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They Might Find Themselves In A Position Where They Can’t Make The Repayments

A report from The New Daily in Australia. “Property prices have fallen on a week-to-week basis for the first time since August, fuelling concerns the housing market is careening towards a catastrophic slowdown. CoreLogic analysis reveals growth in average house prices has been falling for the past three weeks and has now dipped into negative territory for the first time since the 2018-19 downturn. The property market’s woes were compounded by a steep drop in clearance rates. The weekly average across capitals now sits at 30.6 per cent – the lowest result in CoreLogic’s reporting history.”

“Although Sydney has a slightly higher clearance rate (32.1 per cent), the national average was dragged down by sluggish results in Melbourne (20 per cent) and Brisbane (23.5 per cent).”

The Sydney Morning Herald. “Mascot Towers owners will be asked to consider selling the complex which has been cracked since June last year following an escalation in costs to repair the building that could now total $53.5 million. Residents of the 132 apartments were evacuated in June last year over cracking in the primary support structure and facade masonry, causing fears the building had become unstable. At an extraordinary general meeting, owners will be asked to consider selling or repurposing the building, possibly into affordable housing. The date for the meeting is yet to be set.”

“Resident Brian Tucker said it was ‘really distressing’ that residents were still out of their homes almost a year since they were first evacuated. ‘Everyone is so upset with what is going on,’ he said. ‘The costs keep blowing out.’ Another owner, who spoke on condition of anonymity, said the cost of repairs and the 15-year strata loan was just too much for some residents. ‘There is no way I can afford to pay my share,’ the resident said. ‘If owners decide to sell the building, the issue will be the home loan. The money from the collective sale will not be a lot and won’t be able to cover the home loan amount.'”

From ABC News. “Mascot Towers, in Sydney’s south, has been plagued by structural issues and cracking since the complex was evacuated almost a year ago. The price tag subsequently blew out to $15 million, then $25 million, before this week’s estimate of $32 million for rectification works. A further $21.5 million in interest on a 15-year loan would bring the final bill to $53.5 million. That is around $10 million more than previous estimates, and equates to an average of about $400,000 for each owner of the 132 units.”

“Treacy Sheehan owns a three-bedroom penthouse in the complex and expects to pay an additional $5,000 a month towards the repairs. ‘That’s on top of strata fees, mortgages, utilities — we’ll all go bankrupt at this rate,’ she said.”

“Apartment owner Brian Tucker, who is on the Strata Committee, said owners would be asked to consider a collective sale. He conceded Mascot Towers would likely only sell for its land value. ‘But what do we do?’ he said. ‘Do we try to get rid of it but go into debt for the rest of our lives … or keep throwing money into it but find more and more faults? It’s a lose-lose situation. We have to try and find the least-worst option.'”

“Mr Tucker said the building’s developer had gone into liquidation and was unable to be held responsible. The problems at Mascot Towers followed similar issues with the Opal Tower at Sydney Olympic Park, which had to be evacuated on Christmas Eve in 2018 after several major cracks were found.”

From Domain News. “Most landlords are already losing money on their investment, which may explain the hesitance to cut rents for struggling tenants, experts say. Landlords who own a negatively geared property – where the rental income is not enough to cover the associated costs of owning the property, such as home loan repayments – have to personally make up the shortfall. Australian Tax Office data from 2016-17 shows 58 per cent of investment properties are negatively geared.”

“Even with an impending tax rebate, Camberwell landlord Josh Hartwig would struggle to accommodate a rent decrease if his tenant needed it. ‘If the tenant stays in there, I can continue as long as I’m at least working,’ he said. ‘But it is going to cost me 150 bucks a week to keep the place with the tenant in there.'”

“Mr Hartwig’s loan was recently switched from interest-only to principal-and-interest, increasing his costs. His partner also recently had to close her Pilates studio and was on a reduced income. He said he’d need help from the banks to be able to afford it, otherwise he may lose the investment. Mr Hartwig was rentvesting and had already been trying to sell the unit since February, with little luck.”

“‘If the tenants are at the bottom rung and we’re in the middle and the banks are at the top, we need all the help we can get from the top,’ he said. ‘We’re coping at the moment and we’ll see what happens in a couple of months. If I get a buyer, I will sell it. Having said that, I’m not in a rush to sell it but it would make things a lot easier.'”

“AMP Capital economist Shane Oliver said: ‘Financially it makes it more difficult for the landlord. They would be more vulnerable to rent reductions than landlords who aren’t negatively geared.’ Mr Oliver agreed that the typical landlord was wealthier and should be able to absorb the loss, but said those whose job it was to manage several of their investment properties might struggle. ‘There would be some people who run this as a business, with multiple properties negatively geared,’ he said. ‘They might find themselves in a position where they can’t make the repayments.'”

The Daily Telegraph. “Desperate landlords are offering Sydney homes rent free for up to a month or at reduced rates in an attempt to attract new tenants and stave off costly long-term vacancies. The increasingly generous offers helped push advertised house rents down nearly 5 per cent over March, while unit rents dropped 3.1 per cent, SQM Research showed. Rents were likely to fall further as the coronavirus crisis continued and vacancies climbed, SQM reported.”

“There is already evidence social distancing measures and travel bans drove a spike in vacancies in areas once dominated by Airbnb rentals and international student accommodation. Data from realestate.com.au showed a 20 per cent rise in Sydney rental listings in the first week of April, which economist Nerida Conisbee noted was mostly from short-term accommodation becoming available.”

“The trend was most prevalent in northern beaches suburb Avalon Beach and inner west enclave Rozelle, where the supply of rental houses doubled. There was a similar increase in the supply of rental units in eastern suburbs Clovelly, Double Bay and Little Bay. Younger renters uncertain about the future of their jobs were also beginning to move out of sharehouses in areas such as Balmain to move back in with their parents, Ms Conisbee said. Some of the more generous rental deals are being offered in areas with a high supply of new housing, particularly units.”

“Multiple homes in the Pagewood Green estate in Eastgardens are being offered with four weeks’ free rent. Apartments in a Mascot building on Gardeners Rd are being offered with free rent for the first two weeks. Numerous Toongabbie homes in Western Sydney are being listed with a rent free period, including a four-bedroom duplex on Burrabogee Rd with the first month offered rent free. The $650 per week price is also well below the 2018 advertised rent of $775.”

“SQM Research director Louis Christopher said falls in rent last month were ‘a sign of things to come.’ ‘We are likely to record significant increases in rental vacancy rates as 2020 progresses,’ Mr Christopher said.”

The Canberra Times. “Real estate agents across Canberra are reporting an increase in rentals hitting the market as coronavirus creates uncertainty for landlords. Airbnb hosts looking to fill empty rooms and homeowners selling prior to COVID-19 had re-entered the rental market, according to the Real Estate Institute of ACT director Hannah Gill. Manuel Saulo had four Airbnb properties in Canberra up until January this year. He said his Turner and Braddon apartments averaged around $120 a night with occupancy rates at 93 per cent in February.”

“Having let go of the lease on one property, Mr Saulo has been forced to begin accepting medium-term renters at almost half the weekly rental on his three remaining subleased apartments. ‘I had to do it just to get some income,’ he said.”

This Post Has 85 Comments
  1. Well it’s all died in the arse down under.

    ‘Mr Tucker said the building’s developer had gone into liquidation and was unable to be held responsible’

    Lovely.

    ‘The problems at Mascot Towers followed similar issues with the Opal Tower at Sydney Olympic Park’

    See Brian, you’re not the only ones!

    1. cracking in the primary support structure and facade masonry, causing fears the building had become unstable. At an extraordinary general meeting, owners will be asked to consider selling or repurposing the building, possibly into affordable housing.

      The land is now worth less than zero.

  2. ‘What is rentvesting and is it better than buying a home?
    Is it cheaper to rent or buy a home in Sydney? We crunched the numbers to find out.’

    Last updated: 28 November 2019

    ‘To rent or to buy? That is the question facing many Sydneysiders grappling with the housing affordability crisis. As property prices continue to rise, it’s becoming increasingly difficult for first home buyers to break into the market, prompting some to consider whether renting a home may work out to be more affordable than buying a property.’

    ‘A recent Reserve Bank of Australia discussion paper revealed that there’s been very little difference in the long-term economic fortunes of buyers and renters since 1955. The paper found that despite rising rents and regular reports of property booms and bubbles, renters and buyers ended up in a similar financial position. So if you decide to “rentvest” – rent somewhere to live and buy an investment property – you may come out in a better financial position than if you buy your own home straight away.’

    ‘But does this mean it’s a better financial decision to buy or rent a property in Sydney? Let’s do the sums to settle the argument once and for all.’

    https://www.finder.com.au/rentvesting-vs-buying-a-home

  3. ‘Mr Hartwig was rentvesting and had already been trying to sell the unit since February, with little luck…’If I get a buyer, I will sell it. Having said that, I’m not in a rush to sell it but it would make things a lot easier’

  4. Ok. Math time.

    For JUST the repair.

    Thar is $400,000 per apartment.

    Ok…let’s make it affordable housing!

    “following an escalation in costs to repair the building that could now total $53.5 million. Residents of the 132 apartments were evacuated in June last year over cracking in the primary support structure and facade masonry, causing fears the building had become unstable. At an extraordinary general meeting, owners will be asked to consider selling or repurposing the building, possibly into affordable housing.”

  5. Recourse loan?

    Jingle mail?

    Bankruptcy?

    Move.

    ‘But what do we do?’ he said. ‘Do we try to get rid of it but go into debt for the rest of our lives … or keep throwing money into it but find more and more faults? It’s a lose-lose situation. We have to try and find the least-worst option.’”

  6. When that sweet equity is gone…and goes negative…with leverage…and the cash flow doesn’t cover the basics.

    You’re fooked!

    “Australian Tax Office data from 2016-17 shows 58 per cent of investment properties are negatively geared.”

  7. Treacy Sheehan…an additional $5,000 a month towards the repairs. ‘That’s on top of strata fees, mortgages, utilities — we’ll all go bankrupt at this rate

    You were the day you took out the loan Treacy.

    Maybe you were doomed the day your mother misspelled your name.

  8. Q: When a buyer has to actually pay some principal on a mortgage and was counting on income from a pilates studio to cover the costs…is that a FB?

    “His partner also recently had to close her Pilates studio and was on a reduced income. He said he’d need help from the banks to be able to afford it, otherwise he may lose the investment.”

    1. The Financial Times
      Commodities
      US oil price plunges to 20-year low as coronavirus hits demand
      WTI benchmark drops on concerns fuel storage facilities might be overwhelmed
      Hudson Lockett in Hong Kong and David Sheppard in London 49 minutes ago

      US oil prices crashed to a more than two-decade low as the coronavirus pandemic hits global demand for crude and raises concerns about storage facilities being overwhelmed.

      In early Asian trading on Monday, West Texas Intermediate — the US oil benchmark — plunged as much as 20.8 per cent to $14.47 a barrel, marking the lowest level since 1999.

      Jefferies analyst Jason Gammel said the oil industry faced “the bleakest oil macro outlook since at least the late 1990s and perhaps ever”, as he cut his forecast for WTI prices in the second quarter to $19 a barrel.

    2. I may wait another three weeks to fill up my gas tank again, in the hope that gasoline prices will finally catch up with oil prices.

      Energy
      US crude plummets more than 15% as one analyst says the situation stateside is ‘quite dire’
      Published Sun, Apr 19 2020 10:07 PM EDT
      Updated Moments Ago
      Eustance Huang
      Key points
      – U.S. crude prices plunged in the morning of Asian trading hours on Monday as traders continued to fret over a slump in demand due to the coronavirus pandemic, with one analyst describing the situation stateside as “quite dire.”
      – Prices on the May contract for West Texas Intermediate crude futures dropped 15.49% to $15.44 per barrel. The futures contract is set to expire on Tuesday, according to Refinitiv.
      GP: US Oil Workers Oil Boom in Texas’s Permian Basin
      Workers extracting oil from oil wells in the Permian Basin in Midland, Texas on May 1, 2018.
      Benjamin Lowy | Getty Images

      U.S. crude prices plunged in the morning of Asian trading hours on Monday as traders continued to fret over a slump in demand due to the coronavirus pandemic, with one analyst describing the situation stateside as “quite dire.”

      Prices on the May contract for West Texas Intermediate crude futures dropped 15.54% to $15.43 per barrel. Meanwhile, international benchmark Brent crude futures edged 0.68% lower to $27.89 per barrel.

      ANZ’s Daniel Hynes told CNBC’s “Squawk Box” on Monday that one of the reasons behind the “crater” in U.S. crude prices was the impending expiration of the May futures contract, set to happen on Tuesday, according to Refinitiv. The June WTI contract fell 5.47% to $23.66 per barrel.

      Hynes, who is a senior commodity strategist at ANZ, struck a sombre note on the situation in the U.S.

      There is real pressure on storage in the relatively landlocked market as a consequence of the “collapse in demand,” he told CNBC.

      “Without any sort of hope I suppose, at least over the next month … about easing up. I think prices are gonna remain under pressure,” Hynes said.

      1. Thi$ i$ wonderou$ new$ for American ethanol producer$ & by exten$ion, American corn farmers that provide bushel$ & bushel$ of input supplie$ to them.

        1. Corn ethanol was always a boondoggle to help out farmers. Corn uses up more fertilizer than the value of the ethanol coming out. That land, and more importantly, the water, are better used for vegetable row crops to be canned or frozen and sent to food banks or to low-cost stores in .

          (“fresh” fruits and veggies are another stupid boondoggle.)

          I wonder what happened to ethanol from switchgrass? I remember Dubya blathering about it.

          1. As long as they keep making E85 I’ll keep enjoying it. Lately a tank has been lasting me about a month though. I’ve haven’t bought plain gasoline in months. I’m hoping less sick people are touching the E85 handles. I can run over 25psi of boost on E85 but only about 15psi on 91 ACN. So it’s worth about 150hp to me. Traction limited all the way through 2nd gear even with AWD. Good times.

          2. It’s 2 upgraded turbos on a 2008 BMW 3.0 liter inline 6. The ECU software got hacked years ago and it’s pretty easy to change a lot of stuff on it now. I kept the full stock exhaust in hopes of passing CA emissions but they get so hung up on looking stock that I’ll have to leave it registered in Wyoming. So right now it makes 550whp at 25psi on E85 on the dyno and when I replace the stock downpipes it should make about 600whp even. With AWD that makes it really useable on the street, but when I turn off the front half of the drivetrain in software what you can do becomes really limited below 60mph. My last trip to the track I was 5-10mph faster than the Performance Model 3s in the 1/4 mile but wasn’t able to beat them ET-wise because it’s really hard to launch a manual transmission AWD BMW good and hard without breaking it. I should have bought an automatic if that was a priority for me or spent the mod money toward a DCT Audi instead.

          3. Does it have enough radiator to keep it cool while the boost is pushing 25-psi? It sounds like it’s fun to drive, and difficult to keep your foot out of it; horsepower never gets old.

          4. It’s a street car. If I tried to race it on a road course at that power level I’d have huge problems. For sure brakes, probably cooling. But 10 second bursts are no big deal as long as it’s not knocking. And that’s why E85 is so nice. 105 octane and in some ways even better than that number would imply.

            But yeah, I love turbo car power bands. I intentionally drive very generic looking white 4-door cars because I can’t keep my foot out of it for long and the cops don’t notice nearly as often as back when I drove a red Mustang. But I am very careful about where and when.

    3. Commodities Corner
      Oil market in ‘super contango’ underlines storage fears as coronavirus destroys crude demand
      Published: April 18, 2020 at 10:59 a.m. ET
      By Myra P. Saefong
      WTI price spread for front-month vs. later delivery contracts hit an 11-year high
      OPEC noted crude benchmarks moved into “super contango” in March.

      U.S. oil futures have dropped to their lowest since early 2002, but its the price spread between the front-month and future-month deliveries that’s caught investors’ attention this week.

      West Texas Intermediate crude prices for future delivery have risen well above the spot market—a situation known as contango—and that can encourage traders to store oil.

      “The historic contango is a reflection of physical barrels that can’t easily find buyers and are being sold at distressed prices,” Michael Lynch, president of Strategic Energy & Economic Research, told MarketWatch. “The implication is that storage might be more full than thought, or that buyers expect it to be very soon.”

    4. Let her rip…

      Crude Oil WTI (NYM $/bbl) Front Month
      Apr 20, 2020 at 2:03 a.m. EDT Delayed quote
      $14.79
      -$3.48
      -19.05%
      Last Updated: Apr 20, 2020 at 2:03 a.m. EDT Delayed quote

    1. The Fed Induced Twilight-Zone
      Chris Vermeulen
      FX Empire
      April 19, 2020, 6:00 AM PDT

      The past three weeks have been filled with intense drama, incredible highs and lows, political battles that continue to this day, and millions of questions from people throughout the world. Throughout this COVID-19 virus event and the collapse of the US and global markets, one continued belief has prevailed – the US Fed will attempt to rescue the global markets (again).

    2. This is somehow news!?

      Fortune
      The Fed may have fundamentally altered the nature of risk in the stock market
      BEN CARLSON
      2 days ago

      At the lows on March 23, the S&P 500 was off roughly 34% from its highs. From those lows it’s now up more than 27% through the close on Tuesday.

      This is confusing to many investors for a number of reasons:

      – The economy is still effectively shut down for the foreseeable future.
      – The unemployment numbers continue to worsen as jobless claims in the past 3 weeks are more than 16 million people (a full 10% of the labor force).
      – Even though social-distancing seems to be helping, it appears the coronavirus will be with us for some time.
      – No one has a clue how this is going to work when we try to turn the economy back on again.

      I understand the confusion. Markets are seemingly detached from reality at the moment. If you’re not confused you’re not paying attention.

      But there are also more coordinated fiscal and monetary rescue measures going on right now than at any time in history. The Fed just announced this week they will:

      – Make up to $600 billion in loans for small and mid-sized companies.
      – Support up to $850 billion in corporate bonds (which includes individual bonds and ETFs).
      – Buy up to $500 billion in state and municipal bonds.

      This is in addition to taking short-term rates down to zero, the $2 trillion fiscal rescue plan and all of the other measures they already have put in place over the past few weeks (with hopefully more on the fiscal side to come).

      The economy has been put on ice but the Fed and the government are throwing trillions of dollars to (hopefully) thaw it when the time comes. I don’t know how this experiment will unfold. Anyone who tells you they do is either delusional or lying.

      It’s still far too early to say but let’s assume for a minute March 23 was THE bottom. I’m not saying this is a fact but let’s say the Fed and the government somehow thread the needle and do enough to keep investors happy during this economic calamity.

      This outcome would be pretty difficult to reconcile with an economy that could experience a contraction that could rival the Great Depression.

      I can’t prove this with 100% certainty, but in the past when the Fed either didn’t have the tools (or didn’t use them as they are today) and the government didn’t spend 10% of GDP to help out on the fiscal side of things, the stock market likely would have fallen 60%-70% in this situation.

      Many people think this will still happen this time. Maybe they’re right but if not this could have ripple effects on the U.S. stock market going forward.

      Here’s the big question: If the stock market during the worst economic contraction in 90 years can be smoothed out by government spending and Fed actions, does this change the risk-return framework in the stock market going forward?

      Said another way — if stocks are now safer, and no longer carry the risk of a Great Depression-like crash, the fundamental risk vs. reward equation has been altered. And if there’s less risk, does that mean expected returns will be lower going forward?

      1. “Anyone who tells you they do is either delusional or lying.”

        “Feel.thee.bern.$anders = mini.American.$ociali$t

        Federal.Re$erve.$avior$ = Mega.American.$ociali$t

        (Hwy50 raised on looney.tunes & fruit.loops)

      2. “The economy has been put on ice but the Fed and the government are throwing trillions of dollars to (hopefully) thaw it when the time comes. I don’t know how this experiment will unfold. Anyone who tells you they do is either delusional or lying.”

        This Wikepedia entry may offer some useful hints:

        https://en.m.wikipedia.org/wiki/Cryonics

      3. The Fed is betting they can curb inflation later, just like 10 years ago.
        Look at a 70 year chart of the DOW and you can see that the FED has ignored what their policies do. After 50 years of gradual 5% or so increases, 3 huge spikes(declines) in 20 years. FED used to be neutral. Now they are an arm of whatever political party is in charge.

        1. The Fed is betting they can curb inflation later, just like 10 years ago.

          They don’t want to curb it unless it’s in wages. They desperately want inflation in houses and stocks.

    3. Risk on! You can’t possibly lose money anymore in the stock market, so back up the truck.

      Why are stocks soaring as the economy melts down? Thank the Fed.
      Ben Winck
      Apr. 19, 2020, 08:06 AM
      Pablo Martinez Monsivais/AP
      – The stock market climbed for a second straight week, ignoring gloomy economic forecasts and bleak data as traders find a silver lining in the Federal Reserve.
      – In recent weeks, the Fed has used both old and new programs to ensure credit flows where it’s needed, signaling to investors that the public health crisis won’t necessarily translate into a financial-market collapse.
      – While the central bank’s spate of relief efforts haven’t directly lifted stocks, the policies “definitely had ripple effects into the equity market, no question about that,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.
      – The Fed’s policies “precluded the prospect of a complete economic collapse,” leading traders to revive their risk-on views, Goldman Sachs analysts said in a recent note.
      – Visit the Business Insider homepage for more stories.

      The stock market seems unshaken as signs of a deep coronavirus recession pile higher and higher. As quickly as the S&P 500 spun out of its 11-year bull run, it’s soared out of bear-market territory and surged 29% in just over three weeks.

      This recent divergence between stocks and the economy has been jarring. How is the market so nonplussed by the mounting recessionary wreckage? Look no further than the Federal Reserve.

      Over the last several weeks, the central bank has shown it will go to unprecedented lengths to stimulate the economy and prevent further market disruption. Those signals have, in turn, stabilized stocks and allowed them to retrace a significant chunk of their post-coronavirus loss.

      Put simply, the Fed has been indirectly backstopping the stock market by reducing investor worries around how much the coronavirus lockdown will hurt corporate profits and strain outstanding debt.

      More than ever before

    4. Is the yield curve being engineered to make long-term Treasury yields increase, signaling recovery to those who don’t realize that the shape of the yield curve is no longer determined by market forces?

      Bonds
      10-year Treasury yield turns higher after Fed slows pace of bond buying
      Published Fri, Apr 17 2020 2:54 AM EDT
      Updated 5 hours ago
      Yun Li
      Silvia Amaro

      Treasury yields turned higher on Friday after the Federal Reserve dialed back the pace at which it plans to buy government bonds.

      The yield on the benchmark 10-year Treasury note, which moves inversely to price, rose 4 basis points to 0.64%, while the yield on the 30-year Treasury bond was also higher at 1.24%.

      The central bank said Friday that it would buy securities at a pace of about $15 billion a day, slower than around $30 billion a day this week. The Fed launched an unlimited quantitative easing program, aggressively purchasing Treasuries to cushion the economic blow from the coronavirus pandemic.

      Investors also grew more hopeful about an economic recovery after the Trump administration released tentative steps toward restarting the country.

  9. He said he’d need help from the banks to be able to afford it, otherwise he may lose the investment.

    I think his definition of “investment” is different than mine. His sounds suspiciously like “gamble”. Unless he gets dealt four aces next hand he may lose money tonight.

  10. ‘Everyone is so upset with what is going on,’ he said. ‘The costs keep blowing out.’

    Next time you vote for corrupt globalist minions who are in bed with REIC interests, Aussies, you might want to count the cost of captured regulators and enforcers before you buy into defect-ridden skyboxes.

  11. The price tag subsequently blew out to $15 million, then $25 million, before this week’s estimate of $32 million for rectification works. A further $21.5 million in interest on a 15-year loan would bring the final bill to $53.5 million.

    Gosh, what if the cost of the rectification works just keeps going up? Something could very well die in the rectum.

  12. “Treacy Sheehan owns a three-bedroom penthouse in the complex and expects to pay an additional $5,000 a month towards the repairs. ‘That’s on top of strata fees, mortgages, utilities — we’ll all go bankrupt at this rate,’ she said.”

    I thought you speculators were in this to MAKE money, Treacy.

  13. The problems at Mascot Towers followed similar issues with the Opal Tower at Sydney Olympic Park, which had to be evacuated on Christmas Eve in 2018 after several major cracks were found.”

    Surely the problems are limited to just these two skybox towers. This is probably a one-off, as Australia’s ever-vigilant regulators and enforcers, much like our own, would never allow a situation where developers used flawed designs and shoddy construction to maximize profits at the expense of structural soundness and endless defects.

    Oh, wait….

    1. “…flawed designs and shoddy construction…”

      These days it is easy for an untested pre-stressed beam to fail as the concrete mix and/or steel rebar may not meet specification, which will certain affect the designer’s outcome. It’s no different than the drywall scams; you can’t trust anything.

  14. Landlords who own a negatively geared property – where the rental income is not enough to cover the associated costs of owning the property, such as home loan repayments – have to personally make up the shortfall.

    Or they can walk away and let the property get foreclosed on. True price discovery for these defect-ridden skyboxes is going to be a bit*ch.

    1. I think it is a recoourse type mortgage in Aus and Canada – so they will come after your bank and investment accounts

      or am i incorrect

      or perhaps it will take 4 years to do the legal proceedings – so you can pass assets on to family members ??

  15. “Desperate landlords are offering Sydney homes rent free for up to a month or at reduced rates in an attempt to attract new tenants and stave off costly long-term vacancies. The increasingly generous offers helped push advertised house rents down nearly 5 per cent over March, while unit rents dropped 3.1 per cent, SQM Research showed.

    Gonna have to do better than that, greedheads. In our oligarch-looted economies, COVID-19 has shown the dire financial straits of the increasingly pauperized, deeply indebted proles. (Heckova job, central bankers.)

    1. The Financial Times
      Opinion US economy
      We are entering the new age of American austerity
      The decade after the financial crisis saw the creation of a vast asset price bubble
      Rana Foroohar
      US Era of Austerity
      © Matt Kenyon
      Rana Foroohar yesterday

      Americans are traditionally the world’s consumers of last resort. But that’s about to change. Even when what the IMF is calling the Great Lockdown ends and we emerge from the immediate coronavirus crisis, the economic ramifications of this moment will produce a new age of US austerity.

      The idea of Americans penny pinching for any prolonged period may seem unlikely, despite currently living through the sharpest downturn since the Depression. Today’s economy, after all, is built on consumption.

      Since the 1980s, the US has incentivised debt over savings for both consumers and corporations, and encouraged the growth of a financial sector that has repeatedly brewed up asset bubbles to support the spending that real economic growth could not.

      In fact, the decade between the 2008 financial crisis and this one saw the creation of a vast asset price bubble in just about everything. That bubble is now bursting, exacerbating the economic changes that the pandemic has brought, be that a massive increase in public debt, the reshoring of international supply chains or technology-forced shifts in labour markets.

      In many ways, the US has been here before. The period leading up to the 1929 market crash and its aftermath closely mirrors our recent past. It also suggests where we may go next: a new era in which Americans must save and produce more — and consume less.

      Like the decade leading up to the financial crisis, the Roaring Twenties were marked by technological wonders, easy money (including a 1921 rate cut by the US Federal Reserve that set the stage for a stock market bubble) and massive income inequality.

      Working-class wages stagnated, while the wealth of the upper class rose, buoyed by rising asset prices. Then, as now, when people couldn’t afford to buy, they borrowed: in the 1920s, Americans bought more than three-quarters of major household items on credit. They also began investing in securities en masse for the first time. As Harvard economic historian Edwin Gay put it in a 1932 article in Foreign Affairs: “They were not . . . educated in the use of credit; they simply received a new vision of its possibilities.”

      All that ended in tears in 1929.

      Ultimately, debt is a national burden shared by all taxpayers. Policymakers therefore need to think about how to incentivise savings: trimming every unproductive debt and leverage loophole from the tax code is a good place to start.

      In time, the Fed will also have explain how it will shrink all that debt off its balance sheet.

      And everyone will have to think about thrift. Enter the new age of American austerity.

      1. Incomplete $entence.

        “Today’s eCONomy, after all, is built on con$umption.”

        Add: … “of Fal$e.a$$et.value$”

        Believe$ or Knot, this $orta ma$$ mania can even happen if the object is colorful flower$.

          1. Thee Blue$.Brother$

            Bow bow bow…
            Have you ever heard of a wish sandwich? A wish sandwich is the kind of a
            sandwich where you have two slices of bread and you, hee hee hee, wish you
            had some meat…

            Bow bow bow…
            Ummm… the other day I had a ricochet biscuit. A ricochet biscuit is the
            kind of a biscuit that’s supposed to bounce back off the wall into your
            mouth. If it don’t bounce back, hee hee hee, … you go hungry!
            Bow bow bow…

    1. Actually what it means is affordable oil prices into the indefinite future, as oil storage capacity is nearly overflowing worldwide, and societies around the globe have collectively learned that survival is possible without every one of us spending upwards of an hour each day in our cars.

    1. counties and cities are planning for a big rebound and real estate is their main source of $-I’m trying to prove otherwise

  16. ‘Earlier this month Fitch placed 85 tranches of Portuguese and Spanish RMBS transactions on Rating Watch Negative due to the anticipated effects of the coronavirus crisis. The three main drivers are insufficient credit enhancement buffers to absorb additional projected losses, large exposures to self-employed borrowers, and payment interruption risk on securitisation notes if the take- up rate of payment holidays by borrowers is larger than the available liquidity within the transactions.’

    ‘Our revision of the asset performance outlook on Portuguese and Spanish residential mortgages to negative from stable last month reflected not only the impact of the macro-economic shock, but also the delay in foreclosure proceedings from lockdown measures, and the fact that lower household income will only be partly offset by social security payments. A more prolonged health and economic crisis would increase job losses beyond our forecasts, pushing up mortgage default rates further.’

    https://www.fitchratings.com/research/structured-finance/coronavirus-shock-to-lift-iberian-mortgage-defaults-from-multi-year-lows-20-04-2020

    1. Confidence in household finances suffers biggest fall since records began

      ‘“For the first time since October 2017 UK households reported a decrease in earnings from employment in April,” the report said. “According to the latest survey data incomes fell at a substantial rate that outpaced all previous reductions seen since the survey began in early 2009 by a wide margin.”

      https://www.thetimes.co.uk/edition/business/confidence-in-household-finances-suffers-biggest-fall-since-records-began-k0wg7cr87

      A comment:

      ‘The supply of cheap money / mortgages has put us in a position of people overstretching on mortgage / personal finance with no thought of what if? Asset values will be adversely affected in the short / medium term on current evidence.’

          1. ‘Continental food producers are seeing a rapid market breakdown due to the coronavirus crisis, with livestock producers in particular hit by changing demand and falling prices. EU farmer and co-operative group Copa-Cogeca is also warning of mounting problems in the horticultural sector, linked to changing demand patterns and a shrinking labour supply, and is demanding the EU Commission takes urgent action.’

            ‘See also: Graham’s dumps milk as RABDF calls for bailout’

            ‘As in the UK, the abrupt closure of the majority of the continent’s food service outlets is having a marked effect, as growing retail demand fails to take up the slack. “The prices of several dairy products have dramatically decreased, with skimmed milk powder [SMP] prices sharply falling to the intervention level,” said a statement. “This is already creating a huge amount of pressure on farm prices.”

            ‘The loss of food service and catering channels has also hit sales of high-value cuts of beef and veal, which represent 30% of the total carcass value. This has led to increased costs and detrimental consequences for prices. And, partly due to the cessation of various festivities at Easter due to the pandemic, demand for lamb has been hampered, leading to a “downward trend for prices at a time when there would usually be an upward trend”.

            https://www.fwi.co.uk/business/markets-and-trends/meat-prices/eus-farmers-call-for-help-as-coronavirus-causes-price-slump

            Agro Commodity Exporters Groan under Demand, Price Slump

            ‘Exporters of Nigerian agricultural produce, particularly cocoa, are currently in a dilemma following the adverse impact of the COVID-19 pandemic on the economy. THISDAY learnt that exporters were being compelled to sell at discounted prices, which are far below the farm gate prices as demand for commodities had flattened due to the negative impact of the COVID-19 across countries, which are Nigeria’s major trading partners, particularly Europe.’

            ‘The National President, Federation of Agricultural Commodity Association (FACAN), Dr. Victor Iyama, said those in the agricultural produce export sector had been hard hit by the public health crisis. “The truth is that it is going to affect so many of us because the buyers are not even buying because there’s lockdown all over the country and all over the world. And there are no demands and even where the terminal markets are open like in cocoa, for example, you can see that the price has really nosedived- say the cocoa that most of us have bought for N960,000 plus FOB (Free on Board) charges that is going for over N1 million, if you sell today you will lose nothing less than between N350,000 to N400,000- how do you do that?”

            ‘He added: “Even the people we are going to sell to, we don’t blame them, everybody is struggling for his life. “Definitely, nobody will be talking to you about buying any commodity or shipping any commodity to them when there’s lockdown everywhere in the world.” He stated that a similar experience, which occurred between 2002/2003, had led people to commit suicide.’

            https://www.thisdaylive.com/index.php/2020/04/08/agro-commodity-exporters-groan-under-demand-price-slump/

            ‘had led people to commit suicide’

            You are more likely to die from a bad prescription than the CCP virus. And that’s every year, not just 2020.

          2. WTI hit $10.03

            20 years of bubble price gains POOF.

            I wonder what my COLA will be come January 2021.

    1. corrupt mr market at 12:15 has recovered 75% of of the early S&P losses

      no need to worry about layoffs, bankruptcies etc.

      As long as
      amazon.com PE ratio is over 100 for 2019 earning – gasp
      netflix is also over 100
      but hey – google is at 26

      So climb higher littl’ monkey

      1. Amazingzon & Netsflix$ i$ high.octane.fuel$ for Mark.Cuban$ Pre$idential a$piration$!

  17. Rumor has it that the .99 cent $tore$ are going to grow their bidne$$ by ins$talling ga$oline pump$!

  18. I guess it did…….
    Contrary to speculation, engineers say that all of the heavy granite countertops and other upgrades added over the years didn’t put undue stress on the building

  19. Phony Market$, phony deeth👾.xaoh, phony drug prescription$, phony $helter.$hack.price$, phony middle.east.peace, phony.ea$y.trade.war$.pha$e1.v7.6. … Phony.Maloney.Balongne.

    Mu$tard.hot.dog.off.

    MARKET$:

    Cramer says Friday’s rally was ‘phony’ as $tocks open lower

    MARKETWATCH/PUBLISHED MON, APR 2020200 By Jesse Pound

    KEY POINT$:

    The Dow rose 705 point$, or 2.99%, on Friday, with much of that gain coming in a rally in the final hour of trading.

    “Friday’s market was a phony market, okay? There was 300 points added in the last few minutes,” Jim Cramer said on “$quawk on the $treet.”

  20. Haven’t run out of bears who are not fully confident in the Fed’s Unlimited Quantitative Easing rescue of the U.S. stock market just yet.

    1. The Tell
      The S&P 500 may slump below 2,000 by summer, even with the Fed’s help, predicts economist
      Published: April 20, 2020 at 9:40 a.m. ET
      By Steve Goldstein
      A waiter serves a coffee to go at an ice cream parlor in Gelsenkirchen, Germany, as many smaller stores are allowed to open on April 20, 2020. Associated Press

      Charles Dumas, a veteran of General Motors in the 1970s and JPMorgan in the 1980s, has seen a market downturn or two.

      Now chief economist at TS Lombard in London, Dumas recalls a story told by TS Lombard colleague Larry Brainard, when Mexico in August 1982 told the U.S. and the International Monetary Fund it couldn’t service its debt.

      About a month later at the IMF’s meetings, few were concerned, Brainard recalled.

      “What in fact [Mexico’s announcement] was, was a sign of the so-called MBA problem (Mexico, Brazil, Argentina) — and six months later, everyone realized just how much trouble there was,” Dumas says.

      He uses that as analogous to why the current stock market isn’t correctly pricing in the economic deterioration.

      The U.S. economy will probably fall at an annual rate of around 20% in the second quarter, and will fall further in the third quarter.

      He said the firm’s modeling suggests earnings per share will fall about 20% and 30% this year. Giving the S&P 500 a price-to-earnings ratio of about 16 for a “reasonably depressed environment,” leads to an S&P 500 below 2000.

      “You’ve got a situation where people are conditioned to the idea that somehow the stock market will always go up if the Fed is on its side,” Dumas says. “But that just doesn’t have to be true in this situation where the economy is the problem.”

      The release of the April jobs report could cause markets to reassess, he says.

      The downturn in the price of oil (CL.1, -41.27% BRN00, -4.59%) is an indication that the deterioration in the economy may be even worse than what he is imagining.

      I would put this whole situation down to a lack of understanding of the lack of efficacy of monetary policy in the context of an economy which is cratering for social and medical reasons,” he says.

  21. Our state shelter in place order is due to expire this coming Saturday. The governor has been waffling on what he will do: he has been hinting at reducing restrictions, but has not shared any details yet.

    Here are some drivers, IMHO.

    1) School districts are feeling the financial pinch as funding has slowed. Per the Denver Post: “Facing “dire” budget shortfall, Denver school board may consider pay freezes, school mergers ”

    2) Municipalities and counties, facing falling sales tax revenue, are furloughing workers in large numbers.

    I think this will put a lot of pressure on easing the restrictions. It’s OK when private sector workers lose their jobs, it’s a necessary sacrifice, but when .gov workers feel the blade, well, then maybe it’s time to relax those restrictions. The People’s Republic of Boulder has let 737 employees go! Even my little burg’s city hall has announced that 100+ are being furloughed, because sales tax collection is in free fall. Oh the humanity!

    The governor has been warning that there won’t be a return to full normalcy on Saturday, but he has been very vague on what will happen. Maybe I’ll be able to get a haircut?

  22. Don’t do what eye $ay eye won’t do!, do what eye don’t do that’ll eye’ll say eye’ll do!🤔

    $ad. … Vega$ $ad.

    $heldon Adel$on fail$ to comply with a mantra he’s u$ed for years: ‘Yay dividend$!

    PUBLISHED MON, APR 20 2020 / UPDATED MOMENTS AGO

    CNBC / By Jesse Pound

    KEY POINT$:
    $heldon Adel$on has been saying some ver$ion of the phra$e “yay, dividend$!” since at least 2013. A search of Las Vegas Sands conference calls via FactSet shows he’s used it more than 20 times in that time.

    Las Vegas Sands announced that it suspending its dividends due to the coronavirus pandemic’s impact on the casino business.

    The company paid a dividend of $3.08 per share last year.

    Nobody is hurt more by La$ Vega$ $ands stopping dividend$ than Adel$on him$elf, as he own$ more than half of the company’s out$tanding share$.

    Double$ $ad!

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