One of our best “short” (as opposed to “long”) ideas this year has been to bet that the credit spreads on residential mortgage-backed securities (RMBS) would widen—reducing their price—as a function of the toxic combination of falling house prices, rising defaults, surging supply and plummeting home loan prepayment rates. (We... Show More
Adyen is a Netherlands-based company founded in 2006 that offers an ecommerce platform that seeks to smooth payments and provide shopper-data insights for businesses. In 2017, Adyen, which employs fewer than 700 people in 15 offices around the world, processed more than 100 billion euros for the first time. Show More
This week I kick-along the debate about ScoMo's unprecedented proposal to fund $2 billion of SME loans, which I helped design, and examine how investors have whacked Aussie bank and insurer subordinated bonds as if there has been a mini-GFC as a result of a widely misinterpreted APRA discussion paper,... Show More
In the last couple of days, I have received a number of responses from clients and readers regarding our article ‘The golden age of banking is over’. Given the connection some investors have with banks shares this was to be expected and I’ll take some time in an attempt to... Show More
If you’d held banking shares for the last 30 years, and those share prices and dividends had increased in most of those years with only a few hiccups, one can understand the sentimentality and attractiveness these names carry in the minds of investors. This, of course, doesn’t make that thought... Show More
APRA has released an important new consultation paper on the regulator's approach to ensuring the major banks have sufficient "Total Loss Absorbing Capacity" (or TLAC). I have written at length about this in the AFR here (or AFR subs can click here). Show More
We conducted a cross-asset scenario analysis on potential outcomes from the upcoming midterm elections in the United States. Using both a macro and a bottom-up approach, our base case was for a Democratic House of Representatives and a Republican Senate, but we also considered the possibility of a sweep in... Show More
Today I review research that shows if Labor eliminates negative gearing and increases capital gains tax by 50%, national house prices could fall 9-12% on top of the current declines; parse new analysis from CoreLogic highlighting a spike in the share of apartment owners realising losses when they sell their... Show More
Today I argue that the Hayne royal commission's interim report is flawed in several respects that will force lenders to hike mortgage rates and reduce access to credit (click on that link to read the column): Show More
Today I explain how ScoMo (and Turnbull) saved Australia's AAA rating, and in the process also saved borrowers from a certain 10bps per annum rate hike worth over $10,400 over the life of a typical home loan. Last week S&P shocked the market, but not us, by upgrading Australia's AAA... Show More
This week I interview Tim Lawless, the head of research at Australia's largest real estate data company, CoreLogic, who says fears of a future Labor government eliminating negative gearing and doubling capital gains tax on housing (and equities) are one reason why house prices are falling as investors run for... Show More
In some ways the regulatory response that followed in the years after the collapse of Lehman Brothers has been a success. The days of racy balance sheets chasing outsized profits on wafer thin capital are largely over; replaced by a mantra of prudence and bread-and-butter lending to the real economy. Show More
Volatility and wild swings in company share prices were a feature of the August 2018 reporting period. For example, Bellamy’s shares immediately fell 8% on the result only to rally and end the day 6% higher. According to Charlie Aitken, it’s a symptom of large amounts of short-term money sloshing... Show More
Moody's believes APRA's new proposals for the reporting of capital ratios could end up being credit positive for the Aussie banks, arguing that "both options would be credit positive because each would improve the comparability of Australian banks' capitalisation to global peers". I wrote about this in the AFR on... Show More
In the AFR I assault the notion that the big banks are going to be threatened with irrelevance, nay disintermediated, by the various threats posed by fin-techs, blockchain, bitcoin, and/or the FANGs (click on that link to read for free or AFR subs can click here). Excerpt: Show More
Mortgage interest rates in Australia have increased in recent months, despite a steady cash rate. Domestic mortgage rates are heavily influenced by a combination of factors in addition to the official cash rate, and two we’re going to focus on in this paper are the banks’ exposure to domestic and... Show More
In the AFR today I reveal that the regulator's latest stress-tests of Australia's 13 largest banks show a vast improvement over the results of the 2014 stress-test when some banks' common equity tier one (CET1) capital ratios fell below 5%, triggering the conversion of their hybrid securities into equity. In... Show More
Around 12 months ago, I shared my 10 predictions for FY18. These included a peak for the housing market, struggling retail stocks, and global macroeconomic strength. It was great to see that a lot of these predictions proved true. With FY18 now over, Livewire have asked for my predictions for... Show More
In the AFR today I argue that nobody seems to have noticed that the royal commission's mandate is biased in favour of the imprudent over the parsimonious. It has spent most of its time agonising over the tiny number of "bad" borrowers who defaulted on their interest and/or principal repayments... Show More
I have a friend who is mildly wealthy but not gainfully employed. He has been a customer of the same bank for the past 40 years. Like me, he doesn’t own a house. Unlike me, he has been thinking about it. Show More
