US Market Meltdown + global meltdown

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Permalink Reply by jacquesk on September 16, 2008 at 3:16pm

Hi Miffy
Some of our banks, like the National, are suffering because of the U.S subprime situation but none will be going under anytime soon. Might be the odd council in N.S.W going bankrupt. :-)

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Permalink Reply by Mary M on September 17, 2008 at 12:17am

And perhaps the odd investment bank...

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Permalink Reply by Miffy on October 12, 2008 at 8:57pm

Hi all, when I started this post a month ago, I had no idea just how bad things were going to get!! Now the whole world seems to be infected by the "credit virus", and markets are in freefall. Rudds guarantee of deposits for Aussie banks shows just how bad things have become, although personally I think this was a necessary move to restore confidence. I just hope it doesn't have the opposite effect, as it highlights who bad things are...

Where to from here? No one had much to say about this last month. Surely some of you have a stronger opinion on all this now!!!

Miffy

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Permalink Reply by Vonny on October 12, 2008 at 10:06pm

Hi Miffy,

This is my general feeling of the Aussie economy, not just with the banks.

Now it's starting to get scarier with bad news almost everyday. but could this be nearing the end? we've hurt so much already that maybe (hopefully) it might stop soon. So far our economy is going ok but it's starting to look shaky in terms of a recession happening in Australia. We still haven't had a bank collapse but I was only starting to wonder the last 2 weeks or so if i should diversify what banks i put my deposits in! now i worry about that less after Rudd's guarantee.
The Aussie currency plummeted the last week too which was quite unexpected and it went UP (?!) after the Reserve Bank cut rates by 1%?!

I think our house prices are still ok around the non-mortgage belt areas. I haven't seen drastic falls except in the newish mortgage-belt areas and in perth where there was a bubble. I think if the problems in Australia start escalating then we'll see more significant falls in the suburbs. I haven't really heard of bargain auction prices in the news yet. Even mortgagee auctions tend not to be at the bargain price level yet.

Just talking about our banks, we've always been assured that Aussie banks are ok. But before the credit crunch really started to affect Australia, we also thought that we had "decoupled" from the US and that's turned out not to be the case. On the surface so far, the banks seem to have absorbed everything that's been thrown at them. Seems really that we will never know until the end of the global crisis. So far CBA seems ok since they bought bankwest. I take that as a sign that they are financially stable enough to do so. Not as sure about the other banks.

Generally, since our economy was doing so well before the credit crunch and our banks were relatively conservative, it seems like we have the room to move down without it crippling us. Even now we have a bit of downward movement we can absorb. Our interest rates are high, we still have 600 basis points to cut if required. We haven't made many government "bail out" or prevention type measures so we still have those measures to maintain our economy if things get worse.

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Permalink Reply by jacquesk on October 13, 2008 at 1:37pm

Hi Miffy
My opinion is unchanged. Things are definitely bad and we are a long way from the end of the current crisis, and especially its long term ramifications, but I do not see that any Australian banks are going to go bellyup. Not even the few smaller ones that have not been bought up by the big players. :-)

I actually bought bank shares last week (cashing in on the panic). I have enough faith in the greedy capitalists running the banks to buy in.

I agree with Vonny's opinion of the Australian economy. We may suffer a little but compared with other countries nowhere near as much.

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