Only a Fool Would Listen to This Central Banker

Oh no, it’s 2008 all over again! Don’t let your mind run away from you. I don’t mean an impending collapse, but this…

Short positions in Australian banks have topped $8 billion, according to the Australian Financial Review last week.

The paper reported:

While there is no easy way to prove it, traders reckon it matches the sort of numbers seen in the financial crisis.

‘And, anecdotally on prime broking desks, they reckon the phone calls from fast money hot spots like Hong Kong aren’t slowing.’

No wonder. That certainly looked like the smart trade last week when hedge fund man Jonathan Tepper made headlines. He suggested bank shares will fall 80% on the back of a housing collapse.

But Australia’s GDP numbers revealed this week have upset the narrative.

Those shorts could get burnt. Don’t let it happen to you…

Too bad for about these numbers for the short sellers

You probably heard the GDP numbers already. But for the record, the Aussie economy grew at 0.6% in the last three months of 2015 from the previous quarter and 3% from a year earlier.

That keeps the bean counters who track all this happy. They say that growth figure is about level with potential growth rate. That’s where we want to be.

Of course, anyone tracking the stock market could have forecast something like this result. There’s simply too many companies reporting good profits to suggest a downturn. See Terence Duffy’s Money Morning article on Wednesday for a list of those.

Suffice to say, the world will keep spinning as it always does. What doesn’t seem to be stopping either is the level of development happening in Australia.

Lendlease just won approval for a $2 billion mixed use scheme in Melbourne. The first part is a $200 million dollar tower. It’s the first of seven planned buildings, both residential and commercial, for the site.

There was also the news that former Essendon footballer Andrew Welsh has planning approval for a 199 hectare greenfield housing development in Melbourne’s West.

There’s plenty happening.

The Aussie dollar seemed to approve of how things are going. It jumped to a three month high.

Full credit should go to my colleague Phillip J Anderson. He has kept telling our subscribers not to be spooked by the constant worry that the Australian economy is teetering on the brink of recession or collapse.

Of course, the constant talk of another crash doesn’t help put people’s mind at ease. Former Bank of England governor Mervyn King has come out and said another financial crash is ‘certain’ and will happen ‘sooner rather than later’.

Yawn. What we have is another geezer who didn’t see the 2008 financial crisis, presuming to tell us there’s another one coming.

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Why you can ignore this gloomy call

King doesn’t appear to give any exact timing, of course, just some vague and indefinite period. That will work for him if he happens to be right (think of the speaking fees!) but everyone will forget if he’s wrong.

Oh, and by the way, he just happens to have a book he wants to flog. Apparently the financial system needs ‘reform’ according to this wizard.

According to the Guardian, ‘spending imbalances within and between countries led to the crisis in 2008 and he believes a current disequilibrium will lead to the next.’

This is how you know he’s as clueless as he was in when he ran the Bank of England. There’s no mention of the land market in the US.

This is what collaterises and underpins the US financial system in the first place. It was a land collapse that brought on 2008, not ‘spending imbalances’.

Those that understand this were able to call 2008. That doesn’t include me, I might add. What little I know anyway is thanks to these guys.

The men you should be following

Here’s the proof, by the way, of the three economists who understand the economics and implications of land within the financial system. They are Phillip Anderson, Fred Folvary and Fred Harrison.

Here’s what each said BEFORE the 2008 collapse:

Phillip J Anderson on 19 January 2008:

On average, US land prices will decline 20 to 30% by the time this is all over. In my view, US (and UK) property prices have only just begun their decline. As such, the credit problems in the US in 2008 will deteriorate, then continue worldwide.

Fred Folvary on 18 September 2007:

There will be a recession and depression by the end of the decade of 2000-2010, and why the most probable year is 2008.’

And Fred Harrison in August 2005:

So when will the crunch really come? History suggests that things will start to collapse in 2008 (18 years on from 1990 when the last bubble burst).

I know who I listen to and it sure isn’t guys like Mervyn King. If you want to know what underpins the work of Phil, Harrison and Folvary, go here.



Ed Note: This article was first published in Money Morning.

Callum Newman

Callum Newman

Callum Newman is the editor of Markets and Money and Associate Editor of Cycles, Trends and Forecasts. He also hosts Markets and Money Podcast. Originally graduating with a degree in Communications, Callum decided financial markets were far more fascinating than anything Marshall McLuhan (the ‘medium is the message’) ever came up with. Today Callum spends his day reading and researching why currencies, commodities and stocks move like they do. So far he’s discovered it’s often in a way you least expect. To have Callum’s thoughts and insights on the current state of the currency, commodities and stock markets delivered straight to your inbox, take out a free subscription to Markets and Money here.

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