Some Pertinent Property UPDATES

Wednesday, 22 December 2010

Housing Industry Association

Housing supply, demand gap grows

Australia continues to run large annual deficits between the underlying demand for dwellings and the completion of dwellings, according to HIA.

HIA's updated projections of the underlying demand for housing suggest that Australia built 22,000 too few dwellings in 2009/10, with a projected deficit of 16,800 dwellings in 2010/11 and 21,000 dwellings in 2011/12.

"In the longer term Australia's housing market is underpinned by the immutable forces of insufficient supply and robust underlying demand," HIA chief Andrew Harvey said.

Looking forward, Mr Harvey said supply-side factors such as the increasing scarcity of land in the main urban centres in Australia will continue to play a major role in driving Australia's housing prices.

"We need to be clear that supply side obstacles which prevent housing construction from keeping pace with the rate of household formation will see Australian burdened with a growing under-supply of housing and a resultant worsening affordability problem," said Mr Harvey.

"Governments at all levels need to increase their efforts to address these supply side issues as a matter of urgency," he said.

Wednesday, 22 December 2010

The Reserve Bank of Australia

RBA satisfied with monetary policy

The RBA is content with its "mildly restrictive" cash rate policy.

According to the minutes of the December Monetary Policy meeting, released yesterday, the positive outlook for business investment means the current policy setting is appropriate.

The Board kept its overnight cash rate target at 4.75 per cent in December after a surprise increase of 0.25 of a percentage point in November that it called a pre-emptive move to ensure that positive terms of trade shock and any surge in capital expenditure did not fuel inflationary pressures.

Inflation remains in the bottom half of the RBA's target range of 2 to 3 per cent

Thursday, 23 December 2010

St George Bank

Rent considered genuine savings

St George will now accept rental payments as evidence of genuine savings.

In a move that will help first home buyers all over the nation, St George has announced it will accept rent as a form of savings for a home deposit if there is evidence of a minimum of 12 months continuous satisfactory rental history and the property is leased through a property manager.

"This is a significant breakthrough for first homebuyers and a move which could be a major boost to the home finance industry," Loan Market chief operating officer Dean Rushton said.

"Higher interest rates, tougher lending conditions and the end of the boosted federal government grant at the end of last year have driven first time buyers out of the market.

"Another major restriction for them has been the difficulty in saving a deposit for a home loan, particularly in this economic climate with people having to cope with massive cost of living increases including rental payments."

Up till now, all Australian lenders have required a percentage of the purchase price - normally five per cent minimum - to be saved for all loans.

"But if rental payments were taken into consideration as a factor in assessing genuine savings that would enable many people to pursue the dream of home ownership," Mr Rushton said.

"St George has now moved to accept rental history as a form of genuine savings and they should be applauded for this decision as it will enable a lot more people to realise the great Australian dream of home ownership."

Thursday, 23 December 2010

PRDnationwide

Qld “hotspots” revealed

PRDnationwide has revealed its Queensland-based affordable property hotspots for 2011.

According to recent research by the estate agency, Stafford Heights, Lota, Northgate, Virginia and Mount Gravatt East in Brisbane are all expected to thrive in 2011.

Property researcher Josh Brown said the suburbs were all ideally located near amenities and employment.

"Brisbane's sub $500,000 property market reflects a fantastic opportunity for potential purchasers to exploit their position in the marketplace and invest within this grade of real estate," Mr Brown said.

"With 2011 likely to become the year of the buyer, investors and home owners should begin to gear up now if they want to capitalise on the attractive economic environment.

"It's the season to be buying."

The research shows sales activity of Brisbane property priced under $500,000 has dropped an extraordinary 40 per cent over the first half of 2010.

"The stagnating sales activity in Brisbane's affordable market, poses an opportunity for investors to capitilise on buyer favourable conditions," Mr brown said.

"When looking for a property with strong long term gains ensure the property is within close proximity to employment nodes; in an undervalued suburb - determined by price gaps between surrounding suburbs; general affordability; and within close proximity to lifestyle amenity and transport corridors," he said.

Mr Brown said Stafford Heights was identified due to its affordability and location among key amenity hubs on Brisbane's north, which will continue to drive growth.

Virginia and Northgate, located 10km to Brisbane's north, will provide solid long term growth for investors and purchasers, while Lota is set for growth due to its waterfront location within an easy commute of the CBD.

The National Australia Bank "GLITCH" ????

One Commentator's Opinion

We've reported on Kris Sayce's "dark" opinion before. However, here we go again.

We notice NAB CEO Cameron Clyne has paid for a full-page ad in today's Australian Financial Review (AFR) – and we dare say other newspapers – apologising to NAB customers for the problem in "processing some payments and transactions.”

That's nice. But what a dope. Not a single mention of the fact that the glitch has affected non-NAB customers as well.

According to The Age, "Mr Wright [NAB spokesman] said the accounts of all but 19,000 customers have been fixed.”

That would be 19,000 NAB customers of course. Not including the hundreds of thousands, probably millions of customers at other banks where transactions haven't been received due to the NAB's stuff up.

But here's the thought that ran through your editor's conspiratorial brain over the weekend... is this whole mess really the fault of a computer glitch? Or is it something much more serious than that?

I mean seriously, a corrupted file bringing down an entire bank's systems. We wouldn't have thought so.

Clearly they don't have the calibre of IT staff at the NAB that most IT helpdesks have. We wonder if the NAB has tried switching its machines off and back on again... or the ultimate solution, if they've tried unplugging the machine, waiting thirty seconds and then plugging it back in.

That usually seems to work when the printer in the office doesn't work or when the wireless router has gone haywire.

Anyway, perhaps we're naïve, but we thought the mega-banks had disaster recovery sites, and data back-up thingies, and erm, other technology stuff that helps prevent something bad from happening.

The banks spent millions making sure all their systems were prepared for Y2K. And the banks have been heralded as safe and sound thanks to their – albeit taxpayer guaranteed bailouts – escape from the global financial meltdown.

Yet according to The Age, "NAB did not know the correct balances on some accounts in its investment banking division.”

And now you're expected to believe that a "corrupted file” has caused the bank's entire payment and processing system to collapse.

But then again, maybe it's just a coincidence that the NAB's computers should encounter a glitch at the time the Irish banks are being bailed out by European taxpayers.

Surely there's no connection between NAB's former ownership of National Irish Bank, which admittedly it did sell to Danske Bank in 2004. But despite that being six years ago, can it be entirely discounted that there aren't some hangover assets or liabilities still on the bank's balance sheet?

According to Terry McCrann over at the Herald Sun, "NAB has had to provide around $1.2 billion for loan losses in its two small British banks.” This refers to NAB's current ownership of Clydesdale Bank and Yorkshire Bank.

And what about the reports at the end of last year that, "National Australia Bank has amassed a $12.78 billion indirect exposure to the debt-laden Italian Government...”

The report in the Herald Sun in December 2009 claimed:

"NAB is believed to have been issued up to $12.78 billion worth of Italian bonds as collateral for taking on that obligation.

"The bank is exposed because if it has to take up the lending obligation it will be relying on the value of those Italian bonds as compensation.”

Then this:

"Disclosure of the exposure comes as ratings agencies have cast a spotlight on the rising risk of southern European governments defaulting on loan repayments to international lenders.”

You can see from the chart below how that the yield on Italian two-year bonds has soared from 1.5% to over 2.5% over the last twelve months:

Source: Bloomberg

Most of that gain in yield has come in the last month as doubts about the ability of European nations to honour their debts grows.

But why is a rising bond yield bad? It's not if you don't own the bonds and you want to buy them, but if you already own them you take a hit on the capital. Bond prices move in the opposite direction to bond yields.

If the yield rises then the price falls. And vice versa. As for the NAB's current exposure to the Italian debt, according to a May 8th article in The Age, NAB's exposure to the Italian bonds was down to $5.5 billion, "most of this in short-term maturities.”

Based on the chart above, if the NAB has sold down its position further it will have taken a hit on the transactions as bond prices have fallen since December 2009.

Of course, that's not all. The NAB would have copped it from the Aussie dollar increasing against the Euro:

Source: Yahoo! Finance

In December 2009, $12.78 billion would have been worth about EUR7.92 billion. Today EUR7.92 billion is only worth $11.01 billion.

Of course NAB doesn't have the same exposure today as it did then. And the loss isn't huge. Not when you compare it to the total size of the bank's balance sheet.

But the important thing to remember with banks is that it's not the size of the total balance sheet that's important, because that's all built on leverage.

Leverage gained by taking depositor money, claiming that it's held safely in a deposit account which is available on demand, meanwhile the bank is creating the same amount of money as credit and gambling it on an overpriced housing market and European sovereign debt...

Sovereign debt that turns out to be not as good an investment as originally thought.

So, as with all leverage, seemingly small losses are magnified. A $1 billion loss on a bond transaction may seem small against the total leveraged position, but compared to the bank's shareholder equity the loss is more significant.

Then add in the cash to bailout its two British banks... and it's starting to add up. And we're still only half-way through the story.

And is it really stretching the imagination to think the bank's exposure to Ireland could be just as bad? I mean, the NAB did own a couple of banks on the island.

You'd think it would have some legacy investments there.

Below is a chart stretching back to 2006 that shows the yield on an Irish government 10-year bond:

Source: Bloomberg

Even just in the last couple of months the yield has soared from below 5% to over 9%. Remember that a soaring yield means a plummeting price.

According to a May 8th report in The Age:

"Australian banks' exposure to the euro area is running at just over $56 billion, including more than $3 billion to Spain and $4 billion to Ireland.”

What's NAB's exposure to this? We've no idea. But based on these numbers, let's say it's a quarter – about $14 billion.

That includes the roughly $5.5 billion exposure to Italy and then let's say around $1 billion to each of Spain and Ireland.

But let's not forget, that's only the known direct exposure. What about the unknown indirect exposure? What about investments NAB has in other European banks which do have a larger exposure to Ireland?

And also take a look at the credit default swap (CDS) spreads on the sovereign debt of Greece, Spain, Portugal and Italy:

Source: Acting-man.com

In simple terms a CDS is like an insurance policy. It's the market cost to insure against the risk of default.

As you can see on the chart above, over the past year CDS spreads have bolted higher. For instance, Spain (red line) has seen its CDS spread increase from around 100 basis points (100 basis points is the same as 1%) to over 250 basis points (or 2.5%).

In other words, insurance costs have taken off. It's reflective of the risk investors see in investing in sovereign debt.

That's not good news for banks that need to source about 40% of their funding from offshore. In a nutshell, what happens to interest rates in Europe does have an impact on Australian bank interest rates.

Simply because interest rates don't work in isolation. Interest rates act as a measure of risk to investors. If an investor is choosing between two investments he or she will consider the yield. If one is 5% and the other is 6% the investor would naturally prefer the one yielding 6%.

However, the 6% investment could be a higher risk than the 5% investment. That's something the investor needs to weigh up and decide if they're prepared to take the risk in return for a higher income.

But if another firm – say an Australian bank – offers the same risks as the 6% investment, but the Australian bank only wants to pay 5.5%, then it's going to be tough to attract investors.

Why would any investor accept the same level of risk for a lower yield? They wouldn't.

To the extent that the Australian bank may have to increase the yield it pays in order to attract investors.

That feeds back to what the bank charges to borrowers in the Australian market, and how much it can afford to pay depositors.

In other words, Australia and Australian banks aren't isolated from sovereign and corporate debt problems overseas.

And let's not forget that NAB has form with dodgy investments. Remember the currency trading scandal a few years back?

And how about the bank's secret CDO losses that it kept mum about. As the Sydney Morning Herald report a couple of weeks ago:

"National Australia Bank is facing a class action from shareholders seeking $450 million in losses caused by a share plunge in 2008.”

And according to the law firm bringing the class action, Maurice Blackburn:

"Our case is that all of the indicators showing the deterioration in the US sub-prime housing market were available to NAB – it's a bank after all – starting as early in some cases as 2006, going through 2007.”

Look, maybe it is just a coincidence. Maybe it was a "corrupted file” that caused the bank's systems to meltdown. And maybe NAB will be back to normal tomorrow.

But what if there is more to it than the bank is letting on? As I say, it wouldn't be the first time NAB has kept quiet.

The bank didn't think to tell investors about the potential $12.78 billion Italian debt exposure until it was sitting on its books. And it didn't tell anyone about the collateralised debt obligation (CDO) exposure until the last possible moment.

Why should you assume that NAB has been upfront on its exposure to European debt now, when it wasn't upfront about its exposure to US and European debt two years ago?

Quite frankly, given the extraordinary lengths the major banks have gone to in recent months to not only deny the existence of a housing bubble, but to keep pumping it higher, it strikes us that the banks will take any step necessary to hide from the market the real extent of their liabilities.

Could that extend to blaming it on a computer glitch to prevent customers from withdrawing funds?

Conspiratorial? Maybe.

Drawing a long bow? Perhaps.

But based on everything we've seen happen in the market over the last couple of years we wouldn't be at all surprised to learn that the real problem for NAB is a question of liquidity rather than a glitch.

Make no mistake, despite the spin, Aussie banks aren't the conservative and well-managed institutions they and the mainstream media would have you believe.

Cheers.
Kris Sayce
For Money Morning Australia

Is there a forthcoming "Housing Slump" in Australia ???

Can we say Australia is a single market ???

"NO" resoundingly and the following depends upon it.
Monday 8th November, 2010 – Melbourne, Australia

By Kris Sayce

EDITORS COMMENT:

Kris is a harsh property investment critic.

So far none of his doom and gloom “the bubble is about to BURST” predictions have come true. BUT, in the interests of broad spectrum analysis, it is worth reading his comments.

Jack Henderson

(click on the links to view the pics, graphs and charts)
"Auction clearances dive on interest rate rises", reports today's Australian Financial Review (AFR). It states:

"In Melbourne, the clearance rate dropped sharply to 61 per cent, the lowest turnover since mid-December 2008…"

Ouch! It certainly isn't a sellers' market.

And our friends at RP Data agree with us. Money Morning reader Duncan pointed us towards a comment by RP Data on its own Facebook page:

Source: Facebook

As Duncan says, it's not really all that puzzling why there's an increase in the number of properties for sale "when conditions are not particularly strong for sellers."

But it looks as though RP Data have already received some helpful feedback from Dale Morris who posted the following response:

Source: Facebook

We agree with Dale's last comment. Just as the mainstream economists failed to see the credit crunch arriving in 2007 and 2008 because they were blinded by bogus economic growth, so the property bulls have failed to see the coming housing collapse because they've been blinded by their own bogus spin.

I tell you what, with the housing market hanging over the edge of a cliff by a single thread I wouldn't want to be on the wrong side of a $100 million bet on the next move in house prices.

But, are we again jumping too soon with the housing crash forecast?

According to Dow Jones Newswires last week, "Australian Government Examining Plans to Back RMBS Issuance – Sources".

If you're not familiar with the jargon, RMBS stands for Residential Mortgage Backed Securities.

As a quick primer, it simply means that a financial institution bundles up a bunch of mortgages it has written to home buyers and then flogs these off to investors who buy them in return for receiving the interest payments from the homebuyers.

Prior to the meltdown of global markets two years ago, the big issuers of RMBS were the non-bank lenders. Because they don't have customer deposits to use as capital to fund loans, they've got to go out and borrow the money in order to lend it to home buyers.

But when markets collapsed in 2008 and the appetite for risk followed suit, investors were less keen on lending money to the housing market. Especially considering what was happening to house prices overseas.

Of course, the government came to the rescue and helped its buddies in the banks to not only stay afloat but to help them increase their market share too.

The two following charts from the Reserve Bank of Australia's Statement on Monetary Policy provide a clear picture to this. The first shows the collapse in RMBS issuance from late 2007 onwards:

Source: Reserve Bank of Australia

You can see that RMBS issues dropped from an average of around $12 billion during the previous two years to an average of around $4 billion since then.

But as I say, that's when the government stepped in, putting your money on the line to underwrite Australia's major banks. The same banks the government is now involved in a verbal stoush with.

Source: Reserve Bank of Australia

It's no coincidence that at the same time as RMBS issues slumped that the issuance of bonds by Australia's banks increased… by roughly the same amount.

But it was a double booster for the banks as they also saw a massive increase in deposits as savers took advantage of the other taxpayer bailout, the deposit guarantee:

Source: Reserve Bank of Australia

On that point, for the first time we heard some sense from a politician last night when we caught a few snippets of shadow Treasurer Joe Hockey's interview on Sky last night.

To paraphrase, Hockey said it was a fairly rum deal for bank CEOs to complain about government interference when it was taxpayer money that saved the banks from going broke. He made the comment that wage earners on $50,000 a year were underwriting the banks to make sure the CEOs kept their jobs earning $50,000 a day.

As I've said before, I've got little time for Hockey or any other pollie, but once in a while they do come up with something that makes sense… what he doesn't admit though is that if he had been Treasurer at the time, he would have done exactly the same thing as Wayne Swan – bail out the banks.

The problem for the banks and the housing market is two-fold. Not only have they succeeded in bringing forward a whole bunch of buyers into the market who may otherwise have provided housing demand over the next three to four years, but they've also encouraged them to do so with jumbo-sized loans.

Of all the fancy charts and tables in the RBA's Statement on Monetary Policy the most shocking was this one:

Source: Reserve Bank of Australia

Perhaps you've seen the desperate attempts from the bankers and spruikers to argue that house prices have gone up not due to a speculative bubble, but rather because interest rates are now "structurally" lower (whatever that means) than they were twenty years ago.

They claim mortgage sizes are bigger because interest rates are lower and therefore borrowers can borrow more. Therefore there isn't a bubble.

Personally, we don't buy that argument. It's a speculative bubble regardless of what the bankers and spruikers claim. And furthermore, who says interest rates are "structurally" lower?

Mainstream economists? The same mainstream economists who couldn't even predict the RBA's interest rate increase last week, but who suddenly have the power to predict what the overall "structural" interest rate is for an entire economy.

Give me a break!

But evidence of their nonsense is in the chart above. If it really was the case that borrowers had adjusted their borrowing higher thanks to lower interest rates then you could reasonably expect the proportion of household interest payments as a per cent of disposable income to remain steady.

As you can clearly see, this isn't the case. As a percentage of disposable income, the amount allocated towards the payment of interest has doubled since 2000 – from around 6% to 12%.

Simply put, it's evidence of a speculative bubble. Buyers are prepared to pay over the odds for an asset, and are prepared to pay a higher debt servicing cost based on the belief that the asset will increase in value by more than the cost of servicing the debt.

Source: Reserve Bank of Australia

So far many buyers have been lucky. Those that were already in the market prior to 2008 got a nice boost as the suckers bought in.

But for those that were suckered in by the bribes, and for any over-leveraged borrower, time would seem to be running out.

Since 2008 according to the chart above, house prices have risen by around 16% - give or take a point here or there.

While that doesn't sound too bad, take out all the costs of buying, the interest payments already made… plus the costs of selling the house, they'd be lucky to break even… and then there's the cost of buying something cheaper (if they can) and the risks of buying in before the bubble bursts.

What you're left with now are buyers committing more of their wages towards interest repayments than ever before. And that has come at a time when interest rates were at record lows.

You can see again by looking at the chart above the impact a small move in interest rates has on borrowers.

Think about it. Back in 2001 the RBA had the cash rate around 5%. And it was at roughly that same level from 1997 – 5%. At that time interest payments as a percentage of household income was just 6%.

Today, with the RBA cash even lower, at just 4.75%, interest payments as a percentage of household income is now 12%, and with more interest rate rises on the cards, it's likely to get worse for borrowers.

Now, there's also something else to consider. And that's the impact of income tax cuts which coincided with the increase in the ratio of interest payments.

So that while disposable incomes have increased, this has potentially filtered through to an increase in household debt. In other words, more money in the pocket and a bigger loan with the bank.

But that shouldn't be used as an argument or an excuse for thinking that there isn't a speculative bubble. Because don't forget that what the government gives with one hand it takes with the other.

The Australian Federal burden has been largely unchanged over that period, around 30-35 cents of every dollar goes to the government. In fact you could argue that it has increased when you factor in GST and compulsory purchases such as private health insurance.

And of course don't forget State taxes as well.

The way we see it is that cuts in income tax rates – while welcome – have had the effect of making the consumer and borrower feel richer while at the same time slugging them for increased indirect taxes.

So the net benefit of income tax cuts to the individual is virtually zero.

However, it has led to a false impression of a wealth effect which has lulled many – mostly first home buyers – into taking out bigger and bigger mortgages and creating the environment for a house bubble that's on the verge of bursting.

That's evidenced by the increase in interest payments as a percentage of disposable income. If borrowers hadn't leveraged up further then you would have seen the percentage drop as disposable income increased.

But it hasn't its increased. And that tells you that borrowers are borrowing more and banks are lending more.

Yet, when it comes down to it, the ability of borrowers to service this debt is no better today than it was twenty years ago. In fact, thanks to the speculative housing price bubble, and further interest rate increases, the ability of borrowers to service this debt is worse and will get much worse from here.

Cheers.
Kris Sayce
For Money Morning Australia

CHANGES: BY STAN GOLDBERG, PH.D.

Self-change is tough, but it's not impossible, nor does it have to be traumatic, according to change expert Stan Goldberg, Ph.D. Here, he lays out the 10 principles he deems necessary for successful change.

My mother died on Christmas day of a massive heart attack. I later counted 15 self-help books on her shelves, but found each offered only broad ideas; none provided the specifics necessary to save her life.

Like my mother, many of us want to change but simply don't know how to do it. After 25 years of researching how people change, I've discovered 10 major principles that encompass all self-change strategies. I've broken down those principles and, using one example—a man's desire to be more punctual—I demonstrate strategies for implementing change in your own life.

Top of Form

Bottom of Form

All Behaviors Are Complex

Research by psychologist James O. Prochaska, Ph.D., an internationally renowned expert on planned change, has repeatedly found that change occurs in stages. To increase the overall probability of success, divide a behavior into parts and learn each part successively.

Strategy: Break down the behavior

Almost all behaviors can be broken down. Separate your desired behavior into smaller, self-contained units.

He wanted to be on time for work, so he wrote down what that would entail: waking up, showering, dressing, preparing breakfast, eating, driving, parking and buying coffee—all before 9 a.m.

Change Is Frightening

We resist change, but fear of the unknown can result in clinging to status quo behaviors—no matter how bad they are.

Strategy: Examine the consequences

Compare all possible consequences of both your status quo and desired behaviors. If there are more positive results associated with the new behavior, your fears of the unknown are unwarranted.

If he didn't become more punctual, the next thing he'd be late for is the unemployment office. There was definitely a greater benefit to changing than to not changing.

Strategy: Prepare your observers

New behaviors can frighten the people observing them, so introduce them slowly.

Becoming timely overnight would make co-workers suspicious. He started arriving by 9 a.m. only on important days.

Strategy: Be realistic

Unrealistic goals increase fear. Fear increases the probability of failure.

Mornings found him sluggish, so he began preparing the night before and doubled his morning time.

Change Must Be Positive

As B.F. Skinner's early research demonstrates, reinforcement-not punishment-is necessary for permanent change. Reinforcement can be intrinsic, extrinsic or extraneous. According to Carol Sansone, Ph.D., a psychology professor at the University of Utah, one type of reinforcement must be present for self-change, two would be better than one, and three would be best.

Strategy: Enjoy the act

Intrinsic reinforcement occurs when the act is reinforcing.

He loved dressing well. Seeing his clothes laid out at night was a joyful experience.

Strategy: Admire the outcome

An act doesn't have to be enjoyable when the end result is extrinsically reinforcing. For instance, I hate cleaning my kitchen, but I do it because I like the sight of a clean kitchen.

After dressing, he looked in the mirror and enjoyed the payoff from his evening preparation: He looked impeccable.

Strategy: Reward yourself

Extraneous reinforcement isn't directly connected to the act or its completion. A worker may despise his manufacturing job but will continue working for a good paycheck.

Whenever he met his target, he put $20 into his Hawaii vacation fund.

Being Is Easier Than Becoming

In my karate class of 20 students, the instructor yelled, "No pain, no gain," amid grueling instructions. After four weeks, only three students remained. Uncomfortable change becomes punishing, and rational people don't continue activities that are more painful than they are rewarding.

Strategy: Take baby steps

In one San Francisco State University study, researchers found that participants were more successful when their goals were gradually approximated. Write down the behavior you want to change. Then to the right, write your goal. Draw four lines between the two and write a progressive step on each that takes you closer to your goal.

The first week, he would arrive by 9:20 a.m., then five minutes earlier each subsequent week until he achieved his goal.

Strategy: Simplify the process

Methods of changing are often unnecessarily complicated and frenetic. Through simplicity, clarity arises.

Instead of waiting in line at Starbucks, he would buy coffee in his office building.

Strategy: Prepare for problems

Perfect worlds don't exist, and neither do perfect learning situations. Pamela Dunston, Ph.D., of Clemson University, found cueing to be an effective strategy.

His alarm clock failed to rouse him, so for the first month he'd use a telephone wake-up service.

Slower Is Better

Everything has its own natural speed; when altered, unpleasant things happen. Change is most effective when it occurs slowly, allowing behaviors to become automatic.

Strategy: Establish calm

Life is like a stirred-up lake: Allow it to calm and the mud will settle, clearing the water. The same is true for change.

To make mornings less harried, he no longer ran errands on his way to work.

Strategy: Appreciate the path

Author Ursula LeGuin once said, "It's good to have an end to journey toward; but it is the journey that matters, in the end." Don't devise an arduous path; it should be as rewarding as the goal.

It’s the twentieth anniversary of the famous “pale blue dot” photo – Earth as seen from Voyager 1 while on the edge of our solar system (approximately 3,762,136,324 miles from home). Sagan’s words are always worth remembering:

Look again at that dot. That’s here. That’s home. That’s us. On it everyone you love, everyone you know, everyone you ever heard of, every human being who ever was, lived out their lives. The aggregate of our joy and suffering, thousands of confident religions, ideologies, and economic doctrines, every hunter and forager, every hero and coward, every creator and destroyer of civilization, every king and peasant, every young couple in love, every mother and father, hopeful child, inventor and explorer, every teacher of morals, every corrupt politician, every ‘superstar,’ every ‘supreme leader,’ every saint and sinner in the history of our species lived there — on a mote of dust suspended in a sunbeam.

The Earth is a very small stage in a vast cosmic arena. Think of the rivers of blood spilled by all those generals and emperors so that, in glory and triumph, they could become the momentary masters of a fraction of a dot. Think of the endless cruelties visited by the inhabitants of one corner of this pixel on the scarcely distinguishable inhabitants of some other corner, how frequent their misunderstandings, how eager they are to kill one another, how fervent their hatreds.

Our posturings, our imagined self-importance, the delusion that we have some privileged position in the Universe, are challenged by this point of pale light. Our planet is a lonely speck in the great enveloping cosmic dark. In our obscurity, in all this vastness, there is no hint that help will come from elsewhere to save us from ourselves.

The Earth is the only world known so far to harbor life. There is nowhere else, at least in the near future, to which our species could migrate. Visit, yes. Settle, not yet. Like it or not, for the moment the Earth is where we make our stand.

It has been said that astronomy is a humbling and character-building experience. There is perhaps no better demonstration of the folly of human conceits than this distant image of our tiny world. To me, it underscores our responsibility to deal more kindly with one another, and to preserve and cherish the pale blue dot, the only home we’ve ever known.

Confucius says …

1. "Never impose on others what you would not choose for yourself."

It’s the "Golden Rule" and the essence of real compassion . Not compassion as in looking down on someone and have pity for another, this is no real compassion. Compassion means seeing another person 100% equal to yourself (in value, not in differentials on the surface which ultimately do not matter). In fact it is seeing yourself in every other person. And therefore you cannot harm anyone without also harming yourself.

It doesn’t mean to lose individuality or self-worth, on the contrary – but the other person earns the same gift.

2. "Real knowledge is to know the extent of one’s ignorance."

That’s my personal favorite quote since it expresses something very profound which also is very useful to know: Ignorance is a willful neglect or refusal to acquire knowledge. It is not widen one’s own perspective in order to see a broader truth. As an example it would be to have racist thoughts and not realizing that all men are equal.

The ultimate truth therefore is where there is absolutely no ignorance, meaning where the perspective or consciousness has become one with all that there is. In Buddhism ignorance (Avidyā) is seen as the primary cause of suffering. Liberation is Enlightenment. Another quote by Confucius here is "Ignorance is the night of the mind, but a night without moon and star."

3. "I hear and I forget. I see and I remember. I do and I understand."

Those quotes are just perfect. What he is expressing here is that we have to experience something ourselves in order to really understand it. If we are hearing something it might be interesting. If we are seeing something it might be beautiful. But only if we feel in happening to ourselves we can really know how it is.

Picture something nice as winning an Olympic gold medal or picture something terrifying as the loss of a loved one. Can you know this by hearing it or by seeing it? Or do you have to do it and experience it yourself to really know it?

Along with this realization comes the awareness that you cannot understand someone or his actions from hearing or seeing it from the outside. You have to feel empathic compassion for him to really know what it is like. To know and not to do is really not to know. Only by applying our knowledge we can validate it’s harmony with reality, it’s truth.

4. "Everything has beauty, but not everyone sees it."

Amazing. It calls for dropping the inner mask through which we constantly see and evaluate the world, distorted by our wants and belief-systems. Here we have to look at things as they are. Just like a newborn child would look at things. Then we are able to really see again, without instant labeling of what we see and therefore only really seeing our label. If we become able to do this – just for a second without judgment, we can see that everything in nature is as it should be. And in this natural perfection lies beauty.

5. "The Superior Man is aware of Righteousness, the inferior man is aware of advantage."

Another quote is "The object of the superior man is truth." It is the value of integrity: Do we act to our best knowledge of truth or do we bend ourselves and violate our integrity in order to gain an advantage? Do we play fair game or use perfidious tactics?

To be truthful to ourselves is also important to the development of (good) character. And it is the only straight way to liberation.

6. "Wheresoever you go, go with all your heart."

Whatever you do and whatever you commit to, do it fully, give your all – one hundred percent. It is the essence of Carpe Diem – Seizing the day and it’s surely the best way to be satisfied with what we do and get the best results.

7. "Our greatest glory is not in never falling, but in getting up every time we do."

There is no failure, there are only valuable learning experiences. Or as Thomas Edison about inventing the light bulb said: "I have not failed, I’ve just found 10,000 ways that won’t work." The important thing is not giving up, but learning and then improving by using this feedback to get better and ultimately succeed.

A quote expressing the same principle is "A man who has committed a mistake and doesn’t correct it, is committing another mistake."

8. "He who learns but does not think, is lost. He who thinks but does not learn is in great danger."

Confucius explains the connection of learning and reflection. Reflection of that what we learned by thinking or of the results we get by applying the knowledge. "Study without reflection is a waste of time; reflection without study is dangerous" is a similar quote by Confucius. Learning is only useful if we connect the learning within our own minds, with what we already know and what is useful for us. This reflection of any knowledge also saves us from blindly following any knowledge without checking its truthfulness and validity to us.

I think everybody experienced learning when we really want this knowledge and interweave it with what we already know. If there is a need or problem we want to solve, the consume knowledge much more effective than it happens for students in many universities.

9. "He that would perfect his work must first sharpen his tools."

This quote calls for planning and preparation. This includes getting and improving the personal skills we need to be successful. If we want to hold speeches we have to become good with communication skills. If we want to win a race we have to train for it. If we want to do a big project we need knowledge in project management. Steven Covey calls it Sharpening the saw, read about it here.

10. "If you look into your own heart, and you find nothing wrong there, what is there to worry about? What is there to fear?"

It shows that our primary work lies within ourselves: to work on ourselves and improve will automatically take care of the outside world if we use our abilities then. "When we see men of a contrary character, we should turn inwards and examine ourselves." The solution to problems is not "out there". It is the Inside-Out approach: success and happiness can only be found by working on ourselves. It also entails the spiritual message to look inside and to discover ourselves fully.

VILLA VENETTA - POINT PIPER SYDNEY. $52 million record sale

Property shakes off winter blues with $52m sale
Jonathan Chancellor PROPERTY EDITOR
September 2, 2010

Six bedrooms and nine bathrooms . . . Villa Veneto at Point Piper, and Andrea Banks.

SYDNEY'S prestige property market has woken from its hibernation with the reputed $52 million record sale of a Point Piper harbourfront property, Villa Veneto.

The bullish deal almost doubles the highest sale since the onset of the global financial crisis in September 2008.

The grand five-storey Italianate villa owned by recruitment entrepreneur Andrew Banks and his wife, Andrea, was finished in 2004, having taken two years and $15 million to build on its dress circle Wolseley Road location.
Grand five-storey Italianate 'Villa Veneto', Wolseley Road, Point Piper. $52m Villa Veneto Point Piper

Designed by the architect Michael Suttor, the six-bedroom house comes with a 21-person lift, home theatre, butler's pantry, glass-roofed dining room, sauna, art gallery, gym, linen chute and library. It comes with nine bathrooms - including one for the gardener.

The couple bought the 1424-square-metre double block for $14 million in 2001, when they gave their residential address as Trump Tower in New York. The empty nest couple still spend much of their time in United States, which is home to their two children, Nick and Sophia, with their respective American actor spouses.

Mr Banks heads the recruitment company, Talent2 International, indirectly holding 29 million shares which trade on the ASX at about $1.42 a share. He and co-founder Geoff Morgan sold their earlier recruitment company, Morgan & Banks, for $380 million in 1999.

Since the stockmarket implosion inspired by the bankruptcy of Lehman Brothers in 2008, Sydney prestige house price dealings have been few and far between.

The highest sale in the past two years has been $26.75 million in Vaucluse.

A 7500-square-metre Perth residential compound with three houses on the Swan River at Mosman Park fetched $57.5 million in 2009.

Wolseley Road has become Australia's most expensive road. Residents include retailer Frank Lowy and wife, Shirley, the racing manager heir to Coolmore stud fortune, Tom Magnier, property developer Ron Medich, and another recruitment entrepreneur, Julia Ross.

Five lessons for being human...

1. First Important Lesson – “Know The Cleaning Lady”

During my second month of college, our professor gave us a pop quiz. I was a conscientious student and had breezed through the questions, until I read the last one: “What is the first name of the woman who cleans the school?”

Surely this was some kind of joke. I had seen the cleaning woman several times. She was tall, dark-haired and in her 50s, but how would I know her name? I handed in my paper, leaving the last question blank. Just before class ended, one student asked if the last question would count toward our quiz grade.

“Absolutely,” said the professor. “In your careers, you will meet many people. All are significant. They deserve your attention and care, even if all you do is smile and say “hello.”

I’ve never forgotten that lesson. I also learned her name was Dorothy.

2. Second Important Lesson – “Pickup In The Rain”

One night, at 11:30 p.m., an older African American woman was standing on the side of an Alabama highway trying to endure a lashing rainstorm. Her car had broken down and she desperately needed a ride. Soaking wet, she decided to flag down the next car.

A young white man stopped to help her, generally unheard of in those conflict-filled 1960s. The man took her to safety, helped her get assistance and put her into a taxicab.

She seemed to be in a big hurry, but wrote down his address and thanked him. Seven days went by and a knock came on the man’s door. To his surprise, a giant console color TV was delivered to his home.

A special note was attached. It read: “Thank you so much for assisting me on the highway the other night. The rain drenched not only my clothes, but also my spirits. Then you came along. Because of you, I was able to make it to my dying husband’s bedside just before he passed away. God bless you for helping me and unselfishly serving others.”

Sincerely, Mrs. Nat King Cole.

3. Third Important Lesson – “Remember Those Who Serve”

In the days when an ice cream sundae cost much less, a 10 year-old boy entered a hotel coffee shop and sat at a table. A waitress put a glass of water in front of him. “How much is an ice cream sundae?” he asked. “50¢,” replied the waitress.

The little boy pulled his hand out of his pocket and studied the coins in it.

“Well, how much is a plain dish of ice cream?” he inquired. By now more people were waiting for a table and the waitress was growing impatient. “35¢!” she brusquely replied.

The little boy again counted his coins. “I’ll have the plain ice cream,” he said. The waitress brought the ice cream, put the bill on the table and walked away. The boy finished the ice cream, paid the cashier and left.

When the waitress came back, she began to cry as she wiped down the table. There, placed neatly beside the empty dish, were two nickels and five pennies. You see, he couldn’t have the sundae, because he had to have enough left to leave her a tip.

4. Fourth Important Lesson – “The Obstacles In Our Path”

In ancient times, a King had a boulder placed on a roadway. Then he hid himself and watched to see if anyone would remove the huge rock. Some of the king’s wealthiest merchants and courtiers came by and simply walked around it. Many loudly blamed the King for not keeping the roads clear, but none did anything about getting the stone out of the way.

Then a peasant came along carrying a load of vegetables. Upon approaching the boulder, the peasant laid down his burden and tried to move the stone to the side of the road. After much pushing and straining, he finally succeeded. After the peasant picked up his load of vegetables, he noticed a purse lying in the road where the boulder had been. The purse contained many gold coins and a note from the King indicating that the gold was for the person who removed the boulder from the roadway. The peasant learned what many of us never understand – “Every obstacle presents an opportunity to improve our condition.”

5. Fifth Important Lesson – “Giving When It Counts”

Many years ago, when I worked as a volunteer at a hospital, I got to know a little girl named Liz who was suffering from a rare and serious disease. Her only chance of recovery appeared to be a blood transfusion from her 5-year-old brother, who had miraculously survived the same disease and had developed the antibodies needed to combat the illness. The doctor explained the situation to her little brother, and asked the little boy if he would be willing to give his blood to his sister. I saw him hesitate for only a moment before taking a deep breath and saying, “Yes, I’ll do it if it will save her.”

As the transfusion progressed, he lay in bed next to his sister and smiled, as we all did, seeing the color returning to her cheeks. Then his face grew pale and his smile faded. He looked up at the doctor and asked with a trembling voice, “Will I start to die right away?”.

Being young, the little boy had misunderstood the doctor; he thought he was going to have to give his sister all of his blood in order to save her.

Courtesy of INSPIRE21

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What is the Market REALLY doing ? Does anybody know ? TALK TO ME ! ! !

Home prices post biggest fall in 14 months
Home prices

• The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – reported that home prices fell by 0.7 per cent in seasonally adjusted terms in June – the biggest decline in since April 2008.
• Home prices are up still up 10.5 per cent in June on a year ago – but it is the slowest annual growth rate in eight months.
• Home prices fell most in Perth (down 1.5 per cent) and Melbourne and Canberra (both down 1.4 per cent).

What does it all mean?
• The Reserve Bank clearly has another reason to stay on the interest rate sidelines. Home prices slumped in June according to the RP Data-Rismark Hedonic Australian Home Value index. And given that the index has the capability of tracking every property transaction in Australia, the preliminary June results clearly represent a wake-up call.
• While the APM house price index posted a healthy gain for the June quarter, it suffers from definitional problems much like the Bureau of Statistics survey. The Reserve Bank as well as rating agency Moody’s rely on the RP Data index as the best guide to home price trends.
• We had always argued that the May rate hike was a step too far. In fact the April move can also be questioned. But it will be important now for the Reserve Bank to stay on the interest rate sidelines to give shell-shocked consumers and home-buyers a chance to catch their breath.
• It may be the case that interest rate levels are only at “normal” levels. But the pace of rate hikes – the most aggressive tightening cycle in 16 years – clearly has taken its toll.
• Overall housing market fundamentals are positive. Population growth is still firm, the job market is healthy, housing supply still lags demand in many markets and wealth is at record highs. So this correction still looks more like the ‘pause that refreshes’.

• Home-buyers and home owners must factor in more normal growth of home prices in 2010/11 around 5-8 per cent. And some markets like Melbourne may face a more protracted period of softness. Provided rates remain on hold until at least late this year, the housing market should experience a soft landing.
• While the outlook still remains positive, a 0.7 per cent fall in the space of a month is clearly unsettling.

What do the figures show?
House Prices
• The RP Data-Rismark Hedonic Australian Home Value Index fell by 0.7 per cent in seasonally adjusted terms in June – the biggest monthly fall since April 2008. The monthly growth rate peaked in January at 1.7 per cent and has consistently softened since.
• House prices fell 0.8 per cent in the month with apartments down 0.5 per cent.
• Home (dwelling) prices are up 10.5 per cent on a year ago with house prices up 10.2 per cent and apartment prices up 11.4 per cent.
• The biggest fall in home prices occurred in Perth (down 1.5 per cent), followed by Melbourne and Canberra (both down 1.4 per cent), Darwin (down 1.0 per cent), Brisbane (down 0.8 per cent), Adelaide (down 0.7 per cent)and Sydney (down 0.1 per cent).
• In all capital cities home prices are higher than a year ago. Leading the way is Melbourne (up 16.0 per cent) followed by Darwin (up 14.3 per cent), Canberra (up 10.6 per cent), Sydney (up 10.4 per cent), Adelaide (up 9.1 per cent), Perth (up 5.1 per cent) and Brisbane (up 4.5 per cent), and

What is the importance of the economic data?
• The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 280,000 sales during 2009. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
• The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index

What are the implications for interest rates and investors?
• Investors need to readjust their sights. Double-digit annual growth in home prices is never sustainable – the long-term average is 8 per cent and that’s where prices are headed. In fact prices are likely to overshoot with growth easing to the very low single digits before bottoming.
• The Reserve Bank now has even more justification to stay on the sidelines. Fortunately inflation has eased, otherwise the RBA would have had a difficult decision – firm inflation and falling home prices is a dangerous combination.
• The fundamentals for housing are still positive. Nevertheless the sharp drop in home prices in June will reduce the appeal of banks and housing-dependent stocks in the short-term.

Source Craig James, Chief Economist, CommSec

Money Education From RONIN Asset Management

How Exchange Rates Work
Maybe you’ve travelled to the U.S. or Canada, and exchanged your Aussie dollars for the Green back or Loonies. Or, perhaps you’ve traveled from England to Japan and exchanged your English pounds for yen. If so, you have experienced exchange rates in action. But, do any of us really know how they work?
You’ve probably heard the financial reporter on the nightly news say something like, “The dollar fell against the U.S. today.” In this article, we’ll attempt to explain what exchange rates are and some of the factors that can affect the value of currency in countries around the world.
The Cost of Money
National currencies are vitally important to the way modern economies operate. They allow us to consistently express the value of an item across borders of countries, oceans, and cultures. We need exchange rates because one nation’s currency is not always accepted in another. You can’t walk into a store in Japan and buy a loaf of bread with Aussie Dollars. First, you’d have to go to a bank and buy some Japanese yen with your Aussie Dollars. An exchange rate is simply the cost of one form of currency in another form of currency. In other words, if you exchange 1 Aussie Dollar for 86 Japanese yen, you really just purchased a different form of money.
The Floating Exchange Rate
There are two main systems used to determine a currency’s exchange rate: floating currency and pegged currency. The market determines a floating exchange rate. In other words, a currency is worth whatever buyers are willing to pay for it. This is determined by supply and demand, which is in turn driven by foreign investment, import/export ratios, inflation, and a host of other economic factors.
Generally, countries with mature, stable economic markets will use a floating system. Virtually every major nation uses this system, including Australia the U.S., Japan, Germany and Great Britain. Pegged rates are for economies trying to get themselves up to the international standards required for the free flow of money. They have their currency pegged for stability, China is in the news at the moment about this very thing. With countries like the U.S. saying that the Chinese are using their pegged rate as leverage and that they are now in a position to let their rate float. Floating exchange rates are considered more efficient, because the market will automatically correct the rate to reflect inflation and other economic forces.

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Australia's unexpected record trade surplus

hot gossip - When is good news seen as bad, and yet still good?

When is good news seen as bad? When you see the trade surplus figure below!
Australia's trade surplus unexpectedly reached a record in June as Chinese demand spurred exports of coal and iron ore, while imports stagnated amid a slowdown in domestic spending.
The excess of exports over imports reached AUD$3.54 billion, a Bureau of Statistics report showed in Sydney today. A separate report showed house-price gains decelerated in the second quarter, underscoring the impact of the central bank's six interest-rate increases since early October. An example of this is a client of ours at Ronin who told us this week that the value of his house at Palm Beach in Sydney had been devalued to the tune of 30%, ouch.
This has lead to the creation of a new term, "the two speed economy" in which domestic spending has been throttled back and yet external spending (China buying coal and steel) had almost doubled, giving concern that the RBA may raise rates again in an attempt to slow any gain in inflation caused by the flood of money coming in to the country.
Exports gained 7 percent in June to AUD$26.7 billion, today's report showed. Sales of metal ores including iron surged 23 percent and coal shipments jumped 15 percent.
Today's trade surplus, the largest since the statistics bureau began measuring the balance in 1971, has expanded for three straight months, ending 11 consecutive months of deficits.
It is true that the policy makers did expect that a trade surplus was inevitable after the GFC proved to be very short lived in Australia it is also true that this surge was not expected to be as large as we have seen.
The other concern running around in the back of the RBA's mind is the effect of NOT having a mining super tax, and let's be realistic if the Labor party wins the next election I think it is safe to say they have been really stung by the backlash from both Queensland and WA, and thus it will be allowed to stay well and truly buried in the pile of things to think about, never to see the top of that pile.
And yet still Good?
All that being said we feel this is good news for traders as the miners are still out there digging holes and that's good. The banks are lending money and that's good. You can't make a good return on your property so your money goes into the market and that's good.