ASX at the close

ASX_logo by Chris Weston It will be an interesting week for short-term-focused traders, with a number of markets that have recently seen better trending conditions exerting clearly overbought or oversold conditions. The sell-off that has materialised in the US bond market of late is coming at a time when we have seen some fairly bearish dynamics in other economies and, as a result, we’ve seen some strong trends in AUD/USD, EUR/USD and USD/JPY. These trends have led to some one-sided positioning, with the 14-day RSI on USD/JPY at the highest level since 2001. We seem to have got to a point where we could...
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How banks’ housing obsession is starving SMEs of credit

ScreenHunter_4319 Sep. 22 13.02 Cross-posted from The Conversation Since the global financial crisis, credit growth in Australia has returned. But while growth in home lending between 2008 and 2014 was relatively strong (0.49% per month), it was actually negative for business lending (-0.04% per month). This pattern of weaker business credit for corporates and small to medium enterprises is not unique to Australia but has been reflected around the globe due to long-term factors, such as the consolidation of banks and the centralisation of credit assessment. The issue has been accelerated by shorter term cyclical factors,...
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Retail needs lower costs not more hours

retail-therapy-girls-with-shopping-bags by Chris Becker It's hard not to be skeptical about the findings from any inquiry into competition in Australia's business sector. One always suspects either a dogmatic economic answer (i.e free markets always good, government interference always bad) or a reinforcement of a status quo of a monopoly or oligopoly - the latter supported in kind and method by the Abbott government as "how it is" or "how it should be". Sometimes you get both and it seems that way with today's release of the study into the retail sector, from Fairfax: Bans on retail trading hours should be scrapped, according...
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Lower rates can’t stop the stress

bill_stress by Chris Becker It seems the RBA's intent to goose the Australian economy in the great hand-off from mining to [insert] something else, while accidentally blowing a housing bubble, is paying off in one area: stress! Dun and Bradstreet are out today with a new forecast of higher stress, amid a backdrop of growing unemployment, low wage rises and elephant in the room consumer debt levels: Despite easing to 18.4 points in the June quarter, from 19.7 points last year, Dun & Bradstreet's Consumer Financial Stress Index is forecast to hit 25.3 points by the end of this month, the...
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Competition review targets rent-seeking pharmacies, taxis

ScreenHunter_4322 Sep. 22 13.44 By Leith van Onselen The draft report of the Harper competition policy review has urged the government to free-up rules preventing competition in the the pharmacy and taxi industries. From Business Spectator: Current restrictions on the location of pharmacies and a rule that only pharmacists can own a pharmacy do not ensure the quality of advice provided to a consumer and should be scrapped... The draft report... recommended that restrictions on ownership and location of pharmacies be removed "in the long-term interests of consumers"... "Such restrictions limit the ability of consumers to...
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HIA continues negative gearing subterfuge

ScreenHunter_43 Jan. 24 08.38 By Leith van Onselen The brainiacks at the Housing Industry Association (HIA) have produced another piece of self-interested "analysis" warning against changes to negative gearing and lobbying to remove stamp duties. From The SMH: Cutting back tax deductions for property investors would erode housing affordability, reduce housing supply and bump up rents, a new report says... ...reducing negative gearing would diminish the incentive to invest in housing and exacerbate current undersupply, pushing rents almost one per cent higher... "Under current housing policy settings, discounting...
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Fortescue heading to $3? UPDATE

vertical-crack-foundation by Chris Becker UPDATE at 230pm: FMG is down nearly 7%: So, following the new five year low in spot iron ore, Fortescue Metals (FMG) is down 2% this morning on the open, with the broader market off half a percent. Not exactly a bearish day as that particular stock can rally or fall multiples of that figure no problem. But before Houses and Holes went on his break last week I mentioned to him that the weekly chart candlestick for Fortescue (FMG) was ominous. I don't use candle analysis on its own (although to be fair, any type of analysis, including random picks can work if your...
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Off-the-plan apartment values slump in Melbourne, Sydney

ScreenHunter_06 May. 06 09.27 By Leith van Onselen The AFR published another report over the weekend warning of an impending oversupply of apartments in the major capitals, with the value of some apartments in Sydney and Melbourne reportedly declining by 20% between purchasing off-the-plan and receiving the keys: Nearly 44 per cent of apartment ­purchases in the most populous cities are below the sale price at the time of completion, and units in mushrooming high-rises in major capital cities are the hardest hit, according to WBP Property Group. ...the negative equity appeared to be worst for ­two-bedroom apartments...
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Mortgage war highlights regulatory failure

ScreenHunter_4312 Sep. 22 09.19 By Leith van Onselen Fairfax has today reported that mortgage competition is heating-up, with NAB offering new mortgage customers $1,000 to take-out a home loan from the bank in a bid to boost it's market share: Australia's big banks have tried to entice borrowers with cash payments worth $1000 or more in the past 12 months in effort to grow market share. But NAB says its latest strategy is different because it is not a rebate... Instead, it will give customers $1000 on an eftpos card to spend however they choose... It comes after NAB tried to poach customers from its competitors last...
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Trading Week

trading week globe world by Chris Becker Its a solid week ahead for local and global markets so let's take a technical look where they are at the moment and analyse the risks and opportunities available. This report is one I compile each week for my own trading decisions, and does not constitute investment advice. I may have positions, long or short, on multiple timeframes (intraday, daily or longer term) in any or all of the markets discussed below. Please seek independent investment advice from a licensed advisor before considering any investment decisions. First, a quick look at bonds with the US 10 year...
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The Australian continues negative gearing defence

ScreenHunter_01 Jun. 28 09.52 By Leith van Onselen What is it with The Australian newspaper? With regularity it trots-out articles defending negative gearing and warning against policy changes to the scared cow. Today's effort comes from Sydney Journalist, Kylar Loussikian, who has written a piece arguing that negative gearing is not the domain of Australia's elite, but rather that of the good old Aussie battler who's simply trying to save for their own retirement and take pressure off the Aged Pension: THE vast majority of property investors taking advantage of negative gearing are “mum and dads” earning less than...
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Hockey scores win in global tax avoidance crackdown

ScreenHunter_4311 Sep. 22 07.25 By Leith van Onselen One of the good news stories coming out of the G20 central bankers and finance ministers meeting in Cairns over the weekend was the global agreement to share information on tax avoidance by large multinational companies. On Saturday, Treasurer Joe Hockey introduced a detailed set of OECD recommendations to counter tax base erosion and profit shifting practices by multinationals and high net worth individuals. Along with the measures, Hockey proclaimed: “Our government is absolutely determined that Australian tax is paid on profits earned in Australia... We are...
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Iron ore price update: capitulation

billpaxtongameoveraliens by Chris Becker Your regular iron ore specialist - DLS - took a sweet time to have a break, as the iron ore complex looks like folding in on itself! Spot iron ore hit a new five year low just below $82, revisiting the September 2012 low and dragging its dead cat bounce into the other markers: Recent price action is classic capitulation: And the post-GFC landscape is easily discernible with one picture: For those with a even longer term view on the iron ore price, the quarterly average is dragging along, about to broach $USD90: Rebar is getting slogged as the Chinese real...
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A stomping win for National in NZ general election

ScreenHunter_4310 Sep. 22 06.36 By Leith van Onselen As you may have already heard, the New Zealand general election was held over the weekend, which delivered the incumbent National Government, led by Prime Minister John Key, an emphatic victory and its third term, with National scoring the biggest vote since the mixed-member proportional (MMP) electoral system was introduced in 1996. National captured a massive 48.06% of the vote – not just its highest ever share under the MMP voting system but also the highest since the 1951 New Zealand general election, when it captured a record 53.99% of the vote. By contrast, Labour...
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Hockey, IMF back macro-prudential

ScreenHunter_69 Sep. 20 16.34 By Leith van Onselen The International Monetary Fund (IMF) has dealt the RBA/APRA another credibility blow, endorsing macro-prudential controls on high risk mortgage lending in its communique to the G20: To mitigate financial stability risks from a prolonged period of low interest rates and prevent premature monetary tightening, macro-prudential tools should be the first line of defense... Macro-prudential policies are an important first line of defense to address potential financial stability threats associated with too low for too long rates... Financial stability risks related to a...
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Comedy relief from the ECB

stand up comedy by Chris Becker You know, there's no shortage of derision on tap when it comes to central bankers these days - and the European flavour does not disappoint this morning, following the G20 finance minister/central banking wow-pow in Cairns this weekend. From Bloomberg: “We will judge the combined effects of the measures, the measures of June and the measures of September, and then we’ll see if this is enough,” Coeure told reporters in Cairns, Australia. “In case it would not be enough, the Governing Council is ready to do more. But it’s way too early to tell.” Oh really? This is an...
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China dampers perma-stimulus bulls hope

bull_elk_frozen_in_the_lamar_river_yellowstone_national_park_003 by Chris Becker In news over the weekend that is sure to make the China perma-bulls a bit nervous, Finance Minister Lou Jiwei confirmed their resolve at long term restructuring by reiterating that the country cannot rely upon continual government spending for infrastructure investment. From Reuters, via Yahoo Finance: China will not dramatically alter its economic policy because of any one economic indicator, Finance Minister Lou Jiwei said on Sunday, in remarks that came days after many economists lowered growth forecasts having seen the latest set of weak data. "China will not make major...
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Auction clearances retrace some more

ScreenHunter_19 Mar. 13 13.12 The national auction clearance rate slid further over the weekend on the back of declines in Sydney, Melbourne and Brisbane. According to RP Data, the national weighted average preliminary auction clearance rate was 69.2% over the weekend, which was down 1.6% from the 70.8% preliminary clearance rate reported last weekend. Sydney’s clearance rate fell by 1.4% to 76.9%, whereas Melbourne’s fell to 69.3% (last weekend 70.5%). Brisbane, which typically only has a small number of auctions, experienced an 8% decline in its clearance rate to 41.4%. However, overall auction volumes (2,536) were up...
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RP Data weekend property market update

ScreenHunter_18 Mar. 18 17.58 Click to view RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 21 September 2014. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates; Latest median house & unit prices; Average time on market & vendor discounts; Mortgage market activity; and New listings...
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Chinese real estate market freezes over

icy-cold-patagonia-argentina_9001 Cross posted from Investing in Chinese Stocks Earlier this week I posted Another Credit Guarantee Gone Bust, One Month After Backing A Trust, which covers the latest incident of a debtor fleeing his or her debts. In that case, the debtor is the developer Shi Yubao of Golden Century, who borrowed privately from thousands of people. The result of this episode, and no doubt the defaults earlier in the year that involved similar borrowing practices (see link above for more info), is that Handan residents are now afraid to purchase a home. They fear the others developers could also run away too...
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Links 22 September 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: ’Bubble in everything, everywhere’: Marc Faber - CNBC "We Are Recreating The Markets Of 2007" - Zero Hedge Three years the price of gold peaked - The Reformed Broker Why is the price of gold falling? - Pragmatic Capitalsm Some enduring lessons from the financial crisis - A Wealth of Common Sense Has the Bitcoin bubble popped? - FT Alphaville Oil price quirk sends crude out to see - Wall Street Journal North America: 1 in 4 Americans open to secession - Reuters Will US Economy Ever Be As Good As in the ’90s? - New York...
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Weekend Links 20-21 September 2014

the-links1-300x233   China China's job market said 'severe', finding work difficult – survey (SCMP) China debates how to impose carbon caps (FT.com) ...and a call to Australia may not help them... Amid Market Downtown, China's Developers Dig In (Caixin) In Praise of China’s New Normal (Project-Syndicate) 500 Bln Yuan Question: Is PBOC Going to Ease Liquidity for Certain Banks? (Caixin) Taking Stock of the Shanghai FTZ after One Year (Peterson Institute) Chinese Property Investors Make Big Bets Overseas (WSJ) China fines GlaxoSmithKline $492M for bribery (Washington Post) PBoC joins...
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ASX at the close

ASX_logo by Chris Weston, IG Markets There has been a sense of excitement through the markets today, not just because of the binary outcome in the Scottish referendum, but because there seems to be a fundamental shift occurring through the capital markets. Firstly, I have to say Janet Yellen and the Federal Reserve are doing a top-notch job in managing asset prices. By all intents and purposes, they have told the market they plan to raise short-term rates five times in 2015 and a further six in 2016 – and the S&P 500 continues to find buyers. The fact that the Fed have such aggressive targets...
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External shock as I wave you goodbye!

imgres Rebar futures are down 60 points or 2.2% to 2716 today and Dalian iron ore ore futures are down 17 points or 3% to 576. These are big moves and markets have closed almost on their lows. From Reuters: "There is no sign that demand for steel can improve in the short term," said Cao Bo, analyst at Jinrui Futures in Shenzhen, citing the prolonged weakness in China's housing sector. China's home prices fell for a fourth straight month in August, data showed on Thursday, pointing to a deepening downtrend in the country's property market that is weighing on the broader economy. Real estate, along...
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Wherefore art thou gold?

tumblr_m2xds4BxVZ1qk553k By Chris Becker If you're a long term speculator in gold, I think its apt time to ask the Pascometer to come out swinging against the "shiny useless metal". If you're more of an observer, and/or you consider a little slice of physical gold in your portfolio as just another form of insurance, then Cullen Roche's latest piece at Pragmatic Capitalism makes for interesting reading (added chart is mine): A reader writes in asking about the price of gold and why it keeps falling despite surging US government debt.  The thinking here is that gold prices will hedge against a collapse in the US Dollar...
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