Ugly Sisters

A great piece from bondvigilantes.com featuring slides from a M&G presentation showing the extent of the bubble in property prices!

Here

TBTF (Too big to fail)

An interesting analysis of the Canadian banking system from FT Alphaville, following former Canadian Central Banker Mark Carney starting as head of the Bank of England, with a useful comparison to Australia.

Australia and Canada are very similar economies and jurisdictions - English heritage, resource and commodity exporters to the major economies of China and the USA and structural booms remaining in place (barely) with suggestions of currently overvalued property markets.

On the banking side both have conservative sectors with several (four or five) major banks at the pillar.  Interestingly the FT hailed one of the strengths of Canadian regulators recently was that they stopped the banks growing too big during, blocking earlier mergers amongst the top pillar banks.  A couple of questions:

i) while they look in good shape now (helpful for looking at Mark Carney today) will this hold into the future?  If not will Australian banks follow down a similar path? (hard to imagine given they are rated a world leaders at the moment on some metrics)

ii) in Australia it could be argued that one bank, CBA succumbed to merger fever when it acquired ailing BankWest, as CBA now has absorbed the loan book and swollen its income to be the leader of the pack of Aussie banks.  Might CBA now be too big to fail?  Certainly signs from the recent private wealth adviser frauds at the CBA aren't a good sign.  

Ozzie gold bugs

Hat tip to the Keiser Report which spotted a new (non-bank) gold vaulting service opening in Sydney.  Suggestive of a new interest in gold (and likely exodus from the banks)?

...There is an interesting phenomenon happening in the CBD of Sydney: Private Vaulting. Until now the only option for safe deposit boxes was with one of Australia’s four TBTF banks and most of those vaults seem to date from the gold rush era of the 1890′s. But in the space of two months there will be two state of the art private underground safe deposit vaults opening, both with an emphasis on storing physical gold and silver. One has been showcased by Mike Maloney in a national news report and the other vault opens at the end of this month (here).

Money is melting away...

In Canada at least.  In what is proving a headache for the country's central bankers, including Mark Carney, who recently joined the Bank of England, newly issued plastic notes have attracted criticism due to their stickiness, faults with the design, and, the fact they seem to melt under high temperatures.

Australians have a long experience of using plastic notes - the ones you can wash, but they had better hope that the Aussie doesn't follow the Loonie and fall prone to melting away! (here).

Melted Loonies (c) Mona Billard 

AUD to head into the loonie bin?

Many in the markets have grouped all things Australian with Canada.  Two big resource rich countries exporting to the two biggest energy using countries, with developed financial systems attracting high inflows matched by high exchange rates.

Unfortunately many suspect Australia is subject to a similar housing boom (with matching weakness in the banks) and now with reported pressure on the Canadian currency, the loonie, investors will expect falls in the Australian dollar as well?


...It looks like sentiment toward the Canadian dollar may be shifting....The loonie, as it is known, by mid-session on Monday was on course to close at its weakest level versus the US dollar since August....The loonie’s traditionally tight correlation to investors’ perception of global growth prospects has looked very shaky of late. That soft domestic data has counteracted better economic news from the US and, in particular, China....Traders are now adjusting strategies (here).