Weekend Links 1st-2nd November 2014

reynard Global Macro / Markets: Why Taxation Must Go Global - Wolfgang Schäuble Some countries getting killed by cheap oil - CNN Apologizing to Japan - Krugman. Big Banks Brace for Penalties in Probes - WSJ The case for corn.  - Andrew Thrasher Americas: Is Military Spending Driving U.S. GDP Growth? - WSJ The U.S. Shale Boom May Be Shorter Than Predicted - OilPrice Citi restates 3Q earnings downward by $600m for legal costs - SEC , Bloomberg Why the U.S. Has Fallen Behind in Internet Speed and Affordability - NYT In Private Papers, A More Candid Tim Geithner Speaks Out - Pro...
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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 Japan has been the main point of focus in Asian trade today, with the Nikkei significantly outperforming the region. While the BoJ meeting and raft of data out of Japan have been pinned as the highlights of today’s session, the Government Pension Investment Fund (GPIF) came back to the fore on the back of reports by the Nikkei newspaper. The reports suggested Japan’s Health Minister is set to announce holdings of domestic and foreign stocks will be bumped to 25% each. It’s important to note the market was expecting holdings...
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Wollongong council pimps first home buyers

ScreenHunter_4733 Oct. 31 14.57 By Leith van Onselen In what could easily be some kind of Halloween joke, the Illawarra Mercury this week spruiked a new home deposit scheme that would provide low-to-middle income first home buyers (FHBs) with assistance to get "into the housing game": The West Dapto Home Deposit Assistance Program is the first of its kind and is designed to allow low-to-middle-income singles, couples or families to buy a new house or land package in the suburb’s new release area. The grants will be administered through a partnership between IMB and the council and will be available for loans worth up to...
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PPI shows lack of inflationary pressures

ScreenHunter_4728 Oct. 31 14.22 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released Producer Price Index (PPI) data for the September quarter, which has registered a 0.2% quarterly increase in final (stage 3) prices and an increase of only 1.2% over the year: The 0.2% increase in final (stage 3) prices was driven primarily by increases in the prices received for building construction (+1.0%), partly offset by falls in the prices received for electricity supply; gas supply; and water supply, sewerage and drainage services (-3.6%) and petroleum refining and petroleum fuel manufacturing...
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Iron ore majors launch as gloom deepens

dsgw4 Don't look to equity markets for rationality. There ain't none. Not today anyway. The news flow for iron ore is dreadful with Vale's price, profit and inventory shocker and a downgradeto $70 today for the price outlook from Morningstar (though rather stupidly not until 2017, two years too late) and big equity price falls in London overnight to boot. There's not much help in Dalian, either. But stuff that, BHP and RIO are pouring it on, up 1% apiece and Fortescue is firm. Perhaps there's some global rotation out of Vale and into the locals, which makes no sense given Vale showed how screwed the...
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ANZ perpetuates bank capital myths

ScreenHunter_4572 Oct. 20 10.36 By Leith van Onselen ANZ Chief, Mike Smith, has once again warned that Australia's Big Four banks risk becoming globally uncompetitive if they are required to raise capital levels to withstand external shocks. From The Canberra Times: In a market briefing on Friday, Mr Smith argued Australian banks were already well capitalised compared with peers. Tougher capital rules would push up the cost of credit across the economy, he said. "We need to think very carefully about importing other people's solutions to other people's problems, and frankly, Australia deserves a better debate on this issue...
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New Zealand seeks to avoid “generation rent”

ScreenHunter_02 Jun. 14 21.43 By Wendell Cox, reproduced with permission from New Geography: The political leadership and others in New Zealand are talking about the consequences of its land use policies. Under the "urban containment" land use policy (also called by terms like "smart growth," "growth management," and "livability") in effect in every urban area, house prices have doubled relative to incomes over the last 25 years. The principal causes have been the restrictions inherent in urban containment policy, such as making most suburban land off limits for housing development, (which raises its price, like rationing...
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Investor mortgage growth accelerated in September

ScreenHunter_12 Sep. 23 12.54 By Leith van Onselen The Reserve Bank of Australia (RBA) today released its private sector credit aggregates data for the month of September: A chart showing the long-run breakdown in the components is provided below: Personal credit growth (0.2% MoM; 0.6% QoQ; 1.0% YoY) and business credit growth (0.5% MoM; 0.7% QoQ; 3.8% YoY) continue to grow at a modest pace in annual terms, whereas housing credit growth (0.6% MoM; 1.7% QoQ; 6.8% YoY) is stronger, but remains below its long-run average growth rate; although it is still growing more than twice as quickly as wages and off a very...
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RP Data: home prices up 1.1% in October

ScreenHunter_15 Mar. 05 15.42 By Leith van Onselen RP Data's price results are in for October, with the daily index recording a 1.08% rise over the month at the 5-city level, with values rising in Sydney, Melbourne and Brisbane, but falling in Adelaide and Perth (see next chart). It was the fifth consecutive monthly increase in values, with values also up by 2.37% over the quarter (see next chart). Price growth appears to be well past its peak, with annual growth trending down nationally on the back of Sydney and Melbourne (see next chart). Values are now 11.4% above the October 2010 peak at the 5-city...
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Why metadata is an expensive erosion of privacy

sdfsad By Leith van Onselen The Abbott Government's metadata legislation to require telecommunications companies to store detailed information about the calls and internet use of its customers for two years has met stiff resistance from a number of quarters. The Guardian's Geordie Guy has labelled the legislation as "desperate, confused and contradictory" while significantly impeding civil liberties: Retention poses enormous concerns for anyone who’d prefer their Internet provider didn’t store everything about them. Of course giving the authorities the right to peruse your data without judicial...
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It’s time to ban SMSF leverage

Its_Time_badge By Leith van Onselen The AFR is reporting today that self managed superannuation funds (SMSFs) are gearing into property at an increasing rate, with the amount of debt held in limited-recourse mortgages more than tripling from "$2.5 billion at the end of June 2012 to $8.7 billion at the end of June 2014". A few weeks back, former Treasurer, Prime Minister, and architect of Australia's compulsory superannuation system, Paul Keating, called for curbs on SMSFs using leverage to invest in Australian residential property, arguing that it "is making it nearly impossible for younger people,...
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Boomer dole boom as Abbott floods with coolies

ScreenHunter_4715 Oct. 31 07.55 By Leith van Onselen The Australian is reporting today that the number of over-50s that are on NewStart unemployment benefits has soared by 9% in a year, prompting accusations of 'dole bludging': THE Employment Department has accused baby boomers of ­“retiring’’ on the dole, as the number of over-50s on Newstart jumped 9 per cent in a year. Unemployment is rising five times faster for Australians in their 50s than for those in their 20s, the latest social-security data reveals, creating a “grey army” of 50,000 long-term jobless. Older jobseekers will soon be forced to hunt for...
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Macro Morning: Gold woes

marketmorning By Chris Becker The catalyst for last night's volatility following the end of QE3 was a very positive Q3 GDP print for the US, coming in well above expectations at 3.5% while weekly jobless claims printed as expected. Before this surprise, European markets had to absorb the new reign of King Dollar and the German October unemployment print which was steady (paradoxically the rest of Europe needs this to rise to have a lasting positive effect). Later in the session the CPI in the "Fourth Reich" came in a bit below expectations suggesting deflation is continuing to bake in even in the powerhouse...
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“Mad” Adam says “no” to macroprudential

images "Mad" Adam Carr has a positive spin on things for housing investors today: Some recent signals indicate that regulators are taking a step back from employing macro-prudential policies in the property market, although calls for a regulatory response will no doubt step up following strong house price growth in October... both regulators appear to be playing down its use, instead preferring to act within the ‘existing prudential framework’. ...Whatever action is taken, regulators are seeking to reassure the market that steps will be modest. Given the ‘last bout of speculative excess in...
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AFP pursues dodgy Chinese realty

chinese-corruption From the AFR: Government-run media outlets in China have speculated for years that Gao Yan, a former high-ranking Communist Party official, alleged to have stolen millions of dollars in state assets, fled to Australia in 2002. One source has confirmed the ­Australian Federal Police is ­investigating property linked to Mr Gao’s son, Gao Xinyuan. This raises the prospect the Gao family is on a ­target list put together by the AFP and Chinese authorities as part of a joint effort to trace and freeze illicit assets. ...Tracking down officials hiding overseas and confiscating their assets has...
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How big are Australia’s developer land banks?

ScreenHunter_18 Jul. 05 10.22 By Leith van Onselen Prosper's David Collyer has released an excellent new report examining listed developer land banks in Australia, using data derived from ASX annual reports. Below are the key extracts. First Collyer examines some of the underlying reasons behind land banking, which support my own views (outlined here): Listed property developers report their land holdings to the Australian Stock Exchange, which opens a window into the murky world of ‘englobo’ landbanking. Their 2014 annual accounts show they have 272,000 lots in development, with a disclosed end value of $81...
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Weekly RP Data Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 30 October 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, was essentially flat (+0.02%).  The result follows five consecutive weekly increases (see next chart). Home prices rose in Sydney and Brisbane, were essentially flat in Melbourne and Adelaide, and tanked in Perth (see next chart). Values are up by 1.11% so far in October, with all major capitals except for Adelaide rising (see next chart). Since the start of the year, home values nationally have risen by 7.49%, with...
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Daily iron ore price update (green)

anvil1-200x200111 Here are the iron ore charts for October 30, 2014: Positive price action for no apparent reason. Paper markets firmed with rebar futures up firmly and Dalian May up 2% plus. Spot and rebar average too. Some might take it as more evidence that $80 is the new equilibrium price. Texture from Reuters: Some steel mills in Hebei, China's top steel-producing province, have been asked to reduce or suspend production during an Asia-Pacific Economic Cooperation summit in November to help improve air quality in Beijing. Traders initially believed the capacity reduction would help thin supplies...
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Big miners tumble as Vale shocks

dgwr Hoocooanode? Vale was out with its third quarter earnings report yesterday and it shocked with a $US1.44 billion loss versus the $US1 billion plus expected. The culprit was a nearly $US3 billion loss on FX derivatives as the Brazilian real tanked. But it was also bad in iron ore with Vale's average sales price down to $US68 per tonne. It is also accumulating iron ore inventories like there's no tomorrow, up by 9.3 million tonnes, despite its record shipments in the quarter. The company intends to sell 'em soon said the CEO Luciano Siani. Shares fell 3.5% in New York. Reuters has...
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Chinese bank’s bad loans take off

lib From Fortune: China CITIC Bank, the bank owned by the country’s largest investment firm, said Thursday it would sell up to 11.9 billion yuan ($1.94 billion) in new shares in a private placement to China National Tobacco, maker of the country’s most popular cigarette brand. As such, that’s basically moving money from one state pocket to another. ...Bank of China announced last week it would raise $6.5 billion in international markets in the form of s0-called “contingent convertible” debt...Agricultural Bank of China, another of the country’s biggest lenders, is preparing to issue preferred...
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Why isn’t Oz in the mining transparency drive?

images Cross-posted from The Conversation. It’s a far-from-perfect instrument of global governance. But as theExtractive Industries Transparency Initiative (EITI) coalition celebrates its 12th birthday, it can point to steadily increasing membership and dialogue between countries, mining companies and NGOs. Regrettably, Australia, with one of the world’s largest mining economies, has still not committed to joining the 48 other nations working on EITI disclosure. This is despite the obvious benefits that greater transparency could deliver to all Australians as they confront deep-seated disputes about...
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A near perfect quarter of US GDP

Q3 2014 GDP Equity and currency markets are celebrating the overnight release of US Q3 GDP, up a half percent as I write with the US dollar breaking out. From the BEA: Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- increased at an annual rate of 3.5 percent in the third quarter of 2014, according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 4.6 percent. ...The increase in real GDP in the third quarter primarily reflected positive contributions from personal...
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Links 31 October 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Why Oil Prices Went Down So Far So Fast - Bloomberg Are gold miners a value trap? - ETF Shale LNG trading volumes are picking up - Wall Street Journal Predicting stocks with bond market - Alpha Architect The fiendish bond market needs a radical rethink - Financial Times Why high yield bond investors should pay attention to the stock market - CSSA North America: Fewer Americans filing for job benefits - Bloomberg Real GDP increased at 3.5% annualised - Calculated Risk What did QE accomplish? - The Upshot 2015 could be the year of the...
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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 While US equities retreated on the back of the Fed, Asia has reacted somewhat differently with markets broadly mixed. Just to recap on the FOMC meeting, QE came to an end as many expected and the Fed offered up a moderately hawkish statement. The Fed did not make reference to global growth concerns as the market was broadly expecting, sounding more optimistic about the labour market and showing less concern about moderating inflation. However, the considerable time reference was maintained, but analysts feel this will go in...
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Soufun says China property prices to fall 10%

imgres From Bloomie: China property prices may decline as much as 10 percent this year and the slump may extend into 2015, according to SouFun Holdings Ltd. “Chinese property prices are seeing an adjustment after the rapid increase in the past two years,” Vincent Mo, founder of China’s biggest real estate information website, said in a Bloomberg Television interview with Haslinda Amin in Singapore yesterday. “Prices should stabilize by the middle of next year.” Such a correction would be unprecedented in modern history: If it happens you can expect new development investment to keep...
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