NT LNG boom softens construction downturn

ScreenHunter_5170 Nov. 26 12.01 By Leith van Onselen The ABS has released data on the value of construction work done for the September quarter of 2014, which registered a seasonally-adjusted 2.2% fall in total construction activity over the quarter and a 5.1% decline over the year. The result disappointed analysts' expectations of a 1.9% fall over the quarter. The 2.2% quarterly decline in construction activity was broad-based, with engineering construction falling 3.2% and building construction falling 1.0%: Residential construction – the great hope as the mining investment boom unwinds – disappointed, falling...
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Will the iron ore crash destroy house prices?

19g0dseuuoeyxjpg Back in 2010 when MB was just taking shape, one of the very few sell side analysts to get the iron ore price right in advance, Tim Toohey of Goldman Sachs, wrote an equally excellent piece on what the great iron ore correction of 2014 would do to house prices. Here is some of it: On whether Australian house prices constitute a speculative bubble: No  • We think that the behaviour of house prices over the past year, and indeed the past decade does not resemble a speculative bubble. Our rationale is that: i) Refinancing of established homes is at a 9-year low. ii) The turnover of home sales that...
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The slow dawn of iron ore horror

021 From the AFR: Former Rio Tinto chief Tom Albanese says weak iron ore prices are here to stay for longer than expected and “volatility is the new normal”, as iron ore sank below $US70 a tonne overnight Tuesday for the first time in five years. ...“As long as there is a large amount of new supply you are going to have a much softer pricing world than people would have anticipated, for at least a couple of years.” He said the ditching of the benchmark pricing system in 2010 had transformed the market. ...“While it’s fun on the way up, it’s painful on the way down.” Yes, it is,...
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PPL ball and chain drags on Budget progress

bloom By Leith van Onselen With the year winding down, and many of the May Budget measures still stuck in limbo, the Abbott Government is preparing to "clear the barnacles" and water down or junk some unpopular measures in order to start the new year on the front foot. As reported in The AFR today, the $7 medical co-payment is set to be scrapped by the Government, along with the attached Medical Research Fund, with Abbott's signature paid parental leave (PPL) policy also likely to be watered down. It is also seeking a compromise with the Senate on university fee deregulation: Senior government...
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Citi: World moving to “everything but coal”

fhger From Citi: In the past two weeks, the US and China announced an agreement signaling stronger action to curb greenhouse gas (GHG) emissions. The International Energy Agency (IEA) issued its annual update, World Energy Outlook 2014 (WEO-2014). China released its Energy Development Plan 2014-2020. We consider the implications of these developments for investors in fossil fuels. Caution for coal and oil, optimism for gas – Citi’s commodities team assessed the impact of the US-China announcement, concluding that lower demand from 2015 to 2030 could be valued at ~US$1.3 trillion for oil and as...
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Macro Morning: Australian dollar to the ground

marketmorning By Chris Becker Even amid broad USD weakness last night, as gold, euro and other major currencies rallied, nothing could save the Aussie dollar from its almost perfect technical short setup as it fell over 1 cent and broke through critical support to a new four year low: I opined yesterday (I can't give any stronger hint than that!) that the four hour chart above was forming a classic head and shoulders bearish reversal pattern with the neckline at the 85.40 level. This medium term setup reflects the longer term picture for Aussie that we've been talking about at MB for a long time and with...
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Australian dollar smash resumes

1343012726_1pesoV The Aussie smash resumed last night with a new four year low just above $85.10: The iron ore crash is playing its part, as is good US growth, with bond rates falling faster in Australia: The end result is the spread between US and Australian bond rates is on verge of breakdown: Phil Lowe gave it a nudge as well. However, the Aussie was singled out for pain across the spectrum: Iron ore is certainly weighing and as it heads for $50 over the next eighteen months we can expect first 80 cents on the dollar, then 60 cents as the rate cuts flow, then sub-50 cents in the next...
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OECD piles pressure onto RBA housing blunder

,hbj The great monetary blunder of our time, attempting to slingshot the Australian economy over the mining bust using a housing bubble, is cast in stark relief today by new advice from the OECD to lift interest rates despite plunging growth, at least according to the AFR: The Reserve Bank of Australia should raise interest rates in the first half of next year to prevent housing prices rising to risky levels and “unwinding sharply”, the Organisation for Economic Cooperation and Development has advised. The OECD’s semi-annual economic outlook sounds an alarm bell about the household saving rate...
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Phil Lowe’s grand plan to kick the can

imgres By Leith van Onselen As noted by Houses & Holes earlier, RBA deputy governor, Phil Lowe, has delivered another Panglossian assessment of the prospects facing the Australian economy, effectively endorsing Australia's 'population ponzi' economic model and 'selling dirt' without adequately considering the downsides to Australian's living standards. Lowe's comments about Australia's rampant immigration intake are particularly curious: Over the past decade, Australia has had almost the fastest rate of population growth in the OECD and this is expected to continue for some time to come...
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Phil Lowe celebrates houses and holes

url My great hope for the future of the Reserve Bank of Australia is fading away. Deputy Governor Phil Lowe showed great promise in the early century as he led from below the bank's push against the Greenspan doctrine of the time. Alas, the independence of thought that characterised that young man appears to have been molded by the bank's awesome powers of group think into just another broken record pushing Australia further and further into structural imbalances. Last night, vice-Capt' Lowe described Australia's houses and holes economy beautifully while completely overlooking its internal...
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Abbott popularity surges among Indian youth

imgres If only they voted, from the UK Telegraph: Australia’s prime minister, has denied claims he bought “likes” on Facebook after it emerged that his biggest supporters are 18 to 34 year olds from New Delhi. Tony Abbott, whose approval ratings in Australia are low, said the surge was due to a recent visit to Australia by Narendra Modi, India’s prime minister, whose foreign tours tend to generate widespread enthusiasm both at home and from India’s expatriate communities. The recent surge in “likes” on Mr Abbott’s Facebook page was detected by a pair of Sydney comedians called the...
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More Glenrio dreaming

images From Gina's mining newsletter: Bernstein’s ­London-based senior analyst, Paul Gait...told The Australian ­Financial Review that Glencore’s shock announcement it would shut down its Australian coal operations for three weeks is a strong indication that Mr Glasenberg will try again for Rio. Mr Glasenberg would be able to point to Glencore’s willingness to pull tonnes out of an oversupplied market in a direct challenge to Rio over its expansion in iron ore, Mr Gait said. “To me this coal announcement is clearly Ivan ­playing games,” he said. “It had the language of someone trying to...
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Daily iron ore price update (Highway to Hell)

anvil6-200x200 Find below the iron ore charts for November 26, 2015: As expected, Chinese iron ore bears are in total control. The paper conflagration is raging out of control with Dalian signalling $60 by May. Surely we'll sink into the $50s today. Physical is no match for the wild fire and benchmark plunged well past Qingdao to $68.60. Texture from Reuters: "We're seeing very slow trades for spot cargoes. I think some sellers are also holding back and getting reluctant to accept the low prices," said an iron ore trader in Shanghai. "Iron ore markets remain conflicted, with oversupply from...
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Daily LNG price update (Brent bash)

fg35 Oil was knocked hither and thither last night as OPEC members muttered about no cuts and tightening discipline on existing targets.  Brent is down 2% in the low $78s as I write: The equivalent LNG contract estimate is $11.64mmBtu: The spot market is still weakening as well, down 6 cents to $10.10mmBtu, with sub-$10 in its sights: In news, the AFR has nice wrap on the state of play for developing US projects: The US could be shipping 60 to 70 million tonnes of liquefied natural gas by the end of the decade, cementing it as one of the industry’s top three players. ...Three...
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The hope of a Chinese rebound

Screen-Shot-2014-11-25-at-13.46.39 From Gavekal’s Chen Long via FTAlphaville: The crucial question is how the new easing cycle will affect credit growth and economic growth. In both 2009 and 2012-13, credit growth surged following rate cuts. In 2009, total credit growth leaped to 36% as new bank loans doubled the target official target. In response GDP growth rebounded to 12% and property prices skyrocketed. In 2012-13, YoY loan growth bounced modestly to 16%, but total credit growth rebounded to 22% in early 2013 as shadow financing exploded. The credit easing ignited another property boom, but the impact on the real economy...
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Links 26 November 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: The commodity super-cycle aint over yet - Market Anthropology Oil prices: What’s the futures market telling us - covestor.com The bull case for European equities - Financial Times US Stocks Surge To ’Best’ Streak In 86 years - Zero Hedge The 51% Chinese Stock Rout That Analysts Never Saw Coming - Bloomberg Millennial Investors Don’t Trust The Market - mebfaber.com North America: US GDP registers best consecutive quarters of growth since 2003 -  Real Time Economics Q3 GDP revised upwards - Bespoke US house price inflation slowing -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets Yesterday’s euphoric reaction to China’s easing measures has proved to be short lived as equities around the region experience some downside today. Japan is an exception after returning to trade following yesterday’s holiday in observance of Labour Thanksgiving Day. The Nikkei has played a bit of catch up and is modestly firmer with investors focusing on BoJ monetary policy meeting minutes and some comments by BoJ Governor Kuroda. USD/JPY reacted positively to the BoJ minutes which showed Kuroda is considering expanding the...
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More analysts see rate cuts

capex-620x349 From the SMH blog: There’s an increasing likelihood that the Reserve Bank will have to cut rates next year, global asset manager AllianceBernstein says. “The risks for the Australian economy are tilting to the downside, in our view, and, far from increasing interest rates, there’s a growing prospect that the RBA may well need to cut them again,” said AllianceBernstein senior economist Guy Bruten. Currently, the vast majority of economists is expecting a rise in the cash rate next year. The rationale is that the downturn in resources is being offset by an economic rebalancing in which...
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Australian dollar threatens new lows

fghe5 The Aussie is under heavy selling pressure today as it becomes apparent to markets that the Aitken iron ore crash is far from over: Only 30 pips from the break and then onto 80 cents, followed by 60 cents in the subsequent 18 months as the rate cuts flow: And finally, full circle for the mining boom, under 50 cents in the next global shock. One really does wonder why any investor, local or international, would buy Australian right...
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Taxis and hire cars declare war on Uber

ScreenHunter_5153 Nov. 25 11.54 By Leith van Onselen The fight against Uber's ridesharing service, Uber-X, is getting ugly, with taxi and hire car companies resorting to making citizens' arrests against drivers illegally carrying passengers. From The SMH: Hire car owner Russell Howarth has now carried out multiple arrests of uberX drivers, and other drivers are attempting to mobilise in various ways against what they see as an existential threat to their pay and conditions... The incident demonstrates the volatility of situations where the incumbent industry attempts to turn the tables on its upstart competitor... Anger...
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Capex preview

imgres From Westpac come a preview to tomorrow's capex release: The ABS survey of private business investment plans, the CAPEX survey, will provide some further guidance to growth prospects. The September quarter edition will be released on November 27, with responses received over October and November. This update will include the fourth estimate of plans for 2014/15. The 3rd estimate for 2014/15 pointed to a decline in business capex, with a sharp downturn in mining only partially offset by a lift in service sector investment. These broad themes are likely to be restated. What policy makers will...
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China plans profits-based tax for iron ore miners

imgres From Bloomie: Regulators are working on a plan to shift the current volume-based taxation to price-based, China Business News reports, citing Lei Pingxi, executive vice chairman of the China Metallurgical Mining Enterprise The reform may help ease mining company's tax burden amid falling iron ore prices. What a choking irony. It was Australia's giant iron ore miners that trashed the equivalent Australian tax, insisting that it would deter their expansion plans, and now the Chinese rivals they are trying to put out of business with that excess supply will be supported by a Chinese version. As...
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Iron ore crash resumes

liub Charlie Aitken had one good day but the iron ore crash returns today with RIO and BHP at the verge of new 2014 lows, down the better part of 2% and retracing much of yesterday's short squeeze. FMG is down 6%. Here are the comparative charts: The idiocy spreads are still widening: Juniors are still corpses: Dalian iron ore futures have slumped again, down 2.3% to new lows at 465, roughly $60. And there's more to come, I reckon. The following two charts from Morgan Stanley show that Chinese iron ore inventories remain abundant: Both "days of inventory" lines are a little...
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Risk on, as interest only mortgages hit record

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen APRA just released their quarterly data on housing exposures, which captures Authorised Deposit-Taking Institutions (ADIs) loans to the housing sector for the September quarter of 2014. According to APRA, ADIs’ total domestic housing loans were $1.3 trillion, an increase of $103.4 billion (9.0%) over the year to September, with the value of interest only loans growing by 14%. There were also 5.2 million housing loans outstanding with an average balance of $239,000. Of mortgages issued in the September quarter, 42.5% were interest-only loans. Moreover, over the year to...
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Glencore-Rio merger is pure fantasy

url From the AFR: Hedge funds including GLG Partners, DE Shaw & Co, and Pentwater Capital Management were told this month by a prominent London mining banker to prepare for an all-but-inevitable takeover of Rio Tinto by Glencore, according to people familiar with the meeting. Former JPMorgan Chase & Co. dealmaker Ian Hannam, who now runs a boutique advisory firm, convened representatives of more than 20 investors at Corrigan’s Mayfair restaurant in the British capital in mid-November to share his views on the potential deal, the people said, asking not to be identified discussing a private...
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