ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Equities have drifted higher in Asia, with a cautious tone prevailing as investors look ahead to Jackson Hole and Janet Yellen’s speech. It seems the market is broadly expecting Yellen to remain fairly dovish, focusing on measures of labour market slack that support continued policy accommodation. In such a case, we might see a stall in the USD rally, followed by a reversal in most of the key currency pairs. However, any shift away from her usual dovish stance could be a game changer and lead to further USD strength in the...
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PBO warns again on Budget

ScreenHunter_3902 Aug. 22 15.25 By Leith van Onselen The Parliamentary Budget Office (PBO) has issued another warning that that government spending would balloon to nearly $700 billion over the coming decade without reform. From The Australian: Warning of future economic shocks, the independent agency forecasts a rise in government spending from $384 billion to $682bn over the coming decade as health and education outlays continue to grow. Federal spending on schools, defence and childcare will continue to grow faster than the economy but the strongest surge will be in Tony Abbott’s paid parental leave scheme, at 12 per...
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Machines to swallow call centre jobs

ScreenHunter_3901 Aug. 22 14.15 By Leith van Onselen Earlier this year, The Economist and The Atlantic published reports arguing that increasing automation, computerisation and artificial intelligence could place at risk half of current jobs in the United States within a decade or two. Both publications argued that routine-based jobs or jobs that can be solved by smart algorithms are most at risk, whereas those jobs requiring high levels of critical thought and analysis are relatively safe. Most in the firing line are manufacturing, administrative support, retail, and transportation workers, who will continue to lose...
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Abbott confuses tax sabotage with tax reform

ScreenHunter_3900 Aug. 22 13.05 By Leith van Onselen Tony Abbott has spoken-out against Treasury Secretary, Martin Parkinson's, claim last night that the Government had failed to sell the case for tax reform, noting instead the following: “I’ve been saying on many occasions that tax reform starts with scrapping the carbon tax and scrapping the mining tax. It certainly doesn’t end there and that’s why we’ve got a white paper on tax that we will be publishing towards the end of next year.” No, Prime Minister. Tax reform involves broadening the tax base and replacing inefficient taxes with more efficient ones. The...
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Iron ore miners caned despite futures

dfgewq Bit of a reversal of recent trends going on today for iron ore equities with Chinese iron ore and rebar futures up, 2 and 10 points respectively,  but the locals getting smashed, with FMG leading the way. Here are latest relative performance charts. In recent times, juniors have arrested falls as the price hasn't breached new lows and bong-smokin' hopes of acquisitions persist despite busted business models: The majors have all been enjoying time in the sun as fundies buy the "volume to outpace price" drivel: Anything other than high-risk tactical plays remains a resounding "don't...
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More evidence NZ macroprudential is working

ScreenHunter_02 Jun. 14 21.43 By Leith van Onselen From Interest.co.nz's Friday Top 10, featuring David Whitburn - a professional property investor, comes more evidence that the Reserve Bank of New Zealand's (RBNZ) loan-to-value ratio speed limits are working: The Loan to Value Ratio (“LVR”) restrictions that took effect on 1 October 2014 have had an immediate effect on the market. However this is not recorded by either the REINZ Indices which use median house prices, or the Quotable Value/Property IQ/Core Logic data which use averages. The reason is the LVR restrictions hammered the bottom third of the market...
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When ghosts of the past haunt our politicians

ScreenHunter_3893 Aug. 22 11.51 Cross-posted from The Conversation: Bill Shorten had little practical alternative but to name himself as the person police had been investigating in relation to an alleged rape in the 1980s. The opposition leader told reporters that the “easy option would have been to say nothing”. But that would not have been a sustainable option, let alone a politically wise one. If he hadn’t outed himself, it would have been only a matter of time before Shorten was identified in the mainstream media - possibly quickly but certainly as the election grew closer. It was widely known in political...
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Is NAPLAN testing just ‘juking the stats’?

ScreenHunter_3892 Aug. 22 10.33 By Leith van Onselen Roland 'Prezbo' Pryzbylewski: I don't get it. All this so we score higher on the state tests? If we're teaching the kids the test questions, what is it assessing in them? Grace Sampson: Nothing. It assesses us. The test scores go up, they can say the schools are improving. The scores stay down, they can't. Roland 'Prezbo' Pryzbylewski: Juking the stats. Grace Sampson: Excuse me? Roland 'Prezbo' Pryzbylewski: Making robberies into larcenies. Making rapes disappear. You juke the stats, and majors become colonels. I've been here before. Grace Sampson: Wherever you...
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Canberra housing set for capital punishment (members)

ScreenHunter_01 Jun. 02 20.31 By Leith van Onselen Following my recent reports on the Perth housing market, a member contacted me and requested that I provide an update on Canberra, which he claimed also seems to be cruising for a bruising. Given I do not intend to cover the smaller capitals in member special reports, I am only too happy to oblige with the below short post summarising the key data surrounding the Canberra property market. First, let's look at prices. To say that Canberra has missed the current house price boom is an understatement, with both houses and units recording less than 1.5% value growth...
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Nomura: Foreign flows to hit Australian dollar

SDFASD From Nomura: After very strong growth in Q1, the Australian economy is entering a period of slightly below trend growth of between 2.5% and 3.0%. This means that RBA is likely to retain its neutral policy stance. Moreover, recent communications from RBA Gov Stevens highlighted the probable intention to not cut rates saying „cumulative movements in interest rates since the start of the year amounted to a noticeable easing in financial conditions‟ and that he does not think that „lower rate is the answer‟. As a result, we believe that unless we see big surprises in the incoming data,...
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S&P500 to test 3000?

CSP500-M-8-21-2014 From Martin Armstrong: We still see the US share market rising sharply. The cash SP500 should reach the 3000 level. We have an important Monthly Bullish Reversal standing at 212342. Only an August closing below 193000 would be short-term bearish. There remains no other game in town. With the lethal combination of the Sovereign Debt Crisis and the Cycle of War, the only place to park big money will be the private sector and that the smart money will choose equity while the so-called “conservative” will buy corporate debt, especially with corporate cash at record highs. I'm on board with...
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Mad Adam pumps the confidence fairy

fairy By Leith van Onselen Business Spectator's Adam Carr has fired another shot across the bow of us 'doomsayers' who believe that the unwinding of the biggest commodity price and mining investment booms in the nation's history will cause income growth to decline and weigh on living standards. Instead Carr argues that recent weak wages growth is all because of a "crisis of confidence": According to the UN, Australia currently enjoys an extremely high standard of living... On the income side, Australia actually scores very well... A decade ago 12 of the top countries’ GNI per capita was...
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Parko: Income taxes are gonna skyrocket without reform (members)

ScreenHunter_05 May. 21 15.13 By Leith van Onselen Australian Treasury Secretary, Martin Parkinson, has given an interesting speech to the ACT Young Economists Network, in which he once again highlighted that Australia's existing tax structure is becoming increasingly narrow and how personal income taxes will rise dramatically via bracket creep as the once-in-a-century commodity price and mining investment booms unwind and national income growth slows. From Peter Martin: "If Australia gets the same productivity growth as its long-term average, then living standard growth will be about a third to a half of what the...
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Murray makes more encouraging noises

imgres From the AFR: “The ­post-crisis monetary ­settings have distorted asset prices again,” he said in a speech in Sydney on Thursday. “That is going to cause a correction at some point, which will put more ­political pressure on financial systems.” ...Mr Murray suggested in his interim report last month the banks might need to hold higher levels of capital to protect the system from systemic risk created by their high leverage to housing. ...Mr Murray said Australia was in a regulatory “quandary” because it “didn’t appear to be damaged by the [2008] crisis” but “we...
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Weekly RP Data Australian house price update (members)

ScreenHunter_3870 Aug. 21 15.34 By Leith van Onselen In the week ended 21 August 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.43% (see next chart). Growth in this week's home values was fairly broad-based, with all capitals except Perth experiencing rises (see next chart). So far this month, home values have risen by 1.04%, with gains across the board but strongest growth in Sydney (see next chart): Values are up by 6.06% so far in 2014, with all major capitals except for Perth experiencing growth, and particularly strong gains...
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More Goldilocks US data

ISMFedPrelimAug2014 Not too hot to bring forward rate rises and not too cold to upset equity markets. That's US data right now and overnight we got more of it. The NAR reported existing home sales and they were firm with rising inventories offsetting any price worries (all charts from Calculated Risk): Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 2.4 percent to a seasonally adjusted annual rate of 5.15 million in July from a slight downwardly-revised 5.03 million in June. Sales are at the highest pace of 2014 and have risen...
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Daily iron ore price update: arse gone (members)

anvil Here are the iron ore charts for August 21, 2014: The arse has fallen out of paper markets. The 12 month swap is in free fall. Dalian six month futures are in free fall. Rebar futures are in free fall. In some good news, we may all be able to trade Dalian soon: China's Dalian Commodity Exchange (DCE) will actively explore ways to realize internationalization of its iron ore futures, including implementation of iron ore futures bonded delivery and introduction of international investors, according to Li Zhengqiang, general manager of DCE. Li made the remarks at the 2014 China Coal...
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As China diets, one country is the biggest loser

imgres I've noted many times that the framework through which China is discussed in global markets is completely wrong. For three years, every time we've seen any slowdown in growth, Western "analysts" pile in with calls for broad-based monetary easing as they reference the need for "recovery". What is being missed is that China is not interested in a cyclical "recovery" given it will only lead to a bigger bust further down the track. China is engineering a structural adjustment away from credit-led growth and towards one driven by productivity. Today, Goldman Sachs describes it beautifully: Better...
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As China rebalances, we’ll be awesome

1311618182438 For balance, here is James Laurenceson on why Australia will waltz through the coming Chinese rebalancing, from The Conversation: China’s leaders have been vocal in their support of a new growth model, one where consumption leads the way. Economic commentators fret about what this means for Australia. One view is that economic pain lies ahead. As the rate of resources and energy-hungry investment in China falls, commodities such as iron ore and coal will not fetch anything like the prices they did a few years ago. Investment in the natural resources sector will dry up. As a result, in Dog...
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How bad is Ebola, really?

Capture12-200x200 Yesterday's Congo outbreak has suddenly gotten much worse and much better: At least 70 people have died in northern Democratic Republic of Congo from an outbreak of hemorrhagic gastroenteritis, the World Health Organization said on Thursday, denying that the illness was Ebola. A WHO report dated Thursday and seen by Reuters said that 592 people had contracted the disease, of whom 70 died. Five health care workers, including one doctor, are among the dead. "This is not Ebola," a WHO spokesman said in an email to Reuters on Thursday. Let's hope so, the WHO is still conducting tests. In Ireland...
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Links 22 August 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Just because the VIX is lowdoes not mean it is a buy - Volatility Made Simple The first half hour trading predicts the last half hour - Alpha Architect Why it would be a mistake to trade like George Soros - Brian Lund Warren Buffett hoards cash while individual holdings hit 14-year lows - James Saft Investing is more about psychology than strategy - Millenial Invest The dark side of technical analysis - Adam Grimes The world is getting old…fast - CNN World’s Biggest Wealth Fund Slows Emerging Market Investment - Bloomberg North...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston is Chief Market Strategist at IG Markets The USD is king again, with the USD index (a basket of currencies comprising predominantly made up of EURs) currently at the highest since 2013. We are approaching key support on EUR/USD, with the 38.2% retracement of the July 2013 to May 8 rally in focus at 1.3227 – a break here would naturally bring the 1.30 handle into play. USD/JPY has really blown expectations out of the water, and while I was expecting a move higher in the pair earlier in the week, I certainly wasn’t expecting a test of the 104 level. It’s worth remembering that...
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Why Goldman cut its last cut

imgres From Tim Toohey: Economy evolves as we expected, but RBA indicates a reluctance to ease In late 2013 we outlined our rationale for why the RBA cash rate would be lowered one final time in 2014. Our expectations of a sharp fall in commodity prices, a disappointing recovery in non-mining activity, the resumption of fiscal consolidation, the commencement of a multi-year decline in mining investment and delay in the ramp-up of LNG exports, a compression in labour income growth, a forecast peak in the inflation rate in mid-2014 and a rising unemployment rate were all key aspects of...
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UK rail shows pitfalls of natural monopoly privatisation

ScreenHunter_30 Jul. 02 10.28 Cross-posted from the UK Conversation: The announcement that rail fares will increase by up to 5.5% is yet another indictment of the failure of the country’s privatised railway industry. Railway privatisation was sold to the public on the basis it would “provide better value for money for the public who travel by rail”. The government’s White Paper in 1992 that heralded the break-up and privatisation of Britain’s state-owned railway network ultimately promised a lot but in reality delivered very few benefits for the passenger or the tax payer. In particular, as far as rail fares...
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Beheading WTF

sfda I wasn't going to touch this this morning given it was only a distant act of irresponsible journalism. But it's suddenly evolved into an outright assault on local liberalsim.   This morning the Daily Tele ran an egregious cover of the beheading of journalist James Foley by ISIS in Iraq. This stuff is not new. It's happened before. So, what does giving us all good dose of beheading achieve. Well...this: Horrific acts of terrorism such as the ''truly sickening and utterly evil'' beheading of journalist James Foley could happen in Western countries including Australia, Prime Minister Tony...
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