Links 27 January 2015

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: What’s driving the price of oil down? - Econbrowser Carney Says QE Can Encourage Excessive Risk-Taking in Markets - Bloomberg Mark Carney warns of liquidity storm as global currency system turns upside down - The Telegraph Soros Warns Public Pensions Against Investing In Hedge Funds - Value Walk Where notable go-anywhere fund managers are putting their dough - Morningstar The triumph of the boring 60/40 portfolio - The Reformed Broker 8 ways to blow up your trading account - Mike Bellafiore On the difference between momentum and trend...
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Australia Day 2015 weekend links

reynard Global Macro/Markets/Commodities What gold does in a currency crisis, euro edition - Zero Hedge From Davos, a new framework is needed - FT Euro tumbles to 11 year low post QE against all majors - FT Bill Gates' annual letter - Gates News (an uplifting read) This Chart Shows Why the Oil Bust Will Last - Wolf Richter A Few Savvy Investors Had Swiss Central Bank Figured Out  -WSJ When hedge funds don't hedge - Pragcap How Economists Came to Dominate the Conversation – NYT Martin Wolf on why trade imbalances matter – FT Asia/China Kuroda says BOJ may explore more options...
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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 Euphoric reaction to ECB decision The European Central Bank (ECB) has set the ticker boards alight across the globe with investors responding favourably to another central bank deploying more stimulus. As European equities rallied heading into the ECB meeting and the euro fell, there was a real risk that the outcome would disappoint and spark a reversal in price action. Having disappointed on a number of occasions in the past, it was important for Mario Draghi to get it right this time and keep the momentum going. The highlights...
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UBS: Big miners aiming for “Goldilocks” price

Goldilocks_and_the_three_bears From the AFR: UBS mining analyst Glyn Lawcock says...BHP, Rio, Fortescue Metals and Brazil’s Vale...want a “Goldilocks” price at which only they have the ­incentive to expand, new players cannot enter the market and their smaller rivals are locked in a desperate fight for survival. “The low cost incumbents at the bottom of the cost curve want a price that doesn’t deter them from investing, that makes a good return for them, but not too good a return such that it encourages new entrants and competitors,” Lawcock says. ...The price would be about $US56 a tonne, Lawcock says, at US80¢...
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Will ECBQE fire up gold?

PC_wide_23Jan-gold-620x349 The SMH has a nice chart today: My view of gold (I traded it successfully for some years), is that it is primarily the undollar, the natural hedge against the reserve currency (or unyuan if that eventuates). As such it's primary driver of valuation is that of its partner currency. In turn, that value derives not just from the raw price of the reserve, but from the many variables that make the pricing context: monetary, fiscal, strategic etc. Thus there is no one-to-one correlation between any given metric - price, money supply, fiscal balance, power position - and gold. The price is a...
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Why Bill Evans sees a Feb rate cut

imgres Here's the Westpac CPI forecast for next week: • Westpac is forecasting a meek 0.1%qtr rise (1.6%yr) in the headline CPI in the December quarter. • December is historically a seasonally soft quarter due, in part, to the further discounting of health costs, and pharmaceutical in particular, as more households cross the PBS threshold for assistance. The ABS seasonal factors suggest that this negative seasonality is worth –0.1ppts. Ergo, our seasonally adjusted forecast is 0.2%. • The core measures, which are seasonally adjusted, are forecast to rise 0.6%qtr/2.3%yr (on average) which...
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‘Draghi put’ floats miners as iron ore sinks (updated)

theark Is Mario Draghi a Chinese property developer? No? So why are Australian mining stocks off to the races today? The reason is that markets constantly mis-price and hence offer endless second chances to enter trades, in this case short, as iron ore goes one way, and major miners the other. BHP is up 2%, RIO up 1.4%, and FMG is up 2.3%. Here are the indexes:  The idiocy spreads are superbly named today as they widen: But juniors are taking it firmly in the team as ARI nicely demonstrated their imminent futures: There is nothing in the steel market to justify this price action and Dalian...
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China Flash PMI soft

China-slowdown Fresh from HSBC: Flash China Manufacturing PMI™ at 49.8 in January (49.6 in December). Two-month high. A bit above consensus for 49.5 but still...
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Australian credit spreads ease on ECBQE

images A solid fall in CBA CDS today from a recent high of 76.5bps to 68.5: It will be interesting to see how far it falls as Eurozone risk comes off the table, especially after Greece votes. Whatever is left is Australia's own deteriorating...
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Doomsday Clock ticking on climate

3 From the Bulletin of Atomic Scientists: Editor's note: Founded in 1945 by University of Chicago scientists who had helped develop the first atomic weapons in the Manhattan Project, the Bulletin of the Atomic Scientists created the Doomsday Clock two years later, using the imagery of apocalypse (midnight) and the contemporary idiom of nuclear explosion (countdown to zero) to convey threats to humanity and the planet. The decision to move (or to leave in place) the minute hand of the Doomsday Clock is made every year by the Bulletin's Science and Security Board in consultation with its Board of...
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Daily LNG price update (dead King)

1 The big news is King Abdullah of Saudi Arabia has died, from the FT: King Abdullah bin Abdulaziz al-Saud, Saudi Arabia’s ruler since 2005, has died aged 91, state television announced on Friday morning local time. A cautious reformer whose ascendancy to the throne helped restore some popular legitimacy to the al-Saud family, he steered the world’s largest oil exporter through some of its most fraught times. After Saudi nationals in al-Qaeda carried out the September 11 attacks on the US, he confronted a crisis in relations with Washington, a crucial ally and the main guarantor of the...
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Macro Morning (fly you fools)

marketmorning by Chris Becker Another QE cat is let out of the bag with the ECB announcing a 60 billion euro monthly purchase program overnight, as expected. The response on risk markets was one of relative calm, with almost all bourses up 1 to 1.7% across both sides of the Atlantic, the commodity complex including gold steady, haven haul-ass to the USD continued while European bond yields plummeted to new lows. The German 10 year Bund is now at 0.44%, falling 0.08%, with Greek 10 year yields falling half a percent to 8.5% as peripheral bond yields fell between 0.1 and 0.2% across the board. Here's a quick...
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ECB risk on

1 Good wrap from Chris...
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Santos to undertake white elephant review

elephant-clipart-black-and-white-13285-cartoon-elephant-clip-art-design From The Australian, the former stars are forming meteor shower: Santos posted record annual and quarterly sales revenue figures driven by the ramping up of production from the PNG LNG project as well as higher Cooper Basin output. ...Santos said it will be undertaking an impairment review in the wake of the lower oil price, which has slumped to six-and-a-half-year lows. As such, Santos said, the group’s financial results for the year, to be announced in February, may differ from the guidance provided today. Stand by for white elephant write...
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600 jobs go as Arrium shuts high-cost mine

url And so the great iron ore junior wind-down begins, from The Australian: Iron ore miner and steelmaker Arrium has said it has been forced to shutter one of its mines due to the sharp fall in the price of the commodity. Arrium said it would “mothball” its higher-cost Southern Iron operation in South Australia by the end of June and focus its efforts on its lower-cost Middleback Ranges operation. The move means it will now target around 9 million tonnes per year of iron ore sales, down from current annual production rates of around 13 million tonnes. Mothballing an asset means production ceases...
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How low will the Australian dollar go?

imgres Brace for this post. How low will the Australian dollar go? There are  limitless factors as always in forex forecasting but the MB five drivers model of value is as solid a method as any to make your punt. Those five drivers are: interest rate differentials; global and Australian growth (more recently this has become more nuanced for the Aussie to be more about Chinese growth); investor sentiment and technicals; and the US dollar There's is not much point in going through each in detail for a long range forecast, which is just throwing darts. I'll just give you my view straight...
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Australian dollar 70s with a bullet

$(KGrHqJHJE8FFywMRj1UBRkjyuwSRw~~60_35 Back to the 70s as markets price for a US dollar bull and RBA...
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On iron ore “morons”

Dumb-and-Dumber-jim-carrey-1 Charlie Aitken is angry, from The Australian: “WHAT the f. .k is wrong with these morons?” That’s the question Bell Potter’s head of institutional equities, Angus Aitken, is asking about Rio Tinto management — particularly CEO Sam Walsh — in a note to clients that is an early contender for rant of the year. Aitken is upset that Rio is using its position as the lowest cost producer of iron ore sold to the key Chinese market to pump out oodles of the stuff, keeping prices depressed. He reckons Rio should “tone down the production and the price will rise” — along with Rio’s...
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Daily iron ore price update (down she goes)

anvil Here are the iron ore charts for January 22, 2015: Paper is burning. Physical too. Though benchmark held above its December low at $66.30 while Qingdao fell through its. Of the three descending triangle patterns in the above three charts, two have now broken, the third must soon. Rebar and coking coal are still tumbling. We are into another leg down. Texture from Reuters: "Poor steel margins are hurting smaller steel mills in China, especially given the current state of tight credit where they have very little cash to be able to withstand losses," said a Singapore-based trader. And...
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The only chart you need to know why euro QE is a very bad idea

k9PkszMMpb-2 From the FT: The European Central Bank launched its long-awaited bid to revitalise the eurozone economy and counter deflation with a €60bn-a-month bond-buying programme that was far larger than investors had expected. ECB president Mario Draghi said the bank would buy more than €1tn in assets, including government and private sector bonds by September next year — and could extend the programme — in an attempt to raise eurozone inflation to its target of just below 2 per cent. And here is the one chart that shows you why this new action is a very bad idea: No, it's not the euro....
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Links 23 January 2015

reynard Global Macro/Markets/Commodities OPEC defends refusal to cut output - FT Cyber attacks are highest concerns at Davos - BBC News Swiss Franc shakes up trading floors - Euromoney When will oil find a bottom - Oilprice Asia/China Why we should study China's Machiavelli - The Diplomat Japan scrambling jets at cold-war levels - The Diplomat Europe/UK ECB to buy 60 billion Euro of QE assets each month until 2016 - ECB (Math: 1.2 trillion!!!) ECB leaves rates steady before monetary policy decision - Bloomberg Swiss yields at new lows at -1% - Zero Hedge UK targeting...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Central banks dominate the markets’ thought process more than ever and, despite the fact it’s only January, traders must already be exhausted by the barrage of news flow already seen this year. The central focus has been on preventing falling inflation, which has been predominately driven by a glut of savings and falling key commodities, with central banks having to use monetary policy to control prices. With many economies having structural issues, there is real scepticism the moves will do more than throw markets around, but central banks...
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The party line from Bloxo

1342757372-imglargephotoairguitar1 If you need a pep-up, click...
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Moody’s puts Origin on downgrade watch

imgres Another day, another downgrade for Australia's falling boom stars. From Moody's: Moody's has today placed Origin Energy Limited's Baa2 issuer and senior unsecured ratings, and its P-2 short term issuer rating on review for downgrade.At the same time, Moody's has also placed on review for downgrade Origin Energy Finance Limited's Baa2/(P)Baa2 senior unsecured and Ba1 preference stock ratings.Origin has a 37.5% interest in APLNG, which is developing a two-train LNG project in Queensland that has the capacity to produce up to 9 million tonnes of liquefied natural gas (LNG) upon completion. The...
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Fortescue plunges to new lows as iron ore set to break

MCDNOAH EC011 Yes, it was all good this morning with Super Mario's funny money blinding the sharemarket to what's happening in iron ore, with BHP, RIO and FMG soaring majestically into the firmament. But reality has struck this afternoon with Dalian iron ore futures rapidly unwinding gains for the big two (though still up). FMG meanwhile is down 5% to a new post-2009 low at $2.21, on its march back to $1.80 and restructuring. Here are the index charts: The idiocy spreads are taking a breather today but the trends are clear: The juniors are all down too, except ARI which may be benefiting from the...
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