Here's our summary of key economic events overnight that affect New Zealand, with news the banking crisis has shifted to Europe, and investors are betting big on the Fed not changing rates next week. Oddly, some key UST yield inversions are being wound back sharply at the same time.
But first, we start with news that American mortgage applications had another good rise last week, rising +6.5% from the prior week, the sixth rise in the past twelve weeks. Mortgage rates are unchanged.
American retail sales were expected to post a small slip in February from January and they did. Year-on-year they are up +5.4% nominal so not keeping up with inflation. It is car sales that are the drag.
Producer prices were up +4.6% in a year in February, a sharp reduction from the January rise. They fell month-on-month. Wholesale inflation is leaking away quite quickly now. The year-on-year rise hasn't been this low since early 2021. On a quarterly basis, producer prices are back to levels last seen in 2015/16.
US business inventories were essentially stable in value in January, and that allowed their inventory-to-sales ratios to retreat slightly - and for the first time in a year. The Americans don't really have an excess inventory problem.
The New York state factory survey was grim reading for Wall Street. Activity under its nose is leaking away sharply now.
China's February data came in pretty much as expected for their first full opening-up month. Retail sales rose +3.5% in a no-surprise result, good but not that strong really. Industrial production was up +2.4%, a tad less than expected. Real estate development is not falling anywhere near as fast as it did in 2022, but it is still falling.
And while we are talking about China, we should note that its youth unemployment level has surged recently, now topping 18%. A year ago it was 12%.
In Argentina their inflation has topped +100% year-on-year again. They haven't had it at this gruesome level since their ugly hyper-inflation of the early 1990s when it reached 20,000%.
Disappointingly, Indian exports were lower in February from a year ago, down almost -9%.
But Indonesia's trade surplus increased to +US$5.5 in February and much higher than the same month the previous year and beating market expectations. It was their largest trade surplus since last November, as exports rose +4.5% while imports fell -4.3%.
German producer price inflation fell to +8.9% in February, the lowest rate since April 2021. But the food component was still up +17% with milk and dairy up a staggering +25% in a year. German inflation is still being pressured by high and rising wholesale prices. But they can take comfort that they hardly changed between January and February.
In Zurich, the Credit Suisse share price fell a disastrous -24% yesterday alone, and is now down -42% for the year and down -76% in a year, down -98% since its pre-GFC peak. It's toast. But it is taking a very long time to die. The Swiss National Bank declined to comment or support what is Switzerland's second-largest bank, (UBS is the largest) even after an appeal for help from the bank, after its largest investor, the Saudi National Bank with 10%, said it could not provide Credit Suisse with more financial assistance because of regulatory constraints.
Other large European banks took a share market beating too. Deutsche Bank fell -9% yesterday to be down -12% for the year. BNP Paribas fell -10% overnight to be -5% lower for the year. And HSBC fell -5% on the day, although it is up +9% so far in 2023. Banco Santander fell -7% overnight, but is still up +13% for the year after that. UBS fell -9% yesterday.
The UST 10yr yield starts today at 3.47% and down a risk-off -14 bps from this time yesterday. (Recall, its recent peak was 4.08% on March 3, 2023.) But the UST 2-10 rate curve is very much less inverted and now at -40 bps. Their 1-5 curve inversion is also much less inverted at -62 bps. Their 30 day-10yr curve is much less inverted again at -59 bps. The Australian ten year bond is down -19 bps to 3.27%. The China Govt ten year bond is a tad lower at under 2.89%. And the New Zealand Govt ten year is starting today at 4.46%, bucking the trend and up +15 bps from this time yesterday.
On Wall Street, the S&P500 is ending its Wednesday session down -0.7% with markets seemingly convinced the global economy is heading for recession. Overnight European markets all fell sharply, down more than -3% except London which fell -3.8%. Yesterday Tokyo closed down little-changed. Hong Kong recovered +1.5% of the prior day's large fall and Shanghai rose +0.6% on the same partial bounce. The ASX200 ended its Wednesday session bouncing back a partial +0.9% and the NZX50 closed up +0.2% and a lesser recovery.
The price of gold will open today at US$1933/oz and up +US$24 from this time yesterday.
And oil prices start today down very sharply, down -US$7 at just on US$66/bbl in the US. The international Brent price is now just under US$72/bbl. For oil, these are very large daily retreats.
The Kiwi dollar has fallen away against the greenback on the risk-off sentiment, now at 61.8 USc and down almost -½c. Against the Aussie we are firmer at 93.6 AUc and a new high for the year. Against the euro we are firm too at 58.6 euro cents and up +½c. That keeps the TWI-5 at up 70.5 and little-changed from week-ago levels.
The bitcoin price is sharply lower today, now at US$24,228 and down -5.6% from this time yesterday. And volatility over the past 24 hours has been very high at +/-4.0%.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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And so it begins.
BNP Moves to Cut Counterparty Exposure to Credit Suisse
No wonder NZ$/Gold is at an all-time high.
Reducing exposure now to CS is perhaps a bit late by a month or several.
The question is no longer if, it is now when. And who else do they take down with them.
The pullback effect from others is usually worse than the actual collapse.
I guess they were assuming someone would come out and make a reassuring comment along the lines of Biden's "We guarantee all deposits in American banks". Unless someone does, it's looking grim.
Looks to me like we're back to "Whatever it takes" days and QE. In which case Inflation is going to soar this time. Then we will get the worst of all possible outcomes.
Looks like the US has to decide between a serious financial crisis or runaway inflation.
The US has decided they cannot afford a bank run country-wide as the flow on effects of this would throw them into such a depression that they would lose their global dominance, possibly their reserve currency status as their dollar would plummet, and there would be the opportune time for rivals to initiate physical conflicts knowing full well the US would be in far too much debt to 1./ Be able to intervene in a meaningful way and 2./ maintain their global military presence
I think you underestimate their ability to do both.
They have. Swiss govt will support all depositors.
When depositors stop trusting banks you get bank runs, but when banks stop trusting each other is where fat really hits the shin. It doesn't matter how much money there is (or isn't) if it's not going anywhere.
The bus has just left that stop on its way to the central bank......
Picked up some GDX (gold miner ETF) yesterday - even that is down (albeit a tiny bit)
Picked up some GDX (gold miner ETF) yesterday - even that is down (albeit a tiny bit)
It's a tough one to get the timing right on Wolfie. I've owned since 2019. Down about 19%. Bought as a long-term hold for times like we seem to be going in to.
https://www.cnbc.com/quotes/CSCD5
5y CDS for Credit Suisse has doubled today.
https://news.bloomberglaw.com/bankruptcy-law/bnp-stops-accepting-swaps-…
BNP Paribas SA has told some clients that it will no longer accept so-called novations where BNP is asked to step in on derivatives contracts on which Credit Suisse is a counterparty, according to people familiar with the matter.
Paris-based BNP’s move, an effort to trim its counterparty exposure to the Swiss lender, comes amid a chaotic day for Credit Suisse. The cost to hedge against its default surged, reaching levels that are reminiscent of the 2008 financial crisis.
A representative for BNP in Paris declined to comment. The people familiar with the bank’s pullback asked not to be identified.
Prediction I made at the start of the year. Could be close but catalyst might not be right.
"Credit Suisse could be a catalyst for another ‘08 style blow up. The FDIC meeting clips doing the rounds are somewhat interesting."
Can the SNB afford to bail CS ?
I assume you mean the Swiss Central Bank
https://www.theguardian.com/business/2023/mar/15/credit-suisse-shares-f…
Credit Suisse shares have plunged more than 20% to record lows after its largest shareholder, Saudi National Bank (SNB), said it would not be able to stump up more cash for the beleaguered Swiss bank because of regulatory restrictions.
SNB’s chair, Ammar al-Khudairy, said he would not be able to spend any more money to support Credit Suisse, since the Middle Eastern lender had already accumulated a 9.9% stake. “Well, we can’t … We cannot because we would go above 10%,” he told Reuters in an interview.
However, Khudairy said he did not believe Credit Suisse would need a fresh capital injection. “I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries,” he said on the sidelines of a conference in Riyadh.
“I don’t think they will need extra money; if you look at their ratios, they’re fine. And they operate under a strong regulatory regime in Switzerland and in other countries,”
It feels like a quote from the GFC doesn’t it. Let’s hope he’s right, the market clearly doesn’t agree with him.
You may need to review their own statements around material weaknesses in their reporting.....
They are:
"Credit Suisse will be borrowing up to 50 billion Swiss francs ($53.68 billion) from the Swiss National Bank under a covered loan facility and a short-term liquidity facility."
https://www.cnbc.com/2023/03/16/credit-suisse-to-borrow-up-to-about-54-…
Not looking pretty, on multiple fronts, is it?
Will be interesting to see where the NZX opens this morning.
Two words you should always question during a banking crisis or a nuclear accident
ITS CONTAINED
I would be more inclined to replace "Question", with "ignore".
I really hope that any FHBs out there planning to use KiwiSaver as a deposit have their Kiwisaver in a cash fund.
That developer in Remuera is dreaming if they think people will stump up cash here in tender vs later at mortgagee auction
Mortgagee will be true price discovery. Endlessly listing one property at PBN waiting for someone with more money that brains to rock up is a waste of time in today's market.
Exactly!
lol
Correct.
And way overpriced.
Cash funds will do a good 5% this year.......shares, well, all bets are off as our banks risky housing loans are to now be called into question!
Exactly. People bash cash, but at times like these shouldn’t you be happy with +5% versus ‘minus something potentially quite large’?
That’s what I thought with covid, boy was I wrong. If central banks fire up the printing presses to save these banks you would probably be much better off with shares. Who knows what will happen.
Maybe. But I am pretty confident on this, and I rate the views of Grantham and Taleb probably more than anyone.
Having said that, there’s some really wicked problems right now and that certainly creates uncertainty and potential volatility.
Maybe is the correct word, who knows what will happen. When covid happened did you honestly pick that it was a great time to load up on shares and property? 99% of commentators here thought property was doomed, they didn’t realise that a bad event causes low interest rates and money printing.
But yes you are probably right.
I was already in shares when covid hit. I made some great gains in 2020 and 2021 then sold them in late 2021 before they plunged.
That’s cool, you got the right outcome but that doesn’t mean your logic was infallible. If I put money on red at the casino and it comes up does that make my decision right? Or is gambling still a dumb idea and I was lucky?
I used to think like you that it’s obvious when to return to cash, but people have analysed years of data and it isn’t so easy. Inverted interest rates is one known sign, but once these things become known it’s hard to know whether they are already priced in or not.
Ultimately it comes down to gut feel. You research and investigate, come up with a few logical outcomes but acting on those is gut feel.
Certainly wasn’t infallible. But I took a range of things into account m and did a fair bit of analysis, so while not infallible it was certainly very considered.
It's wasn't hard working out when to move to cash, the hard part will be knowing when to move back out. Now isn't the right time, obviously, and trying to predict when, now, is a fools game.
Sorry for dumb question but why would I put my money in a cash managed fund rather than make my own term deposit decisions at a number of banks?
If you opt out of Kiwisaver and go self managed, you miss out on the govt contribution each year, and employer contributions.
And said govt contributions compound over time with your investment
Hard to know what will happen with our banks. On the one hand the vast majority of loans would have been written with house prices much lower than now (like before Covid) so those loans are still positive. On the other hand we thought house prices were well overvalued then so maybe those loans won’t be safe for long.
Fun fact? NPHLs (non performing housing loans) have been increasing for all the big banks in the last quarter. ANZ's NPHLs are up by nearly 10%. The ratio is just small because of how large their loan portfolio is.
Another fun fact? All the banks which report a very low level of high LVR (loan-to-valuation ratio) are almost certainly under-reporting them today - but it's because those loans are not marked to market against the current asset values. That value is calculated once only at the time of origination and are not marked to market (a little like SVB's HTM portfolio of securities). This means when housing values fall (which they have been), suddenly what used to be 80% LVR (for e.g. 800K loan against 1M property) is now 100% (800K against 800K property).
Check it all out on the RBNZ banking dashboard.
NPHLs (non performing housing loans) have been increasing for all the big banks in the last quarter. ANZ's NPHLs are up by nearly 10%. The ratio is just small because of how large their loan portfolio is.
And as reported, theyare almost back to the level they were pre-covid. Nothing to worry about yet.
All the banks which report a very low level of high LVR (loan-to-valuation ratio) are almost certainly under-reporting them today - but it's because those loans are not marked to market against the current asset values. That value is calculated once only at the time of origination and are not marked to market (a little like SVB's HTM portfolio of securities).
They are reassessed when a credit event happens, including when the mortgagor gets behind more than 90days IIRC.
Hmm, 20 hour old account.. which DGM got banned yesterday and has been rebirthed?
And as reported, theyare almost back to the level they were pre-covid. Nothing to worry about yet. --> key word is "yet". It's like saying "there are storm clouds coming but it's not raining yet."
"They are reassessed when a credit event happens, including when the mortgagor gets behind more than 90days IIRC." - that's when they get reclassified into non-performing. My point is that the low levels of high LVR loans are most certainly too low - and that if they are accurately marked to market, you will see an instant revaluation of the loan book. But because the mortgagors have not defaulted YET, they are not required to be MTM. And unlike Treasuries where it's implausible for the US govt to default (yes it's possible), these mortgagors can and do default.
"Hmm, 20 hour old account.. which DGM got banned yesterday and has been rebirthed?" - no one. Just another bored, retired real estate agent that is not spruiking and calling things out as is.
Maybe good time to pull pin on fuel tax too. Choppy chippy.
Yeah, let’s create more pain for the worker.
In election year? He would rather buy votes by keeping it then axe after the election should he, unlikely, have any say in the matter by then
It is car sales that are the drag.
Is that because of the long wait time on new cars? Production is still a long way behind demand globally:
https://www.aa.co.nz/membership/aa-directions/driver/the-long-wait-for-…
You would think these banks or their regulators would have learnt from the GFC. I sure hope none of them get bailed out.
I think they will have to unfortunately. The alternative would be worse.
Incorrect. The banks that lent for speculation (housing included), need to go. They will be replaced by banks that lend in a more productive way. A really good financial crisis is what is needed to stop inflation and save our fiat currency. Bailouts just kick the can down the road and keep the greedy zombie banks in business.
What's that, inflation dropping like a stone in the US with unemployment hitting record lows? It's almost like therre were other mechanisms at play and a couple of million people don't have to join the dole queue to 'tame inflation'.
Meanwhile in NZ our market interest rates remain high because the markets have every confidence in our central bank keeping rates high as they attempt to increase unemployment and 'tame inflation'.
"American mortgage applications had another good rise last week, rising +6.5% from the prior week"
That's what's going to happen if interest rates fall - everywhere. And not just housing - everything.
And if we think that's going to feed into lower inflation, I'll suggest that's a mistaken view.
We had low inflation for 15 years of that happening
Yes. And we went into it with a low Inflationary impulse. Today is the exact opposite.
For starters, there's still global COVID cash still sloshing about looking for an asset to buy. And I suggested above, QE is on our doorstep again, to try to stabilise the financial system. What will you do if QE hits again, given what you saw last time? Sit back and watch prices rise, or get in ahead of everyone else this time?
I'd guess that just like everyone else, you'll be out there spending before price rise as well?
(The irony is that if the above suggestion happens, QE could make % rate rocket and so asset prices collapse. But I guess we'll have to wait and see)
NZ didn’t, before the GFC we had an OCR of 8% due to high inflation. In fact I think it was all very similar, inflation caused high interest rates and high interest rates caused banks to fail.
I think you'll find CPI was half the OCR. Not twice as much, as it is today.
We also had a genuinely hot economy that they were trying to cool. Very different now - we have an economy that’s very wobbly yet high inflation!
wicked problems
I would say it’s pretty similar to 2007. Low unemployment, high house price gains, high inflation. Not exactly the same granted. The outcome might not be the same, but it might be.
If we get a few more banks collapsing my bet is that inflation will instantly disappear along with the low unemployment rate and central bank will lower the CPI and turn on the printers.
Some similarities but plenty of differences. Also between 06-08 the CPI wasn’t actually very high, it was mainly around 3-4%, it spiked temporarily to about 5% or so.
The situation is much worse this time - we have had the CPI consistently up at 6-8%, and we have a very wobbly, although somehow somewhat resilient (so far) economy. We have also experienced big house price falls while the OCR is going up! A major difference to 06-08.
The main difference is that interest rates went up much more slowly back then. So while the OCR did reach 8% it didn’t go up anywhere near the same rate (I’m not sure there was even one 0.5% rise late alone a 0.75%). Also inflation back then was persistently high, we’ve only had it for one year. But there are a lot of similarities.
Again, no!
It averaged around 3% between 06-08, oscillating between 2-4%. Don’t believe me? Then look at the graph in this article:
https://www.google.co.nz/amp/s/www.newshub.co.nz/home/money/2022/04/con…
Another significant difference is that debt (even relative to income) is much higher now than in ‘06-08
Though this is where debt concentration comes in.
If the vast majority of people have been concentrating on paying down debt (as our banks like to tell us), how does that compare to '06-08?
We don't know. There may be more debt in the system, even relative to income, but you may find that's held by only a tiny fraction of the population.
I don't know if they have to report it to the RBNZ, and it's no longer reported to the public, but the banks themselves will know it.
But will those few highly indebted take the rest of us down with them? I honestly have no idea.
RBNZ C31 Since January 2017: 221k Investor loans were written. 2017 Monthly average $330k.
Sure, not all of those loans will still exist and not all will be unique borrowers. If on IO for 5 years, that $330k will become $490 per week P&I @ 25 year (original term of 30).
2022 - 22k investor loans @ $524k average.
Again, "high interest rates caused banks to fail".
No they didn't - dodgy lending/business practices did.
Yes true my bad, I actually pointed this out the other day.
You mean we had low CPI. We had high inflation, we were just conveniently not measuring a significant portion of it. ~8% pa inflation in most people's single largest expense.
So worried that people will start buying houses. Not a problem surely if prices are stable. NZ market very different from US market. Here, we have a surplus of houses which will keep prices in check.
Unemployment is a lagging indicator. Very low unemployment has to cause inflation, if a business can’t find someone to employ then the only option they have is to increase the salary in which case they will need to pass at least some of that on.
Bill Phillips (of the curve fame) argued that it was the rate of change of unemployment that caused wage inflation - not the rate itself. So, if you suddenly want to employ lots more people very quickly, you will risk wage inflation, but if you move slowly towards very low unemployment, you don't.
Phillips also argued of course that changes in other input costs (particularly imported goods) were a key driver of inflation - and, again, he said that it was the rate of change that mattered (how quickly those imported goods increased in price). I think Bill would have looked at the current inflation episode and said 'it's oil prices stupid'.
On trick pony our RB. Should be replaced with AI.
Oddly, some key UST yield inversions are being wound back sharply at the same time.
Market professionals pricing central bank rate cuts in a shorter time frame.
Good thing the #FOMC has been laser-focused on inflation instead of its job. That's the thing, the Fed isn't a central bank. It's a debating society of Economists whose members love the unearned spotlight (see: Nobel Prize). The FOMC are the original reality TV stars. Link
Bill yields should move a few bps here or there. We've gotten used to scrambles for collateral that trigger 10 or more bps moves (down). So what the fu-- is this? A full-on run. Link
Fed employs 2000 economists! Quite the debate.
NZ can be proud about batting above its weight yet again. One of our finest citizens apparently initiated the bank run that collapsed SVB. Imagine that? We should be proud we have the clout to bring global banking to its knees. Another feather in the cap. Guess the doomsday bunker is now fully stocked.
https://www.bloomberg.com/news/articles/2023-03-09/founders-fund-advise…
I think The Bunker got knocked back by planning!
https://www.nzherald.co.nz/nz/billionaire-peter-thiels-plans-for-luxury…
Yes and the Labour Party managed to cause world wide inflation which is quite remarkable too.
their policies do, QED
Well they did nothing to help it….I’m sure they were keen for LVRs to be lowered right when Covid started, not to mention lowering interest rates and pumping money into the economy. You seem to be a die hard pro labour fan despite their terrible record of failure.
2 years ago under labour we had not enough inflation, the central bank had to set the OCR to stupidly low levels to create some. I assume that was their fault too?
LOL, we know that's not quite true:-) It's great we can bask in the warm glow of being first off the mark with pulling the plug on the global banking system though.
A billionaire Trump supporter who decided to bring a “woke” bank to its knees and began a global crisis. What were his motives really.
So where are interest rates going now? Central banks will always favour bank stability over controlling inflation. Will we see 0% cash rates again soon? And will a few bank collapses be an instant end to inflation just like the GFC was?
It’s possible that we kicked the can so long we temporarily forgot we were kicking it, this might be the reminder. It’s hard to believe that central banks allowed a debt fuelled speculative housing boom just 15 years after it caused the GFC but yes they are that stupid.
"we temporarily forgot we were kicking it" Can kicking is standard economic orthodoxy. Has been for almost a generation. There will be bright young economists out there having experienced nothing else.
People seem to be jumping to conclusions very quickly that the Fed will stop hiking, or even reverse. Premature! If this gets really bad they probably will, but we don’t know yet if it will get really bad, right?
I don’t know about jumping to conclusions, just contemplating what could happen. I think it depends on how many banks fall over and how big they are. One or two shouldn’t matter (although hard to know with a market still spooked by the GFC). But signs of contagion will change the current ball game completely.
This will lead to a consolidation toward the bigger, mainstream banks. Smaller banks will fail as depositers transfer to larger institutions. It’s a reshaping of the banking system.
They may hike another 0.25 but the cycle is coming to an end.
And will a few bank collapses be an instant end to inflation just like the GFC was
Inflation in the US was already trending sharply downwards (probably due to unemployment picking up in early 2008) when banks began to fail. The main indicator to keep a close eye on, as always, remains the American unemployment rate.
A lot of posters missing the bigger picture here. This is just one example of the end game that we've been waiting for. Assuming limited contagion amongst banks, what we have here is a massive deflationary pivot (edit: disinflationary is probably the more accurate term). Just look at treasuries. Then look at today's US PPI and oil prices. If we have accepted that something in the system needed to break, this is probably the best of a bad set of outcomes. Properly capitalised banks whose managers didn't skip bond pricing 101 will be fine.
"what we have here is a massive deflationary pivot"
Couldn't agree more.
What we are about to see is if that pivot come with higher or lower interest rates.
The market is suggesting lower. But how will the consumer handle lower interest rates? Will they bunker down for the inevitable fall in asset prices or will they see cheaper Debt as the reason to go on an initial buying frenzy? I'll plump for the latter, because FOMO and QE are at our door.
they see cheaper Debt as the reason to go on an initial buying frenzy
Will rates go low enough to trigger a buying frenzy? I doubt many Kiwis will have the deposits and disposable incomes in this high inflation environment to service a mortgage at 4.XX% rates or higher.
My point is you can't have low interest rates coinciding with high inflation/low unemployment rates without pushing the economy into hyperinflation. If unemployment goes up, you still won't have the consumer confidence for a buying frenzy.
If we do enter a deflationary period, there is little doubt in my mind that interest rates will be lower, much lower. That would lead again to rising asset prices, just look at the last few years.
China exported deflation to the world in much of the last decade amid low energy prices (US shale boom) and a global commodity glut.
The mass-export led growth has maxed out in China and the authorities are steering the nation towards higher value industries (semiconductors, EVs, solar panels, battery cells, etc.). The Ukraine war, better market coordination from OPEC and US shale wells declining at rapid rates will keep a floor under commodity prices for the time being.
There's a big difference between disinflation and deflation. I don't see outright deflation as a probable outcome at this stage (edited my post above to clarify).
Consumers and businesses have had just about enough of the reality check to stave off any spending spree brought on by lower rates. For instance, I don't see our housing market leaping out of the gate just because interest rates come back a percent or so. As I've stated elsewhere, I do see prices stabilising over the next few months.
Humans do forget, but we relearn if beaten over the head hard enough for long enough. Hence the enevitability of economic cycles, and our tendency to over-extrapolate trends.
Agreed rjn1, I made my earlier comment when you said "deflation", which I see you have now changed to disinflation.
‘Net worth of median household is basically nothing,’ says Carl Icahn.
https://www.marketwatch.com/story/net-worth-of-median-household-is-basi…
It will be interested to see the networth of households in NZ when house and share prices bottom out.
Property prices dropping 20% and showing no letup. And now financial contagion!
Methinks our banks will be looking very hard at their balance sheets about now and wondering whether all is as hunky-dory as it was just 1 year ago.
More than that in some areas.
And I am sure they are looking very hard at their balance sheets now - because it isn't pleasant looking with underwater loans and unemployment yet to rise.
20% is the point at which on average banks will start losing equity. They really needed to have passed those properties on to the next sucker/ mortgagor by now to avoid loses. The last ten years they have been avoiding mortgagee sales as much as possible, great plan when things are only up, now the can kicking avoidance may be a poor plan.
Correct. And those are only for the sales that have transacted.
There are more properties that have NOT transacted even after dropping prices, and more properties that are underwater and not on the market (which also weakens the underlying assets of the banks' loan books) because the mortgagors can still afford to pay. When job losses start happening, then this becomes a real wildfire.
Might be easier to tweak the ‘regulations’ to allow the Saudi’s to stump up more cash. I wonder whether the 10% limit is from the Swiss or Saudi end? Or self imposed by Credit Suisse?
I'm pretty sure they could have side stepped the regulations if they had wanted too. Ergo, they don't want too.
It was a convenient excuse, nothing more.
I'm not much of a technical analyst, but the CS share price started its downward slide ages ago. Sensible share traders / investors would have had their stop losses triggered ago and wouldn't have been back. So who has been buying? And more importantly, on whose recommendations?
Interesting times!
I'm in an unusual situation where I can make money from the bank. I sold a mortgage free house and I could use some of the money to repay a mortgage (about $500k) on my own house, which has mortgage fixed at 2.49% until August. But I could also deposit the $500k at a much higher interest rate, until August, and actually make money front the bank. There is a concern though, with some banks struggling, is my $500k secure at the bank?
What would you do?
Split it across multiple banks - keep some 'on-call' and be ready to pounce on solid stocks that report non-threatening but bad results.
Pay off your mortgage, and you lose the liquidity for the future. The bank may not give it back in the future.
Stick it into an Offset Account - reduce your 2.49% to zero if you can break it. It's a Call Account and if things look dicky, you can transfer the balance at the tap of a key.
That's what we've done. Offset our mortgage almost completely and due to refix in September off 2.49%. Should clear that then can use our offset as a Call Account that we'll reduce over time as we build up cash etc elsewhere.
But you pay floating rate on your “ withdrawal” from your offset cash , I.e. the money you were borrowing on a fixed rate will now be borrowed at current floating rate.
It won't be paid from our offset cash account. Also have savings earning more than our fixed account is costing us.
The NZ banks are Liquid. I feel safe with simillar ammounts with them, You could go here if you are super paranoid,
Kiwi Bonds | New Zealand Debt Management - The Treasury
Yes, I think it’s safe too
Thanks for your comments, I really appreciate it !
I agree with most of the above, NZ banks are relatively 'safe', but only to the extent that 1) the vast majority of LVRs are less than 100%, and 2) the job market remains strong.
There is clearly a risk increment associated with holding a deposit and a home loan concurrently. The question is, are you adequately rewarded for that risk when accounting for net interest return and more assured future access to your capital. That's largely a judgement call mediated by your appetite for risk.
Wait until August, pay off 80% of your mortgage, invest the rest as an inflation hedge.
Easy ..purchase Bitcoin
For stress free life just pay off your mortgage, work a lot less and go surfing (or whatever you enjoy) for couple of years.
The future is looking increasingly uncertain- more so than ever before because the rate of change on Earth (especially dangerous things like AI, geopolitics, climate change, economic stability, energy availability, human lifespan/population growth, animal exticntion, pandemics, social unrest..) is now accelerating faster than ever before. Economically it means the future value of any assets, skills, institutions and cash now is very hard to predict - my plan is to go safe for a few years, enjoy the world and spend time with kids before they leave the nest - whilst develop inglikely valuable future skills ... and then to re-evaluate.
Thanks OSE, wise advice indeed.
NZ banks are fine. Surely you know that.
Of course they are ... Until they aren't.
Real US term interest rates collapsing. Sovereign fiscal deficit spending exuberance will persist - hence gold price rising.
If "inflation is always and everywhere a monetary phenomenon" then ipso facto deflation must also be.
The question is where either lands.
Time for the Reserve Bank to take a pause. Things are breaking. Time to reassess. Central banks everywhere are taking a breath. Housing market definitely will not be affected. Although it may steady. So don’t panic doomsayers.
They are not taking a breath, they are gasping.
The whole situation is Revenge of the DGM.
Popcorn.
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