Author: Martin North

Martin North is the Principal of Digital Finance Analytics

The Big Lie About First Homeowner Grants…

In recent years we have seen a swathe of “initiatives” from state and federal governments with the aim to encouraging and helping more first-time buyers into the housing market. The previous Government claimed they had helped “hundreds of thousands” into the property market.

The latest ABS statistics shows that the number of First Time Buyers is falling again – and the part peaks map directly onto Government “stimulus” measures.

The latest is the Albanese Government release of 40,000 new places under the Federal Government’s Home Guarantee Scheme, which will enable eligible first home buyers to purchase a property with a deposit of as little as 2% or 5%.

This as a time when the Reserve Bank of Australia is aggressively increasing rates and house prices are expected to plunge by between 10% and 20%, depending on the forecast. What could possibly go wrong?

In fact, the evidence suggest that these schemes are ineffective. Indeed, the long-term trends in terms of home ownership shows that across Australia, a smaller proportion of people own their own home, and those that do have bigger mortgages for longer. The latest Census data, which is still in the process of being released continues to confirm this trend.

Home ownership rates in Australia have declined over several decades, and the likelihood of attaining home ownership by age 30 has fallen substantially. Go back two decades and the average age of a first time buyer was 27 year, today its 34 years and rising based on my surveys. In addition, especially in Sydney, Melbourne and Perth, first home buyers (FHBs) are now buying fewer houses and more units, and evidence shows that more are receiving parental assistance.

Also while mortgage repayment affordability stress has been cushioned by falling interest rates until 2022, mortgage deposit requirements have risen with prices and become an increasingly serious constraint—far more so in Sydney and Melbourne than elsewhere.

I have long argued that this First Home Owner grants are bribes which distort the market, lift prices and are more designed to assist the construction sector. In other words, First Time Buyer Grants are a con.

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

This Crypto Winter May Not Turn To Spring!

Well, those following my channel over recent years will know that I have been quite skeptical of Crypto wave, and while Crypto has gone through several major drops in its history, this time could be different. I was not impressed with so called celebrities starting spruiking them, including Kim Kardashian, but when financial mainstream started getting involved, my concerned grew. In the US, Fidelity’s plans to offer Bitcoin in 401(k)s – their equivalent of superannuation – could impact an entire generation.

Its worth recalling the sector spiked to around $3 trillion in total assets last November, before plunging to less than $1 trillion, with Bitcoin and a range of altcoins plunging from record highs.

What started this year in crypto markets as a “risk-off” bout of selling fueled by a Federal Reserve suddenly determined to rein in excesses has exposed a web of interconnectedness that looks a little like the tangle of derivatives that brought down the global financial system in 2008. The collapse of the Terra ecosystem — a much-hyped experiment in decentralized finance — began with its algorithmic stablecoin losing its peg to the US dollar, and ended with a bank run that made $40 billion of tokens virtually worthless. Crypto collateral that seemed valuable enough to support loans one day became deeply discounted or illiquid, putting the fates of a previously invincible hedge fund and several high-profile lenders in doubt.

The recent crypto plunge, with Bitcoin down about 70% from its peak, is fueling widespread financial troubles for companies involved in the space. Lenders like Celsius Network, Babel Finance and Vauld have suspended withdrawals, while firms such as Coinbase Global Inc. are cutting jobs. This is what is now being called a crypto winter – but will spring ever come?

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

After Central Banks – What?

There was an outstanding piece from John Authers this week arguing that the Age of Credibility for Central Banks Is Over as inflation blunders have destroyed the trust that’s anchored the global financial system since the end of the gold standard.

Certainly, in Australia, the RBA has been on shaky ground for many years, including over forecasting wages growth, taking interest rates too low, and relying on household wealth to be artificially inflated by poor policy for years. But the shocking reversal from last November’s no rate rises til 2024, to today’s 1.35% target cash rate, with more to come, shows just how far from credible they are – despite politicians still talking about mountains of respect. Over in New Zealand they are further up the curve, but the issues are the same. Central Bank credibility is shot.

It appears that the most likely anchor to replace central bank credibility is confidence in governments. But that is not a comforting thought.

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

The Recession Obsession…

The latest edition of our finance and property news digest with a distinctively Australian flavour.

Wall Street ended little changed on Friday after a volatile session in which investors tried to comprehend how a robust jobs report would influence the U.S. Federal Reserve and its plans to aggressively hike interest rates.

“I’m calling this period right now a recession obsession,” BMO Capital Markets Corp. chief investment strategist Brian Belski said .“Institutional investors are not positioned for any kind of upside move. That’s why you are seeing these sharp moves on a day like today and certainly over the last few days in terms of a short squeeze. We remain positive and think people are way too negative.”

Atlanta Fed President Raphael Bostic, until recently among the central bank’s most dovish policymakers, said on Friday he “fully” supports another 75-basis-point rate rise later this month.

Speaking later on Friday, New York Federal Reserve President John Williams did not specify if he favors a half point or three-quarter point increase at the Fed’s upcoming July meeting, but acknowledged rising interest rates were affecting the economy.

[Content]

0:00 Start
0:15 Introduction
0:27 Recession Obsession
1:35 US Non Farm Payrolls
4:45 US Markets
10:15 Gold
10:35 European Markets
12:00 Oil
12:40 Asian Markets
14:20 Australian Markets
16:15 May Trade Surplus
18:30 Market Trends
21:25 Crypto
22:15 DXY
22:35 Summary and Close

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The Dominos They Are Afallin’: With Tarric Brooker

My latest chat on a Friday afternoon with Journalist Tarric Brooker, covering the latest economic and financial news, courtesy of his famous slides. https://avidcom.substack.com/p/charts-that-matter-8th-july-2022

You can follow him on Twitter @AvidCommentator

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

The Disappearing Money Trick – Or Why The Recession Is Already Here!

While the technical definition of a recession traditionally is two quarters of contraction or negative growth, I think that definition is frankly irrelevant given where we are today.

You simply have to look at the trends in consumer confidence, which are ultra-low in many western countries, from Australia, New Zealand, the UK and the US. And what is driving this is the concern about inflation – which is why central banks are jaw-boning their ability to get inflation under control. Quite simply, people’s money is disappearing fast, and they’re worried it could get a lot worse.

By the way, pause for a moment to ask why a 2-3% inflation target is used – it have become a convention, but there is little to explain why that number is correct. The truth is, that number was grabbed from thin air years ago, and has taken on a life of its own.

Note that Goldman Sachs Group Inc. economists put the risk of such a slump in the US in the next year at 30%. Others put the probability considerably higher, with the risks building beyond that time frame.
But for many it already feels like it’s here.

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

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.

Mortgage Stress Even Higher!

We review the latest analysis from our surveys – as discussed in a number of TV and radio interviews over the past couple of days.

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

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.

FINAL REMINDER: DFA Live Q&A Property Now With Chris Bates 8pm Sydney

Join us for a live discussion about the current state of the markets with Chris Bates from Wealthful, on the day the RBA will lift rates again. You can ask a question live.

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