Author: Martin North

Martin North is the Principal of Digital Finance Analytics

FINAL REMINDER DFA Live 8pm Sydney: Investing Now With Damien Klassen

Join us for a live discussion about the current state of the financial markets with Damien Klassen Head of Investments at Walk The World Funds and Nucleus Wealth. You can ask a question live.

Go to the Walk The World Universe at https://walktheworld.com.au/

Crunch Time Approaches…

We are coming to the pointy end of the action now, with the Nasdaq closing lower on Monday after a choppy session for U.S. equities ahead of a big week of technology earnings reports while oil prices rose and treasury yields edged higher as investors braced for a Federal Reserve interest rate hike.

The S&P 500 see-sawed on Monday and ended close to unchanged.

Meanwhile in Australia the head of APRA, the entity responsible for banking supervision is going, while the local bond market is in pieces.

In currencies, the dollar index, which touched a 20-year high this month, was down slightly and gold also slipped, as did bitcoin.

Concern that rising interest rates will drive the economy into a recession has been escalating as the Fed tightens monetary policy aggressively to bring down the steepest inflation in four decades. Fed Chair Jerome Powell has said that failing to restore price stability would be a “bigger mistake” than pushing the US into a recession, which he has continued to maintain the nation can avoid.

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Its Edwin’s Monday Evening Property Rant!

Edwin Almeida, our Property Insider joins us through another ramble through the latest property news, including rooster cam, news from China, and the latest in listings numbers. We also look at the latest articles and consider the impact of the recent rains on high-rise property in particular. Go to the Walk The World Universe at https://walktheworld.com.au/

Higher Rates, And Risk Of Recession, As Weaker Lending Is Expected

We look at the latest data as forecasters indicate a rise in mortgage rates as the RBA tackles inflation, leads to reduced lending, and risks of stagflation or recession.

Today’s post is brought to you by Ribbon Property Consultants. If you are buying your home in Sydney’s contentious market, you do not need to stand alone. This is the time you need to have Edwin from Ribbon Property Consultants standing along side you. Buying property, is both challenging and adversarial. The vendor has a professional on their side. Emotions run high – price discovery and price transparency are hard to find – then there is the wasted time and financial investment you make. Edwin understands your needs. So why not engage a licensed professional to stand alongside you. With RPC you know you have: experience, knowledge, and master negotiators, looking after your best interest. Shoot Ribbon an email on info@ribbonproperty.com.au & use promo code: DFA-WTW/MARTIN to receive your 10% DISCOUNT OFFER.

Households Hit Hard By The Property Crash!

It started as an act of protest by fed-up apartment buyers in a single project in a city in central China.

Now tens of thousands of people around the country are withholding payments on their mortgages for homes that developers, including China Evergrande Group, have yet to finish.The movement has since spread to at least 301 projects in about 91 cities according to figures from a crowdsourced document titled “WeNeedHome.”

Tracking the extent of the protest has grown increasingly difficult after China began censoring in mid-July crowdsourced online documents tallying the number of boycotts. Such shared files have been a key source of data for global investors and researchers.

Real estate accounts for about 78% of household wealth in China—double the US rate—and families typically save for years and borrow from friends and family to purchase a home. As the Evergrande debacle unfolded last year, many market watchers said that the financial contagion would be limited by the fact that homebuyers in China often pay in cash.

But some did use mortgages, and the boycott underscores how much of the pain of the crisis has fallen on households. China’s outstanding mortgages stood at 38.3 trillion yuan at the end of 2021, according to the People’s Bank of China. GF Securities Co. expects that up to 2 trillion yuan ($296 billion) of mortgages could be impacted by the collective refusals. That’s the total balance of the loans; the amount that could be withheld will be smaller.

Should every buyer default, that would lead to a 388 billion-yuan increase in nonperforming loans, Jefferies’s said. Banks say the impact is much lower still. Lenders have detailed about 2.11 billion yuan of loans at risk from the protests, according toa tally of banks that have disclosed their exposure.

The wildcat boycott on loans worth as much as 2 trillion yuan ($296 billion) threatens to deepen China’s real estate slump by shifting focus from the country’s embattled property companies to its massive banks. Lenders have relied on mortgages as their safest source of revenue as Covid lockdowns stifle growth.

Go to the Walk The World Universe at https://walktheworld.com.au/

Downgrading Housing Forecasts – Fast!

It is becoming a new sport, it seems – trying to assess the potential fall in property values across many markets here and around the world.

Indeed, Christopher Joye in the AFR writes: the great Aussie housing crash is accelerating, and it is being driven by the fastest and largest interest rate shock households have faced in modern history. Sydney house prices have now plunged almost 5 per cent since their peak only months ago according to CoreLogic. Home values in Melbourne are not far behind.

But let’s look at another market, because property price falls are being predicted around the western world, as Central Banks, appear at least, to be coordinating rate rise increases.

We might want to pause to consider the group-think, which has been exhibited for the past two decades – cutting rates after the 2007 and 2008 crisis, cutting them again radically ahead of COVID, to say nothing of the quantitative easing which has flooded markets with cheap money, and rate control, plus handing ultra-cheap funds to banks. I will leave you to judge how independent each central bank was and the degree of collusion, versus common reactions to the same economic out-turns, but the current mode of operation is driving highly inflated home prices which were driven by their bad policy – sharply down as they tighten. Some would suggest the High Priests of Finance, are not as powerful as they may like to appear.

So, let’s look at Canada’s housing market which has sharply shifted since the Bank of Canada began raising its benchmark interest rate from record lows in March. The central bank, seeking to rein in inflation that is running at its hottest in four decades, unveiled its largest one-time interest rate hike since 1998 last week. It raised the benchmark rate a full percentage point to 2.5% and promised more increases to come.

Go to the Walk The World Universe at https://walktheworld.com.au/

Operation Anti-spruik Episode 5: Western Australia!

More analysis of recent price changes for property – this time in the West, and again strong correlation with high levels of mortgage stress. Thanks for Cookie Boy for doing the research.

We focused on more affordable houses, and spruikers note, prices are down.

Go to the Walk The World Universe at https://walktheworld.com.au/

The Bear Market Is Not Over – Yet!

One characteristic of a Bear market are relief rallies, which start strong, but which also eventually run out of steam. We have seen this during the week, as a gauge of global stocks fell on Friday to end the trading week on a down note after five straight sessions of gains.

In addition, the dollar dipped against a basket of major currencies after soft data on U.S. business activity was released.

Friday was wobbly on Wall Street which posted modest losses in early trading but declines on the S&P 500 accelerated as Big Tech names such as Meta and Alphabet lost ground in the wake of earnings from Snap Inc which plunged 39.08%.

Defensive sectors such as utilities and consumer staples were among the few advancers

“Every rally we have had during this bear market, there have been a number of sharp rallies and then they fade and we set new lows and that has been a pretty consistent pattern here,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York. “Everybody is looking for the turn, everybody is trying to guess at when we get a sustained rally, and everybody is hoping for one, but to me there is still a lot of unknown ahead of us.”

[CONTENTS]

0:00 Start

0:15 Introduction

0:12 Bear Market Bounces

3:30 Fed and Economic Data

5:40 US Markets 8:20 US Dollar

09:40 Oil

11:10 European Markets

14:00 Wheat Agreement

18:20 Gold

19:30 Asian Markets

20:20 Australian Markets

23:20 NAB Rate Outlook Up

24:30 Outlook

27:25 Crypto

28:00 Summary and Close

Go to the Walk The World Universe at https://walktheworld.com.au/