It's deja vu all over again.

So, in late 2007 some of us woke up one morning to be told that the RMBS market had..... you know.... closed. This WTF moment was shortly thereafter followed by a HFS! moment when it appeared that global banks suddenly didn't want to lend to each other.

Interesting times ensued.

The RMBS market (with substantial assistance from the AOFM) eventually emerged from it's GFC-induced coma to stumble around as a partly functioning version of its old self.

Anyhoo....Greece.

Over the last couple of months the RMBS market seems to be having an acid flashback and for all intents and purposes has...you know...closed.

Interesting times.
 
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TF as before it follows the crazyness in currency markets from a few days ago.


Kent Brockman: Hordes of panicky people seem to be evacuating the town for some unknown reason. Professor, without knowing precisely what the danger is, would you say it's time for our viewers to crack each other's heads open and feast on the goo inside?

Professor: Yes I would, Kent
 
Over the last couple of months the RMBS market seems to be having an acid flashback and for all intents and purposes has...you know...closed.

Interesting times.

Interesting indeed.

Wasn't that followed about a year later by a substantial property boom in Australia?

I wonder if history will repeat?
 
Interesting indeed.

Wasn't that followed about a year later by a substantial property boom in Australia?

I wonder if history will repeat?

I suspect you may have differrent definitons of:
(a) substantial
(b) property boom, and
(c) Australia

to me.

In fact, you appear to have very different defintions of "substantial" and "boom" to...well...you ;)


My definitions...


Boom: +15 to +25% nominal per annum

Strong growth: +10 to +15% nominal per annum

Moderate growth: +5 to +10% nominal per annum

Stagnation: +5 to -5% nominal / -5 to -15% real over several years.

Cyclical correction: -5 to -10% nominal / -15 to -20% real over several years.

Crash: -10 to -20% nominal / -20 to -30% real over several years.

Major Crash: -20% to -35% nominal / -30% to -45% real over several years.

Ed Karan Crash: -40% over two years from tipping point in Q1 2008.

**** Crash: -70% to -90% in one year. All specufestors burned. Participation in ponzi schemes decreed punishable by death.


Would be interested to hear others definitions...

Cheers,

Shadow.
 
More information please TF. Got some numbers? My understanding is that securitisation has been way down from where it was pre GFC for the last few years but is still functioning and has been bouncing around a bit. Can't find any evidence that it has "closed" though.

Of course it has closed before and we survived. If that happens, it depends on whether our banks can source other funding again this time around - and for how long.
 
I dont pretend to be an expert in this, but isnt the situation a lot different now with us all saving a lot more and lessening our debt?

Though seeing we have the same government (effectively) I guess we could see the same reaction.
 
More information please TF. Got some numbers? My understanding is that securitisation has been way down from where it was pre GFC for the last few years but is still functioning and has been bouncing around a bit. Can't find any evidence that it has "closed" though.

Of course it has closed before and we survived. If that happens, it depends on whether our banks can source other funding again this time around - and for how long.


The dependance on seczn. these days is tiny compared to pre-2007 so it's not really about materiality. The "sudden" reversal in recent months is of relevance in terms of an indicator of the broader markets.

There are people in my world genuinely talking about the prospect of sovereign guarantees coming back into play.
 
Big banks around the world are still broke as the band aid solution of giving away money is not really a solution.
And neither is borrowing and infinitum to pay interest on borrowings when your not printing the money yourself.

The banks lending to the PIIGS thought they had gurantees, but those banks are already bankrupt and living on drip fed aid.
So the govts bail out the banks dodgy deals, who then expect to be paid? Not likely.
So nothing is guaranteed as the world economies are not recovering but still sliding down into the abyss.
 
Last time the banks were bailed out by the governments, who didn't realise how much trouble they were in themselves.

This time governments:
1. Are very aware
2. Have no money in the kitty
3. Don't want to be downgraded by the ratings agencies, risking bankruptcy themselves

Who bails out the banks AND countries, especially those the size of Italy?

I am in middle management at a Big 4 bank. A very senior bank executive recently told us in a large group meeting that he has never seen such a dangerous situation in the markets, worst in his lifetime, beyond GFC1.

Mortgages have gone from being high priority to low priority and deposits are by far priority #1 again with huge growth in the deposits teams, in an effort to capture every last dollar they can before the proverbial hits spinny things.
 
Who bails out the banks AND countries, especially those the size of Italy?

The printing presses. The European Central Bank just has to create the money and guarantee to lend it to Italy et al and all will be well. You have to admit there is plenty of precedent for that strategy - although it might scare a few Germans along the way... Alternatively they split out of the monetary union so as to be able to achieve the same outcome with their own currency and central bank.

Someone around here used to say money is the creation of man and I couldn't agree more. While deflation is the problem, the printing presses will be the solution. Admittedly an imperfect one and not without its own risks of course but it's hard to talk about the risk of inflation when the main problem is that everything is contracting...
 
Mattnz

What a very insightful post from a banker who actually works in a Big 4.

I am hearing the same thing! The Senior Execs in Banking are running scared because the proverbial sH!!te is about the fan!

I am also hearing that cost reduction is a real priority...the CBA wants to hit worlds best practive with a costs at 35%....most aussie banks are beteen 40-50%!

What does that mean...well...the following:

1. More outsourcing...not only IT but also Loans Processing, accounting, etc.
2. Reducing the 500-800 people at GM level or higher within most of the Big 4 ...that means people on packages of $200k plus at banks. Find out where these people typically live and don't buy there - in Sydney it is most probalby areas like Mosman, Lindfield, parts of the Sutherland Shire...and other WASPish suburbs
3. Cash again will be king!!!!!....and Cash Flow will be the new black!!!

Last time the banks were bailed out by the governments, who didn't realise how much trouble they were in themselves.

This time governments:
1. Are very aware
2. Have no money in the kitty
3. Don't want to be downgraded by the ratings agencies, risking bankruptcy themselves

Who bails out the banks AND countries, especially those the size of Italy?

I am in middle management at a Big 4 bank. A very senior bank executive recently told us in a large group meeting that he has never seen such a dangerous situation in the markets, worst in his lifetime, beyond GFC1.

Mortgages have gone from being high priority to low priority and deposits are by far priority #1 again with huge growth in the deposits teams, in an effort to capture every last dollar they can before the proverbial hits spinny things.
 
I suspect you may have differrent definitons of:
(a) substantial
(b) property boom, and
(c) Australia

to me.

In fact, you appear to have very different defintions of "substantial" and "boom" to...well...you ;)

I don't really follow your response or the relevance of that old quote? In the post you responded to, I was really just pondering the likelihood of a repeat of the last time we saw an RMBS freeze - i.e. we saw a substantial property boom about a year or so later? And by the way, when are we going to get that big credit tightening you used to tell us about... the one that's going to cause a property crash?
 
I am in middle management at a Big 4 bank. A very senior bank executive recently told us in a large group meeting that he has never seen such a dangerous situation in the markets, worst in his lifetime, beyond GFC1.

The PIIGS were broke long before the EU was even a concept.
The EU just made it worse.
They were definitely broke at the end of WWII and it was very convenient for the UK/US to keep it that way, allies or not friend or foe.

Now suddenly it's a surprise... Boo!
 
I don't really follow your response or the relevance of that old quote? In the post you responded to, I was really just pondering the likelihood of a repeat of the last time we saw an RMBS freeze - i.e. we saw a substantial property boom about a year or so later? And by the way, when are we going to get that big credit tightening you used to tell us about... the one that's going to cause a property crash?

Of you don't beleive there has been a material and ongoing change to credit appetite and growth in Australia since 08 you are getting to world-beating levels of cognitive dissonance.

For the safety of others, please stay away from windows and crowds.

The relevance of the quote is simple. You claim that there was a substantial real estate boom in Australia post-GFC. I'm calling BS and for convenience reminding you of your own definition of a boom ( I assume substantial boom is a grade above).

And, as you well know, I don't believe there will be a sudden crash (unlike, yourself, of course). My position is simply - as per my sig - that historical growth rates in RE here and elsewhere has been driven and supported by credit growth that was an aberration and, therefore, will not be sustained.

Your infatuation with booms and crashes has more in common with the perma-bears than most here, I suspect.
 
Last time the banks were bailed out by the governments, who didn't realise how much trouble they were in themselves.

This time governments:
1. Are very aware
2. Have no money in the kitty
3. Don't want to be downgraded by the ratings agencies, risking bankruptcy themselves

Who bails out the banks AND countries, especially those the size of Italy?

I am in middle management at a Big 4 bank. A very senior bank executive recently told us in a large group meeting that he has never seen such a dangerous situation in the markets, worst in his lifetime, beyond GFC1.

Mortgages have gone from being high priority to low priority and deposits are by far priority #1 again with huge growth in the deposits teams, in an effort to capture every last dollar they can before the proverbial hits spinny things.

Exactly the point I was making.

I think because the signs were there in 07 for a few months before the market imploded completely, including a rapid blowout in RMBs spreads, the principal of "panic hard, panic early" seems to be top of mind atm.

If it does go as badly as some are saying, I think the speed at which aforementioned manure will impact on the air circulator will be breathtaking.
 
Who is asking who for guarantees TF? I can understand the banks that lent to the PIIGS are now wishing they had some sort of g'tee.

Is what you mean?

During GFS phase 1 the Big Issue was that banks suddenly couldn't be sure if their counter parties (other banks) had exposures that meant they might not be able to repay their debts.

So they stopped lending to each other and the world financial system came to the brink of collapse.

Governments stepped in and started guaranteeing their banks to sure up confidence and get capital moving again. Hence, "sovereign guarantee".

The issues in Europe - which are obviously not new but the music has stopped and there aren't enough chairs - have a slightly different character in that we now have arguably two levels of counterparty risk in the system - banks and governments.

Who guarantees the banks this time when it is governments themselves that are the bad debt risk?

If this sort of clusterfunk gets underway, with all the fear and loathing one would expect, we may be back to 08 when the Feds have the guarantee Oz banks again to maintain confidence.

Let's hope things don't come to that but you can smell the fear.....
 
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