|
 Well,
that's it, the taxpayer subsidised wholesale banking guarantee is set to end on
March 31st.
According to Australian Bankers Association (ABA) chief executive David Bell, "The decision comes as no
surprise and reflects the relative strength of the banking sector."
Really? Aw, you know what we think about that don't you? Do we really need to
go over the details again?
Just a little bit then. Seeing as you asked nicely...
The fact is, under a fractional reserve banking system no bank is strong or
safe. They're each as rotten and feeble as the other.
So, was the decision really "no
surprise" as Mr. Bell claims?
Of course not, but it's only natural he'd put on the 'we don't care' image for
the press. The banks care so little about the wholesale guarantee that in 2009,
according to yesterday's Australian Financial Review (AFR):
"The government said
the big banks had raised about $160 billion using the guarantee and that non-majors
had raised $32 billion."
The guarantee that no-one needed has been used to the fullest extent possible.
In fact, if you look at the chart printed on page eight of yesterday's AFR
you'll see that Australia's 'strong' banks raised more through bond issues last
year than in the previous three year's combined.
Most of it underwritten by you and other taxpayers.
Meanwhile, taxpayers are underwriting a soiree organised by the Bank of
International Settlements (BIS), the so-called central banks' central bank.
The mainstream press are labelling it as a 'secretive' meeting of the world's
central bankers. So 'secretive' is the meeting that it's been splashed across
the pages of News Ltd and Fairfax websites for the last three days.
And so 'secretive' is it that The Age has even been able to get the scoop on who the
attendees and guests are, what the attendees were drinking and what kind of
music they listened to.
But never mind, it's nice to know how your tax dollars are being spent.
We do like the timing though. It's funny how Treasurer Wayne Swan made the
announcement this weekend to withdraw the government guarantee. Not last
weekend before the mob arrived. And not next weekend after the mob has gone.
Nope, it had to be this weekend. It's a perfect example of how ego-mania plays
a more important role in the life of a politician rather than concern about
what governments are doing with taxpayer money.
But, there's a simple reason why the Treasurer chose this weekend. And it's got
nothing to do with Australia's banks being stronger today than they were a week
ago. It's... what's the phrase?
That's right, it's called 'showing-off.'
"Look at me, look at
me!" Treasurer Swan is effectively saying, "Look at what I can do!"
It's nothing more than the political equivalent of a six-year old trying to
show-off in front of his mates. Treasurer Swan chose last weekend to announce
the end of the guarantee because he was hoping to get in some back slapping
from his new central banking pals.
Looking ahead, the interesting story will be how many of the banks gorge
themselves on the guarantee over the next couple of months before it's
withdrawn.
And already it looks as though the pinstripes at Macquarie [ASX: MQG] have been
spooked. From today's Sydney Morning Herald (SMH):
"Macquarie Group is
expected to return to credit markets before the expiry next month of the
government funding guarantee, in an attempt to roll over more than $2 billion
worth of funds that are due to expire this year."
Ouch! Of course in its presentation to analysts and investors this morning
Macquarie claims:
"Removal of
Government guarantee was anticipated and is not expected to impact funding
position"
We've got a feeling that was written through gritted teeth as the banking whizz
kids quickly figure out how the heck they're going to raise more debt without
paying higher interest rates.
But we're sure the bright sparks there will figure something out. Not that
investors are too impressed so far. As we write, Macquarie Group shares are
down over 6% this morning.
Our message is, if you've short sold the banks, hang in there and keep shorting
them. But just make sure you're using stop or guaranteed stop orders through a
CFD provider such as City Index.
That way you won't face potentially unlimited losses if the banks receive more
taxpayer funded support to get them out of their dark deep hole.
Anyway, if you look at the chart below of the four major banks plus Macquarie
you can see there's still plenty of downside potential:
As you may know, we've refused to tip any of the banking stocks in Australian Wealth Gameplan even though they may
have good dividend yields.
Our simple position is, that when we know something is rotten and technically
insolvent - due to fractional reserve banking - we'd prefer to keep clear. To
us it's akin to walking across a rope bridge that's fraying at the ends.
Sure, we may get across safely, but quite frankly I'd rather not take the risk
when we can cross the iron bridge further up the stream.
But what are the consequences of the end to the banking guarantee. Clearly it
could lead to the banks increasing interest rates independent of any action by
the Reserve Bank of Australia (RBA).
And that will naturally cause big problems for our property spruiking friends.
Speaking of which, it's clear we've hit a raw nerve. We cruised on over to the Business Spectator website yesterday to see what the doyen
of property spruiking, Christopher Joye has been writing about.
Not surprisingly it's the same old stuff. Cutting and pasting millions of
charts from his heroes at the RBA, all of it of course pointing to a wonderful
time for the economy and a perfect time to buy a house.
However, and here's where we think we've struck a raw nerve. In fact, we even
think early stages of paranoia may have set in. So concerned are we, that we're
tempted to put in a call to the Sydney Mental Asylum to see if they can send
the 'men in white coats' round to Rismark's offices.
Because as we were casually looking through a couple of the articles and some
of the articles posted, we noticed these quite extraordinary comments by
Christopher Joye:
It seems that Joye is convinced your editor is posting comments on the Business
Spectator website under the assumed name of "Tom Kimop." If you're a
regular reader of Money
Morning you'd clearly know that's not our style.
When we have something to say, we blurt it out there for everyone to see. And
what's more you're free to go to the Money
Morning website and comment without fear of censorship - unlike
some other mainstream websites.
Anyway, we could excuse one comment from Mr. Joye as an aberration perhaps, but
four hours and twenty minutes later it seems it's still eating him up inside:
Considering Mr. Joye had this to say about us on 8th January:
"One striking example
is the occasional scribblings of the sharemarket and CFD promoter Kris
Sayce..."
It makes you wonder why the "scribblings" of your editor warrant such
fear by a Cambridge University educated and BRW award winning company
executive.
It certainly is bizarre. The only conclusion we can come to is that over the
past year or so, your editor has revealed the truth behind the stinking corpse
that is property spruiking.
For years these clowns have gone unchecked in their claims about property
prices doubling every 7-10 years and about the so-called chronic housing
shortage. For years they've mesmerised the mainstream press with one made-up
index after another.
And even the latest index produced by Rismark has faltered at the first sign of
questioning. According to Joye, in his 29th January blog, he claims:
"As Australian home
values rose robustly in 2009, Rismark's National Dwelling Price-to-Income Index
has risen from its low of 3.7x in December 2008 to 4.1x as at the end of the
third quarter of 2009... Over the last six years, Rismark's National Dwelling Price-to-Income
Index has remained broadly static after solid growth during the early 2000s...
In December 2003 Australian dwelling prices were 4.2x disposable incomes, which
is effectively where they remain today."
Only they don't. Because even by Joye's own admission in a subsequent post:
"If you applied this
circa $10k difference to the current NA [National Accounts] numbers you would
get a ratio of 4.6x as opposed to 4.1x."
In other words, housing unaffordability is 12% greater than Rismark claimed in
the Rismark National Dwelling Price-to-Income Index.
But look, 4.1x or 4.6x, it doesn't matter which they use, because we all know
the more accurate figure is house prices to be somewhere north of six times
disposable income.
Anyway, we see the humorous side of Joye's comments. Not that what he's written
is funny, it's just that it's humorous to see the scale of the paranoia among
the property spruikers.
They're still spinning the same old stuff. And trying to back up their
half-baked arguments with nothing more than statistics from banks, central
banks and other vested interests in the property sector.
Based on the response of Joye it looks as though we've pushed the spruikers
right to the edge. Is it time to stop? Or is it time to give another big heave
and tip the whole property spruiking lies and misinformation over the cliff for
good?
Definitely the latter.
Cheers.
Kris Sayce. This article is contributed by Money Morning. Click Here to Subscribe to their free newsletter.
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