Fortescue hit as iron ore futures fall

dfwe Today's midday iron ore update sees Fortescue Metals showing some material weakness down 2.5% to $4.20 and not too far above its 2014 low. Having said that, everything else is still holding up just fine. The other majors: As such the idiocy spread remains very wide! And the juniors are fine too: Only a hint of capitulation and only in FMG and still very strong given Dalian iron ore futures are down another 4 points to new lows in China and so are rebar...
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Actual capex in surprise lift

ScreenHunter_07 Apr. 05 12.46 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released data on capital expenditures (capex) for the June quarter of 2014, which registered a surprise seasonally-adjusted 1.1%lift in capex over the quarter but a 4.0% decrease over the year. The result beat analyst’s expectations of a 0.9% fall over the quarter (see below table). While Houses and Holes has covered the more important capex intentions survey, which covers industry’s forward-looking capex plans over the coming years, below are some backward looking charts showing actual capex up to the June quarter...
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Expected capex still sees big cliff

imgres The Australian Bureau of Statistics has released the much admired Private Capex report today and it looks like Glenn Stevens is going to have to do a little more whinging. Estimate 7 for last year is weak and shows capex fell year on year. More importantly, after last quarter's strong rebound, expected capex is easing back: Estimate 7 for total capital expenditure for 2013-14 is $157,869 million. This is 1.7% lower (-$2,661m) than Estimate 7 for 2012-13. Estimate 7 for equipment, plant and machinery decreased by 8.9% (-$4,997m) while Estimate 7 for buildings and structures increased by 2.2%...
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New home sales boomlet ends (members)

dfedv From the HIA today: A downward trend in total new home sales has emerged, affirming previous calls that sales had reached a peak earlier in 2014. The 2013/14 financial year saw the recovery in new home sales gather strong momentum. The 2014/15 financial year, however, has started with the emergence of a downward trend, suggesting that monthly new home sales peaked back in April. Total seasonally adjusted new home sales fell by 5.7 per cent in the month of July 2014, a result reflected in both detached house as well as multi-unit sales. Detached house sales declined by 4.7 per cent, while multi-unit...
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Flying dog crashes into amateurs

Capture While the pollies whine: Markets gain, from Mac Bank: Qantas reported its FY14 result today, delivering an underlying loss of -$646m vs. consensus of -$780m (MRE -$753m) and a statutory loss of -$2.8bn, driven by a writedown of the international fleet of $2.5bn. This is likely to be overlooked, in our view. The key elements to come out today are: 1) No sale of frequent flyer business; 2) A split of the business into discrete international and domestic vehicles, à la Virgin (VAH, Neutral, TP $0.40); and 3) outlook for 1H15 is for a return to underlying profit. Impact Underlying...
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Australia’s boom to bust

ScreenHunter_01 Feb. 17 18.55 By Leith van Onselen Find above an interesting video interview on The AFR with Lindsay David, author of the new book Australia Boom to Bust. In the interview, David slams Australia's record high mortgage debt (see next chart), claiming that "no one in the Western world has ever done what we are doing”. He also claims The AFR article attached to the interview that the three pillars of the Australian economy: real estate, resources and the banks will eventually collapse: He says that as Chinese authorities appreciate, they’ve built more houses and apartments than they need, demand...
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Is China’s property bust cyclical or structural?

fad From Reuters via the AFR: Property launches in China are set to surge in the latter half of the year with developers sticking to their schedules despite mounting inventories, spelling double trouble for a market hammered by months of falling prices. Prices started to decline in March as the slowing economy hit demand, inventories ballooned and developers began offering discounts. The current slump was confirmed by official data only around the middle of the year, way after developers had already committed themselves to completing projects for 2014. Developers also have little choice but to heap...
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UBS: Australian growth rebounding!

dvsd You've go to love the sell side, or is that the sunny side? From UBS today: Weekly SEEK job ads in August point to another modest ~2% monthly gain in the ANZ  job ads series (due 8 Sept, Figure 1), lifting its y/y to almost 8%, its best since 2011  (Figure 3). Despite the recent unemployment jump, this is consistent with a pick-up in  jobs growth to over 1½% by end-14, usually enough to lower the unemployment rate. The weekly BDO retail series – after forecasting the June retail rebound (Figure 2) –  points to a ‘flat’ July (due 4 Sept), and a modest ~½% m/m gain in August. This...
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SMSF lobby hogs the tax trough

ScreenHunter_05 Apr. 15 22.08 By Leith van Onselen In an extraordinary showcase of self-interest, the lobby group representing self-managed super funds (SMSFs) - the SMSF Alliance - has slammed calls to tighten tax concessions around superannuation, arguing that the rich are entitled to their tax breaks. From The AFR: The $1.8 trillion superannuation industry has defended its generous tax breaks, saying it should not be used as a cash cow to rescue the budget deficit at the cost of healthy retirement savings. ...an alliance of self-managed funds said that the rich were just as entitled to benefits... “People who...
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RBA too late the hero on mortgage risks (members)

ScreenHunter_31 Aug. 28 07.42 By Leith van Onselen The Reserve Bank of Australia (RBA) has provided its second submission to the Murray Financial System Inquiry (FSI), which reportedly warns against moves to bolster competition in the mortgage market for fear that it would pump even more funds into property and heighten financial system risks.  From Business Spectator: “The supply of mortgage finance in Australia is ample,” the RBA said. “Therefore, any proposed policies that could further increase that supply should be subject to rigorous analysis of their costs, benefits to consumers and risks to financial...
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Why are we going to bomb Iraq? (members)

imgres Some months ago, Prime Minister Abbott declared his resistance to the idea that Australia commit any air power to strikes upon Syria because it was a case of: "It is not goodies versus baddies, it is baddies versus baddies, and that is why it is very important that we don't make a very difficult situation worse." This raises the possibility that the Abbott foreign policy agenda is values based and that Australia will participate in far flung wars when "goodies" are threatened by "baddies".  Today, the Prime Minister and his Holt Street press office are clearly preparing Australia for just such...
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It’s time to allow “grey” car imports (members)

ScreenHunter_29 Aug. 27 14.45 By Leith van Onselen The Productivity Commission's (PC) report into Australia's Automotive Manufacturing Industry recommends relaxing controls on so-called "grey" imports of second-hand cars, noting that Australian consumers are being fleeced, particularly when it comes to purchasing higher-end vehicles: It might be the case that some ‘premium’ vehicle segments (such as luxury European made motor vehicles) are characterised by larger profit margins and are relatively less competitive compared to overseas pricing because of the existence of fewer close substitutes. An increased supply of...
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Daily iron ore price update (uh oh) (members)

anvil Here are the iron ore charts for August 27, 2014:       Paper market weakness returned with a vengeance with new lows on everything. Physical is worse. The iron ore contango is gone and steel prices are now in free fall. Fresh CISA fast data has large steel mills increasing production in the mid August period 0.5% to reach 1.83 million tonnes. It seems to be largely going towards increased inventories with CISA also reporting that mill stockpiles were at 15.25 million tonnes as of Aug. 20, up from 14.57 million tonnes ten days earlier. That'll keep weighing on steel prices, thanks very...
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Chinese iron ore production is booming

dgfqeaws The one question that nobody in the iron ore sector (or Australia more generally for that matter) dare ask is what if Chinese iron ore production does not close as Australian miners ramp up output. The reason nobody asks it is that the outcome will be calamitous. But it's a very real question to pose, especially since the evidence too date supports that very outcome. We should all recall that throughout the last few years every miner and his dog has argued that Chinese production will close down on mass from $120 downwards, giving birth the so-called "$120 price floor" notion. Well, we're sub-$90...
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Iron ore “idiocy spread” goes mainstream

3 There's no acknowledgement as usual but it's clear from Roger Montogmery's latest post that he is familiar with the "idiocy spread": We are following, with great interest, the discussion currently unfolding in the market about iron ore and the big miners. On the one hand, we have the spriukers calling for a ‘rotation’ out of banks and into the big miners. The logic is no more sophisticated than saying: “You should sell the banks and buy the miners because the banks have gone up a lot and the miners have gone down a lot, so it’s now time for the miners to go up a lot”. On the other hand,...
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Chinese property stumbles into peak season

jinan1 Cross-posted from Investing in Chinese Stocks. Ifeng reports that China's Real Estate Cheerleader, Ren Zhiqiang CEO of Huayuan Property and one of China’s most prominent online personalities (with 16 million followers on his blog) is a little more cautious today. Instead of saying prices won't fall, he says prices will rise again in September 2015, assuming current conditions hold and the government doesn't greatly add to supply with more affordable housing and shanty redevelopments. That won't please the Jinan homeowners who are protesting Glorious Property (0845.HK). In the past two...
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Links 28 August 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: U.N. Draft Report Lists Unchecked Emissions’ Risks - New York Times When FX wars become negative interest wars - Financial Times We should not be surprised that different sectors shine at different times - Crossing Wall Street The return to “behemoth stocks” - Aleph Blog Risk control vs. risk avoidance - A Wealth of Common Sense A simple switching model between value and momentum - Alpha Architect The active vs. passive debate has become tiresome -  Capital Spectator Active vs. passive is the wrong question: cost is what matters -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets We enter a new and crucial stage in the multi-year equity cyclical bull market, with the S&P 500 now commanding a two handle and showing little sign the bulls will let their grip slip. If you want to point to a negative from yesterday’s US cash session, it has to be the awful volumes, which were 30% below the 30-day average and 11.5% below the five-day average (on the S&P 500). If you believe it’s not always about getting from A to B in the markets, but the quality of the journey, then the recent volumes would be a concern. However,...
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S&P warns WA budget on iron ore

Travel-Warning From Standard and Poors this arvo: Standard & Poor's Ratings Services said today that its 'AA+/Stable/A-1+' issuer credit ratings on the State of Western Australia are not immediately affected by the recent fall in iron ore prices to less than US$90 per ton. The potential loss in the state's iron ore royalties would not by itself lead to a lowering of the ratings. We anticipate the Western Australian government's operating balance will remain in surplus after considering the potential earnings loss, at between 0% and 5% of operating revenues. At the same time, we project the state's...
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Hope persists for miners as iron ore futures fall

dfgwr You can't keep a good dead company down! Iron ore juniors and majors are mostly up today, even as Dalian iron ore futures fall 3 points to their Monday lows and rebar futures stall in China: The idiocy spread hasn't deteriorated much yet (remember these are one week moving averages) but remains at a record wide:   Clearly markets are still reckoning on a rebound soon. Some sort of Q4 restock will probably still come but at the current rate of decline in Chinese housing data it ain't going to be much chop. I remain of the view that equities are not sufficiently discounting this...
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China bank loans still slow into August

l8yfig-660x424 From Shanghai Securities News via Forexlive: The Big Four state-owned banks extended CNY131 billion in new loans in August through the 24th, up from CNY56 billion a week ago, unidentified sources said. Banks’ credit officials said some banks, especially small and medium-sized ones, are reluctant to lend due to concerns about rising non-performing loans A report by Shenyin Wanguo Securities said some banks have tightened lending approval to privately-owned enterprises and small business while smaller lenders have resumed mortgage lending as it carries fewer risks. The newspaper also said...
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NBN cost-benefit analysis signals end of an era

ScreenHunter_26 Aug. 27 14.14 Cross-posted from The Conversation: The long-awaited cost-benefit analysis of the National Broadband Network suggests the days of politicians shooting from the hip with taxpayer dollars are numbered. As Labor’s NBN unfolds amid reviews and revelations, it’s apparent the NBN was a political move based on romantic notions of policy-making ending in Labor’s electoral defeat in 2013. In government, the Coalition called for a strategic review of the NBN, revealing a number of problems with the project’s implementation. Malcolm Turnbull also promised to deliver an independent...
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Shock horror! Super funds are gouging members

ScreenHunter_25 Aug. 27 12.57 By Leith van Onselen Australian Super chief executive, Ian Silk, has bemoaned that the financial services industry is using the compulsory superannuation system to enrich themselves, rather than look after their members. From The AFR: As pressure grows on super funds to cut fees, Mr Silk on Tuesday warned there was a risk that savings from the funds becoming more efficient were not being passed on members. “The biggest concern as the superannuation sector grows is that the financial benefits from the economies of scale are being captured by the agents and not ordinary Australians,” Mr...
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Mining unwind drags construction activity down

ScreenHunter_03 Jul. 23 09.31 By Leith van Onselen The ABS has released data on the value of construction work done for the June quarter of 2014, which registered a seasonally-adjusted 1.2% fall in total construction activity over the quarter and a 0.6% decline over the year. The result disappointed analysts' expectations for a 0.5% fall over the quarter. The 1.2% quarterly decline in construction activity was driven entirely by a 3.1% fall in engineering construction, which more than offset the 2.2% rise in residential construction and the 0.5% increase in non-residential construction (-1.5%): Residential...
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Chinese consumer confidence frays

zdfgwe Fresh from Westpac: The Westpac MNI China Consumer Sentiment Indicator, hereafter the Westpac MNI China CSI, fell modestly to 113.3 in August from 114.8 in July, a –1.3% change over the month and –2.4% over the year. The August outcome is 6.8% below the long run average. The survey indicates that the anxieties gnawing away at the Chinese consumer through the first half of the year remain in evidence, and have arguably strengthened. We noted at the time of the July release that a head-to-head comparison with the manufacturing surveys implied that households were less impressed with...
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