New home sales fell for the fifth year in a row, according to data released by the Housing Industry Association yesterday. Australian new home sales fell by 12% in 2006-2007. The biggest decline was a 29.7% decline in Western Australia, followed by declines of 18.9% in South Australia, 10.7% in New South Wales, 8% in Victoria, and 2.3% in Queensland.
“At this point in the housing cycle you would expect to see leading indicators like housing finance and building approvals picking up, and they are not,” says HIA chief Harley Dale. Exactly where are we in the housing cycle, now that he mentions it? The tippy top? Or just the nearly top? With building and land costs high and the entire market unaffordable in terms of the monthly mortgage payment, don’t look for a huge recovery any time soon.
While we’re on the subject of recoveries, how about the local share market? It managed to shake off the bad vibes emanating from Friday’s dark day on Wall Street. The ASX/200 closed up 25.9 points at 6108 while the All Ords gained nineteen points to end the day at 6146.
Who really cares about indices, though? What we all want to know is if today’s integrated global financial markets can survive systemic interest rate stress without crashing into the abyss. The trouble with introducing uncertainty into a complex system like we have today is that you have no idea what outcomes you’ll get…
So far, globalisation has been a winner for investors (and not so much for American factory workers). For example, according to Bank of Japan Board member Kiyohiko Nishimura, Japanese housewives have added stability to the global currency markets by consistently borrowing yen at home to buy higher yielding currencies like the Australian and New Zealand dollar. Imagine that. The strength of the Aussie dollar has as much to do with the housewives of Japan as it does with the Reserve Bank.
Seriously. The Yano Research Institute in Tokyo reckons there are nearly a million retail investors in Japan who trade currencies through brokerage margin accounts. With Japan’s large pile of savings, that money has been put to work in global currency markets. It makes sense. Money goes where it’s treated best. It’s just a bit surprising that Japanese housewives have become key players in the global financial markets.
The retail investor has more choices and more investment vehicles than ever before. This, by itself, doesn’t mean you’ll automatically become a better investor. It just means there are more ways to make (and lose) money in the financial markets. But it certainly is a good thing that retail investors now have ways to hedge against currency risk and to hold governments responsible for how they spend (and print) money. You didn’t really have that option ten years ago, unless you count buying gold, which is itself a hedge against all fiat currency.
Markets and Money