I am amazed that here in Australia people think the country is “different”. They think that the price of houses will go up and up and up up up and up up and up up up up!
This reminds me of the Tulip stock market crash of 1637, or the Japanese crash of 1991, or the 2007-2008 credit bubble in the US, then Europe.
But! Australia is different. We have sunshine, and surfing and people love it here, and the Chinese have a never ending pot of money, they will for ever buy iron and buy property.
Our banks have AAA credit!
What does AAA credit actually mean. I remember when I was kid, and had to move to different schools. In some schools I was cleaver than everyone else, and in others, I felt like a fool. Surely the same thing with credit ratings occur. What exactly is a AAA bank?
|Rating||Realised incidence of defaults 2009|
So there we have it. The amazing thing is this. Before the credit crash, credit raters such as Moody’s, S&P and Fitch Ratings thought that the AAA would only have 0.008% loan payment defaults (actual was 0.10%) and a BBB+ only 0.340% as opposed to reality of 48.73%.
So it seems that these ratings were entirely subjective. They were 2 orders of magnitude out, that means they were 100 times overestimated as good banks. That means Moody’s, Standard and Poor’s were 100 x overconfident in the banks.
Guess what, it is happening again, right here in Australia.
The banks in Australia like ANZ, CBA, Westpac and NAB are all AAA ratings, what the hell does that mean? Absolutely nothing, because when the banks here finally crash with the massive property bubble and the fact that the banks do not have the capital to back up the Trillion dollar housing market.
I would like you all, who have a bank account with NAB, Westpac, ANZ or CBA to ask them for the Capital Adequacy Ratio report. I bet you that their report will be worse than Lehman Brothers. But, Australia is different, the sunshines, the surf is good and our banks are like the cute little princesses at school that got straight AAA’s. (The teacher’s pet of the banking world)
Time will tell how great these ratings are :) But AAA looks good right?
Join me and stop lending from Banks, and use peer to peer lending.
Instead of buying bank stocks (They need your money to backup the trillion dollar industry, hence they lure you in with fancy dividends), get into lending your money out via Peer to Peer lending.
It is time that we embrace technology and move our economy away from these slow monolithic beasts that are driven by GREED! Yet again GREED will be the demise of the next Australian Depression, because property never goes down here “Down Under”.
“Down Under” will soon have a whole new meaning.