My last post, Are Australia’s banks about to collapse?, took Steve Keen to task for a presentation on the dire outlook for Australia’s property market and its banks. However, a commenter has pointed out that it was not Steve’s presentation! Moreover, the final slide of the presentation, which is in very poor taste, appears to have been added by Business Insider.
How did I get that wrong? By following one link too few. Here is a quote from the Business Insider article where I found the presentation:
according to this presentation from economist Steve Keen, courtesy of Mish’s Global Economic Analysis
Following the link to Mish’s Global Economic Analysis gets a bit closer to the truth (“on his blog” not “by him”):
Australian economist Steve Keen addresses that question and more in a presentation on his blog How to Profit From the Coming Aussie Property Crash (and Banking Crisis)
At that point I made the mistake of not following the final link to Steve’s blog and instead read the presentation. Slide 3 was a familiar one I had seen in various forms and by then the notion that Steve had written the presentation was firmly implanted. The style should have given me pause for thought as it is extraordinarily hyperbolic.
If I had followed the final link, as indeed I should have done, I would have found a post entitled “Excellent presentation on Scribd on Australian housing” the following on Steve’s blog:
This presentation was noted by a blog member today. Take particular note of slides 21-20 which compare the balance sheets of US and UK banks to that of one Australian bank, the Commonwealth.
How to Profit From the Coming Aussie Property Crash (and Banking Crisis)
So who did write the presentation? Who knows, but it was uploaded to Scribd by someone called Karenina Fay.
In any event, while Steve may think it is an excellent presentation and I clearly do not, he did not write it and hence this a mea culpa. I apologise for following others in incorrectly attributing this presentation to Steve and I have edited the original post. I will also be endeavouring to click that last link in future!
Possibly Related Posts (automatically generated):
- Are Australia’s banks about to collapse? (28 May 2010)
- Banks, banks, banks (5 November 2010)
- Park the Debt Truck! (16 July 2009)
- How Big Are Australian Banks? (4 March 2009)
oops… Good to see the fast response Sean.
Ooops is right! There’s nothing quite like the sinking feeling you get when you realise you’ve made a mistake like that!
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you also should check your grammar for use of ‘to’ and ‘too’ – paragraph 2: and:
“based on current market valuations, the average loan-to-value ratio (LVR) for CBA’s portfolio is 42%. This means that, on average, the value of the property is more than twice the loan amount. ,This gives the bank an enormous buffer against falls in property prices”.
Does it? Or does it merely highlight the ridiculous ‘value’ that doesn’t exist?
Allen: thanks for pointing out the typo…it has been corrected.
As for the LVR question, regardless of whether you believe property prices are over-inflated or not, a lower LVR gives the bank a bigger buffer. I don’t see how it says much about the ridiculousness of the price. Perhaps your argument is that the LVR is only that low because prices have risen? If you use the original purchase price rather than the current valuation to calculate the LVR, CBA’s portfolio average is still only 52%. While many home-borrowers might originally borrow 80% or more of the purchase price (and remember, if they borrow more than 80%, CBA takes out mortgage insurance), mortgage prepayment rates in Australia are high. Mortgages are typically 25 years in term, but the average life of Australian mortgage pools tends to be less than 5 years. So, CBA’s portfolio is as low as it is because many of the customers pay down their loans faster than they are contractually obliged to.