Black Monday

[alokdhir]

First Central Banks were tripping over each others to throw money into the system so that indisciplined and impatient population can cope with Covid " Misery " ...now they are doing their hardest to snatch away too many lollies they gifted to masses ...to stop sugar high syndrome ...

Poor greedy banks caught up in unprecedentedly fast rate rises ...it seems many cant manage especially smaller banks who have less confidence of depositors

HGH had around $ 4 Billion in deposits with close to 1 billion in call accounts etc ...if people start switching banks then RBNZ will support with liquidity but at OCR+ rates ...maybe it will cost some margin bucks to HGH but it can manage ...but all this turmoil may end up starting something big ...Govts or Central Banks need tackle this ASAP and restore confidence in all banks by maybe providing deposit guarantee for some duration ahead ....

[thegreatestben]

Agreed. Depositors would be fine. Shareholders, not so much.

Banks really have been one of the worst possible investments over the last 23 years - not counting Air NZ of course. Have a look at any bank chart from NZ or Australia and compare it to market returns. Just terrible.

Edit: ok CBA has been ok but has still massively underperformed the NZX50. So I'm sticking with "just terrible".

Are you factoring in dividend and anyone’s participation in drp also?

[Recaster]

First Central Banks were tripping over each others to throw money into the system so that indisciplined and impatient population can cope with Covid " Misery " ...now they are doing their hardest to snatch away too many lollies they gifted to masses ...to stop sugar high syndrome ...

Poor greedy banks caught up in unprecedentedly fast rate rises ...it seems many cant manage especially smaller banks who have less confidence of depositors

HGH had around $ 4 Billion in deposits with close to 1 billion in call accounts etc ...if people start switching banks then RBNZ will support with liquidity but at OCR+ rates ...maybe it will cost some margin bucks to HGH but it can manage ...but all this turmoil may end up starting something big ...Govts or Central Banks need tackle this ASAP and restore confidence in all banks by maybe providing deposit guarantee for some duration ahead ....

There is also around $450m of outstanding commitments as well, things like unexercised authorities.

What are their total bond holdings? Most will be hedged I guess on a rolling basis but don't know.

All banks lend long and borrow short. Nothing new in that. All the Basel Brush requirements won't change that or remove the risk of a run which is why governments often step in because there are too many votes at risk.

Heartland is like a quasi-bank with some things in common with finance companies.

Would the government backstop Heartland?Try and work out the number of votes at stake and which swing electorates they are in and you will have a likely answer.

South Canterbury is the only significant precedent in terms of size and location. The depositors were made good (lots of votes) and according to Lee the government appointed receivers blew about a billion from their mishandling of it.

Not saying Heartland is currently at risk though. Trying so make the point that all banks and finance companies are at risk given certain circumstances and their around 8-12% paper thin equity ratios are not enough to protect them without government support.

[Bobdn]

@thegreatestben, no I havent included any dividends although I dont think it would change things markedly. According to Google, ANZ, for example, is up 96 per cent from 2000. The silly old nzx50 is up 508 per cent from 2003. EDIT: IT DOES CHANGE THINGS MARKEDLY SEE BELOW

I use to own a handful of shares including ANZ, WBC and HGH (or whatever it was called back in the day) and thought I was doing ok until I looked at what the market was delivering.

Some guy on Youtube made this point: Morgan Stanley ws $84.05 in August 2000. Guess what the price was on Friday? $83.95.

[Baa_Baa]

@thegreatestben, no I havent included any dividends although I dont think it would change things markedly. According to Google, ANZ, for example, is up 96 per cent from 2000. The silly old nzx50 is up 508 per cent from 2003.

I use to own a handful of shares including ANZ, WBC and HGH (or whatever it was called back in the day) and thought I was doing ok until I looked at what the market was delivering.

Some guy on Youtube made this point: Morgan Stanley ws $84.05 in August 2000. Guess what the price was on Friday? $83.95.

Since 2003, ANZ returned 10.42% p.a., including dividends.

[Bobdn]

Dividends make a huge difference, as always.

Don't underestimate dividends.

https://craigsip.com/insights/overvi...6%20per%20cent.

[BlackPeter]

Since 2003, ANZ returned 10.42% p.a., including dividends.

Cheers, this had to be said. Don't put money in the bank, buy it!

Clearly Bobdn uses an alternative coding of the English language if he considers banks as the "worst" investments.

Many investors would be quite glad to take that sort of return home.

[SailorRob]

Since 2003, ANZ returned 10.42% p.a., including dividends.

Is that with the dividends reinvested, or just added?

[SailorRob]

Cheers, this had to be said. Don't put money in the bank, buy it!

Clearly Bobdn uses an alternative coding of the English language if he considers banks as the "worst" investments.

Many investors would be quite glad to take that sort of return home.

In Bobdns defence.

https://www.fundsmith.co.uk/news/202...n-bank-shares/

[bull....]

Economist warns national house prices to fall 25 percent, says NZ economy 'still in rehab

And with national house prices already down 18 percent from the peak in 2021, Bloxham issued a stark warning house prices could fall a further 20 to 25 percent

https://www.newshub.co.nz/home/money...-in-rehab.html

good for first home buyers if it happens not so good for baby boomers wealth or people invested in retirement stocks or property stocks

What happens when housing's 'wealth effect' dries up?



But capital gains are only on paper until the home is sold, while the debts taken on in “wealth effect” spending are real and require servicing with regular repayments.
Loan arrears rates are already up, hitting a three-year high recently, and in February 430,000 Kiwis were behind on their bills, according to Centrix data.

The credit reporting company also recorded 18,400 were behind on their home loans in the same month.
Centrix data allows another insight – by comparing the size of loans Kiwis have been taking on to CoreLogic’s Housing Price Index, it shows Kiwis have been taking on progressively larger consumer loans and more credit card debt as house prices ticked up.

https://www.stuff.co.nz/business/131...ffect-dries-up

not so good for retail stocks and other consumer facing stocks

I agree with more people moving of fixed mtge's this yr and next the wealth effect has some way to go to play out yet.

So another down yr nz50 my pick as it all starts to bite company profits and not forgetting inflation is still eating the profits away too