Comments
Transcript
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NR.
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RRGood interview. Just pains me to listen Joye's self promotion of himself.
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CKIt's funny that he mentions the hedonic index, for those that dont know in Aus the govt and rba rely on that index as a measure of house price growth. It is based on proprietary information not shared with the public, and provides a calculated metric as to what house prices are doing in 'real time'. You might ask why do govt agencies not just provide real verifiable information on housing? Because plausible deniability for politicians and 'houses always go up' narrative is deeply embedded in the australian economy, this privately owned index serves as a win win for govt. When your banking system is 60% loaned out to the housing market.. sadly unproductive housing will always be front and centre for govt policy.
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NLChirrs can predict where Oz housing is heading because, as he said it himself, he advices the Government on this market. So this is what happened – brief history – this is my view only: Around Feb 2019 Royal Banking Commission (RBC) found Oz banks were lending irresponsibly and this cause many people to get in lot of trouble as these people took homeloans they could never repay. Many can hardly service interest paid on those loans. These findings triggered tightening of the lending rules via macro prudential measures. Snice the pandemic Oz Gov (I wonder how could have given the Gov this great idea) decided to abandon the responsible lending and ordered the banks to start lending outside the macro prudential measure in order to revive the Real Estate (RE) market. Now RE prices are moving up again. Important point here is that just before we had our RBC, house prices started to fall (around mid 2017) and my view at that time was these falls were due to 2 factors: 1. China tightened their laws and started being more effective in preventing Chinese citizens buying RE overseas. 2. Aussies hit their borrowing capacity limits. During that period house prices did fall around 13% in Sydney and recovered most ground ever since and we were at the limit of our borrowing capacity again. As pandemic hit prices started to fall fast again. So this is what Oz Gov is doing now – besides getting the banks to lend irresponsibly again (I doubt banks will go 100% back to what they were doing before) the Gov also is allowing many people to access their retirement savings (portion of it) and want to extent and expand this initiative for first home buyers. Basically RE prices must stay high and go higher and people must borrow even higher loans. Will be very short lived as without wage growth we are about to hit the limit of our borrowing capacity very soon again. On top of that Aussie banks still have billions of dollars of bad loans that people can’t pay where banks have given these people more time to find jobs so they can start servicing their loans. If Aussie economy does not recover sufficiently over the next 8 months there will be very interesting developments on how Aussie banks will treat these loans on their books. The only other extreme measure that we haven’t taken out is – intergenerational home loans but I am sure some one who advices our moronic government has this ace up his/her sleeve ready to be used soon. We are basically taking desperate measure to keep this bubble inflated and John Hampton is right about his views in Oz Real Estate. I recommend people to visit Joe Walker’s podcast and listen to his interview with John Hampton to get the idea of the crazy times we had and about to have again with our Real Estate. Another point to mention is that Anti-Money Laundering organisation in Paris singled out Australia for having almost no rules to prevent drug lords and other criminals from laundering their money via Oz Real Estate.
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RGSection on China was fascinating.
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SWDon't hunt me - I am not a bear! Surely credit supply for housing is tapped out to a point where credit creation in housing (in AUS) is dependent on credit creation elsewhere in the economy. Isn't this is the reality of capital adequacy ratios and relative weights of sectors in lending portfolios etc. and the bank's current appetite for capital to shore up ratios? And isn't affordability is also a limiting factor - and affordability is all about wage growth and the working population demographic? Cuz lets face it a 25bp fall in mortgage rates (where RBA cuts are based on) is only a saving of $1250 per annum or $25 per week on the average $500,000 mortgage where once a 100bp decline fed savings of $5,000 per annum or $100 per week! The current (Covid based) economic outlook suggests both availability of housing credit and affordability are under pressure. Save for the temporal effects of 'lifestyle' pockets being chased based on the emergence of work from home the outlook has to be one of 'peaking prices' and 'pricing stagnation' where prices appear to hold based on reduced transaction activity. Even an optimistic view of wages growth will surely face the headwind of a working population that is no longer growing.
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JFPlease Tell Joe Walker that he is lacking Vitamin B5, that would help his asthma. Avoiding Dairy would eliminate the gunk in his lungs and throat.
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JFPlease Tell Joe Walker that he is lacking Vitamin B5, that would help his asthma. Avoiding Dairy would eliminate the gunk in his lungs and throat.
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jbhttps://www.vu.edu.au/mitchell-institute/tertiary-education/australia-to-lose-half-its-international-students-by-mid-2021 The numbers and math don't lie. The population issue is real and isn't going away . . . what are they going to do/what can they do? No view on Australia as a whole but Sydney and Melbourne look likely to see some real pain in the years ahead.
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CDRather than "pot shots". And we don't "trade". We do move between listed equivalents. Our balance sheet's concerned with unpacking both "employment" and "capital flows" at the minute. We've sat down with demographers and economic consultants to achieve an explanation of "demand" - "supply" is pretty straight forward - it's not that simple. Like/hate 'im he's a clever dude, he is. That said, we've actively exploring a "short". In this regard we believe resi., on balance, is more horse shit than fundamentals. Thank you for your insights CJ!
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SUI could smell alot of BS, either that, or Christopher Joye the best trader/investor mankind has ever produced 🙄
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BMDid it take 10 quants and five dedicated data scientists to become convinced of a pandemic in late February? Anyone trying to get a flight to Asia knew the same. Flights were getting canceled everywhere.... I watched this video for the Australia situation insights. Especially housing. Interesting information there.
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jbThe RBA property model (Chris in prior media has says his model is based on) has two major items which have been excluded from this interview. The first is rents which have been in free fall largely due to the effects of a shrinking population and over supply. This is forecast to continue over the next two years by the Australian treasury. Remember the RBA cut the cash rate over the last decade by around 350bps pre covid which should have lifted purchasing power for all of those in WA but house prices dropped 35% . . . The second is the basically the assumption prices always rise. Not enough time to go into here but worth looking into before you think about investing in Australian property.
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DBHmmm
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PLDoes Christopher have a throat problem? Lol
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DHHow does Joel have such good connections (politicians, RBA governors etc.) at such a young age? Makes me suss of his authenticity. HE IS A FED! /s jk he is probably just rich or went to the right school or whatever. Good on him for his good fortune.
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TNNot sure I learned anything new from this interview. It is always off putting when an interviewee appears to show little humility. Chris seems to be closely embedded into the RBA and the political structure in Australia and I could not help but think he is the embodiment of the Cantillion effect. Note that he does not talk of any of the negative impacts of QE in terms of widening the wealth gap which is creating a powder keg under future social stability.
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PBMaybe I'm missing something, but after supposedly calling all the big issues near perfectly this year (sharp, but short-lived Covid meltdown in March, exceptional V-shaped recovery, vaccines developed before year end, buying Aussie GBs etc) yet the fund is up c. just 8% YTD... https://coolabahcapital.com/performance/
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ALPlease make Chris a regular, cheers
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MDGreat interview Chris. Thanks. We need you around here more often mate.
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APInteresting to hear his thoughts on China. Would've liked him to go into more detail into China's impact on the oz housing market. Also, as he is a fund manager and apparently called this year almost perfectly, it would well be worth going into his funds' returns.
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OCWoah. Was not expecting this stellar interview. Get this guy back and have him talk with Dee Smith! Very interesting and informative exposition on geopolitics as it relates to China and Xi and what it means from an investment perspective. I'm currently reading Dr. Jonathan Ward's book on China so it was really interesting to have that accommodative view that is not just US-centric. Good stuff.
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ASBrilliant Christopher! Please get him back again! Would love to hear more forward looking insights on the market next time.
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EDMy Question - Does QE alway work in propping up housing markets?
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JGThank you gentlemen, fascinating insights around China as well as the expected outlook for Australia. As a fellow Aussie, I've been shaking my head at our housing bubble for years, but I guess since we're only just beginning our QE journey it seems like there won't be a 'pop' any time soon. Logical insanity?
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GKChristopher is brilliant!
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IMSection on China quite insightful!
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EDCanadian RE prices are something to behold as well. I would love to see some interviews on here with some experts talking about this.
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DSExcellent interview. Mr. Joye has a very unique ability of synthesizing analytical and practical viewpoints into a coherent investment strategy. Very rare. I hope we can see him again soon on RV. Many thanks to Mr. Walker for bringing this interview to RV. DLS
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RMGreat discussion overall and particularly the section on China - very insightful! Would love to see Joe and Chris back in 6 months for an update and any new insights they can provide.
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DSFascinating - thanks guys
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CCChris, Insightful as always; I read your AFR column. Great to see you on Realvision, Hope to see you more often. Would love to hear you and Raoul talk bonds and investment framework