We are quickly approaching a significant date, a date which had a profound impact on the global economy and our physchy.  This August is the fifth anniversary of the beginning of the Global Financial Crisis, yes, it started a half decade ago.    What were you doing five years ago?  I suspect you were reading the headlines of the day wondering what does it all mean to me?  It was unfathomable to think back then that sub-prime mortgages, ARM teaser rates, and new terms to the general public like derivatives and swaps, could nearly bring down the global economy.  And yet here we are five years later, dealing with a fragile economy because aftershocks are still being felt because of the GFC, Global Financial Crisis.

Plenty has been and will continue to be written about the Global Financial Crisis and its aftershocks, example being the state of the U.S. economy and the European crisis.  However, little has been written about the lingering affects of the crisis will have on our collective physchy.   I see examples of it everywhere. You don’t have to look any further than the deep distrust and vitriol people have towards banks, and bankers.  Mention Wall Street, executive compensations packages, stock markets and the like and most people will speak of these in contemptuous terms.  That to me will be one of the most significant fallouts of the Global Financial Crisis; the demonization of success.

It has become fashionable to disparage and criticize success.  What was once admired and encouraged is today scorned.  You’re successful?  You make a large sum of money? Shame on you.  It really has become open season for those who are successful.  Politicians and journalists have been exploiting this sentiment for the last five years and will continue to do so until consumer confidence returns in force.  To be clear this not an attempt to justify million dollar comp packages.  But I will say this, if it doesn’t bother you that Shea Weber of the NHL’s Nashville Predators just signed a 14 year contract for $110 million, why are we bothered by what business leaders  earn?    I understand the argument that the wealth gap between middle class and the affluent is widening but its too easy to suggest that fairness would be severed by simply making the affluent pay more.  But it’s becoming fashionable to suggest that because if you’re successful, wealthy, well, you must have done something wrong to earn that wealth.  And if you ‘re legit, you should have to pay  more for the sins of your business brethren.

In some aspects I understand the cynicism towards business leaders, and bankers in particular.   Why wouldn’t there be?  Where are the indictments for those who perpetrated the Global Financial Crisis?  Prosecutors made Bernard Madoff pay, and deservedly so.  But his was school yard compared to those who nearly brought down the global economy.  This injustice fuels the mistrust and demonization of those who are successful.  I hope this doesn’t result in future generations saying to their children, “dream big, be average”.

Until next time.

Cheers.

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The one significant difference between the Australian and Canadian broker market is broker market share.  CMHC just reported that in Canada, broker market share is 27%.  In Australia, it’s 42%.

Attending the MFAA Conference has accorded me the opportunity to garner insight into the Australian broker market.  The stakeholders in Australia are as passionate and committed to their industry as we are in Canada.   I am struck by the market similarities we share, as it relates to the overall economy, and the broker market specifically.   One similarity we share is negative press. The issues are different but the press in Australia is as committed to fear mongering as it is in Canada.  There’s no talk of too much consumer debt here, yet their average mortgage balances are no different than in Canada. Here the primary focus is all that could go wrong beyond Australia’s boarder, which in turn will lead to the destruction of the Australian economy.  

Europe’s an issue; however, the press in Australia is casting its worrisome gaze in China’s direction, which on the surface is laughable.  China is Australia’s largest trading partner.  The Aussies distanced themselves from the U.S. market years ago.  They decided to hook their wagon to an emerging market like China, and fortuitously decided to distance themselves from the world’s largest sub-merging economy, the US.  Ah, but gory headlines are needed, so the focus is on China’s slowing economy.  It appears that 7 1/2% growth is no reason to celebrate or feel comfortable.  The talk is will China have a soft or hard landing, which ultimately will impact the Australian economy.  Can you imagine,  if the US was forecasting 7 1/2% growth, and what that would mean for the Canadian economy?  Yet somehow 7 1/2 % growth in China could have a negative impact in Australia.  Just wondering what part of 71/2 % growth produces a hard landing?    I guess the old saying about the press is no different in Australia – “if it bleeds…it leads”.  

The one significant difference between the Australian and Canadian broker market is broker market share.  CMHC just reported that in Canada, broker market share is 27%.  In Australia, it’s 42%.  I’ve asked every Aussie I’ve spoken to at the conference the following: “how did brokers grow their market share to 42%”?  As I suspected, there was no one definitive answer, but there were some underlying themes.

It appears that the psyche of the average Aussie plays a part in those market share numbers.  Aussies have a deep distrust of the banks and animosity towards their profits. Many Aussies believe the higher cost of borrowing has contributed to those bank profits.  Yet, banks in Australia have a 90% market share of all broker business.  So that distrust and anger has not resulted in less business for the banks. In large part that is due to the lack of competition, but it appears also that consumers look to brokers to provide them with the best of the least tasteful option.  Interesting, to say the least.

Another critical factor which contributes to the success of the broker channel is the investment that the large firms make towords advertising.  I had the pleasure to speak to Michael Russell, CEO of Mortgage Choice in Australia, about this very subject.  Without getting into specifics, Mortgage Choice invests multiple millions of dollars in advertising.  Their individual franchises advertise on their own, which collectively exceeds the dollar amount committed to advertising by Mo rtgage Choice corporately.  Throw in Aussie Hone Loans, and number of other firms which advertise, and it’s easy to see why an Aussie consumers would chose a mortgage broker.  Some of the larger broker firms in Australia spend more on advertising than the banks do, as it relates to mortgages.  The messaging is choice, service, quality of broker, trust and yes, pricing.  Since the GFC (Global Financial Crisis), Aussies are far more focused on price.  However, price alone is not enough.  The Aussie borrower is looking for utility and competency.  

There’s plenty to learn from the Australian broker experience.   Volumes speak, like $90 billion a year in origination.  I’m looking at a rate sheet from Westpac, one of the major banks in Australia, and their 5 year fixed rate is 6.99%, and the good news is their ARM pricing has been reduced to 7.09%.  You may be surprised to learn that 60% of all mortgages in Australia is ARM.  The most recent MFAA Home Finance Index, which measures consumer sentiment, indicates that the percentage of consumers who would chose a broker first, as compared to those who would chose a bank first, is almost identical.  We share many similarities with the Aussie broker market, yet some of the differences are profound.

Until next time

Cheers

For God’s sake they should get a couple of thousand tugboats, some good strong rope, and tow this island somewhere closer to civilization. 

In the name of all things holy it’s far.  For God’s sake they should get a couple of thousand tugboats, some good strong rope, and tow this island somewhere closer to civilization.  For transparency I was fortunate to be able to sit at front of the bus for the flight over.  That gave me the opportunity to stretch out and get some sleep, some seven hours’ worth.  It was the other fifteen hours that I had to fill, and what I learned is that to pass that amount of time away you need a distraction.  Like food!  The flight attendants try to feed you at every moment.  “Mr. Bozic, is there anything I can get you?” Let me see, it’s been 22 minutes since my last meal, “sure, how about some dim sum and 4 bags of chips”.  I’m not kidding.

The real estate market is red hot here – This according to the cab driver who drove me to my hotel.  Property values are increasing by 10% annually, and he owns multiple properties. Hmm, interesting.  I was afraid to ask him if he was a part-time mortgage broker.  Let me rephrase that, I was afraid of the answer.  I have this illusion that the Australian mortgage broker industry wouldn’t allow that.

As soon as I unpacked at the hotel in Melbourne, I went for a walkabout.  I went out and picked up two newspapers, which I planned to read from front to back, so that I can get a flavour of what’s current and happening in Australia.  On the front page of The Australian and The Daily Telegraph was this number one story: the original Wiggles are no more.  Yes, Australia’s jewel and gift to children’s programing is going through a radical makeover.  Three original members are leaving for personal reasons; the usual, wanting to be closer to family etc.  Yeah right, one day the truth will come out and we’ll all learn that there’s a Yoko Ono story in there somewhere.  One of the replacements is, are you sitting down, a Wigglette.  Only 22 years of age, Emma Watkins is the new face and the first female member of the Wiggles.  If you’re wondering she will dawn the yellow shirt.

Australian stock market has tanked.  It’s lost all of its gains in 2012. The European debt crisis dominates the business section but the major banks here feel they’re insulated because they have been preparing for the inevitable for some time now.  Australia biggest trading partner is China.  As goes the Chinese economy so goes Australia’s.

The best five year fixed rate I could find is 6.5%.  Gulp!

Melbourne is a lot like Vancouver, from architecture to the overall feel.  Melbourne hates all things Sydney; just like Vancouver and Toronto.

The learning continues.  The bastards drive on the wrong side of the road.  I was nearly killed twice jaywalking.

Revolving doors at the hotel turn in the opposite direction.  Smacked my head a few times – D’OH!

Clearly I speak funny.  I was in Melbourne for less than twelve hours and two people asked me the following: “so you here on vacation, mate?”

The most important thing I’ve learned so far is that there’s no awkwardness in meeting family for the first time. It was odd talking to my cousin on the phone, making plans to meet at the hotel and having to describe what I was wearing so he could pick me out of the crowd.  He found me, and I got a chance to spend some time with him, his beautiful daughter, his brother and his mom, my aunt.  They were extremely gracious and they treated me like family.  It doesn’t matter what happens from here – that will be my lasting memory of this trip.

Until next time

Cheers

It’s hard to imagine that Europe’s economic situation could become more uncertain but you have to hand it to the Europeans, they figured out a way.  The “left” is taking control of the political leavers in Europe, and the response was somewhat unexpected.  The markets did not react negatively to the elections in France, and Greece last weekend.  Pundits on Wall Street are suggesting they have already built in the outcome of the elections.  It’s seems somewhat odd that the markets took the elections in stride given past responses to the European crisis.  Ah, but that was on Monday.  By Tuesday the markets started to react as investors finally took note.  The delayed reaction was surprising because recent history suggests that the markets will respond negatively to all things Europe.  Manchester United loses 1-0 to Bolton; the Dow and TSX down 200 points.

 The stock market aside, this wasn’t a good week for Europe.  Some economists are suggesting that Europe is once again in, and heading towards another deep recession.  Last month Europe’s aggregated economy contracted.  Spain now holds the dubious distinction of having the highest unemployment rate of member countries in the EU.  It’s estimated that one in four Spaniards are unemployed today.  You know Europe is teetering when Germany and France’s economy has come to a sudden halt.  The population of Europe is looking to punish someone for the mess there in.  The first big shoe to drop was in France.

There’s a new president elect in France.  President Hollande is a left wing ideologue.  He exploited the mood of the French population, and convinced them that they could tax and spend their way to prosperity.  He convinced the French population that France could recover without having to impose deep austerity measures.  France’s new president wants to move from transatlantic agreements and focus more on member countries of the EU.  This will impact Canada.  The Harper Government has been negotiating with the EU about a new free-trade agreement but now that Hollande is controlling one of the leavers the free trade agreement may not come to pass.  At the very least it might be put on the back burner.  France is not the only country to move to the left.  Greece, they’re back.  Yes, a new government was elected in Greece last weekend, one that promises to spend their way out of debt.  Correct me if I’m wrong – but I think that way of thinking contributed to mess they’re in today.  It’s worrisome to see the direction Europe is headed in.  But I also understand when people feel hopeless, confused and desperate, the impulse is to roll the dice and hope for a miracle.  How much worse can it get?

It can get worse, a lot worse.  What was unthinkable a year ago, countries defaulting, is starting to look more probable.  The IMF will not put up with Greece if they attempt to increase spending.  There may be no more bailouts, and if that was to happen there’s no way Greece could remain a member of the EU.  There’s a real possibility that we’ll be witnessing history; rather appropriate given a number of countries in Europe appear to be history.

Until next time,

 Cheers.

From time to time all of us put our faith in people we know nothing about.  We assume that if our life was in danger a police officer would risk their own life to save us.  We assume that if were in a burning building a fireman would navigate the flames of hell to save our life.  We assume that if we ‘re attacked by terrorists our politicians would respond in a way to not only protect us but to extract vengeance as well.  We assume our children are safe in schools because the faculty and staff would do everything humanly possible to protect them.  I only started to think about this after reading about sinking of The Costa Concordia.  It’s only dawned on me now how much blind faith I’m capable of. (more…)