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The on coming train wreck... are you prepared?

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From "the sky is falling down and gold is the only sensible investment mob"... and their pearl of wisdom. You should read about it.

... and this cautionary tale on your neighbourhood banks from this gentleman

Excerpts that you should pay more attention on...

In case you missed it a few months ago we'll say it again: Australia's property boom was bought with borrowed money. Both residential and commercial property values soared with the credit boom. If you think the banks are fine because they don't have a subprime problem, think again. The banks have a property problem, and you can find it on the asset side of the balance sheet.

The banks are rightly worried about having to borrow money in the wholesale market. National Australia Bank's CEO Cameron Clyne says, "We are reliant on the willingness of others to lend to us, domestic demand for credit significantly exceeds our capacity to save."

And this...

Of course one of the most stunning predictions this week has been that of NAB chief economist Alan Oster, who believes that house prices will fall 10 per cent (The rate debate, June 16). Given that consumer confidence is rising, its not what the market expects to happen.

If Oster is right, then CBA, which loaned heavily on the first home buyers' grants, will be under pressure. Clearly this is not what CBA expects to happen.

By early next year we will know who was right and the outcome of that difference of opinion is going to play a big role in stock market levels and the share prices of banks in the coming six months.

*** and this is one of the many reasons why I have been nagging all these whilst - in times to come, the only credible source of capitals will be from those creditor nations. Of them, the most relevant and most likely one that will provide the majority FDI into this country is China, with Japan running a second. Between the two, the Chinese are the one with most interest in doing business with us.

Based on the public response to the Rio-Chinalco deal and the way the media and politicians blowing it up into some kind of anti-Chinese imperial invasion in my view - SUCKS!

If we don't want to do a deal, just take a walk. There is no need to call them names. There is no need to be cocky by accusing them pillaging this land and practising predatory acquisition, etc (can anyone still recall Chinalno was approached by Rio at first and that they were actually paying a large premium to the Rio share price at that point?...)

Look what happen now? The Chinese were feeling so hard done by that they are talking all kinds of threat and are refusing to budge in their iron ore negotiation. That's quite ok since both Rio and BHP can still sell their ore in the spot market. Next, just watch that outlet shrink when their restocking is done, whilst they maintain their squeeze by prolonging the negotiation... it's almost a sure bet that Rio and possibly BHP will be reporting a less than shining result in their next two quarters. And then you watch their share price getting a wallop. (Those who are rushing into Rio like there's no tomorrow now will probably regret what they are doing)

But that's still not so bad. What is bad is the future, the next few years if/when the global economies really settle down and when everyone can clearly see the US and the EU economies are not recovering with high growth and are going no where, and their banks are barely maintaining their solvency through state help that we, this country, is finding out our acute need of foreign capital and/or foreign direct investment (FDI); and that the usual old allies and traditional sources of capital from the US+EU are drying up and/or have become so costly that the local banks will have no choice but to slug everyone to pass on their cost to keep their margin... that is when people will begin to see and appreciate what the Chinese money is doing for this country both in terms of keeping the economy going and in avoiding a much larger scale and scope of unemployment.

That's when we will read about Krudd and Swan (if Labor is still in power) talking about good relationship and doing business with China in earnest because by then it will be so obvious to everyone where the money is...

... and let's hope by then, the Chinese and the Chinalco' bosses and backers are not in charge of China and that they have kind of forgotten how we kicked their **** and thumb our nose to them once.

- End of Rant -

ps: if and when you next see the property prices are plunging in your neighbourhood, you should know it's probably time that the flow of "traditional" money is drying up, like the Murray...

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  1. MRC & Co's Avatar
    Cheers Haunting, another interesting post.

    Our property market has to be about the only one that hasn't experienced a serious correction to date........
  2. kennas's Avatar
    The GD sent the market down 90% or so. That's another 50% or so from here I guess. So, if we have some cash, or have enough invested that gives us a good margin lend, it will be an absolutely amazing buying opportunity once the worst case scenarios eventuate. Whoohoo!! Stop painting fear and see the opportunity that this crisis/depression represents. Already some people saw that there was going to be significant bear bounce, which has been a great trading op. Those who were too scared to invest sat on the side and saw their cash earn 2% or so. I was only half invested but still has earnt me more than the average wage. Yes, the economy is ****e, but lets see the opportunity!!! A once in a lifetime opportunity!! Good luck.
  3. haunting's Avatar
    China's new Iron find... can't be good news for RIO and BHP. Also in a separate report , Wuhan spokesman was quoted to have said this... "Chinalco's failure tells us that we should cooperate with companies that are honest and faithful," - I would take it to reflect how the other Chinese biz people are thinking. Not good at all.
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