How long until / or will the major institutions are in trouble?

Discussion in 'Property Market Economics' started by K974, 31st Mar, 2020.

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  1. K974

    K974 Well-Known Member

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    (can someone edit the thread title)


    I said it on here weeks ago I am no expert , plenty brighter Minds that me here, but I drew a parallel with my expierence of the GFC outside of australia , only this time it’s the GFC with steroids

    But it’s surprised even me in the last week or so the scale of the issue , as I said a few weeks ago I predicted some major institutions will go under / need to be bailed out

    I’d be looking at the listed developers and likes of Westpac , anyone else of same opinion, any candidates ?

    currently it’s following the GFC (again outside of australia identically) a mantra of “solid fundamentals”, “soften the landing “ “we’ll get through this “

    maybe you think I am completely off the mark, maybe I am , and I’m scarred from banks going under and burnt by 100yr old developers that were back then too big to fail
     
    Last edited: 31st Mar, 2020
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  2. Morgs

    Morgs Well-Known Member Business Member

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    Not sure, it is your story so maybe you can tell us?
     
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  3. See Change

    See Change Well-Known Member

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    Can't see the big four having an issue . The Government won't let it happen and with all the tightening up of the banking sector in the last years , they're a lot more robust . I know one small banker just did a capital raising and they had no problems getting the funds they wanted without having to pay a premium .

    Developers , I'm sure some will go under , but that happens with any recession .

    Cliff
     
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  4. K974

    K974 Well-Known Member

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    I said weeks ago that a disaster was brewing , I said the 7% unemployment forecast was a joke , a few skeptics to my comments but more and more sentiment has changed

    my opinion hasn’t changed you’ll see some of he banks bailed out , they won’t be nationalised but they will be capitalised and austerity measures brought in to fund it , a number of the listed developers go under , and quite a few of the large contractors

    property will fall 30% but probably less than.20% in the inner city and premium locations , the outter suburbs The mass produced units land the vast subdivision in the other suburbs will be 40% + , some of the stuff built out there won’t recover for years

    generally it will recover quickly in comparsion to other recessions possibly within 2 yrs And faster here than elsewhere

    Credit will dry up , for a period of time the banks will be effectively closed for business , not for long but expect finance applications to lie in limbo for months

    I’ve said people understand the concept of recessions but have never expierenced one and frankly have no idea what they are in for particular the younger generation


    All just my uneducated but to be fair expierenced 2 cents , jusy interested if anyone else shares same opinions and forecasts
     
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  5. Redom

    Redom Mortgage Broker Business Member

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    @K974, I can certainly see where you're coming from, the crisis itself should lend itself to those outcomes. Its easy to draw comparisons from other economic crisis & draw a link to today.

    But I don't think it will get that bad now.

    Have you factored in a 16%+ of GDP fiscal stimulus from the federal government, the RBA adding significant liquidity to financial markets, myriad of actions to stop forced selling/etc, so many cheap short term loans guaranteed by government, etc etc.

    The government has a very low net overall debt position and has demonstrated willingness to do whatever it takes to get through this crisis. I.e. they can comfortably throw another 20, 30, 40, 50, 60, 70, 80% of GDP at it too. They have the balance sheet to do it. I.e. they can replace the entire economic activity of Australia for a year themselves.

    Wild idea, but so to is a 16% stimulus (its literally HALF the size of the yearly budget in additional money thrown at the crisis, and counting).

    Basically...you're right, those dominoes should fall. If this crisis goes on for an extended period of time, all those things may actually happen. But the government seem absolutely hell bent on making sure it doesnt.

    Does any of the above change your views?
     
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  6. The Y-man

    The Y-man Moderator Staff Member

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    I still have faith in the banks that they will not only survive but find better, innovative ways to make money from the people and business that remain.

    But talk is cheap - so I've got a seven figure sum riding in shares of the big 4, a couple of minor banks, and 2 major shopping centre owners.

    Will let everyone know how things pan out on the other side if we're still around.

    The Y-man
     
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  7. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member

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    WBC are already at 20 + days for pleb brokers like me :), and ANZ a while back were not much better.

    but thats not coz of no money

    1. Marketing didnt CC the Memo to production when they rolled out their cash rebate pork barrel, and had no idea that they would be attracting many serial refinancers, plus tonnes more serious long term new borrowers.

    2. Much of their processing is Via Manilla/Clarke/Bangalore etc. 2 weeks ago the cities got shut down, and the staff cant get to work. Yep, there are some projects on the go on WFH, but takes time and has other issues. IT equipment is in shorter supply than Loo paper was in OZ a mth ago.

    Middle term, credit will slow a lot for sure, but in our client portfolio its more around vals more so than income loss per se.

    ta
    rolf
     
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  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member

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    You make it sound like roulette, when really, over the long term its more like a reasonably sure thing, as long as you are "survivability" and prepper trained and implemented and arent margined above 30 %

    ta
    rolf
     
  9. Mr Burns

    Mr Burns Well-Known Member

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    Smart words Redom. This feels different to the GFC.

    GFC was about the financial system collapsing first. With this, a cure or eradication of covid will turn things around fast.
     
  10. willair

    willair Well-Known Member Premium Member

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    Quote..
    But it’s surprised even me in the last week or so the scale of the issue , as I said a few weeks ago I predicted some major institutions will go under / need to be bailed out

    Every morning is the same thing the media is awash with opinions and predictions and very few long-term will be right short-term most will be wrong..
    With the big 4 Banks as this is no different from the GFC and every other time only this time unlike the GFC the swing range is where the market is telling investors which way its going.
    .
    I just wonder how the steep fall to the bottom will feel like as i watched one Bank that makes up over 60 percent of my stand-alone set-up go from 95 bucks into the mid 20 dollars and i watched that fall over a period of time

    ..Last time it took a while i bought back in at 30 dollars then it went i think just above 24 dollar and at $24 then the market turned ,all the div's like they have 24 hours ago still turned up in the bank accounts maybe sometimes 30 percent less but they never stopped no matter what anyone said..

    This time as i have done nothing and have a small order in that still has about 9 business day to go for 35 bucks might not run too that level as no one knows how severe the nest leg down will be and in 9 days time the next order will be set at 30 bucks as the big 4 no matter what ever you read will come out of this the same as last time and it's just too bad some get the same felling when the market hits the top ..imho..
     
  11. Trainee

    Trainee Well-Known Member

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    Be very careful when your thinking starts with i’ve been saying for a long time things are going to collapse.
     
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  12. bumskins

    bumskins Well-Known Member

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    That all assumes that money is getting to the right places but.
    We are seeing a lot of companies rush to try and raise equity & renogotiate debt.
    What's the chance they are all successful?

    Some companies will just be overlevered.

    The stimulus money is largely helping on the expense side of the equation (labour). But let's not kid ourselves if the revenue is not there...?
     
  13. K974

    K974 Well-Known Member

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    i've never said that to myself, yes i have been somewhat cautious due to prior experience but investing and accumulating as i go along, but never ever did i believe in collapse of this nature, however what i am seeing due to Covid-19 is a repeat but with a multiplication factor of 2007/2008 overseas

    the comments about this being different are true i accept this, but i see more things happening each and every day in the exact same way as i saw in 2008 , little by little, bit by bit its going the same way. .

    We'll see how it plays out i suppose but its interesting to share thoughts and its quiet apparent the viewpoint from those who got burnt before and it experienced a major recession to those who haven't, i'm not in anyway saying either side is right, and i'm certainty not the smartest person on here, I'm just saying that its interesting to see how your experiences influence your outlook to such an extent.

    one thing is true, and i'd stake my bottom dollar on this is 75% + of the "experts" and "commentators" will call it wrong
     
  14. Ummm

    Ummm Well-Known Member

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    Our banks are unquestionably strong...geez..don't you ever listen
     
  15. K974

    K974 Well-Known Member

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    without a doubt .......
     
  16. See Change

    See Change Well-Known Member

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    Aren't those dots emotive ......:rolleyes:

    I've been looking at the stability of the banks , more from the point of view , we have a reasonably large amount of cash and need to park it somewhere while we let everything play out so just wanted to make sure some of the small institutions we have loans with are also safe .

    My conclusion is that if the banks go down , the last thing I'll be worry about is money . I'll just be glad my hydroponics is going well ....:eek:

    And that's not going to happen .

    Cliff
     
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  17. K974

    K974 Well-Known Member

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    The banks won’t disappear , of course not but Ireland for example they had to be nationalised and capitalised them

    massive austerity measures to pay for this, and all the knock on effects of cuts to budgets for year , that’s what I’m Talking about
     
  18. datto

    datto Well-Known Member

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    I think that the current situation that the world is in is a perfect breeding ground for paranoia.

    Relax and take a few deep breaths (but please observe social distancing first).

    I never suffer from paranoia. Delusions of grandeur? Well that's another story. I will win Lotto next week for sure. I have the power !
     
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  19. Waterboy

    Waterboy Well-Known Member

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    This is NOT a financial crisis. Thanks to lessons learned from the GFC, our banks are well-capitalised. As well, there's plenty of financial accommodation from policy makers in case of trouble.

    The RBA cannot let any of our big banks collapse, otherwise it will be Australia's Lehman Bros. moment. If there are struggling smaller banks, they will be absorbed by the bigger ones, like what happened to Bankwest and St George a decade ago.
     
  20. Wattle

    Wattle Active Member

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    I think there is going to have to be a lot more government stimulus/support/intervention across all facets of business/lending to stop this from spiralling further. What has been announced is a bit of padding and will help stabilise and calm for while, I predict there will have to be much more to come if we want to end up with the economy we thought we had pre COVID. Hoping for the quick vaccine and controlled escape out of isolation but this is not looking promising, the US and Europe looks like it’s heading for some rough few weeks ahead and what happens there will have a significant impact on our economic recovery given how small we are in the grand scheme of things.

    Some others note this is not a financial crisis and the banks are much more capitalised relative to GFC but you only have to look at the exposure to residential property on balance sheet of the big 4 and do some simply math to work out could be in for some tough times if the government support doesn’t work as effectively as planned. Yes, there a significant chunk of these mortgages ahead on payments with buffers in place but it only takes a small % of their enormous exposure to property to start to impact their financial strength. I know APRA has already given leniency on capital treatment and noted they can eat into the “unquestionably strong buffer” but it’s going to be how well they can prove this to the external market when they need to raise their billions in external funding over the next year or will the government step in again?? The May bank results will be highly anticipated.