Before we get into party games, thank you for all the feedback we’ve received from our last few articles. At the end of today’s Markets and Money we’ll reprint some of the remarkable experiences you had making three crucial phone calls. And your thoughts on whether or not retiring overseas is a good idea given Australia serves the world’s most expensive beer.
But now onto something even more fun than beer and phone calls.
By far the best party game going is called Ballontanz. That’s German for balloon dance. The players, who are usually below the age of 10 and number more than 10, have a balloon tied to their ankle. The aim of the game is to pop all your opponents’ balloons without them getting yours. Chaotic background music helps.
This German institution is the one scenario where goose stepping still remains appropriate.
The trick is to keep your balloon moving. Just like a housing bubble, a balloon with momentum is hard to pop. But if you try and pop someone else’s balloon, it’s very difficult to keep your own one flicking about. Unless you have three legs or can tap dance.
Time and again, the elation of seeing your victim jump at the sound of their balloon popping is closely followed by the dread of your own stationary balloon being squished by your school yard arch-enemy who was creeping up behind you the whole time. Once your balloon is popped, it’s game over. Germans don’t like opportunities for revenge.
While Australian property owners point and laugh at the Americans, Spaniard and Greeks, impoverished by the loss of their housing bubble, their own wealth has just been pierced.
Both Legs Are In Trouble
The leg of the Australian economy that allowed us to crush our competitors’ balloons left, right and centre is the resource boom. For years our exports and exporters dominated resource markets. Huge capital investment and wealth flowed through the economy. Now that source of prosperity is getting sluggish.
Greg Canavan’s warnings of China’s slowdown are coming to fruition. So are his ways of protecting your wealth. But that doesn’t change what is happening to Australia as a whole. People are complaining about economic malaise before it even gets going. Australians don’t realise they are stretched while times are good. Once times get bad, it’s going to be a right shock.
The other leg, the one our housing bubble balloon is tied to, is the banking industry. As we explained on Wednesday, it’s rotten to the core. Here’s what one Markets and Money subscriber wrote in:
Thank you for helping to expose the ‘low-no doc loan” scandal in Australia. We were 64 and 75 year old pensioners when the CBA gave us a 30 year $520,000 loan. We requested a re-finance of $360,000 but they pursued us relentlessly to take on the extra figure. Our loan application form is full of errors entered by bank staff without our knowledge or consent. My husband and I are listed as stock brokers on the form (which we’re not) and I am listed as a solicitor which I’m not, the list goes on and on.
We are now unable to keep up the payments as our savings are completely depleted through mortgage repayments.
Thanks and please more exposure.
Thanks for writing to the Markets and Money. According to a survey conducted by the Banking and Finance Consumers Support Association, 10% of Australian full-doc (standard) loans include the kind of dodgy dealings R.J. experienced. Money Morning editor Kris Sayce is working behind the scenes with whistleblower Denise Brailey to expose the mess and demand action. We’ll be needing your help though, so keep your eyes open for more on this. In the meantime, if you’re a borrower and want to find out if you’re a victim of the fraud, read our article about the three phone calls you need to make here.
If you’re sceptical about whether calling your bank really works, here is what one Markets and Money reader wrote to us about his efforts:
Ha! My phone call with bank played out as predicted!
…a real reluctance! finally got it after speaking to the supervisor’s supervisor…
And a very helpful reader sent in his knowledge about the Loan Application Form – the document banks have been manipulating to get borrowers past their own lending standards when they shouldn’t:
The information contained in the LAF is personal information.
Under The Privacy Act 1988 individuals have the right under the National Privacy Principles to know what information has been collected about them and to have it corrected if wrong.
Also, all personal information collected by an organization must be protected from misuse, modification or unauthorized third party disclosure.
If a lending institution refuses to provide a copy of the LAF (Being an ‘internal document’ is irrelevant) then they are breaking the law and a valid complaint would be in order. Where the institution will not cooperate, a complaint may easily be escalated to the Office of the Privacy Commissioner whose web link is: http://www.privacy.gov.au/complaints/how
So there shouldn’t be any argument about someone wishing access to their LAF.
Furthermore, a subsequently altered LAF resulting in an excessive unaffordable loan is unconscionable conduct and an act of “Bad Faith” under common law, by the institution. In this case, the loan would be wholly or partly voidable. A complaint to the Banking Ombudsman ($ limits apply) is free and their decision binding on the institution but not the individual. Institutions tend to want to make a quick confidential settlement before escalating to the Ombudsman if there is any risk of opening the flood gates on an issue!
One reader disagrees with all this.
I am an avid fan of your emails, but felt I should send a letter regarding the ‘three phone calls ‘ article. You can see from my email address I work for one of those 36 banks.
I did Home Lending for a number of years, and can say that the statements made by Denise Brailey simply don’t happen. They are the exception rather than the rule.
I can honestly say that throughout my years I never used any of the methods suggested by Ms Brailey. In fact there were mechanisms in place to ensure the data was accurate. If it wasn’t then it was pretty much it would cost my job if it happened a couple of times.
What advocacy groups like Ms Brailey’s should concentrate on doing is educate people about entering into loan contracts. I can count on one hand how many people took the time to read the contract and terms of a loan offer. I found it amazing that people would commit to huge loans without hesitation.
Anyway, keep up the good work. I thoroughly enjoy reading your emails.
The argument R. makes is valid. People shouldn’t borrow beyond their capacity to repay. But that is only one small part of what is going on here. And it doesn’t address our point. But first of all, based on the victims we’ve become aware of, many were clearly relying on the bank’s judgement. A 98 year old lady was given a 30 year mortgage. A $4.5 million dollar loan was made to a 73 year old lady without income or assets… the list goes on. Predatory lending, at least by our lehman’s definition of it, is one thing.
Document fraud is another. And that is what the banks have been doing as far as we’re concerned. And that is why the usual ways of preventing predatory lending have failed. Changing people’s Loan Application Form without them knowing is just wrong, even if it weren’t illegal. It’s being done on a systemic scale and it’s earning certain people a lot of money. One mortgage broker made $5 million a year and is now calling it all ‘a lie’.
By the way, the Irish solution (bear with me) to all this is called a debt wake. People with an unaffordable mortgage throw a wild house party and say goodbye to their friends and family. Then they leave for a far off country, never to return. Usually the bank’s house isn’t left in a great condition. Debt wakes have made a comeback in Ireland since 2008. Maybe we should try it.
We received some feedback on the idea when we indirectly raised it on Tuesday. In response to Australia selling the world’s most expensive beer, why not leave for somewhere cheaper in retirement…
I really enjoy your less conventional view on the world, and find it rather
I have been planning my retirement for some time and hope to be able to do
with in the next 3 – 4 years.
I have a short list of places I’ve been look it at as a retirement escape
residence (I’ll only be 40 by then, so lots of time to live) and can’t wait
to see where you have on your list. All new ideas are always worth further
We’ve just completed our own shortlist of 3 places Australians should look into for retirement. You’ll find them in the free report that goes with taking a trial to our upcoming newsletter. More on that soon.
Re- Tuesday’s article about the expense of retirement in Australia, it’s unfortunate that Nick Hubble views Australia as poor value for retirees. His comments relating to the way that invested funds are taxed are simplistic, and do not take into account the potential benefits of franking credits on share dividends.
A more balanced summary would mention that only Aust and NZ give shareholders a full credit on tax paid at the corporate rate, if they are fully franked, and that all other countries tax the dividend instead. The net result of this difference in tax policy places Australian shareholders significantly better off than those of other countries – perhaps as much as 25 – 30% net of tax compared to the UK for example.
It may also be noted that the benefits of franking credits can be experienced by investors of any age, not just retirees.
We’ve made dividends the centrepiece of our first newsletter issue. But with a twist that turns them into fish traps.
This from New Zealand:
It’s been a number years since I’ve been to Australia
But I reckon that New Zealand has more expensive beer and wine and more
expensive restaurants etc and more expensive real estate (in ratio to
average incomes) than Australia
It would great if one day someone could do a quick run-down on New Zealand.
We never get a mention.
I think that things in NZ are looming much worse than in Australia (expect
perhaps our dairy industry may fare better than the Aussie miners in the
short to medium term, albeit there will be a day of reckoning there also
given the surge in dairy conversions in places like South America (Brazil
and others) and also in East European countries. NZ may well have more of
its eggs in one basket than even Oz.
It would be hugely appreciated if you could deliver a Markets and Money
synopsis on New Zealand economy
Always enjoy the great information you provide
All the best
An experienced expat shared his views too:
Firstly, let me thank you for keeping me sane. I read your bulletins
the moment they arrive. Its nice to know I’m not alone. Although a
Melbourne lad, 15 years ago I was involved in Private Banking in the
UK, Switzerland and France. I was privy to meeting’s with Fed
officials and advisors, that changed my worldview, and still can’t
believe the system continues to roll forward. Thats why I find the
Markets and Money so refreshing, no one else seems to understand. If I
discuss with anyone its like looking at a Rabbit in a Spotlight.
Anyway to your current awareness on alt. living, (ie: away from
this…..). I also subscribe to International Living and read with
interest there review on alt. retirement countries, benefits etc.
With my financial understanding of how the world was heading, and
having had enough of overregulation, with the understanding that no
one has to accept any responsibility, the boss must pay, (read always
the villain.) I sold my factory, investment properties in AU and
moved to a tropical tax haven island. Happiest Country in the
World…… Due to unfortunate circumstances, (tsunamis, and
insurance companies calling them acts of God), am now bck in AU
The NUMBER 1 issue you should be mindful of in suggesting or
recommending this path, is that any wealthy expat is considered Fair
Game. In societies not as wealthy or without the opportunities we
have, the General Populace is not immune to envy. Most places with a
cheaper cost of living will be hit hardest by the forthcoming economic
contraction, thus putting higher expectations upon people living in
their midst, that have a higher quality of living.
Since departing my tax haven paradise 14 months ago, 3 expat friends
have been murdered over money and or disputes and another blackmailed.
Out of a fairly small (1000) expat community, I find that alarming.
Aside, nature deciding I had a life too easy and making me get back to
work, I would have left the country anyway, having been bashed in my
own house, cars destroyed, on home robberies getting from none in the
first 2 years to monthly in the 6 yr. I simply stopped replacing
goods, so there was no more to take.
Guess the point I’m trying to make is, unless you have personally
lived in the country for years that you are discussing, be very wary.
For all my misgivings, am happy to be home. Law and Order is still
impeccable here, compared to many places. It is a quandary…
Send your feedback to firstname.lastname@example.org
Until next week,
Markets and Money Weekend Edition
From the Archives…
28-09-2012 – Greg Canavan
Banks versus the Farms
27-09-2012 – Greg Canavan
A Familiar Sequence: Print, Spend, Crash
26-09-2012 – Bill Bonner
The Hamburglar’s Budget
25-09-2012 – Dan Denning
The Cheeseburger Police
24-09-2012 – Dan Denning