Special Report: Gerard Minack on whether mining will bust housing

dominoes Exclusively for MB paying members from Gerard Minack of Minack Advisors. Australia enjoyed two booms over the past 20 years: the well-known once-in-a-century mining boom, as well as an unprecedented boom in banking, borrowing and buying houses.  The economy is now struggling with the end of the mining boom.  The bear case for Australia is that a mining bust bursts the banking boom. Australia’s 24 year expansion has run on the back of two booms, in mining and housing/banking.  Exhibit 1 shows the rising share of real GDP for both sectors.  This under-states the impact of their growth.  For...
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Who’s regulating the financial regulators?

ScreenHunter_6368 Mar. 04 14.56 Cross-posted from The Conversation: ­ Scandals involving Australia’s financial advice sector and the regulation of it have continued into another month, the latest chapter of which has involved NAB’s financial advice division. But this is not the first time NAB has attracted attention for its behaviour and the oversight of it. There was the time when the Australian Investments and Securities Commission (ASIC) allowed NAB to review and massage ASIC’s own media statement about NAB malfeasance. And the controversy when it was discovered senior lawyers from NAB had been allowed into ASIC,...
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Don’t like McMansions? Blame government policy

ScreenHunter_03 Apr. 02 11.00 By Leith van Onselen Jane Goffman, principal of consultancy firm Active Planning, has penned a piece in The Canberra Times this afternoon lamenting the increasing popularity of McMansions across the nation's capital - a trend also present in other jurisdictions around Australia: ...recent inquiries show all that is changing and increasingly the one-size-fits-all approach to planning that the ACT has borrowed from other cities produces XL homes crowded into small, medium and large blocks of land... The appetite for extremely large new houses on blocks large, medium and small is putting pressure...
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Iron ore miners hit as dollar rallies

3 The major iron ore miners are getting a bit of a caning today as the RBA failed to deliver and the Aussie firms up (and valuations trigger profit-taking). BHP and RIO are both down 1% and FMG is down 4%. To the indexes: The idiocy spreads are slowly turning: Nothing new to report on juniors: Dalian up...
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Abbott delivers danger bonus for military

2594090-3x2-940x627 From The Australian: TONY Abbott has retreated from his below inflation defence force pay rise of 1.5 per cent per year, unveiling a larger pay deal for the nation’s 57,000 full time uniformed personnel. The Prime Minister today revealed the government would increase the pay offer from 1.5 per cent to 2 per cent per annum over the next three years. ...Speaking just outside the ACT, Mr Abbott said he had received advice that the move would cost about $200 million over the next four years.   Only fair given the plan to invade Ukraine, Nigeria and...
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GDP in detail: Stuck in the slow lane

ScreenHunter_13 Jul. 15 15.13 By Leith van Onselen As summarised earlier, the Australian Bureau of Statistics (ABS) today released the national accounts for the December quarter, which registered a 0.5% increase in real GDP over the quarter and a 2.5% rise over the year. The result just missed market expectations of 0.6% growth over the quarter and 2.5% growth over the year. On a per capita basis, real GDP rose by just 0.2% and was up by only 1.1% over the year. More importantly for living standards, real national disposable income per capita was unchanged over the quarter and was down 0.9% over the year. According to the...
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GDP remains weak

imgres The Australian Bureau of Statistics has released December quarter GDP and the news is more weakness with a close to consensus 0.5% quarter-on-quarter and 2.5% year-on-year: DECEMBER KEY FIGURES Sep Qtr 2014 to Dec Qtr 2014 Dec Qtr 2013 to Dec Qtr 2014 % change % change GDP (Chain volume measure) Trend 0.4 2.3 Seasonally adjusted 0.5 2.5 Final consumption expenditure (Chain volume measure) Trend 0.7 2.5 Seasonally adjusted 0.8 2.6 Gross fixed capital formation (Chain volume...
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RBA to investigate rates leak

ScreenHunter_01 Jun. 08 23.33 As I mentioned yesterday, there was some pretty weird dollar action pre-announcement from the RBA, and now: The Reserve Bank has confirmed that an investigation is under way into a price spike in the Australian dollar one minute ahead of yesterday's decision to hold the cash rate at 2.25 per cent. "The Reserve Bank has verified that the monetary policy decision was published at exactly 2.30pm and according to the appropriate procedures. ...“We were sitting here, the Aussie just jumped and we’re wondering what’s going on,” said Annette Beacher, head of Asia-Pacific research at TD...
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WA knocked off top mining perch

1dfvwf From the AFR: The Fraser Institute annual survey of mining companies showed Western Australia slipped to No. 5 last year from being the world leader in 2013, replaced by Finland as the most desirable mining jurisdiction based on investment attractiveness, factoring in perceptions of policies and geological potential. Saskatchewan, Nevada and Manitoba placed ahead of Western Australia. Queensland placed No. 27 on the list, behind the African nations of Namibia and Botswana. ...The impact of royalty payments on miners' bottom lines last year was a likely reason that Australia was seen as a...
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ASX valuations charted

3 From Morgan Stanley: Consensus forward Price to Earnings multiples continue to re-rate, will all Macro Sectors trading at or above +1 std to long-term average. On the back of stronger market returns and flat earnings profile, the ASX 200 is trading at 16.2x, ~21% above LT average of 14.1x. Stripping out resources and financials the Industrial ex Financials has moved higher to 18.5x with Resources now trading at 5 year highs of 16.1x. •Consensus aggregate earnings growth forecasts for FY15 and FY16 have moved lower through reporting season. The market is now forecasting flat earnings growth...
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The great grey gouge of the West

ScreenHunter_6346 Mar. 04 10.06 By Leith van Onselen There's an inter-generational war going on in the UK, which is also being played-out across most developed nations, whereby older generations are 'making out like bandits' at the expense of their children and grandchildren. Here's the Financial Times: Average twentysomethings have seen their living standards slip from a position of comparative affluence to well below par over the past 35 years as average pensioners have enjoyed a rapid rise up the national league tables of incomes... They come as David Cameron intensifies his efforts to woo older voters, pledging to...
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Macro Morning: Fade

marketmorning-200x200 By Chris Becker Apologies for lateness today. The weak session in Asia yesterday, which saw the Nikkei flat but the ASX200 lose nearly 0.5% and Chinese stock markets down around 2%, translated into falls on the European and American bourses overnight. Although a solid retail sales print in Germany should have helped the bulls, it was a case of sideline action with the DAX retreating 1.1% but still well on trend: The FTSE was off 0.75%, continuing to meet resistance overhead on the dailies, with another bearish rising wedge pattern forming amid worrying falling daily volatility: One...
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Stock on market surges in Perth, Darwin

ScreenHunter_03 Jan. 30 13.18 From SQM Research comes their stock-on-market data for February, which registered a 0.1% rise over the month and a 1.6% increase over the year: As shown above, there is significant divergence between capital cities, with stock levels down over the year in the frothy markets of Sydney and Melbourne, but up massively in the mining-heavy jurisdictions of Perth and Darwin. According to SQM: While property listings were mostly steady over the month, in Perth and Darwin they were much higher from a year earlier, reflecting weakness in those property markets given the mining downturn. Sydney...
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Bank boom pushes services PMI up

2 From the AIG: The services sector expanded for the first time in 12 months in February, following generally stable conditions in January. The seasonally-adjusted Australian Industry Group Australian Performance of Services Index (Australian PSI®) improved again by 1.8 points to 51.7 points in February. Much of this growth was concentrated in the health and community and financial and insurance services sub-sectors. • The three-month moving average for the Australian PSI® also increased to 49.7 points this month. Recent results from the Australian PSI® suggest growth in Australian...
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Bears roar!

hqdefault The AFR goes all bear porn today: Highly regarded Australian Ethical Investment portfolio manager Mason Willoughby-Thomas warns "the risk of capital loss once monetary conditions eventually normalise could be significant as investors rush for the door en masse." ...Baillieu Holst equity analyst and author of market newsletter Sunset Strip Mathan Somasundaram is also comparing current stock market conditions to what happened prior to the 1987 stock market crash and GFC, which saw the stock market nearly halve in value. ...Pete Wargent, property buyer and co-founder of AllenWargent property...
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SQM: No housing bubble

ScreenHunter_6337 Mar. 03 17.08 By Leith van Onselen SQM Research's managing director, Louis Christopher, released his weekly email newsletter last night, which attempted to dispel the notion that Australia has a housing bubble [my emphasis]: Well, the Reserve Bank surprised markets today by holding interest rates steady. Moreover, it made clear in a statement that while Sydney’s market may be hot, property elsewhere isn’t so hot, with more varied performances in other cities in recent times. We think today’s statement will put to rest talk of a national housing bubble. The RBA doesn’t appear to be too concerned about...
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FIRB forces $36m foreign buyer property sale

ScreenHunter_4459 Oct. 13 10.08 From the AFR: China’s 15th richest man has 90 days to sell one of Sydney’s finest homes, at whatever cost, or face the prospect of prosecution. The $39 million Point Piper mansion Villa de Mare was sold last year in contravention of existing laws that prohibit foreigners buying property without government approval, Treasurer Joe Hockey said. The grand home, once owned by recruiter Julia Ross, was bought by Golden Fast Foods, a holding company ultimately owned by Evergrande Real Estate Group under Xu Jiayin, who is known as and for having strong connections to the Chinese Communist Party and...
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Has The Abbottalypse passed?

Gua07_0688 It's a rare good day for Prime Minister Abbott today with several stories suggesting his immediate crisis has passed. The first is Malcolm Turnbull offering praise, from the AFR: Malcolm Turnbull has lauded Tony Abbott as an intelligent, courageous, brave and thoughtful man but added the only attribute that really matters is that the Prime Minister has the majority support of colleagues. As well, Peter van Onselen lays into IPSOS: LEADING pollsters have lined up to condemn the overreach of Fairfax’s new polling boss, Jess Elgood, when analysing Ipsos’s poll results in Monday’s Fairfax...
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Business rallies against secretive TPP trade talks

ScreenHunter_3418 Jul. 23 10.44 By Leith van Onselen Fairfax's Peter Martin is reporting today that the Australian Chamber of Commerce and Industry (ACCI) has called on the text of the Trans-Pacific Partnership (TPP) - the US-led trade agreement between 12 Pacific rim nations (including Australia) - to be opened and negotiations monitored in real time by the Productivity Commission (PC): The ACCI wants negotiating drafts to be shown to community and business groups who would then be under an obligation to keep them confidential. Negotiators would retain their power to conclude deals without reference to the parliament but...
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World Bank offers iron ore a ray of hope

1280px-Ray_of_Light_on_Cap_Haitien,_Haiti_(7908717282) From Bloomie: If history is any guide the global glut in iron ore may persist for as long as two years, according to the World Bank, which forecasts that the steel-making raw material will average $75 a metric ton this year. “From experience from earlier iron ore episodes as well as other metal markets, it takes about one to two years for either excess supplies to get back to normal levels or excess demand to be met by larger supplies,” John Baffes, a senior economist at the lender, said in an e-mail response to questions. “Weak economic growth prospects in the global economy is the key...
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Assessing RIO risk

5 Given the magnificent rally that has transpired in RIO this year, I thought I'd take a look at a few metrics to see how it is travelling. Consensus for RIO pre-tax profits is for a small rise from last year to $10 billion in 2015. Then onto $11.8 billion in 2016, $13.6 billion in 2017 and $16.6 billion in 2018. A smooth and accelerating 75% ramp in profits. Price to book is currently 2x and the price earnings ratio 13-14x forward earnings on a yield of 4%. Pretty rich stuff! By now we all know the argument that in a low yield environment stocks will reprice and traditional metrics cease to have...
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Glencore attacks RIO again

1 From the AFR: Mr Glasenberg went to lengths on Tuesday to position himself as a superior marketing manager to his counterpart at Rio Tinto and the other iron ore majors, which continue to pump tonnes into a heavily depressed market and push down prices. Glencore is slashing its annual Australian coal production by 15 million tonnes, or about 15 per cent. Mr Glasenberg stressed the tonnes Glencore was withholding were profit making, and dismissed the argument – used by the iron ore majors – that if you withhold supply, your competitors will simply fill the gap. Let's see, then, is Glencore...
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Commodity price index keeps on falling

ScreenHunter_13 May. 01 13.26 By Leith van Onselen The RBA has released its commodity price index for February, which registered another 2.7% fall in SDR (currency weighted) terms - the key determinant of the terms-of-trade - but a small 0.1% rise in Australian dollar terms, on the back of ongoing currency depreciation: Preliminary estimates for February indicate that the index declined by 2.7 per cent (on a monthly average basis) in SDR terms, after declining by 0.1 per cent in January (revised). A significant contributor to the decline in February was the price of iron ore. The base metals and rural commodities subindices...
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Daily iron ore price update (lows)

anvil-200x200-200x2001-200x200 Here are the iron ore charts for March 3, 2015: Spot weakened with benchmark falling 0.8% to $62.30. Paper was firmer though not strong. Rebar average slid to its recent low and CISA released its steel production data for mid-February which, as you can see, is running at almost 2011 levels. This was the holiday period so the next few periods into late February and early March will tell us lot about the extent of weakness in underlying demand. Reuters has texture: "I heard some mills are expecting prices to fall further this month so they are looking at prompt cargo," said a...
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Daily LNG price update (Wood Mac gloom)

elephant-clipart-black-and-white-13285-cartoon-elephant-clip-art-design-200x200 The Brent oil price recovered some lost ground overnight to trading up 1.5% at $60.39 as I write. Reuters has texture: Oil rebounded on Tuesday from the previous session's tumble, lifted by fighting that threatened Libya's oilfields, although U.S. crude struggled to hold to gains due to record crude inventories. Higher prices imposed by Saudi Arabia for its crude buyers in Asia, the U.S. and northwest Europe did not immediately boost benchmark Brent and U.S. oil futures, although some traders saw the move as supportive. The indicative LNG contract price lifted to $8.82mmBtu: In news, Wood...
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