Charlie Aitken goes bearish

bear_market3 by Chris Becker One of the biggest permabulls out there, Bell Potters Charlie Aitken, has clanged the warning bell, from Livewire: I am increasingly concerned that cracks are appearing in US equities and Wall St itself will become the next trading victim of the resurgent US Dollar and an increase in volatility. On that basis I am going to issue a correction warning on US equities this morning. What will be the catalyst for this correction? My answer is consensus US earnings downgrades driven by the strong US dollar. When EPS downgrades come through in multi-nationals, large cap tech, and US...
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Macro Morning

marketmorning by Chris Becker We're at that stage in market psychology where even good(ish) news gets talked down and converted into a further excuse to sell, plus the usual scaremongering over terrorism, Ebola and wearing a burqa (niqab). Risk off is the meme of the moment, with US and European stock markets falling, the latter down almost 1% with the former taking bigger falls. There was also a race to bonds with US Treasury Notes (10 years) yields falling to 2.4% with similar moves in German Bunds and UK Gilts. As the QE go-go juice program nears its end, risk markets are looking decidely skittish, and...
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RBA: demand-side stimulus can’t fix housing affordability

ScreenHunter_92 Oct. 02 09.56 The Reserve Bank has this morning appeared before the parliamentary inquiry into housing affordability, and hosed-down demand-side measures aimed at improving housing affordability, noting that with Australia's constipated supply system, measures that add to demand will simply be capitalised into higher prices: ...housing prices and affordability are affected by the interaction of both supply and demand factors. The factors that I have mentioned so far, such as household incomes and the cost and availability of finance, primarily affect the demand side of the market. In the short to medium term,...
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Stock on market fell sharply in September

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen SQM Research has just released its stock on market figures for September, which revealed an unusual 2.4% decline in for sale listings over the month, with listing levels also down 1.1% over the year: As shown above, Sydney has led the charge, with listings there down a massive 6.9% in September and by 10.2% over the year. By contrast, listings in Darwin were up 0.2% over the month and by 25.4% over the year. According to SQM managing director, Louis Christopher: “The falls recorded in September are abnormal as listings normally rise at the start of spring. It...
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We’ve reached peak mining employment

Mountain_Climber_Scaling_Peak_10950000837 Cross posted from Peak Jobs Analysis by Shane Granger I am going to commence with a prediction. Australia reached its Peak Jobs Mining moment in May 2012 when the industry recorded a total workforce of 275,500. The more than 10% decrease in mining employment in the most recent ABS update to 237,400 gives the first clear indicator that the sector is looking to return to a >200,000 labour force, not seen since November 2010 and faster than previously expected. The month of September 2014 was a bad one with another 2,500 jobs lost. This is the third month, out of the previous four where more...
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Falling commodity prices to crunch national income

ScreenHunter_07 Nov. 26 16.13 By Leith van Onselen Yesterday evening, the RBA released its commodity price index for September, which registered a large 1.4% fall in Aussie dollar terms and larger a 2.4% decline in SDR (currency weighted) terms: Preliminary estimates for September indicate that the index declined by 2.4 per cent (on a monthly average basis) in SDR terms, after rising by 0.2 per cent in August (revised). The largest contributor to the decline in September was the price of iron ore. The base metals and rural commodities subindices declined during the month. In Australian dollar terms, the index declined by...
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Daily iron ore price update (BHP)

113px-BHP_Billiton.svg by Chris Becker Its National Day holiday in China with markets closed so no iron ore price data. Instead I'll update Houses and Holes so-called "idiocy spread" of the ASX listed iron ore miners, both senior and junior. First though, a quick look at weekly Chinese port inventories which remain stable and elevated: The relative performance of the junior miners vs the spot iron ore price: And the senior miners:   And the "idiot spread" where it looks like FMG still has some catching up to do:   Adding to RIO's bravado over expanding its iron ore operations...
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The pros and cons of foreign property investment

ScreenHunter_06 May. 06 09.27 By Leith van Onselen The chief of one of China's largest developers, Country Garden's Johnson Zhang, has played down concerns that Chinese investment into Australian housing is driving-up home prices and shutting-out locals, instead arguing that there is plenty of second hand stock available for locals. From The AFR: “I feel this debate has errors,” he said. “Remember, foreign investors including Asians can only buy new properties. There is a huge second-hand market with enough housing there for locals”... “We just don’t think there should be a fear of foreigners coming to...
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Renminbi selling on HK crisis

100Yuan Cross posted from Investing in Chinese Stocks The offshore yuan market is heading lower once more. Keep an eye on the Asian Dollar Index. The yuan is by far the largest component. It isn't a volatile index, but it also isn't far from the major support level of the past 4 years or so. If ADXY breaks, the equilibrium will be broken. The US Dollar Index is very close to a post 2008 high as well and the euro down at 1.25 isn't in good shape either: I'm not pressing the panic button, but a chill wind is blowing. There was a recent discussion of the offshore and onshore renminbi and how...
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Links 2 October 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: ’Dr. Doom’ Roubini reveals his black swan scenarios - CNBC IMF calls for shake-up of bank executive pay - Financial Times High yield bonds are falling - Business Insider A poor end to a bad investing month - Bespoke Will rising rates hurt REITS? - A Wealth of Common Sense Expectations for the rise in rates pummels REITS - Wall Street Journal Why is volatility a proxy for risk? - StreetEye When bond kings manage too much money - SSRN North America: ISM Manufacturing survey declines, but shows continued growth - Calculated Risk U.S....
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ASX at the close

ASX_logo by Chris Weston, IG   It’s been a strange day in Asia, with traders having to deal with a barrage of Asian economic numbers, as well as preparing for key upcoming events. The market was keen to look at the Japanese Q3 TANKAN report and, while the headlines will state that corporate Japan is happy to increase capital expenditure plans by 8.6%, there are some concerning numbers to focus on too. Some confidence was seen in large manufacturing but the same can’t be said for the outlook, with those surveyed painting a less rosy picture. The fact that we saw household spending (released...
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Governments must work together to solve housing supply

ScreenHunter_18 Jul. 05 10.22 Cross-posted from The Conversation: Is there a national housing supply problem? No, but there is a problem of access to affordable housing in certain regions. Last month, Reserve Bank Governor, Glenn Stevens commented on the need for “animal spirits” to respond to the exceptionally accommodative monetary policy setting and boost the supply of housing. More than 12 months have passed since the RBA last adjusted the cash rate to the current record low of 2.5%. This has stimulated investor demand, particularly in metropolitan Sydney and (to a lesser extent) Melbourne. Yesterday’s Reserve...
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Watch out for the super gouger “savings” meme

definitely no super for you by Chris Becker Uh Oh. Get your antennae up when the super-duper fund managers start using the "need to put more savings into super" meme to increase their ticket clipping activities. From news.com.au:   The head of the country's largest wealth manager has warned Australians will end up poorer and paying more tax to fund pensions if something isn't done to boost superannuation savings. AMP chief executive Craig Meller says a lack of savings will leave Australia with a fiscal challenge far more serious than the budget shortfall currently facing the Abbott government. "We...
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Australia’s “low” mortgage growth is still a big problem

ScreenHunter_86 Oct. 01 12.52 By Leith van Onselen Business Spectator's Alan Kohler has continued his schizophrenic take on Australia's housing market, today arguing that concerns about excessive speculative activity in the housing market are not warranted because credit growth is so low: There’s talk of macroprudential policies to limit investment lending, but no one is rushing into this, and for good reason: there isn’t really a problem. There were three booms in property investment during the 1990s, when investor housing credit grew at between 25 and 30 per cent per annum. The current growth rate is anaemic by...
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Aussie cracks 87 again to near four year low

cracked dollar by Chris Becker The anemic retail sales figures this morning which followed a good Chinese manufacturing PMI print has cracked the Aussie below 87 cents vs the USD again: Its now sitting on crucial support - just above the January lows of this year and near its four year low. Given the RBA meets on Tuesday next week, we could be at a critical juncture but I would caution theres a bit too much bearishness in the air (I'm going to cover my intraday short soon as its way oversold, but leave longer term positions open). Most funds would be happy with this level and not any further...
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Engineering construction hits mining cliff

ScreenHunter_08 Nov. 07 08.52 By Leith van Onselen The ABS has released engineering construction data for the June quarter of 2014, which revealed a 2.0% seasonally adjusted fall in the value of work done over the quarter, and a reduction in the construction pipeline. According to the ABS, the total value of engineering construction in real seasonally-adjusted terms fell by 2.0% in the June quarter and was down by 3.8% over the year, with both the private (-1.6%) and public (-3.5%) sectors falling over the quarter (see below chart). You can see the big uplift in activity from 2003 as the commodity price boom...
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Rio gambles on the long run

australia gambling luck dice by Chris Becker You've got to give Rio Tinto the gong for chutzpah, with reports this morning that in the middle of a price crash and a burgeoning supply glut, its looking to add to supply by opening a new iron ore site in the Pilbara. After its magnificent efforts in destroying the MRRT alongside its foreign owned allies like BHP, I'm sure they must make the urinals at their Perth offices low to the ground. From The Australian: In a move that will sustain pressure on smaller producers and the iron ore price, Rio has sought permission from federal regulators in recent days to build a new...
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QE to end like tears in rain

tears in rain by Chris Becker The circa $4 trillion experiment in monetary easing by the US Federal Reserve will finish (for now?) at the end of this month. The Fed published its schedule of purchases last night: In case you've been living on Mars, QE (rounds 1, 1.5, 2 and 3) has had a slight impact on the US stock market: I don't want to sound downbeat or prophetic, but the Fed wants to end this on a Tuesday - in...
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Retail sales disappoint in August

ScreenHunter_02 May. 25 22.30 By Leith van Onselen The Australian Bureau of Statistics (ABS) has just released retail sales figures for the month of August, which registered a 0.1% seasonally-adjusted rise in sales over the month, well below economist’s expectations of a 0.4% increase. Annual sales growth clocked in at a solid 5.1%: The below chart maps out seasonally-adjusted sales growth by state on a monthly and annual basis: At the state and territory level, positive monthly retail sales growth was recorded in Victoria (+0.7%), Western Australia (+0.1%), and the Northern Territory (+1.7%), whereas sales...
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China manufacturing PMI expands

China_PMI by Chris Becker Just in, the official China Manufacturing Purchasing Managers Index (PMI) for September, printed an expanding 51.0, bang on expectations and only just below last months reading of 51.1 The ASX200 has reacted positively, but the AUDUSD is not impressed. As David Scutt at Marketscuttlebutt points out, the acceleration in the PMI is at odds with the declining industrial production prints: Breaking down the gauge output, new orders and new export orders all continued to expand while backlogs and inventories contracted at a faster rate than August. Elsewhere employment...
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US energy production saves the day

stock-vector-red-stamp-saved-guaranteed-by-christ-63971605 by Chris Becker There's something to be said for the notion that what is saving the US's proverbial bacon at the moment is not monetary policy from the Fed but its huge internal oil/gas boom. The last couple of months have seen domestic production in the US almost equalling the powerhouses of Saudi Arabia and Russia, and is likely to exceed the former in the months ahead. This "revolution" goes beyond providing the domestic economy with lower energy prices, but has long term ramifications across the globe. From the FT: The US is overtaking Saudi Arabia to become the world’s largest...
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Chief scientist strikes appropriate balance on CSG

ScreenHunter_76 Oct. 01 10.14 By Leith van Onselen The New South Wales Chief Scientist, Mary O'Kane, last night delivered her Final Report of the Independent Review of Coal Seam Gas Activities in NSW, which apears to have struck an appropriate balance between the economic opportunities of CSG and health and environment concerns. The report, which is based on 19 months of investigation, found that most risks to health and the environment from CSG can be managed, although "unintended consequences" are also inevitable, due either to natural disasters, human error, or accidents, which necessarily requires that CSG activities...
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Manufacturing recession deepens

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen The Australian Industry Group (AIG) has released its Performance of Manufacturing Index (PMI) for September, which revealed an accelerating contraction in manufacturing activity, with the index declining by 0.8 to 46.5 (a score below 50 means that activity is contracting): - Respondents to the Australian PMI® indicated that despite a welcome depreciation in the Australian dollar since early September, it remains high and continues to support intense import competition and weigh heavily on exports. The winding down of Australian automotive assembly and the ongoing...
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Euro unemployment remains high

5733482-ski-resort-in-the-high-mountains-with-ski-lift by Chris Becker Last night saw the release of monthly unemployment statistics for the EU, and specifically Germany and Italy alongside the monthly CPI print. Although there has been almost no monthly change the readings are still way too high (even for the Germans): German unemployment (September) at 6.7% (no change on last month) Italian unemployment (August) at 12.3% (down from 12.6% last month) Eurozone unemployment (August) at 11.5% (no change on last month) No surprise and no change because there still remains no effective action on solving the structural unemployment situation...
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Macro Morning

marketmorning by Chris Becker We're getting into the juicy part of the week when some significant data prints are ramping up volatility across the markets along with the usual end of month/end of quarter shakedown. Its still all about USD strength as this chart of monthly performance shows (via Forexlive): It all began with a Euro smackdown from just below 1.27 to below 1.26 on poor data with a Similar action from Sterling when after a false break (got caught in that, bugger) we saw a large selloff and a confirmation of inherent weakness in Cable following the post-referendum elation. Here's...
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