The Carnival Is Over
A report from the Sydney Morning Herald in Australia. “Wayne Byres, chair of the Australian Prudential Regulation Authority, was on Thursday asked by Greens senator Peter Whish-Wilson about a report from UBS that last month ranked Sydney fourth in a global ‘bubble index’ that sought to measure the risk of a real estate bubble. Mr Byres, who oversees a banking sector with almost $1.5 trillion in mortgages, stressed the risks in the property market but said the ‘B word’ was not helpful. ‘I deliberately avoid using the B word. I think it sort of simplifies the debate somewhat,’ Mr Byres said. ‘It leads people to either, we are, in which case we’re all ruined, or we’re not, in which case, she’ll be right. And in fact the situation is far more nuanced than that.’”
“Sydney prices have risen by about half since 2012, the UBS index said, and APRA has in recent years clamped down on poor lending by banks in the housing market, and curbed lending to investors.”
From Domain News. “National Australia Bank has compiled a confidential borrowers’ blacklist of more than 600 towns and suburbs where it has capped lending to property buyers because of growing risks in the housing market. Buyers in any of the 120 postcodes across the nation will need a deposit of as much as 30 per cent to be eligible for a loan ‘to ensure that we are lending responsibly and sustainably,’ according to internal documents used by the bank to explain its change in strategy to mortgage brokers.”
“Lenders have also responded to pressure from the Reserve Bank of Australia, ASIC and APRA to reduce lending to higher risk investment borrowers, particularly for apartment markets in central Melbourne and Sydney, by cutting back on interest-only loans and increasing deposits to about 40 per cent of the asking price. For example, earlier this year AMP placed apartments in 140 suburbs on a blacklist because of growing concerns about oversupply, off-the-plan sales, and, in some areas, falling prices. Lenders also slammed the brakes on foreign borrowers.”
The Australian. “Australia’s residential market is set to split in two, with first home buyers finally getting a shot at owning inner city apartments, while relatively strong rental yields mean that seasoned investors will look towards investments in houses. Discounting is expected to be most common among high-rise ‘clusters’ where there have already been rising levels of ’settlement difficulties.’ But the outstanding opportunity in the market will be for first-home buyers, especially in 2017-18 when a flood of new apartments are expected to hit the market.”
“‘We are looking at a market where you will see pressure on prices, and you may also see some rental yield decline … I think both markets are vulnerable,’ said Nigel Stapledon, a research fellow at UNSW Business School. ‘On the upside, it becomes a buyer’s market and also a renter’s market.’”
From Smart Property Investment. “The six regions across the country worst affected by the mining downturn have been uncovered by a new report. The report, ‘The carnival is over: house prices in mining towns now the boom is gone,’ compiled by Propell National Valuers, said recent figures and stories of investors’ suffering ‘beg the question of why anyone would take the risk’ of buying into these regions. ‘Price increases of 10 per cent per annum, 20 per cent per annum or more have been replaced by falls in the past two years of up to 38 per cent per annum.’”
The Brisbane Times. “Dozens of expectant Perth homeowners have been left in limbo after the collapse of national building company, Collier Homes. Nearly 30 homes across Perth sit unfinished and subcontractors are owed thousands after liquidators moved in on parent company, Homes Australia, owned by Family First Senator, Bob Day. The multi-million dollar collapse has also left around 20 staff members at Collier Homes’ Osborne Park office out of a job, without any notice. Mr Day resigned from Federal Parliament after announcing the the collapse.”
“Sub-contractor, Ron Van Zoelen and wife, Tracey, fronted the politician’s South Australian electorate office shortly after learning of the closure, claiming they were owed more than $25,000. ‘We’re just shocked and devastated, this is our livelihood, this is our income, and we’ve got family to support, bills to pay, mortgage to pay, it’s really quite upsetting,’ Ms Van Zoelen told Nine News.”
From News.com.au. “A ruling by the tax office could offer a glimmer of hope to locals wanting to buy an off-the plan apartment by putting them off-limits to overseas investors. Under Australian law, foreign investors can purchase only new properties. If an off-the-plan sale falls through, the property will be considered second-hand, The Australian reports. This means thousands of potential foreign buyers will be stopped from buying the properties and potentially lowering the resale price.”
“Confirmation on the ruling comes amid reports of a growing number of Chinese buyers walking away from off-the-plan apartment sales, forcing them to sell. ‘Under subsections 15(4) and (5) of the Foreign Acquisitions and Takeovers Act 1975, a dwelling is considered to be sold when an agreement becomes binding,’ a spokeswoman for the Australian Taxation Office said. ‘If the property is onsold after the date upon which the contract becomes binding, and prior to settlement, then this is considered to be an established dwelling.’”
“LJ Hooker chief executive Grant Harrod told The Australian the real estate agency was starting to see apartments coming onto the secondary market, particularly in Brisbane and Melbourne. ‘We have seen some developers come to us with buildings that have been completed but the owners have been unable to close,’ Mr Harrod said. ‘The original owners who bought off the plan are finding it challenging to raise capital because the banks have raised the loan-to-valuation requirements. There is going to be a real issue if we start to see construction projects not being completed and developers getting into trouble.’”
“Last month, billionaire property developer Harry Triguboff, founder of Australia’s largest apartment builder Meriton, said a ‘very significant’ number of Chinese buyers were failing to settle their purchases.”
‘Surge of apartments gives tenants the upper hand’
‘Hundreds of houses in doubt as Huxley Homes collapses ‘
‘An ill-fated acquisition 13 years ago of NSW home builder Huxley Homes, a management structure which led to a string of complaints over quality, and some hefty donations from his private interests to the Family First party brought the house of Day down.’
‘Insolvency firm McGrath Nicol on Monday afternoon was desperately seeking other builders to take over the construction of 207 houses around Australia in various stages of completion under the five different banners in which Senator Bob Day’s home building empire traded.’
‘Huxley Homes has 56 houses currently under construction, and it is this business which has drawn the ire of many customers and the NSW Office of Fair Trading which has doled out fines for Huxley failing to comply with rectification orders.’
“It did go downhill at a rate of knots but it was a really good organisation when run by the Huxley brothers,” one NSW building industry veteran said. “It’s happened across the building industry. You can look at all the companies taken over that were run by a family. An outsider comes in, takes over, the family disappears and the business goes down the tube. The industry is littered with it.”
Have any of u guys glanced over these shoddy earnings reports for the qtr? what a bunch of bs. Total some and mirrors financial engineering. even mcdonalds claims to be rolling in the cash.
I went in there the other day and a big mac is almost 5 bucks now. LMFAO
Two tiny @ss pieces of meat and sauce and some bread. 50 cents in material.
The stock market always goes up. Buy now, or get priced out forever.
A reader sent this in:
‘Apartment glut warning: More cranes on Australian east coast than in North America’
‘One of the eye-opening statistics of the high rise apartment boom is that there are now more cranes servicing high rise apartment construction down the east coast of Australia than in major cities across North America.’
‘Key points: Record 528 cranes working on Sydney, Melbourne and Brisbane apartments. Only 419 cranes working on apartments in major North American cities. Crane count in Sydney has boomed to 258, Melbourne and Brisbane now easing.’
‘The biannual crane count survey by global property and construction consultants Rider Levett Bucknall (RLB) found there were a record 528 cranes working above apartment blocks in Sydney, Melbourne and Brisbane in the September quarter.’
‘The RLB survey tallied 419 cranes plying their trade in the residential construction game across major North American cities including New York, Boston, Chicago, San Francisco, Los Angeles, Toronto and up to Calgary.’
‘Over the past three years, the number of cranes in use for residential construction has grown an extraordinary 313 per cent. However, growth has moderated sharply over the last quarter, with the number of cranes in Melbourne down from 124 to 109 and Brisbane down from 91 to 87.’
‘Sydney is still booming, though, with residential cranes increasing from 239 to 258 over the past six months, while for the rest of Australia conditions were fairly flat with just three new cranes added to take the total to 74.’
‘The RLB activity heat-maps found that the demographics of the apartment super-cycle vary markedly between the cities. While the maps count the total number of cranes, they are a very good proxy given 80 per cent are now assigned to high-rise dwellings, compared to less than 50 per cent in pre-boom days.’
‘This slowing in high-rise activity in Melbourne and Brisbane may be an early indicator that the boom’s peak is nearing and construction will start to roll over. Morgan Stanley recently estimated that the oversupply in the sector would be around 100,000 units which could spark a sudden downturn which in turn put around 200,000 jobs at risk.’
‘Another investment bank, UBS, argues there is still a fair way to run in the boom, having raised its forecast for overall housing commencements to a record 228,000 in 2016 and a still strong 205,000 before easing back in 2018. Completions are expected to peak in 2018 at 216,000.’
“But within this, completions of (free-standing) houses already peaked last year, while in contrast the multi’s super-cycle is still only about half done, with the number of units completed in 2018 likely to end up well over double the pre-boom trend,” UBS economist George Tharenou noted.’
profits without prosperity:
https://hbr.org/resources/pdfs/comm/fmglobal/profits_without_prosperity.pdf
This little gem was on the national MSM (ugh) news over the weekend. The sinking, leaning tower of San Francisco. Should be a real hoe-down hootenanny when the seismic tremors hit.
http://www.latimes.com/local/california/la-me-ln-leaning-tower-
20161019-snap-story.html
“The tower is sinking — 16 inches so far, with projections that the amount could double over time. And as it sinks, the building also has begun to list ever so slightly — an estimated two to four inches at the structure’s base and 14 inches at the top, where Buttery’s unit sits at the northwest corner of the next-to-highest floor.”
“The Millennium building is too heavy for its foundation.”
Great story, but there’s so much wrong on a number of fronts. I confess, it did bring a bit of an unsympathetic smile to my face. Couldn’t happen in a nicer city (well, maybe NY or DC). But why are they building towers like this in San Francisco in the first place? And why is anyone willing to pay $3.5 million for a condo in such a building, let alone the city?
If I recall, the building is built on “dumping grounds”, which is where they put the muck from dredging SF Bay. It isn’t too heavy for the foundation, it is built on what we here call the “goose poop”. It’s the skyscraper version of the Johnstown Dam.
But who would think it reasonable to drop a skyscraper’s foundation on top of such material???
I don’t think Millenium Partners thought it was reasonable. I think they thought it was convenient and good for profits. And they thought they could get away with it, too. Probably didn’t realize it would shift and sink as fast as it did. Figured they’d be long gone by the time that happened.
Air boxes in the sky!
“But who would think it reasonable to drop a skyscraper’s foundation on top of such material???”
Geotechnical Engineering is a favorite area to start cutting costs because it’s mostly hidden from sight. Recently built Hwy87 through the middle of San Jose, CA has similar “settling” issues.
“the “goose poop”.
You just might be one of the few people on the blog who understands “the goose poop” phenomenon. When I wuz a pup in the Northeast, we lived on a lake that was very popular with Canadian geese and still is, or so I’ve heard. The lake bottom is now about 3 feet from the surface due to the build up of goose poop over time. Granted, it’s a mushy bottom.
Canadian geese are prodigious defecators.
“But why are they building towers like this in San Francisco in the first place? And why is anyone willing to pay $3.5 million for a condo in such a building, let alone the city?”
Nice views of the Bay, nice amenities (that’s a pretty gorgeous pool), and proximity to Embarcadero/Marina business districts, I would assume. As for why SF as a whole, I wouldn’t be surprised if many of the buyers are gay/lesbian or otherwise want to be in a city like SF that has a decidedly liberal bent on social values.
Apparently, in this building at least, the view of the bay is getting better by the day.
Maybe they applied the Chinese method of construction!
https://aeon.co/essays/what-chinese-corner-cutting-reveals-about-modernity
Seems like they took a page from the Chinese construction methodology:
“…when you’re surrounded by the cheaply done, the half-assed and the ugly, when failure is unpunished and dedication unrewarded all around, it’s hard not to think that close enough is good enough. Chabuduo.”
https://aeon.co/essays/what-chinese-corner-cutting-reveals-about-modernity
Chabuduo! Chinese for “Close enough”.
https://aeon.co/essays/what-chinese-corner-cutting-reveals-about-modernity
‘Sub-contractor, Ron Van Zoelen and wife, Tracey, fronted the politician’s South Australian electorate office shortly after learning of the closure, claiming they were owed more than $25,000. ‘We’re just shocked and devastated, this is our livelihood, this is our income, and we’ve got family to support, bills to pay, mortgage to pay, it’s really quite upsetting,’ Ms Van Zoelen told Nine News.’
But Tracey, it’s cheaper than renting!
There are some flippers showing up in the new home development I drive by everyday. As soon as the new construction is finished the realtor signs pop up. I imagine some folks signed contracts with the builders over a year ago at least. I imagine they are cashing in on some new found equity of 50-100k for signing on the bottom line. Their timing was good?
I recorded video of that going on in Colorado Springs over a year ago. And not just a few but a lot. These were $800k houses too.
Inconceivable!
https://www.youtube.com/watch?v=D58LpHBnvsI
“As a result of buybacks, over the past decade net equity issues of U.S stock markets have averaged minus $376 billion per year. Companies fund the stock markets; the stock markets do not fund companies.”
https://ourfuture.org/20140821/the-dirty-little-secret-of-how-ceos-enrich-themselves-at-your-expense
RIGGED
“Last month, billionaire property developer Harry Triguboff, founder of Australia’s largest apartment builder Meriton, said a ‘very significant’ number of Chinese buyers were failing to settle their purchases.”
Tee-hee, oddly enough, this operating basis does not only apply to weawestate. A number of high-end auction houses have experienced the same phenomenon, where wealthy Chinese bidders would bid up the prices of art and objects, win the auction and then not pay at end of auction. While the MSM was breathlessly reporting the high prices in the art world, it wasn’t until much later that they wrote articles about the non-payment. OTOH, my guess is the auction houses also kept the situation quiet in order to inflate the auction prices.
“In a somewhat stunning reality check for the new normal, companies in the S&P 500 have started paying out more money to shareholders than they produce in operating earnings. The last time spending on buybacks-plus-dividends exceeded operating profit was Q2 2007… that did not end well…”
http://www.zerohedge.com/news/2015-06-26/last-time-happened-bull-market-ended
Gut the company to pay executives? Reminds me of SHLD.
The S&P is over-priced due to fed/gov buying the dips for the last 8-yrs.
The S&P is over-priced due to fed/gov buying the dips for the last
829-yrs.The Greenspan put dates back to 1987.
“In 1982, when the Securities and Exchange Commission (SEC) issued a rule to provide ‘safe harbor’ from manipulation liability, buybacks were near zero. Last year, over $500 billion was spent on share repurchases.
“These buybacks were treated as stock manipulation for decades because that is exactly what they are,” she said. “The SEC needs to recognize that.”
Druckenmiller told CNBC in March that he is extremely concerned about the doubling in U.S. corporate debt to roughly $7 trillion, up from about $3.5 trillion in 2007. “Most of that mix has been in more highly leveraged stuff,” he said. “And if you look at what corporations have been using it for, it’s all financial engineering.
The old way of increasing EPS was to increase profits, but the cunning and gray method is to decrease the number of outstanding shares. In the current environment, where real profits are not easy to achieve, taking this route provides unscrupulous individuals in the corporate world with an easy fix.
http://tacticalinvestor.com/experts-insiders-state-share-buybacks-a-scam/
‘The old way of increasing EPS was to increase profits, but the cunning and gray method is to decrease the number of outstanding shares. In the current environment, where real profits are not easy to achieve, taking this route provides unscrupulous individuals in the corporate world with an easy fix.’
Coincidence that they are buying at a market maxima? Taking care of family and friends. I expect a pivot point after the election.
What is the ‘Rule 10b-18′
The Rule 10B-18 is a Securities and Exchange Commission (SEC) rule that provides a “safe harbor” for companies and their affiliated purchasers when the company or affiliates repurchase the company’s shares of common stock. This means they will not be deemed to have violated anti-fraud provisions of the Securities Exchange Act of 1934. The repurchases must fall within the four conditions of the rule.
http://www.investopedia.com/terms/r/rule10b18.asp
So who gains from open-market repurchases? Their sole purpose is to give a company’s stock price a manipulative boost, and prime beneficiaries are the corporate executives who decide to do them.
So why do we let executives manipulate the stock market? Back in 1981 John Shad, a Wall Street banker and Ronald Reagan backer, became head of the Securities and Exchange Commission. Shad, like the Chicago economists who influenced him, believed that a deregulated stock market was good for the economy. In November 1982 the very government agency that is supposed to regulate the stock market adopted Rule 10b-18, which instead encourages corporations to manipulate stock prices through open-market repurchases.
My research shows that this regulatory failure is an important part of the puzzle of profits without prosperity.
http://www.nytimes.com/roomfordebate/2014/09/14/pocketing-profits-or-reinvesting-them/to-boost-investment-end-sec-rule-that-spurs-stock-buybacks
“In that year, Ronald Reagan’s appointees on the Securities and Exchange Commission adopted a rule (10b-18) that effectively holds corporations harmless from allegations of stock-price manipulation through share buybacks.
Time was when corporations invested their retained earnings in expansion, research, even higher wages. Now, even the most profitable companies are left with little to no retained earnings once they pay off their shareholders and top executives, whose incomes derive more from stock than salary. As University of Massachusetts economics professor William Lazonick has documented, the 500 highest-paid U.S. corporate executives received 76 percent of their income in stock-based compensation between 2006 and 2014.
The declining fortunes of the middle class are due in part to globalization and technological change, but those phenomena can hardly account for so shattering an upward redistribution of income and wealth. To solve that riddle, we need to look to the fundamental redefinition of the corporate mission that has transformed U.S. business over the past 35 years. ”
https://www.washingtonpost.com/opinions/how-to-end-the-stock-buyback-deluge/2015/12/30/e9408c52-af2e-11e5-9ab0-884d1cc4b33e_story.html?utm_term=.c90d3c764ce4
maybe this is why trump has become so popular?
Become so popular with so few
http://www.bostonherald.com/opinion/editorials/2016/10/editorial_none_of_the_above_for_president
Liar.
https://i.reddituploads.com/52d9cb5a04a245698dd7625e07b667ee?fit=max&h=1536&w=1536&s=74681bb388818cc0c6f17883a72b23a7
Why does Trump want to lower himself from his lofty reality TV pedestal to accept a lowly government job?
Donald Trump Jr. says the presidency would be a ’step down’ for dad
William Cummings , USA TODAY
5:11 p.m. EDT October 20, 2016
…
Trump One has lost its engines and is headed for a crash. The family is foaming the runway with sour grapes.
While I cannot speak for anyone else, I can say there’s no sour grapes here. None at all.
And there won’t be any, whether Trump loses or not.
Instead, I am becoming increasingly excited in a positive way.
Why?
NeoCons are finally gravitating toward the party to which they already belong: the Progressives. And they are being quite public about it. Tens of millions of people have only very recently realized who all these people actually are.
And that’s great news to someone as deplorable as I.
NeoCons = Progressives = Establishment.
And many millions of people now see that to be true.
And nothing could be better for the country at this point in time.
It will be interesting to see whether liberals who vote (in other words, the voting public rather than the politicians/media/elitists) become distraught over so many NeoCons joining their party.
Where is the outrage from liberal voters? The very people they once dispised (neocons) are now diluting their party by joining it, and doing so quickly and in large numbers.
I guess many liberals have yet to ponder how their own party will be perceived should Hillary win.
“NeoCons = Progressives = Establishment.”
Dogs = Cats = Fish
I’d say it’s exactly the way things have gone.
Ben, no mater what anyone says about Trump, this much is true:
He’s forced transparency upon those who didn’t want to be exposed. Much like Assange and WikiLeaks is forcing transparency.
Like Bear, I perceive vetting as a good thing generally. Unlike Bear, I think vetting is due upon all those in power or seeking public office, not just the opposing “political party”. (Interesting in that there really is no opposing political party now - is there?)
Hillary and the NeoCons are in bed with each other, no matter what Bear says or believes. And when he pulls the lever for Hillary next month, he’ll be voting in NeoCons.
I think it has yet to dawn on him that is exactly what he’ll be doing. I doubt it has dawned on scdave or oxide yet, either.
Hillary = Bush = Obama = Rove = Goldman Sachs = Soros = Creamer = Ryan = Boehner. The list goes on…..
All in bed together. And all part of the NeoCon-Progressive Party. And now, all readily identifiable to tens of millions. And there’s no escaping it.
Well, to put it more succinctly ….
How will Democrats and liberals reconcile the fact that Hillary is enabling NeoCons to take over the Democratic Party?
I thought Democrats and liberals voters despised NeoCons.
I guess not.
Hillary is a Wolfowitz in sheep’s clothing.
Hillary doesn’t matter in this, the voters do. Do backers of Hillary even realize what they are doing?
They are willfully GIVING control of their own party over to the NeoCons!
Astonishing - and a one-in-a-lifetime plus for anyone who supports liberty for individuals. Those against liberty are joining the Democratic Party - and now nearly all such folk will be in one place, under one banner.
What was the Republican/conservative party is being purged. And that is truly fantastic!
An incredibly lucky turn of events for those who love liberty. Now, we can do something about it.
The door is being opened, folks! Let’s step through it.
Another interesting article on the madness in Australia
Take a look at the shack pictured in this article that these young folk are sacrificing for. More than 80km from Sydney.
But the old man who’s enraged that millennials would rather buy expensive breakfasts than save up to buy the houses his generation wants to unload is hilarious.
Somebody break out the rage cages.
I don’t see a link, but I’ve read about the mashed avocado’s thing. It’s interesting what gets people riled up in different parts of the world. Australia does seem to have a big generational rift. Probably because the bubble has gone on so long. (BTW, I don’t think avocados and eggs sounds that great together.)
You’re missing out, Ben. A poached egg in half an avocado, with some Pico de Gallo on top, and some whole grain toast, is an amazing breakfast.
The other day I stopped at a convenience store in Wickenburg, AZ and they had a Mexican ice cream kiosk. They were putting all sorts of hot/spicy toppings (that they called pico) on it.
Was it in powder form?
“(BTW, I don’t think avocados and eggs sounds that great together.)”
Professor Bear’s Egg Burritos
Ingredients (for each burrito; scale up as desired)
Two eggs
Trader Joe’s Smoked Ghost Chiles
Sea salt
1/2 of a fresh jalapeno pepper
1/4 of a ripe avocado
One TJ’s Chile and Onion Flour Tortilla
Sharp cheddar cheese
Sriracha sauce
Butter
Preparation:
1. Slice avocado and jalapeno pepper lengthwise to cover diameter of tortilla
2. Melt enough butter to coat the bottom of your frying pan, then saute jalapeno pepper in butter over medium heat
3. Meanwhile combine eggs, 1/4 teaspoon of salt, and a couple of turns of the crank on the ghost chile pepper mill into a mixing bowl, then beat into a frenzied froth
4. In another pan, heat tortilla on both sides for a minute or so, then transfer to a large plate
5. Transfer sauteed jalapeno pepper to tortilla and distribute lengthwise along diameter of tortilla along with avocado; squirt on sriracha to taste
6. Cook egg mixture omelet-style over medium heat until done, adding grated cheddar cheese while cooking, folding over when set
7. Transfer cooked eggs to tortilla and roll into a burrito
No matter who loses the election, this breakfast is guaranteed to convince you that eggs and avocados are a winning combination.
I don’t know why the link didn’t post, but the Australian gates their articles anyway.
The best way to actually see the article is to google “Millennial divided into avos and avo-nots”
Or try “Millenials face the avo divide”
The Australian keeps trying to keep me out.
Trump Up 2 Points Nationwide
http://www.investors.com/politics/trump-up-2-points-nationwide-while-clinton-campaigns-as-if-the-race-is-already-won-ibdtipp-poll/
Meh…
All eyes on the Yuan…how much of China’s dwindling dollar reserves are they prepared to burn through to prop up this overvalued currency?
http://www.zerohedge.com/news/2016-10-23/yuan-downside-breakout-and-what-it-means-spoiler-alert-nothing-good
When inflation surges, Yellen the Felon will have no choice but to hike interest rates. Pop goes the Ponzi….
http://www.telegraph.co.uk/business/2016/10/22/inflation-next-years-ticking-time-bomb/
Inflation in prices.
No inflation in wages.
Guesses on how it ends?
Hola Hugo…
No rigging in this election. No rigging at all. Trump’s insinuation that the DNC, which is corrupt to its core, would rig an election is pure sour grapes.
http://www.zerohedge.com/news/2016-10-23/new-podesta-email-exposes-dem-playbook-rigging-polls-through-oversamples