Personal Insolvency - Record Levels

[jagmcmanus]

A few interesting figures... Is there a correlation between these figures and how the property market performed over the same period? Its debatable

Fin Yr NSW TOTAL
96/97 5612 21830
97/98 6647 24408
98/99 7229 26376
99/00 6297 23306
00/01 6248 23907
01/02 6484 24109
02/03 6281 22639
03/04 5971 20496
04/05 6251 20507
05/06 7492 22300
06/07 9248 25242
07/08 9938 25981

http://www.itsa.gov.au/dir228/itsaweb.nsf

Interestingly the Total amount of bankruptcies has not yet hit the high of the 98/99 year. This may be because a lot of people have opted for a part 9 or debt agreements instead of full bankruptcy. These have been on the steady increase since 2000.

I wonder where insolvencies will peak?

 

[buzzlightyear]

It will be interesting to see what is actually causing the increase.

Is it individuals who have over-extended themselves through higher LVR's, job losses, business failure, too much "bad" debt ie credit cards, personal loans etc.

Maybe a combination of all

 

[jagmcmanus]

It will be interesting to see what is actually causing the increase.

Is it individuals who have over-extended themselves through higher LVR's, job losses, business failure, too much "bad" debt ie credit cards, personal loans etc.

Maybe a combination of all

I would assume a combination of all. I tried to find data on mortgage deafults but its up to the individual banks to report.

Can you beleive there is no national long term data on defaults?

There probably is but its private research, you can google current year data but its all anecdotal.

I would say that bankruptcies involve a property sale whereas pt 9 or debt agreements would largely be unsecured.

Its funny that the last peak in 98/99 also coincided with the massive lift in Sydney property prices.

I think these are people who held out right through the bad times at then went bust right at the end of the cycle

 

[pendo]

Not to mention the stampede of margin calls that must be going on.

 

[topcropper]

Not to mention the stampede of margin calls that must be going on.

Maybe I'm naive, but I would have thought all the margin calls would have been called in, in previous dumps. Is there still much leverage in the sharemarket? I wouldn't have thought so.

I think a lot of the panic selling in the share market is now people trying to cover their debts in housing and consumer spending, and so the shares have to go.

Just reading posts here on SS, lots seems to be paying off debt as fast as possible.


All the leverage is now in property I would have thought.

See ya's.

 

[pendo]

yes probably right TC

 

[jagmcmanus]

Maybe I'm naive, but I would have thought all the margin calls would have been called in, in previous dumps. Is there still much leverage in the sharemarket? I wouldn't have thought so.

I think a lot of the panic selling in the share market is now people trying to cover their debts in housing and consumer spending, and so the shares have to go.

Just reading posts here on SS, lots seems to be paying off debt as fast as possible.


All the leverage is now in property I would have thought.

See ya's.

Actually there is a massive amount of margin call activity at the moment, comsec have reduced the lending on about 30 stocks since the start of the month (sep 08) and about 14 have been taken off the approved lending list altogether...

ABC learning is now 0%
BNB and all babcock and brown assets (including fundamentally sound ones like babcock power) are now 0%
Credit Corp 0%
Brisconnect 0%

So its actually worse than Feb when lending ratios were 50-70% and share prices slid 20%, because at least people still had equity and a buffer.

In the last week prices got wiped out AND some of these shares went to 0% lending, if someones portfolio consisted of 30% babcock and brown related shares they would have had to sell immediatley to cover the rest of their shares pushing prices down lower (and triggering the same effect on the next lot of investors who weren't as geared up).

I know, as I had a forced sale last wednesday on someof my stock, to be fair Comsec did email me beforehand but I couldn't put enough funds in on time (I did put some in but the market kept sliding), so they did a forced sale and sold on my behalf!

This was all because of the 0% lending with no warning though, I was geared at 60% (which some may consider a lot of buffer as max was about 72%) so I was not maxed out on my margin loan at all before the margin call.