Responsible borrowing

Australia is on a bank-bashing roll currently. As the market (and by that we mean property market – really the only important market in the Dutch Diseased country) rose solidly over the previous decades, the national psyche shifted to one where the expectation of continued growth became pervasive.

To a certain extent, that’s a rational position to take; if everybody, lending institutions and central banks included, is predicting a double digit rise next year there’s wisdom in listening to them.

There’s a similar theory about “technical analysis” of stock charts, that it might not be based on any underlying science but, because everybody believes in “support lines” and “double tops”, it becomes a self-fulfilling prophecy.

However, trees don’t grow to the sky and no market moves in a straight line.

More importantly, if you’re going to make a bet, any bet, you better bloody well know that you can live with the wrong result should it occur.

Westpac has been hit with the first class action against one of the big four since the banking royal commission’s final report earlier this month.

Lead plaintiff Michelle Tate told a media conference in Brisbane on Thursday she and her husband Ian were ruined after the bank lent them more than $1.8 million across five properties, despite the family having just one income.

Ms Tate said Westpac trusted a loan broker who provided information about her family’s financial position, and did not independently verify the situation. She said her family would now lose all of their properties save for a block of land.

Wait, what?

They bought their first home in 2008 but decided to invest in a further three in 2013 and 2014 while Mrs Tate was a full-time mum, all funded through Westpac loans they locked in as interest only and secured against their first property.

Are you insane?

Maurice Blackburn Principal lawyer Ben Slade said Westpac was “required to comply with strict obligations which are specifically designed to protect consumers from irresponsible lending and the risk of financial hardship”.

“This case will seek to prove that Westpac failed to comply with these obligations and that this failure caused substantial losses for many consumers,” he said.

That highlighted claim reminds me of the regrettable line we all mistakenly say once in our lives;

“Honey, does this dress make my bum look fat?”

“No dear, your bum makes your bum look fat”.

Bill’s Opinion

Michelle Tate and her husband knew exactly what they were doing when then went all in on property. It was a one way bet they couldn’t lose.

Blaming the bank that lent you the money in the hope of compensation is an understandable tactic and a common coping mechanism rather than coming to terms with one’s own stupidity and greed.

But you were still stupid and greedy and you absolutely knew what you were doing.

Westpac’s Diversity and Inclusion Officer writes…

…about banking and house prices. One wonders how that got past the Corporate Affairs twinkies.

Obviously we’re being facetious, Brian isn’t really the Head of LGBTQI123& non-TERF Advocacy (not that you’d know it to look at what he seems to spend most of his time focusing on).

No, he’s the CEO of Westpac

Which means, on balance, the article is even more worrying.

Why?

Ask yourself a question; when the CEO of the 2nd biggest bank decides to write a blog post explaining that the property market isn’t crashing, that the bank is sound and they are still open for business, does that make you feel great comfort and security?

Or, do you think to yourself, “why is he telling me this, why wouldn’t everything be fine, what does he know that I don’t?

Bill’s Opinion

The lady doth protest too much, methinks

It’s highly unlikely any of the major Australian banks are going to be in trouble any time soon. However, the prime candidate if one does hit hard times would be the one with the largest exposure to interest only investment loans and a top of the market (2007) acquisition of a competitor that they never got round to integrating and realising economies of scale….

When did you stop beating your wife?

There’s been a campaign running since 1991 called the White Ribbon which seeks to get men to pledge to never commit, condone or remain silent about violence against women and girls.

Very laudable, we’re sure.

Let’s consider the 27 year campaign as an experiment. Is there any evidence it has made a difference?

The Australian version of the campaign publishes selected statistics here. There are a lot of highly-cherry picked data points on that page, feel free to browse them yourself. There is no mention of how these data points have changed over time, however. Which seems an unusual omission if you are requesting generous public donations to a charity that’s had a single purpose for nearly three decades. It’s not unreasonable to ask, “….and how successful has this approach been since 1991?” before handing over a chunk of money.

Fortunately, the source data is linked here at the Government statistics department, the ABS.

Halfway down the page, this gem appears;

Changes in partner violence prevalence rates over time

The proportion of women who experienced partner violence in the previous 12 months has remained relatively stable over the last decade. In 2005, approximately 1.5% of women aged 18 years and over experienced partner violence in the previous 12 months, whilst in 2016 the figure was 1.7%.

Oh, that’s inconvenient. It’s almost as if nearly 30 years of virtue signalling and hectoring of regular law-abiding citizens has had little to no impact to problems in the real world.

Perhaps there’s a clue to be had as to why from the White Ribbon website’s data page;

Indigenous Australia
Statistics show that Aboriginal and Torres Strait Islander women experience high levels of violence and abuse. Family violence among Aboriginal and Torres Strait Islander people impacts on the health and social outcomes of women and children.
Indigenous women are 32x more likely to be hospitalised due to family violence than non-indigenous women.

Wait, what? 32 times more likely to be beaten so severely that hospital treatment is required? That’s a shocking data point by any reasonable measure.

Bill’s Opinion

We can argue over the causes of the incredible asymmetry of severe abuse between the indigenous population and everyone else, and perhaps that will be the subject of a further discussion here at another time.

What seems incontrovertible is that White Ribbon Australia’s resources and campaign are incompetently directed. If the charity’s organisers truly wished to reduce serious physical domestic abuse of women, instead of buying hugely expensive TV, radio and internet advertising, running poster campaigns and events in white-collar offices and similar events in major metropolitan centres, it would seem obvious that the resources should be directly-targeted at a particular and easy to identify demographic.

Of course, however noble the original aims of the charity, eventually it becomes a self-sustaining organism.

If this statement seems incorrect, try the following thought experiment; imagine White Ribbon was approached by a pharmaceutical company with a study that suggested they could produce an effective prophylactic with no side effects that could be added, like fluoride for dental health, to the water supply and would immediately prevent men from beating their partners. What would be the response of the charity, do you think?

Well, for a start there would have to be immediate job losses for the full-time staff (who currently account for $2m p.a. of the charity’s operating costs). That’s not going to be popular. Turkeys voting for Christmas, an’ all that. The army of researchers and other hangers on would need to find other sources of income too.

There would also be an end to the need for the following lucrative programme of extortion which, according to the annual accounts, brings in over $2m a year in “fees”;

The White Ribbon Australia Workplace Accreditation Program is our world leading violence-prevention initiative focused on providing organisations with the tools and strategies to actively prevent and effectively respond to violence against women and drive gender equality.
Organisations that demonstrate a commitment to tackling violence against women and meet and exceed 15 criteria across three standards as independently assessed, become accredited as White Ribbon Workplaces.

It’s likely a safe assumption that the current list of accredited organisations is heavily-skewed to those who can pay the fee rather than, say, a liquor store in a town with a large aboriginal population.

Oh look, our old friend Brian “virtue signalling” Hartzer is all over it like a bad case of genital warts.

Special pleading to commence in 5, 4, 3…..

Australia’s stellar run of property price inflation has come to an end.

The current decline is already the worst in modern history;

So what? Markets are cyclical, trees don’t grow to the sky, etc. The current decline comes after many years of incredible capital gains for those exposed to the asset class. These single digit percentage falls should be of no concern to anyone except those who speculatively bought in the last two or three years or who have taken on extreme levels of debt.

Everyone with a brain and access to standard economics textbooks should have been able to predict that, eventually, there would have been a correction, either minor and slow or major and quick. One way or another, the fact that the double digit percentage increases would not have continued forever should have been news to nobody, not least those paid large sums of money to navigate these markets.

Our old friend Brian “admire my signals of virtue at shareholder expense” Hartzer seems to have been slightly startled by reality, however;

Westpac’s profits flatline, which, to be fair, still means they’ve made a truckload. However, trends are important.

What’s also important is that throwaway line above; “the country’s biggest lender to landlords“.

Let’s pose a question here for Westpac shareholders –

Q. In a falling market, which categories of mortgage debt are least likely to perform well?

If you answered, “the most heavily-leveraged and properties that are not the primary residence of the mortgagee“, give yourself a pat on the back.

Elsewhere Stephen Koukoulas has smashed the glass to get at the emergency alarm button; The next rate move by the RBA should be down.

An RBA rate cut is not about housing – it’s about exports and investment

Many people misunderstand my concern about falling house prices and the coincident call for the Reserve Bank to cut official interest rates.

Well sure, but given that your call for rate cuts conveniently occurred at the point it became obvious these price falls weren’t a blip and, in fact, show many signs of being the new normal for the next year or two, allow us a few moments to consider quite how unbiased your views are.

As for this claim;

The house price declines in the current downturn are much what I was forecasting a year ago.

Are you sure about that? This interview from 14 months ago suggests otherwise;

He’s talking specifically about Sydney prices there. If by “flat” he meant negative 7.5%, then fair enough but that would seem a generous retrospective reading.

Other commentators with an even worse track record are pleading to higher authorities now too.

From the same article, our friend “Doctor” Andrew Wilson (he’s a doctor of property! No, really!) making a prediction so accurate that he got it almost exactly 100% wrong;

So much for a doctorate in property economics. Where was it from, the University of Baghdad, studying under Professor Comical Ali?

Based on that stunning example of incompetence in his core area of expertise, perhaps we might also be allowed to ponder the altruism behind his current pleading for rate cuts;

Economics-wise, that’s just all over the place. Explain please, how lowering rates improves savings rates, for example…..

Bill’s Opinion

Predictions are a fool’s errand on something as complex as an economic system.

We can, however, provide a conditional prediction here today of which we are extremely confident;

Should the decline in Australian property values continue, the current low whine of calls by vested interests to lower interest rates will become a defeating cacophony as they claim it’s in the best interests of the entire country, not just themselves as they are staring down the barrel of large paper, possibly soon to be realised, losses.

The pips will squeak.

Westpac and O’Sullivan’s Law

If their social media profile is any measure of these things, one of the four main Australian banks, Westpac, is firmly in the vanguard of the Australian First Battalion of the Social Justice Warrior armed forces.

Their CEO, Brian Hartzer, is clearly one of the main drivers of this “progressive” attitude, witnessed by the following samples from his Creepbook for Business activity;

And this word salad that seems to be channeling Eric Morecombe’s line, “they’re all the right notes, just not in the right order“;

Some more virtue signalling that is surely guilty of cultural appropriation (or perhaps the drag queen beauty parade was ironically named after Islam’s holiest city?);

More here. No, really ladies, your promotion was entirely merit-based and not simply to hit Brian’s 50% diversity target;

We’re starting to run out of female leaders prepared to be touted as public examples so we’ll recycle a couple here;

And then we see something quite telling, hiding in plain sight, so to speak;

Actively and publicly supporting a political candidate (multiple times too) on the far left of the political spectrum. Well, that speaks volumes, doesn’t it? Obviously he’s allowed to have a personal political opinion but it seems mildly inappropriate to be expressing this in a work-related context.

However, he’s got form on this. Last year, during the same sex marriage referendum, Hartzer approved an SMS to be sent to all Westpac employees’ mobile phones encouraging to get out and vote “Yes”. Which, as measures of good shareholder value go, wouldn’t be top of the priority list, one imagines.

Similarly, Hartzer is happy to splash shareholders’ cash on rainbow lighting on the facade of the HQ during IDAHOBIT Day and have rainbow lapel pins handed out to his staff, none of whom feel at all intimidated or coerced into wearing them, I’m sure.

In a further example of Hartzer’s Olympic gold medal level of virtue signalling, the latest Enterprise Bargaining Agreement (h/t the Welsh Twinkie) with the staff include the following gems;

  • Time off for transgender transitioning, and
  • Time off for “Sorry Business”, i.e. Aboriginal staff can take leave because many non-Aboriginal Australians are suffering from Stockholm Syndrome.

Bill’s Opinion

O’Sullivan’s Law states that any organisation or enterprise that is not expressly right wing will become left wing over time.

Westpac is the case study of this.

Let’s remind ourselves of the purpose of banks; they are to provide shareholder value by securely-holding deposits and prudently writing loans in as efficient a way as possible. Anything else is gravy.

How’s Westpac tracking against that mandate?

Here’s an example to consider; the New Payments Platform (aka Osko), a method to quickly transfer money using a short ID code, was widely launched last year in Australia.

How’s Westpac going with implementing it?

Oh. That’s awkward.