Cable flies on Scotland pike

images by Chris Becker What was that quote about "fighter pilots make movies, but bomber pilots make history"? It seems referenda may make good headlines, but its currency markets that move the real world. Last night's independence vote for Scotland is looking set to be a "No" (or Nein Nein Nein, depending on your view!), according to exit polls - but the recent move in Cable (GBPUSD) and its crosses showed this result was baked in before the polls even opened. Here's a little recent history on Cable using the daily chart going back to mid June this year: A pretty spectacular fall - over...
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Moodys warns on iron ore fallout

imgres From Moodys: Iron ore, Australia’s largest export commodity by value, has been experiencing sharp  price declines since the start of 2014 due to large increases in supply and lower growth  rates for steel production in China. Overcapacity has grown on the Chinese Mainland as  GDP growth slows. The current price of around USD84 per metric tonne (mt) for 62%  Fe iron ore CFR is down over 35% from the beginning of 2014. » This trend will exert a direct negative impact on Moody’s rated Australian producers  over the next 6-12 months. Atlas Iron Limited’s (B2 stable) credit profile will be...
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Daily iron ore price update (crushed cat)

anvil Here are the iron ore charts for September 18, 2014: The dead cat bounce is falling to earth with a thud. Paper and physical are headed for a test of last week's low. It is a brave man that thinks they will hold. In news today, the Globe and Mail has a salutory piece on Chinese steel: Subsidies accounted for four-fifths of the profits reported by Chinese steel companies in the first half of this year, a dramatic increase in reliance on state support that illustrates starkly the industrial weakness that is an increasing drag on the economy. The headwinds faced by China’s massive...
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China’s housing bust is go

China-Bubble-300x200 Good material today from around the web on China's deepening housing bust. From China, there is gloom, via Investing in Chinese Stocks comes the latest from Pan Shiyi, CEO of developer SOHO, real estate rock star and former bull: Summery: real estate not at the turning point, business isn't good this year, only IT firms are supporting the commercial rental market. SOHO is doing well, capturing the IT demand for rental space. Also from Ifeng via Investing in Chinese Stocks comes a report nicely summarising the double bubble: China has two different housing bubbles. In the first-tier cities,...
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The Arrium lesson

images Stephen Bartholomeusz today argues that the Arrium capital raising went wrong because: ...Arrium announced the institutional component of the issue had raised $367 million -- only about 79 per cent of the institutional entitlements were taken up. The rest were cleared in a bookbuild at 48 cents, so the institutions that renounced their entitlements get nothing. The placement raised the $98 million sought, taking the proceeds so far to $465 million. Unsurprisingly in the circumstances, the Arrium share price crashed, falling to 40 cents. If it stays there the retail component -- about $290 million...
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Hockey, RBA mull macroprudential

imgres From the AFR: The Reserve Bank of Australia is weighing up whether to force banks to adopt New Zealand-style limits on mortgage lending to cool an overheating housing market. ...Joe Hockey conceded on Thursday there were “clearly significant” price gains in parts of Sydney, Melbourne and “to some degree” in Brisbane...“obviously the Reserve Bank will look at some of the macro-prudential issues”. ...“I don’t really accept this suggestion that if there is a boom that ­government needs to step in immediately to try control the speed [of the price gains],” he said....
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Break up the banks!

imgres From the AFR, Ex-Goldman chairman Alastair Walton: ...argued that the banking oligopoly allowed the major lenders to focus on home lending and neglect financing innovative businesses critical for future prosperity. ...“Would Australia as a whole be ­better off with eight to ten banks, each . . . rated A (like almost every other bank in the OECD) and primarily rely on domestic deposits to fund their lending activities....Or continue ad infinitum with four ‘too big to fail’ banks each of which [is] rated AA-, and utilise the sovereign ­support of the Australian government (either...
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Pascometer guides Hockey to $2 billion killing

imgres Weeoo, weeoo, weeoo. From The Pascometer: Joe's had a big win at the Forex casino. ...Hockey loaded up last financial year's "Labor" budget with an $8.8 billion capital injection for the RBA. The RBA didn't ask for it, didn't really need it, but certainly went for all it could carry when the offer was made as it removes the annual tussle between the bank and the Treasury about how to divvy up the profit. By maxing the RBA's balance sheet last year, Hockey gets to take back to Canberra all of the RBA's annual profit – and a great deal of that can come from the revaluation of the bank's foreign...
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Charting the city-country employment divide

ScreenHunter_4299 Sep. 18 17.04 By Leith van Onselen Yesterday, the Australian Bureau of Statistics (ABS) released its detailed monthly labour force statistics, which includes breakdowns of employment and unemployment across Australia's capital cities and regions. According to this release, the unemployment rate in Australia's capital cities was 5.7% in August in raw terms, down 0.1% from July. By comparison, unemployment in Australia's rural and regional areas was 6.5%, which was unchanged from July. The below chart, which is presented on a rolling 12 month average basis to smooth volatility, illustrates the trends in...
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RP Data weekly Australian house price update

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen In the week ended 18 September 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, fell by 0.11%. It was the third consecutive week of falls (see next chart). Home prices fell in three major capitals and rose in two (see next chart). Values are up down by 0.70% so far in September, again with all major capitals except for Adelaide falling (see next chart). Since the start of the year, home values nationally have risen by 5.47%, with all major capitals except Perth rising (see next...
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Who is losing their head in this lightning war?

playing_2 Can anyone remember an Australian war that took off so fast? It was August 21 that we got out first beheading WTF and under one month later boots are on the ground, planes are dropping bombs and household raids are happening across Australia to prevent alleged truncations at home. It's all happened before there is any debate, any strategy, any international coalition, any thought.  Prime Minister Abbott is off to New York to try to figure it all out in retrospect: The final plans to wage war against Islamic State will be co-ordinated in private meetings between world leaders in New York next...
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Links 19 September 2014

reynard Global Macro / Markets / Investing: Seth Klarman warns of 2007 like bubble - Business Insider UN creates emergency mission on Ebola - Bloomberg US stocks make new highs, but "more crash prone than ever" - ZH Investors missing 6 key uncertainties to global economy - El Erian Its a low growth world - Reuters (get used to it, even amid massive CB juicing) North America: Oracles Larry Ellison steps down - BBC Housing starts for August disappoint - Calculated Risk But weekly unemployment claims falling - Calculated Risk Hedge fund complexity complicates taxing them -...
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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 Global markets are now entering the eye of the storm as far as event risk is concerned. The first major event of the week has already brought some volatility, with the FOMC meeting resulting in the USD extending its gains. It has been all about the USD over the past 24-hours or so as investors reacted to the outcome from the FOMC meeting. While the initial comments were mostly construed as dovish, it is clear from the price action there has been a hawkish shift in sentiment. Initially, focus was on the fact the Fed maintained...
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Bill Evans says “no” to macroprudential

SMARTI INVESTOR 6TH August 2013  photo by louise kennerley Bill Evans Wespac From Westpac's Bill Evans today: The minutes of the Reserve Bank Board’s Monetary Policy meeting of September 2 have raised the level of concern that the Bank is now signalling around Australia’s residential property boom. Specifically the Board notes: “policy also needed to be cognisant of the risks to future growth that could accompany a large further build up in asset prices, particularly if that was associated with an increase in leverage;”and: “Credit growth for investor housing was running at around 10 per cent per annum. Housing prices were continuing to increase in...
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China launches breathtaking stimulus! (not)

images101-200x20011 More action from the PBOC this afternoon with the Chinese central bank cutting the 14-day repurchase rate by 20 basis points to 3.5 per cent. This is more easing though again questionable as stimulus. From ANZ via the SMH blog: We think the market should consider this as an important move as China has relied more on managing short-term market interest rates to push forward interest rate liberalisation. In our view, this is another policy easing effort following yesterday’s liquidity injection via Standing Lending Facility (SLF). However, none of the commercial banks or the central...
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Kohler’s housing shit sandwich hits the fan

SHIT-SANDWICH If you get five spare minutes today, make sure you watch the above tirade by Alan Kohler on Australian housing , whereby he cheers on Australian house prices and effectively tells first home buyers to eat shit. While there are many disgraceful quotes in the video, these ones below are perhaps the worst: "[Is it] all that bad if prices are high? Everyone's complaining that Australian houses are overvalued. And I'm saying 'yeah it's bad for first home buyers'... [My kids'] are complaining to me that they can't buy a house cause they are having to rent all the time. Well, actually is that so bad?...
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Can the Australian dollar save iron ore miners?

images With some currency relief finally apparent for Australian tradables, Citi offers a timely take on how that might affect the miners: The A$ leverage is surprisingly similar for BHP and RIO, which comes as somewhat  of a surprise given that RIO has historically been more levered to the A$ than BHP. This is due to the impact of the Alcan acquisition reducing the A$ exposure of the  overall group and the still-high margins in iron ore (bigger exposure for RIO) being less sensitive to a lower A$ than the tighter margin coal businesses (larger  exposure in BHP). Given we are bearish iron ore...
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The death of Australian manufacturing

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Following on from my earlier post summarising the latest quarterly employment report from the ABS, below are some charts illustrating the dire situation facing Australia's manufacturing industry. First, total employment in manufacturing fell to the second lowest level ever in August, with only 919,100 Australians employed in the industry - just a whisker above the all-time low 916,900 jobs recorded in May 2013. Moreover, the share of total employment in manufacturing fell to an all-time low of just 7.9% - less than half the 16.8% of total employment in manufacturing in...
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Arrium rupture punishes miners

vghmt It's not going well for the iron ore miners today. The rupturing of Arrium, Chinese house prices sliding fast and Chinese markets selling again with rebar futures down 19 points and Dalian iron ore futures down 4 points.  The falling dollar can't put a dent in it. Here are the juniors with everyone at 2014 (and much longer) lows: The majors are down hard too with BHP and RIO off 1% and FMG down 2.5% having lost the $4 handle again: All things considered it's probably quite a good performance and thus the idiocy spread has sooooooo far still to close:   In the immortal...
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Where are the new jobs and where are they gone?

ScreenHunter_07 Nov. 26 16.13 By Leith van Onselen The Australian Bureau of Statistics (ABS) today released its quarterly labour force report, which breaks-down employment at the industry level. Below are some key charts, which present the changes in employment aggregates on a trend basis. First, the quarterly change in employment by industry: As you can see, science (+21,900) and construction (+13,900) were the big employment gainers over the August quarter, with mining (-13,100) and manufacturing (-11,000) the biggest losers. Public servant jobs also declined by 9,900 over the quarter, possibly reflecting...
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Chinese home price plunge deepens

dvw Fresh from China NBS, average new home prices fell in 68 of the 70 cities compared with July. In July it was 64 cities. Year on year home prices were only up 0.5% versus 2.5% in July. In month on month terms prices fell 0.6% after 0.8% in July. The bellwether cities don't look much better than lower tier jobs.  Shanghai new home prices were up 1.5% versus July's 4.1% and Beijing's new home prices were up 2.1%  versus July's 4.0%. It's awwn,...
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You can’t keep a good iron ore man down

grt Despite the clear and present warning presented by Arrium today, the froth just won't leave the iron ore market. From Fairfax: Iron ore's slump to a five-year low isn't expected to prevent the world's two biggest miners, BHP Billiton and Rio Tinto, returning cash to investors, a JPMorgan Chase fund manager said. "You have to remember the very large operating margins which can still be achieved within iron ore," James Sutton, a portfolio manager at JPMorgan's $US1.6 billion ($1.78 billion) Natural Resources Fund in London, said. There's "a lot of scope for shareholder returns," as Rio and BHP...
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Take’n it in the Arrium

gfhyth64 Freshly returned from its capital raising: It's only the beginning and I've already gone and lost my...
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New Zealand income booms

ScreenHunter_4277 Sep. 18 09.51 By Leith van Onselen Statistics New Zealand (Stats NZ) has released national accounts data for the June quarter, which revealed 0.7% growth in real GDP over the quarter and 3.5% growth over the year - the highest rate of growth since the year to September 2007. The growth was largely driven by the services sector: “Services make up about two-thirds of the economy and all 11 services industries increased this quarter,” national accounts manager Gary Dunnet said. “The biggest increases were in industries that include advertising, employment services, and software...
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Dollar-exposed industrials get set for launch

imgres It's been a good three years for my pet (theoretical) allocation of shares into dollar-exposed industrials. But the good times are only just beginning according to UBS today: Rising Bond Yields & Falling A$ - Reversing The 2014 Trend Investors have been confounded for much of this year by the unexpected resilience of the A$ and the unexpected fall in bond yields. However, some cracks have appeared in the last few weeks with the A$ falling and bond yields rising. We examine the potential impacts on relative stock and sector performance. Yield-Heavy Market Still Looks Vulnerable We think...
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