The Brits are coming... for multi-million mortgage holders

ALesha77 on 12/10/2022 - 23:57
Last edited 27/10/2022 - 22:48

UPDATE:

Ok, the fun did not happen, the Great Brits decided to play vanilla and kick out the PM with chancellor cancelling the mini-budget and going full fiscal prudent.
That is a LOT OF TROUBLE for a developed economy who though they could print their way out of troubles but still no even close to the fun I was expecting. Sadly, there was no "breaking the bank of England" moment and they just served their top official on a plate to the markets.

I am disappointed and I expected more for my pop-corn money but on the other side the market did open a few opportunities to trade on this.

For those of you calling me "doomsayer" and "feeding on doom" - you should re-read the text below.
This was my base case but, to be honest, I did expect some fight and some kind of a fall-out - disappointed that brits did go down without a fight. Well, times are tough.

As for AUS house prices - don't you worry, there will be another trigger. In this world of tightening, there will be plenty.
We have been pre-conditioned with Leverage, now Liquidity started working, so give it some time.
We will get there - slowly and steadily as it is going now or quickly and with lots of fun (given the proper trigger)

Where we are from the top? 10% down already? In some Sydney areas - 20% down?
My forecast from 6-7 months ago is working well - say what you like.

I will make it quick today - in 2 days the Brits will either need to become fiscally prudent, frugal and responsible or… there is no other option really.
But if they won't, some UK pension funds will have to liquidate their books and that could trigger another fall-out somewhere which could trigger something elsewhere and, before you know it, we have another Lehman moment.

https://www.theguardian.com/business/live/2022/oct/12/uk-eco…

As I mentioned many time before, the tight global financial conditions are becoming tighter and will become unbearable very soon if FED won't pivot. At some point, someone will raise a question of collateral value of AUS houses (as it happened to UK gilts all of a sudden).

Time for some Hemingway lessons.
“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually, then suddenly.”

BTW, our brave PM have not yet ruled out a very similar tax-cuts policy that have de-railed UK bonds market and pushed pound to parity.

Have you sold yet? - https://www.ozbargain.com.au/node/706538

See you in 2 days.

Financial

Comments

  • Hybroid on 13/10/2022 - 00:04
    +21

    You must find something else to do than constant drivel of nonsensical doom and gloom fearmongering posts. It's not good for your mental health.

    Take a chill pill. Relax. The world's changing and getting more difficult but you're going to be fine.

      • SF3 on 13/10/2022 - 09:31
        +10

        You are confusing me with someone else

        Doubt it.

        • ALesha77 on 27/10/2022 - 22:01

          Who are you why are you doubting my reply to a person who lovingly cared about my health?

    • Sinnerator on 13/10/2022 - 08:22

      I want to put you and OP in the Octagon.
      But, you have to debate.

      • ALesha77 on 27/10/2022 - 22:01

        You would have to sell tickets first

  • dcep on 13/10/2022 - 03:43
    +3

    I like your short-dated call

    coz in 2 days time , you're either a genius, or nothing happens and we get to laugh at you fools

    • netjock on 13/10/2022 - 09:33

      Everyone trying to make predictions and if they get it right they forever trade on it.

      Dr Doom (Nassim Nicholas Taleb), Michael Burry, Peter Schiff, they are good at making a living making predictions that raise their profile (and whatever they want to sell / get off you).

      Listen to the Peter Schiff podcast, it is hilarious.

    • ALesha77 on 27/10/2022 - 22:03
      +1

      3rd option - you can't read as you did not see that I put "either… or…"
      The Brits went vanilla back-tracking the mini-budget and kicking the PM out - I expected more show for that money

  • The Delray Misfits on 13/10/2022 - 07:25
    +4

    dont wet the bed..again

    your rants are incoherent - you provide no solution to the problem either

    • ALesha77 on 27/10/2022 - 22:49
      +1

      Well, don't judge everyone by your own experience. And sorry to hear about your bed-wetting troubles - see a good doctor.

  • brendanm on 13/10/2022 - 07:48

    Have you sold yet?

    No.

    Another blog post.

    • ALesha77 on 27/10/2022 - 22:03
      +1

      Keep holding the bag.

      How much in red from the highs already? -10%? or worse?

      • brendanm on 30/11/2022 - 21:01

        I'm still so far in the black it's not funny.

  • treekangagaroo on 13/10/2022 - 08:03

    Oh you predicting end of the world and going to chill for two days ?

    • ALesha77 on 27/10/2022 - 22:04
      +1

      Nah, if would be fun to see brit gilts melting but they kicked out PM instead.

  • Ocker on 13/10/2022 - 08:09
    +1

    If nothing else, OP post was worth a chuckle till I read the part "as it happened to UK guilds all of a sudden", then it lost an semblance of credibility.
    Have never heard of UK guilds - UK gilts yes, but "guilds" no.

    • Baysew on 13/10/2022 - 09:47
      -1

      List of guilds in the United Kingdom

      The Skinners and Glovers are pretty alarmed.

    • brendanm on 13/10/2022 - 17:22

      What about the mages guild?

    • miwahni on 16/10/2022 - 01:10

      That was the point where I started chuckling.

    • ALesha77 on 27/10/2022 - 22:05

      Spell-checker got me.

      Good luck with you chuckles, operator

  • dasa on 13/10/2022 - 09:02
    +2

    The Guardian, that says it all.

  • netjock on 13/10/2022 - 09:18
    +4

    At some point, someone will raise a question of collateral value of AUS houses (as it happened to UK guilds all of a sudden)

    You have no idea. It is two different things. Listen to some podcasts. Pension funds put up gilts (gov bonds) as collateral for derivatives that track government bonds (it is like leverage) to increase their returns (yeah like CDS/ CDOs and Lehmans). When the underlying gilts changed in value pension funds got margin called and what else they got to sell other than gilts? Dumping gilts on the market further drives down prices and it is a spiral down.

    Australia housing. You'd have to look at fundamental value. How much is it to build a house? $200k - $250k for a new one. How much for land? Not going to get it for free. The cost of putting in infrastructure is at least $50k in a decent size estate. If you want to build in middle of nowhere $100k+ (if you are lucky). In metro areas you won't get a piece of land for less than $200k so basically bottom price is $400k - $500k for a house on a block of land. If you are living on a $500k property you're pretty safe. If you are living on a $1m property then opinions differ. But then who has derivatives on their houses? Nobody. Worse case is people have too many investment loans.

    The Fed. They screwed up when they said inflation was transitory. They still don't understand where inflation is coming from. Raising interest rates isn't going to matter that much in the US (smart people already locked in 30 year mortgages at 3% in the last 2 years). Higher interest rates are going to hit the poor because rising cost of living from inflation and also credit card / car loans / pay day loans etc. Central banks don't work enough with micro prudential tools. UK BoE recently took out loan affordability tests.

    Central banks also don't work with governments enough and vice versa (like the UK government announce tax cuts and undermines the BoE).

    Energy crisis (Australia has plenty of energy) caused by global perception of energy shortage and speculation is a problem. Countries had plenty of time to get prepared. Just because oil was cheap people shouldn't pretend prices won't rise and we won't end up being short (part of the problem is the available ships to move stuff around as we found out with supply chain crisis and Evergiven). We laughed at people buying slow Camry hybrids but they turned out to be helping everyone else out. There is places that are well suited for solar (Southern Europe like Spain / Italy also Queensland, NT and WA), should have been wiring up the country long time ago.

    • ALesha77 on 27/10/2022 - 22:14
      +1

      Lag, Leverage, Liquidity

      There is a lag to tightening policy. We have not seen the full effect yet. 2008 happened one year after the tightening cycle started.
      Leverage is one of the main reason for almost every market crash (UK gilts are the first large victim in this cycle)
      Liquidity - when it dries up in the system, fundamentals don't matter

      Leverage and Liquidity are two main factors in play right now.

      • netjock on 28/10/2022 - 09:12

        I think you put these posts up to stroke your own ego.

        To think you might actually know more that everyone else (even the educated ones) and getting it right is foolishness. Look at how many people got it right in 2008 and how many of them are getting it right this time around?

        Took you long enough to do the math. Must have been eating you up inside what I said.

  • Tiredman on 13/10/2022 - 09:20

    Well, i agree the market is not bottomed yet due to incoming rate hikes from the Fed. More pain to come but if you are talking about property prices in Australia falling off a cliff. That won't happen. Don't get me wrong if it happens, i'll be the happiest man as i get to buy more but i doubt it. I look at the DXY chart every day and i die a little bit inside. What a wrecking ball for risk assets. If everything crashes due to another Lehman moment, buy buy and buy.

    I'm keeping an eye on the CPI figures and jobless reports and my trading charts open.

    • ALesha77 on 27/10/2022 - 22:17

      US dollar is already a wrecking ball for all assets.
      Don't worry, it has been a blood bath already - AUS housing crash is no big deal in the grand scheme.

      Also, nobody will want to buy in another Lehman moment - you won't either, trust me.

  • ForkSnorter on 13/10/2022 - 11:25
    +4

    Australian property prices will remain over-inflated because the government wants property prices high, and it wants Australians to be in debt.

    This is why there are so many policies pumping money into the property market and encouraging speculation in the property market, instead of into more productive industries, enterprising industries, STEM, etc.

    If you want to buy a 2nd property, the ATO will give you tax breaks if you lose money on it. The ATO will literally pay your mortgage for you if the rent doesn't cover it. The government will create a rental crisis so you can charge heaps of rent for it. If you make heaps of capital gains on it, the ATO will give you a 50% tax cut on your gains (as opposed to earned income, which is taxed twice as high). And if there's a financial crisis and you lose your job and can't pay your mortgage on your 2nd property, the government will bail you out. Meanwhile, those who can't afford rent can rot in an alley somewhere.
    You couldn't make it up.

    • Neoika on 13/10/2022 - 13:18

      Many people will stop working when their all basic needs are met and debt free.

      • ForkSnorter on 13/10/2022 - 14:15

        No, the fear factor keeps people working. There is the risk that they will one day lose their property, or it'll become uninhabitable or an undesirable place to live. There is the risk that their financial assets will lose value through inflation. There is the risk that laws will change or maybe there will be a war/revolution that destroys everything they've worked for.

        Also, I think once people are debt free, this frees them up to have more control over how they work and what they do for work. Without the need to pour their income into a mortgage, they can work smarter, branch out into different fields, try something new, undertake education, work for themselves, do something creative, etc. I don't know anyone who has stopped working entirely.

    • Tleyx on 13/10/2022 - 14:43
      -1

      ATO actually pays less than half thr fifference if the rent doesnt cover

      • ForkSnorter on 13/10/2022 - 16:00

        That's still free money. I wouldn't be complaining if tax payers were paying my mortgage. But it only works if you own more than one property, apparently. How lucky for those people who can afford multiple properties.

        • Tleyx on 13/10/2022 - 16:09

          It might be free money but its not paying the difference as you said

          • ForkSnorter on 13/10/2022 - 16:11

            @Tleyx: I didn't say that.

            • Tleyx on 13/10/2022 - 16:12
              +2

              @ForkSnorter: You said

              The ATO will literally pay your mortgage for you if the rent doesn't cover it.

              • ForkSnorter on 14/10/2022 - 07:22

                @Tleyx: Yes, and it will.

                • Tleyx on 14/10/2022 - 08:34

                  @ForkSnorter: How do you claim the other half?

                  • netjock on 28/10/2022 - 09:23

                    @Tleyx: You will need to click on those ads on facebook / youtube that says there is an ATO loop hole that will pay your mortgage for you.

                    It is like those day trading courses that is so good that everyone quit and jobs and day trade from home. Maybe that is the reason for the vacancies. All the hospitality people were great day traders all along and didn't need to do those jobs.

                    You know tell when people don't have / can't afford investment properties and have some pie in the sky idea about how people can magically come up with a deposit and ATO paying the rest.

        • netjock on 28/10/2022 - 09:18

          That's still free money

          If that is your definition of free then you need to hand your OzB membership back.

          You get a tax credit on the interest paid not the difference to rent.

          If the rent is $1k and your interest is $100. If the renter pays $900 a month you deduct the $100 in interest on the $900 you collect which is tax on $800 (because the bank pays company tax on the $100 they make off you).

          I don't know which part of that is "free" you tell us.

          • ForkSnorter on 28/10/2022 - 09:49

            @netjock: It's free because at the end, you get to keep the house. And you got a discount on your interest. That makes the house cheaper than a 1st home buyer. Why should you get a discount on your interest when they don't?

            • netjock on 28/10/2022 - 11:45

              @ForkSnorter:

              house cheaper than a 1st home buyer

              Depends on where and what you're buying.

              My area rent is $450pw.

              Mortgage is about $2k a month.

              Why should you get a discount on your interest when they don't?

              Do I get a discount on my primary residence interest? We're all on the same boat.

              Investing in property is optional. You could also say the same about margin loans on shares. Should they also get a tax deduction if property investors don't? There might be much more smarter people running the numbers than us.

              It's free because at the end, you get to keep the house

              After you paid deposit using after tax income. Then you get taxed on rental income. Taking out interest deduction. (that is because the bank pays company tax on that interest income, unless you are advocating double taxation which I have a bridge to sell you).

    • brendanm on 13/10/2022 - 17:25
      -2

      The ATO will literally pay your mortgage for you if the rent doesn't cover it.

      Hahahahahahahahahahahahahaha

      If you make heaps of capital gains on it, the ATO will give you a 50% tax cut on your gains

      Like every single investment you hold for 12 months or more.

      • ForkSnorter on 14/10/2022 - 07:26

        "The ATO will literally pay your mortgage for you if the rent doesn't cover it."
        Hahahahahahahahahahahahahaha

        I find that fact amusing too, but also sad. Instead of giving that money to investors, the government could use it to build shelters for homeless people or something.

        • brendanm on 14/10/2022 - 07:29
          -2

          It's not the "fact" that's amusing, the thing that's amusing is that you think that's what actually happens.

          • ForkSnorter on 14/10/2022 - 07:30
            +1

            @brendanm: When you put the figures on the table, that’s exactly what’s happening. You paying less tax if your rent doesn’t cover the mortgage means the ATO is paying your mortgage,

            • brendanm on 14/10/2022 - 07:40

              @ForkSnorter: They don't "pay your mortgage". It reduces your taxable income because of a loss related to an investment.

              Hyperbole doesn't help when making arguments about this stuff.

              • ForkSnorter on 14/10/2022 - 08:53
                +1

                @brendanm: But it's not a loss. It's not a loss at all. It would only be a loss if you sold it for a loss. You are literally making money on it (rent). Then, the ATO gives you even more money (by reducing your taxable income).

                It's just bizarre that you are not seeing this.

                • brendanm on 14/10/2022 - 10:12
                  -1

                  @ForkSnorter: If the revenue (rent) is lower than the costs (mortgage, insurance, repairs etc), it is a loss. It's quite basic math.

                  None of it changes the fact that your claim of "the ATO will pay your mortgage" is simply hyperbole.

                  • ForkSnorter on 14/10/2022 - 11:12

                    @brendanm: But you don't get to claim any of this for your first property. It's only for your 2nd property.

                    So, to clarify, not only can you rent out your 2nd property, but you also get to claim these costs. So, it's easier to pay off your 2nd property than your first. This means the tax policies unfairly favour wealthy people, because less wealthy people can't afford to take out a mortgage on a 2nd property.

                    In addition, by buying up the available properties, investors push up the price of properties across the nation. Maybe this is good for people who own multiple properties, because if they want they can sell and make a killing, but it can be devastating for people who don't own any property.

                    • brendanm on 14/10/2022 - 11:59
                      -1

                      @ForkSnorter:

                      But you don't get to claim any of this for your first property. It's only for your 2nd property.

                      Of course you don't, it isn't an investment, it's a ppor.

                      • ForkSnorter on 15/10/2022 - 07:15

                        @brendanm: Property shouldn’t be treated like other investments. There is a critical shortage of properties. By buying up houses, investors are creating unnecessary competition, pushing up the value of their own properties and making it increasingly difficult for first-time owners to buy or pay off a house.

                        Negative gearing and other tax concessions should absolutely be limited to new builds, new apartments, or new house and land packages. The current policies make property investment a virtually risk-free money grab while simultaneously impoverishing anyone who can’t afford or can barely afford to buy a house.

                        It is fundamentally unfair, and the Australian government should be ashamed.

                        • brendanm on 15/10/2022 - 08:38

                          @ForkSnorter: Nothing is risk free. Just ask the people that bought places in mining towns during the boom. Or people that bought in Perth a few years back. Or many people who have purchased off the plan apartments.

                          Perhaps it's the endless immigration, that creates massive demand for housing, as well as driving down wages, that they should be ashamed of? Perhaps they should be ashamed of allowing rich foreigners to buy up land and houses/apartments, that they don't even have any intention of living in or renting out?

                          No no, it's mum and dad, who have worked their guts out their entire lives just to try to get ahead and secure their retirement who are the problem. Those bourgeoisie assholes.

                          • ForkSnorter on 15/10/2022 - 14:30

                            @brendanm: No, as I stated several, times, the problem is the policies.

                            The policies incentivise investment into property when stock is critically limited. It’s free money for those who can afford it, but in the end it impoverishes everyone, because it artificially bloats housing prices relative to incomes, which are ultimately limited by competition in the global economy.

                            It means owners take longer to pay off their houses and it means a higher proportion of the population are unable to buy a house.

                            • brendanm on 15/10/2022 - 14:43

                              @ForkSnorter:

                              stock is critically limited

                              See my comment above.

                              There will always be people who want to rent. The problem is too many people and not enough properties.

    • ALesha77 on 27/10/2022 - 22:21

      in my view, regulations have added to the bubble but the main reason are infinite QE and ever-lower interest rate. Both have come to an abrupt halt.

    • netjock on 28/10/2022 - 09:16
      +1

      The ATO will literally pay your mortgage for you if the rent doesn't cover it.

      We know that is not correct.

      You also need to know what cash flow actually means.

  • whatwasherproblem on 13/10/2022 - 14:57

    @ALesha77 you're a good kid, but there's much more fun ways to be a doomer than by unironically falling for the FUD on /biz/.

    • ALesha77 on 27/10/2022 - 22:24
      +1

      Did not get any of what you are trying to say.
      Username checks out.

  • The Delray Misfits on 14/10/2022 - 10:15
    +1

    where is the doomsdayer "alesha"..hasnt been seen since posting this

    • ALesha77 on 27/10/2022 - 22:25

      Been busy, those were some good days in the market

  • brendanm on 17/10/2022 - 18:58
    +2

    Well, it's been more than 2 days….

    • MITM on 18/10/2022 - 15:17
      +1

      Perhaps she met her doom.

  • brendanm on 25/10/2022 - 20:04
    +1

    @ALesha77 I hope you're ok. Please come back to us with more prophecies.

    • ALesha77 on 27/10/2022 - 22:25

      Oh, bugger off, go buy another AirBnB or something

      • brendanm on 27/10/2022 - 23:50

        Butthurt your prediction didn't come true?

    • [Deactivated] on 27/10/2022 - 23:16

      obsessed?

      • brendanm on 27/10/2022 - 23:50

        At least this isn't a completely unrelated thread 😉

  • grog on 27/10/2022 - 22:18

    God save the king

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