America

How not to win over climate skeptics

This is exactly why climate alarmists struggle to sway climate skeptics. Screaming, chanting and laughing hysterically proves what? One thing – no willingness to challenge the thinking with reasoned argument, debate and engagement. If the research is so robust on the alarmist side, why not let the data speak for itself? Surely an open and shut case. Oh that’s right, the science is so settled that government and university bodies continue to be busted for scandalous manipulation of data to fit a ‘political’ wealth transfer narrative. NOAA was subpoenaed by Congress for willful distortions ahead of the Paris summit in 2015. Yet scandals don’t sway the faithful.

Where was the acceptance from the hecklers that US emissions have headed south for several years and likely to remain in % terms little different going forward? Where was the protest against China & India which are cranking up coal fired energy generation out to 2030? Or does blindly signing a document that is non binding and largely ignored in practice more worthy to the protesters that not signing and being more successful on containing emissions? Group think at its worst. CM worries about the future for our kids – not cut short from the risks presented by climate catastrophes but woeful indoctrination which removes their ability to critically evaluate.

How did these people miraculously get to the COP24 summit? Fossil fuel powered jet aircraft and cars perhaps? Did they realise that the steel that went into the transport that delivered them is derived from coal products? Have they not looked outside their own bubble at the 22,000 other disciples kneeling at the altar of the UNIPCC? Are 7,331 observers really needed? The hypocrisy is astonishing. Perhaps they expect the rest of us to offset their carbon footprint?

No it is just better to scream and shout and use kindergarten level tantrums to try to prove a point. No wonder the UN organisers fawned over a 15yo Norwegian girl who they anointed as an expert on climate change. She may have been behind the worldwide school strikes for climate ahead of the summit but it is truly sick to see the exploitation of kids to drum home a message that has failed to cut through on the merits of the science alone.

The irony of these summits is that the crowds attending do not want the circus to end. Every year the scare mongering gets more extreme to keep the attraction going. 22,000 frequent flyer accounts won’t be able to keep status if COP meetings don’t roll on to the next town.

CM is absolutely willing to be convinced otherwise. Happy to listen to sensible solutions that prevent civilians from setting light to their own cities in protest over climate policies that will achieve zero. However hysterical shouting down and chuckling cannot trump well researched and balanced debate. Perhaps when countries like Guinea send two delegates instead of 409 it maybe worth lending a more generous ear.

Being holed up in a hotel in Tokyo, the only English channel is CNN which is broadcasting climate alarmism on a loop. There was a touch or irony that the network featured a story about a Honduran man, who like many others, is escaping climate change at home to seek asylum in the United States, a country, according to the wailers, going the completely wrong direction on climate policy. Go figure. Instead of being in Katowice, these protesters should be on the Mexican border megaphoning that ICE is the least of their worries.

Brexit – Jonathan Pie does it again

Whether you’re a Remainer or Leaver, Jonathan Pie explains in his trademark profanity-laced way why the Brexit deal of UK PM Theresa May is such a dud. What is the point of having a referendum which garners the highest ever voter turn out only to throw it back in the faces of both sides? In what world would a collective constituency want their parliamentarians to vote for a deal that makes everyone worse off? Why did May fold to every EU demand? She should have channeled the leader across the pond as to how to negotiate with Brussels.

Last week the Bank of England (BoE) ditched its independence charter to aid-and-abet the PM by producing a document stating a “No Deal” Brexit would hit UK economic growth by 8%.  What a joke. Would the EU seriously try to stitch up the economy of the second largest car market for German auto makers? It is preposterous in the extreme. Obama threatened in 2016 that the 5th largest economy would be at the back the queue when it came to trade deals. Trump would happily move it to the front. Canada and Australia too…can the BoE honestly come up with credible reasons why the ROW would spurn the UK in unison to get to an 8% slump?

Why only now has the BoE discovered this potential economic apocalypse? After all, the scare stories leading into the referendum about how the UK would plunge into the abyss should “Leave” succeed have simply not manifested. None of it. Why believe it now when its forecasts have been so off reservation? After all it did not advise the HM Treasury not to dump all of its gold at the very bottom.

Yet the Brits aren’t so stupid to see the deal being offered is the only one going. They have heard Minister for European Parliament (MEP) Guy Verhofstadt demand that member states hand over more sovereign powers to the EU. They saw EC President Juncker stagger blind drunk across a NATO stage BEFORE the dinner. There was little doubt in their minds when they checked the ballot square as to what was at stake. A No Deal Brexit is the one that should be pursued. The EU has so many disaffected member states that it is the one that needs to play nice with the UK, not the other way around.

 

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Take this chart, which shows the level of apathy member states have to show up and vote at European Parliamentary elections. Were the Brits so gung-ho to stay in the EU, why have only one-third of Brits ever shown up to express their love and affection for federalism? Is it any surprise that Italy, Spain, France & Greece have shown similar disdain over time as the EU fails to deliver for them? Surely the trend since 1979 has shown the underlying mood of member state constituents about how they value EU membership.

Perhaps Verhofstadt put the Brexit discussion into perspective (from 6:20) – after member states ratified the May plan in 38 minutes (a sure sign it is a great deal for the EU) – when he stated the hope that in the not too distant future, “a new generation of British…decide to come back into the great political European family

Tells us all we need to know. This week will show beyond a doubt about whether the island nation will have the very democracy it has shed so much blood to defend will be protected.

As Baroness Margaret Thatcher said of Europe,

 “During my lifetime most of the problems the world has faced have come, in one fashion or other, from mainland Europe, and the solutions from outside it.”

Complacency kills – the ticking time bomb for Aussie banks

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In the late 1980s at the peak of the property bubble, the Imperial Palace in Tokyo was worth the equivalent to the entire state of California. Greater Tokyo was worth more than the whole United States. The Japanese used to joke that they had bought up so much of Hawaii that it had effectively become the 48th prefecture of Japan. Japanese nationwide property prices quadrupled in the space of a decade. At the height of the frenzy, Japanese real estate related lending comprised around 41.2% (A$2.5 trillion) of all loans outstanding. N.B. Australian bank mortgage loan books have swelled to 63% (A$1.7 trillion) of total loans.

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Sensing the bubble was getting out of control, the Bank of Japan went into a tightening rate cycle (from 2.5% to 6%) to contain it. Unfortunately it led to an implosion in asset markets, most notably housing. From the peak in 1991/2 prices over the next two decades fell 75-80%. Banks were decimated.

In the following two decades, 181 Japanese banks, trust banks and credit unions went bust and the rest were either injected with public funds, forced into mergers or nationalized. The unravelling of asset prices was swift and sudden but the process to deal with it took decades because banks were reluctant to repossess properties for fear of having to mark the other properties (assets) on their balance sheets to current market values. Paying mere fractions of the loan were enough to justify not calling the debt bad. If banks were forced to reflect the truth of their financial health rather than use accounting trickery to keep the loans valued at the inflated levels the loans were made against they would quickly become insolvent. By the end of the crisis, disposal of non-performing loans (NPLs) among all financial institutions exceeded 90 trillion yen (A$1.1 trillion), or 17% of Japanese GDP at the time.

The lessons are no less disturbing for Australia. Don’t be surprised to hear the authorities and local banks champion stress tests as validity that we are safe from any conceivable external shock. The November 2018 Reserve Bank of Australia minutes revealed that the next rate move is likely up but the board is happy to sit on its hands because housing is slowing even at 1.5% cash rates.

With US rates heading higher, our banks are already facing higher funding costs because of our reliance on overseas wholesale markets to fund mortgage lending. Japanese banks have 90%+ funding from domestic deposits. Australia is around 60-70%. Our banks need to go shopping in global markets to get access to capital. Conditions for that can change on a dime. External shocks can see funding costs hit nose bleed levels which are passed onto consumers. When you see the press get into a frenzy over banks passing on more than the rate rises doled out by the RBA, they aren’t just being greedy – a large part is absorbing these higher wholesale funding costs.

What about America? Who could forget former Goldman Sachs CEO and US Treasury Secretary Hank Paulson tell us how robust US financial institutions were right before plugging $700 billion to rescue the crumbling system? US banks such as Wells Fargo, Citi and Bank of America (BoA) have been reducing mortgage exposure relative to total loans outstanding. Yet each received $10s of billions in TARP (bail out funds) courtesy of the US taxpayer.

By 2009 the Global Financial Crisis (GFC) had turned over 16% of Bank of America’s residential mortgage portfolio into either NPLs, mortgage payments over 90-day in arrears or impaired (largely from the shonky lending practices of Countrywide (which BoA bought in 2008). Countrywide’s $2.5bn acquisition price turned out to cost BoA shareholders a further $50bn by the end of the clean-up. Who is counting?

Oh no, but Australia is different. Residential property prices in Australia have had a far steadier rise over a longer period – a 5-fold jump over 25 years – meaning our local banks should be less vulnerable to external shocks. There is an element of truth to that, although it breeds complacency.

Property loans in Australia as at September 2018 total A$1.653 trillion. 82% of those loans are made by the Big 4 banks. Interest only loans are around $500 billion of that. As a percentage of total loans outstanding in Australia, mortgages make up 65%. The next is daylight, followed by Norway at around 40%. US banks have cut overall property exposures and Japanese banks are now in the early teens. Post GFC, US banks have ratcheted back mortgage exposure. They have diversified their earnings through investment banking and other areas. You can see this below.

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The advent of interest only loans has helped pushed property prices higher. NAB notes in its latest filing that 29% of its mortgage loan book is in interest-only form. The RBA expects $120 billion of interest only loans resetting to principal & interest (P&I) each year to 2020 which will hike monthly mortgage repayments to jump 30-40%. If investors were up to the gills in interest only mortgage repayments, adding one third to the bill will not be helpful. This is before we have even faced a bump in wholesale finance rates due to market instability. Look at the way that GE – once the world’s largest company in 2000 – is being trashed by the credit markets as they seek to reprice the risk attached to the $111bn in debt after a credit downgrade. This is a canary in the coalmine issue.

We also need to consider what constitutes a bubble in property. Sensibly, affordability makes the strongest argument. At the height of the bubble, the average central Tokyo property value was around 18.2x income. Broadening this out to greater Tokyo metropolitan area this was around 15x. This figure today is around 5x. Making arguments that ever higher levels of migration will keep property buoyant is not a sound argument as affordability affects them too.

Back in 2007, Sydney house prices were 8x income. In 2017 Demographia stated average housing (excluding apartment) prices are in the 13-14x range. The Australian Bureau of Statistics notes that 80% of people live in houses and 20% on apartments. Only Hong Kong at 19x beats Sydney for dizzy property prices.

In 2018, Australia’s GDP is likely to be around A$1.75 trillion. Our total lending by the banks is approximately $2.64 trillion which is 150% of GDP. At the height of the Japanese bubble, total bank lending as a whole only reached 106%. Mortgages alone in Australia are near as makes no difference 100% of GDP.

Balance sheets are but snapshots in time. If we look at our current bank exposure to mortgages, it is easy for analysts to paint rosy pictures. Banks’ shareholder equity has quadrupled in the past 16 years. Prosperity and record bank profits should give us comfort. Or should it? We need to understand that the underlying tenets of the Australian economy are completely different to that of a decade ago.

At the time of Global Financial Crisis (GFC) Australia’s economy was lucky to get away broadly unscathed. We carried no national government debt and were able to use a $50 billion surplus to prime the economy through that period of turmoil. Many countries were not so lucky. Our fiscal stewardship leading up to the crisis allowed economic growth to remain in positive territory soon after. Now we have $600 billion debt and charging the national credit card with all of the promises so aggressively that we should expect $1 trillion of debt in the not too distant future.

Australian banks are highly leveraged to the mortgage market. It should come as no surprise. In Westpac’s full year 2018 balance sheet, the company claims around A$710 billion in assets as “loans”. Of that amount, according to the latest APRA data, A$411 billion of lending is ‘real estate’ related. Total equity for the bank is A$64.6 billion. So equity as a percentage of property loans is just shy of 16%. If Australia had a nationwide property collapse (we have not had one for three decades) then it is possible that the banks would face significant headwinds.

What that basically says is if Westpac suffered a 16% decline in the value of its entire property loan book then it would at least on paper appear in negative equity, or liabilities would be larger than assets. Recall in 2009 that BoA had over 16% of its residential loan portfolio which went bad. It can happen. CommBank is at a similar level. ANZ and NAB are in the 20% range before such a hypothetical situation would be triggered. See the chart below. Note how the US banks stung by the GFC have bolstered balance sheets

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Of course the scenario of a housing collapse would imply that a growing number of borrowers would have to find themselves under mortgage stress and default on payments. It also depends on the portfolio of the properties and when those loans were written. If the majority of loans were made 10 years ago at 40% lower theoretical prices than today then there is lower risk to solvency for the bank if it foreclosed and dumped the property.

Although if we look at the growth in loans since 2009, the Australian banks have been making hay while the sun shines. As it stands, the likes of Westpac and CommBank each have extended mortgage loans to Aussies to nearly as much as BoA has to Americans. That said the American banks, so stung by the GFC, have become far more prudent in managing their affairs.

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It goes without saying that keeping one’s job is helpful in paying the mortgage. If you were a two income family and one of you lost your job, it is likely that dining out, taking fancy overseas holidays, buying new cars (which have been awful this year) and so on will go on the backburner. Should those actions swell to a wider number of mortgage holders, the economic slowdown will exacerbate in a downward spiral. Even your local coffee store may be forced to close because $4 is just cash you and others might not be able to spend. Boarded up High Streets were everywhere in America and Europe post GFC.

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The following chart shows the negative correlation between housing prices and unemployment rates. US unemployment doubled to 10% when Lehman collapsed. Housing prices took heavy hits as defaults jumped. It is not rocket science.

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On the other hand, Australia’s unemployment curve remained below 6% for around two decades. Even with GFC, jobless numbers never got out of hand. Our housing prices only suffered a mild dip.

We can argue that a sub-prime style mortgage crisis is highly unlikely. But it does not rule the risk out completely. To have that, mortgage holders would need to be in arrears on monthly payments, their houses would need to be in negative equity and banks would be required to take asset devaluations.

An ME Bank survey in Australia found only 46% of households were able to save each month. Just 32 per cent could raise $3000 in an emergency and 50 per cent aren’t confident of meeting their obligations if unemployed for three months.

According to Digital Finance Analytics, “there are around 650,000 households in Australia experiencing some form of mortgage stress. If rates were to rise 150 basis points the number of Australians in mortgage stress would rise to approximately 930,000 and if rates rose 300 basis points the number would rise to 1.1 million – or more than a third of all mortgages. A 300 basis point rise would take the cash rate to 4.5 per cent, still lower than the 4.75 per cent for most of 2011.”

Do you know how many homes NAB has under repossession on its books at the latest filing? Around 277. Yes, Two hundred and seventy seven. Out of 100,000s. Recall BoA had 16% of its loan portfolio go bang in 2008?

If we think about it logically, examining the ratio of total assets to shareholder equity (i.e. leverage), the Aussie banks maintain higher levels than the US banks listed below did in 2008. Were total asset values to suddenly drop 7% or more ceteris paribus, Aussie banks would slide into a negative equity position and require injection.

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Human nature is conditioned to panic when crisis hits. Sadly many of our middle management class have never experienced recession. They are in for a rude shock. As for depositors note that you should be focused on the return “of” your money, not the return “on” it.

As Mark Twain once said, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so!

 

 

Sir David’s 22,000 disciples won’t be able to sustain frequent flyer mile status

Yes Sir David Attenborough, we’re doomed if we look at history of the very people in place to save us. Not withstanding the 22,000 climate change disciples who have flown to Katowice, Poland to pay homage at the altar of the UNIPCC to cling on to each other hearing about their inevitable extinction. What a shame that instead of embracing technology and live-streaming COP24 to help us mitigate impending disaster, government funded frequent flyer mile status of climate apparatchiks takes precedence to saving us from all of these dangerous CO2 emissions.

Apart from the 100% certainty of me being screened for explosives at Sydney Airport (yet again today), the other is that the growth in air travel suggests that more and more people are happy to save the planet, provided that someone else offsets on their behalf. CM has long argued this position. Our consumption patterns dictate the “true” state of care of the environment. It hasn’t stopped SUV sales dead in their tracks and last year the IATA forecast that the number of airline passengers is set to DOUBLE by 2030.  Hardly the actions of those frightened by climate change.

Oh but you can offset your carbon footprint! In its 2017 Annual Report, Qantas boasts,

We have the world’s largest airline offset program and have now been carbon offsetting for over 10 years. In 2016/17, we reached three million tonnes offset.”

Carbon calculators tend to work on the assumption of 0.158kg CO2/passenger kilometre.

In the last 10 years Qantas has flown around 1 trillion revenue passenger kilometres. While the literature in the annual report denotes one passenger offsets every 53 seconds, the mathematical reality is simple – 2% of miles are carbon offset. So that means that 98% of people couldn’t care less. Would dispensing with frequent flyer programs cut emissions? These loyalty programs by their very nature encourage more travel. The more you fly the more you can fly for free!  Surely the IPCC should scream for a ban here. Dispense with first, business and premium economy to maximise passenger loads each flight. Apologies for the preamble.

While the US is not a signatory to Paris, 19 of the G20 are. The irony is that the non-signatory nation has seen its total emissions fall while many of the others have not. What value the ink on a pledge? No sooner had President Macron thrown stones at America, that he’s backed down and postponed a fuel tax hike for 6 months to save his city from burning down. There it is in a nutshell. We’re told if we don’t act now we’re doomed. So 6 months is a long time in “immediate” speak. What we do know this is classic smoke and mirrors by Macron. In 6 months the fuel tax will be all but forgotten. Virtue signaling Exhibit A scrapped. Why doesn’t anyone in the media pick on China? It has promised to increase emissions out to 2030 and is a signatory.

Sir David should get cold chills lifting a rock on the recent saga surrounding the NATO signatories where we can learn how worthless pen strokes can be. In 2006, NATO Defence Ministers agreed to commit a minimum of 2% of their Gross Domestic Product (GDP) to defence spending. This guideline, according to NATO,  “principally serves as an indicator of a country’s political will to contribute to the Alliance’s common defence efforts.” In 2017, only 5 of the 28 members outside the US have met the 2% threshold – Greece, Estonia, UK, Romania & Poland in that order. Despite Greece’s economic problems elsewhere, it manages to honour the deal. NATO Secretary General Jens Stoltenberg said “the majority [not all] of allies now have plans to do so by 2024.” 3 more are expected to hit the target in 2018. So for all the good will in the world, is POTUS wrong to call the other 19 members slackers that ride off the US taxpayer when so many of them are only likely to hit the target 18 years after ‘committing’ to it?

Alas, who doesn’t want to breathe clean air? The question is once all of the hysteria of 100m sea rises, forest fires (sharply down from 70 years ago & 90% caused by arson or accidents), hurricanes (nothing extraordinary in the data to show increases in ferocity) or sinking islands (sorry 80% of Pacific atolls/islands are stable or rising) are properly analysed what is the most efficient way to get there? Even Turkey wants to be downgraded to a developing nation in order to benefit from wealth redistribution on climate.

What a masterstroke if signatories to Paris are prepared to take on America’s share of saving the planet. American taxpayers can feel happy in the knowledge that other nations are paying for their NATO commitments by rebating them with tax credits on climate, all the while ruining their domestic competitiveness along the way.  Why does Trump need to Make America Great Again, when the majority of nations are prepared to do it for him? Economist Paul Krugman shouldn’t be calling climate skeptics “sinners” but “saints”

Save James

As Tasmania looks to remove gender from birth certificates, take note of a 6yo boy named James who is facing chemical castration when he hits 8yo in America.

The father claims his son has always identified as a boy when with him and has testimony from others that proves his stance. He always chooses to dress as a boy when with his father.

Yet his mother has dressed him as a girl since the age of 3, calls him Luna, enrolled him as a girl at his local school and takes him to social transitioning therapy which the courts are requiring his father to pay. The bills will be extended to transgender surgery and sterilization drugs when he is of age.

The mother is seeking to remove custody from the father – who challenges her assertion – for child abuse in her divorce proceedings.

Walt Heyer, author of Trans Life Survivors and former transgender female, warned a misdiagnosis could ruin the boy’s life. Heyer claims he was secretly cross-dressed by this grandmother as a young boy. He went on to say

The diagnosis is critical, because labeling a child with gender dysphoria can trigger a series of physical and mental consequences for the child and has legal ramifications in the ongoing custody case. Get it wrong and the boy’s life is irrevocably harmed…[and] hinges purely on the diagnosis of gender dysphoria by a therapist who wraps herself in rainbow colors, affirms the diagnosis of gender dysphoria, and dismisses evidence to the contrary,”

Putting an acrimonious divorce to one side, should courts be determining the life of a 6yo kid based on a therapist’s diagnosis? Has the therapist got decades of scientifically backed research and proof to back her assertions? Or is this a case of confirmation bias? If we think about it, a therapist’s repeat business thrives more from confirmation than rejection of gender dysphoria. This is also a question of ethics.

Coming out as transgender is one thing. If the child reaches an age when they are biologically fully formed and can decide for themselves then they should be free to choose. There is no question everyone should have equal rights under the law but allowing parents the right to chemically castrate kids at age 8 before they can possibly understand the ramifications of those actions is criminal.

There is no 100% guarantee every child won’t switch back to identifying as their birth gender, but once the hormone sterilization begins the child has been permanently damaged. What will James’ mother say if she is wrong about him? “Mommy’s sorry”? Legally she bears no risk.

Let’s pray the right thing happens for James’ sake.

Obama solves climate change conundrum

https://youtu.be/fNrSEH4WVBw

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Obama has cut the Gordian Knot on climate change. Who knew?

“…the reason we don’t [invest in climate change policies] is because we are still confused, blind, shrouded with hate, anger, racism – mommy issues…”

Call me a sceptic, but even if I believe that 97% of scientists were correct on climate change, I should be more intrigued why the 3% don’t agree. Could I be missing something? After all 97% of economists believed it was a new paradigm right before the GFC almost sent us back to the financial Stone Age.

Perhaps Mr Obama should check the following study from Professor Valentina Zharkova. It might not be racism.

She explains and confirms why a “Super” Grand Solar Minimum is upon us:

Principia Scientific wrote,

Professor  Zharkova gave a presentation of her Climate and the Solar Magnetic Field hypothesis at the Global Warming Policy Foundation in October, 2018. Even if you believe the IPCC’s worst case scenario, Zharkova’s analysis blows any ‘warming’ out of the water.

Lee Wheelbarger sums it up: even if the IPCC’s worst case scenarios are seen, that’s only a 1.5 watts per square meter increase. Zharkova’s analysis shows a 8 watts per square meter decrease in total solar irradiance (TSI) to the planet.

The information she unveiled should shake/wake you up. Zharkova was one of the few that correctly predicted solar cycle 24 would be weaker than cycle 23 – only 2 out of 150 models predicted this. Her models have run at a 93% accuracy and her findings suggest a SuperGrand Solar Minimum is on the cards beginning 2020 and running for 350-400 years.

The last time we had a little ice age only two magnetic fields of the sun went out of phase. This time, all four magnetic fields are going out of phase. 
Would you ignore the 1 in 75 contrarian view whose model has predicted accurately or the 74 in 75 that have missed? It’s probably just racists with mommy issues that’s to blame…After all if Obama says it’s true, it must be right. Right?

Nothing to see here

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Aussie bank mortgage lending continues to reach ever dizzier heights. What is probably lost on many is that Westpac & CommBank have outstanding mortgage loans extended to as many Aussies as the colossal Bank of America (BoA) is lending to Americans.

Shareholder equity as a % of real estate loans looks like this. Note how post GFC  the US banks have shored up the balance sheet to avoid a repeat of the disastrous contagion when Lehmans collapsed. Note Citi, BoA and Wells Fargo each took $20-45 billion in TARP to prevent a collapse.

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Westpac & CommBank have shareholder equity vs R/E loans of 16%. That means if the aggregate loan value get smacked  by 16% or more via defaults or a sharp slowdown then these banks would be in negative equity. Extreme?

In 2009 the Global Financial Crisis (GFC) had turned over 16% of BoA’s residential mortgage portfolio into either NPLs, mortgage payments over 90-day in arrears or impaired (largely from the shonky lending practices of Countrywide (which BoA bought in 2008). Countrywide’s $2.5bn acquisition price turned out to cost BoA shareholders a further $50bn by the end of the clean-up. Who is counting?

In 2018, Australia’s GDP is likely to be around A$1.75 trillion. Our total lending by the banks is approximately $2.64 trillion which is 150% of GDP. At the height of the Japanese bubble, total bank lending as a whole only reached 106%. Mortgages alone in Australia are near as makes no difference 100% of GDP.

Japan ended up wiping out Y90 trillion ($A1.1 trillion) or 17% of its GDP at the time. The only thing that springs to mind with the Aussie banks is complacency and the RBA minutes today only reinforced that view. At least 3 years behind the curve. Yes of course people will lob stress tests as a reason not to worry (we were told in 2007 that everything would be fine until the whole edifice collapsed) but CM doesn’t buy it for a second.

Aussie banks are still beholden to global wholesale markets. In a world where rates are rising overseas and companies like GE are facing a massive wall of higher funding costs due to credit downgrades, risk is about to be priced properly. The Aussie dollar is likely to be hit too.

A recent ME Bank survey in Australia found only 46 per cent of households were able to save each month. Just 32 per cent could raise $3000 in an emergency and 50 per cent aren’t confident of meeting their obligations if unemployed for three months.

The Weekend AFR reported that according to Digital Finance Analytics, “there are around 650,000 households in Australia experiencing some form of mortgage stress. If rates were to rise 150 basis points the number of Australians in mortgage stress would rise to approximately 930,000 and if rates rose 300 basis points the number would rise to 1.1 million – or more than a third of all mortgages. A 300 basis point rise would take the cash rate to 4.5 per cent, still lower than the 4.75 per cent for most of 2011.”

Do you know how many homes NAB has under repossession on its books at the latest filing? Around 300.