mention this is that there is a chance that the Chinese gold miner knows what it is doing and will come to the same conclusion as everyone else who have had a look at that area.
Ask Lihir how those high grade/low tonnage operations work out *cough* Ballarat gold *cough*. $410 million burnt in two years and no explanation as to WHY?
Anyway best of luck with your decision!
Comment by Stillgotshoeson on 1 April 2010:
@Hossak
Citigold has a higher proven reserve than the Ballarat mine.. The Chinese are looking to up their gold reserves.. My take on the situation is the JV will go ahead... as you say.. Lihir sat on Ballarat a couple of years hoping it would "perform" then gave up and wrote it off... JV with Citigold too would be given time to see if it performs.. After announcement of a JV I expect Citigold to jump,
I will seriously contemplate selling then and booking a profit. If all goes well for them it will still be a couple of years before they hit peak output. So taking the money and early seems to be the logical step.
Comment by Stillgotshoeson on 1 April 2010:
forgot to add I made $36000 nett profit on the Goodman Shares I sold.. 100000 @ 25 cents sold for 65 cents... only 10% CGT as I had them over a year...
Still have 180000 more Goodman Shares.. Thinking of selling them too. I don't think they will do much more this year in Capital Growth.. maybe $5000 in dividends in October.. Think I can do better elsewhere.. Part of me wants to hold them for the longterm.. 5 or more years could see them back at $5 or more... with 25 cent dividends.. that's potentially $45k to $50k in income big incentive to keep them. Getting more in dividends a year than they cost me, that's a sweet position to be in...
The other part of me says, they probably won't do much this year.. selling and making a gain elsewhere and buy more later..
Comment by Biker Pete on 1 April 2010:
All good moves, Shoes. Realised I'd seriously underestimated you when you replied to my cheap shot about losing your house with the comment that you gave it to your wife to ensure your kids had a more stable homelife.
May you prosper... !
Comment by Justin on 1 April 2010:
Citigold wants to start mining gold rather than shareholders, I think that 'goldmine' has been exhausted. Their latest 'capital raising' only made them $1 million. Would that even cover their operating costs for a week?
Still, I agree there is upside in the share price. Gold has to move soon enough, despite the RBA's current 'anti-inflationary' stance. I'm afraid the horse has long since bolted.
Interestingly, repo operations using 'general collateral', read anything with a gov guarantee, hit a record on 31st March, $4.85 billion! Which when 'unwound' this morning left the banks in the red a whopping $5.14 billion! Creak...Creak
Comment by Stillgotshoeson on 1 April 2010:
@Justin 225 shareholders of 11000 took up the SPP offer...
They were always going to struggle with no discount, some people were obviously not happy with the SPP and sold down to keep it under the 12 cents, so, few were ever going to take up the offer.
Citigold say they need 20000 ounces a year to be cash flow positive so on that $1 million would be about a months working capital. March Quarter report due later this month will tell us if they are still mainting 5000+ ounce a quarter.
Hopefully Citigold will realise that investors are getting tired of the dilutionary actions...
Comment by Hossak on 1 April 2010:
You could say the same about Lihir shoes