Discussing GFG, And Local Steel On The Radio

This is a replay of my latest interview on ABC Illawarra discussing the problematic relationships between local Steel businesses owned by the GFG Alliance, and its complex financial relationships with Greensill Capital, Credit Suisse and Citigroup in the light of recent court proceedings.

We need to ensure the local manufacturing capability is protected, to say nothing of some 6,000 jobs which could otherwise be at risk!

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Are Mortgage Rates On Their Way Up? – With Steve Mickenbecker

I discuss the latest research from Canstar with Steve Mickenbecker, their Group Executive, Financial Services & Chief Commentator. Seems some are thinking mortgage rates are set to rise – but how likely is that?

https://www.canstar.com.au/team-members/steve-mickenbecker/

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Household Financial Stress Higher Than Before COVID

The latest results from our household surveys confirms that there are more households in financial stress than before the pandemic hit. As the various Government support mechanisms are ratcheted back, we will see the true impact on the community. Household debt is also turning higher again.

We have 41.1% of mortgaged households (1.5 million) in financial flow stress, despite the lower interest rate environment. While many have paid down debt, other have borrowed more. For example, the average new first time buyer loan is 15-18% larger than a year back- so much for the maintenance of lending standards!

We discussed this in detail in our live show, last night.

Across the states, the patterns are familiar, with Tasmania still reporting the highest proportion of households in mortgage stress thanks to low wages, and rising home prices. Victoria continues to be impacted by the longer lock-downs. Rental stress is being exacerbated by the end of tenant protections, so expect to see more evictions, and rent rises in the weeks ahead. Property investors in NSW are still having rental flow issues (due to high vacancies and lower rents). Overall financial stress – the aggregated measure across all households is highest in NSW, ACT and VIC.

Across our household segments young growing families, and those on the urban fringe in high growth corridors are being impacted, although across our segments and stress categories, it remains a real patchwork.

The top post codes for mortgage stress include Narre Warren and Fountain Gate, 3805 in Victoria, and Liverpool 2170 in NSW.

The top rental stress post codes include Liverpool 2170, NSW, Mount Druitt and Lethbridge Park 2770, NSW and Westmead 2145 NSW.

Investor stress is highest is St Kilda 3182, Westmead 2145 and Surfers Paradise 4217 in QLD.

Cumulative financial stress is highest in Liverpool 2170, Mount Druitt 2145, and Westmead 2145.

The mapping of mortgage stress to post codes reveals the potential hot spots, which include many of the high growth corridors, where vast estates continue to be built and sold to people who extend themselves to buy them. Many are first time buyers. Given flat wages, and higher unemployment post JobKeeper, this is one to watch.

Sydney

Melbourne

Brisbane

Adelaide

Perth

Hobart

ACT

Darwin

Whilst property prices are rising in many areas, the financial pressures on households are building, and we expect to see more casualties ahead. Financial stress can ultimately lead to significant social and behaviourial issues. Mortgage default rates (which are also rising) do not tell the full story.

“Lets Create Yet More Money”: Says The IMF

This past year or so has seen a massive creation of liquidity across the world as Central Banks ramped up their Quantitative easing programes and Governments threw money into the mix in an attempt to revive economic momentum, inflation and preserve the unstable financial system. There is of course no simple way back, and currently the main impact appears to be asset inflation across stocks and property, while the real economy languishes, even as debt climbs.

But now the IMF wants to join the FIAT party – FIAT meaning “Let it Be” or created from nothing using allocating special drawing rights (SDR) to augment instantaneously the international reserves of its members. They claim this would significantly benefit poorer countries and help build confidence at a time of global crisis, dramatically demonstrating international cooperation. But it is pure Neo-liberalism…

CONTENTS
0:00 Start
0:40 Introduction
1:16 IMF Joins the Fiat Party
2:00 Special Drawing Rights
3:12 IMF Statement $650 Billion SDR Allocation
10:20 The History of SDR’s And How They Work
21:35 PRGT Australia Contributes $500 million
22:05 SDR Accounting
24:50 Pros and Cons
27:22 My Conclusions

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Archegos – Is Leverage In Question Now?

We dissect the Archegos Capital Management story, and look at Family Offices, Block Orders and the derivatives they used. And also asks whether this flags a new perspective on leverage.

0:00 Start
0:40 Introduction
1:00 Background – What Is A Family Office?
5:40 Total Return Swaps
6:45 Contracts For Difference
8:05 About Prime Brokers
10:05 ViacomCBS and Other Stocks
11:50 Margin Calls
12:50 Attempts To Mitigate Failed
13:20 Block Trades
14:53 The Fall Outs Across Major Banks
17:12 Biggest Hit Since LTCM
18:00 Questions To Ponder – Why Did The Banks Do It?
20;00 $10 Billion Losses
23:12 Is This Overdone?
29:03 My Conclusions – The Consequences Of Over Leverage

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