Links – Anzac Day 2014

anzac They went with songs to the battle, they were young. Straight of limb, true of eyes, steady and aglow. They were staunch to the end against odds uncounted, They fell with their faces to the foe. They shall grow not old, as we that are left grow old: Age shall not weary them, nor the years condemn. At the going down of the sun and in the morning, We will remember them. Lest we forget... Global Macro / Markets: Unwilling Trans-Pacific Partners - WSJ GE’s $57 Billion Cash Overseas Said to Fuel Alstom Deal - Bloomberg Apple Stock Split Removes Obstacle to Inclusion in Dow -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets The bulls will take a flat session in US stocks given the weakness seen in new home sales and further escalations in the Ukraine. Still, most equity traders would have been looking forward to trade in the post-market; given the cracking numbers from Facebook and Apple, our desk certainly saw a sizeable pick-up in activity in these trader favourites. Both stocks have rallied strongly in the post-market and especially with Facebook it appears that this is name that has good short-term upside potential. With Facebook and Apple having...
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Don’t shed a tear for the taxi cartel

ScreenHunter_24 Jun. 25 08.09 By Leith van Onselen Business Day's Michael Pascoe has written a cracking article today (worth reading in full) questioning whether the New South Wales Government will have the cojones to side with the "consumer, competition, innovation and improved productivity", or will side with the rent-seeking taxi industry, and seek to shut-down Uber's ride sharing operation: A very large amount of money is at stake... there were 5,647 plates just in Sydney last year with each plate worth the better part of $400,000. Call it $2.2 billion. Then there’s Cabcharge, the biggest of the networks, with a...
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WA shows leadership on tax reform

ScreenHunter_2162 Apr. 23 13.54 By David Collyer, cross-posted from Prosper WA Treasurer Mike Nathan has heard the call from REIWA President David Airey to end Stamp Duty and fund this by removing exemptions from State Land Tax, according to today’s West Australian newspaper. I warmly welcomed Mr Airey’s comments yesterday because they rose above the traditional selfish tax-shifting nonsense industry leaders usually offer. The WA government is keen too. “Treasurer Mike Nahan will consider alternatives to stamp duty after conceding it was one of the nation’s least efficient taxes. “The real estate sector...
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RP Data weekly Australian house price update

ScreenHunter_03 Apr. 02 11.00 By Leith van Onselen In the week ended 24 April 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, fell by 0.09%. It was the first weekly fall in values in eight weeks (see next chart). Values fell in two major capitals but rose in three (see next chart). Values are up 0.46% so far in April, with values rising in three major capitals and falling in two (see next chart). Values are now up 4.02% so far in 2014, driven by big gains in Sydney and Melbourne, with Perth values falling: Over the past 12 months, home...
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Abbott senior advisor sees global cooling

wsdf From Giles Parkinson at Renew Economy: Maurice Newman -- who heads a triumvirate of climate change sceptics heading key Abbott advisory bodies (Dick Warburton on the renewable energy review and David Murray on banking) -- was interviewed on ABC TV’sLateline program on Tuesday night. He said, in part: "We’ve had, since 1996, 17.5 years where the temperature has shown no measurable increase. In fact, it can be argued since 2003, it has cooled off somewhat." Newman was recently challenged by Nobel laureate Brad Schmidt to agree to a $10,000 bet on Newman’s prediction that the world would...
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What if the US does not raise interest rates?

forward guidance The basic assumption in Australian monetary policy right now is that the US recovery will push up interest rates in the medium term and that will, in turn, close the yield spread between Australian assets and those in the US, dragging down the Australian dollar. This forecast relies largely upon the expectations of the US Federal Reserve. But a chart by BofAML shows that may be a more perilous leap of faith than one might expect: ...in each of the last three business cycles, the market consistently mispriced the Fed, expecting rate hikes much too early. Let’s take a look at the forward curve...
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More on the biblical iron ore flood

io From Westpac's Robert Rennie: Last week's iron ore quarterly production data from Australia's 'big three' miners proved to be something of a mixed affair. As the first chart below notes combined WA iron ore production from BHP, Rio and FMG came in at 127mt, down from 131mt in the previous quarter. This represents a 2.9% drop in production versus the 4th calendar quarter of 2013. This took the annual rolling sum of Australian iron ore production to a fresh record high of 520mt. Ordinarily, this might be a source of concern for some. However, iron ore production in Australia tends to be...
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Repairing infrastructure can fix the economy

ScreenHunter_2175 Apr. 24 12.35 By Leith van Onselen Larry Summers, former secretary of the Treasury for President Clinton and the director of the National Economic Council for President Obama, has written a great article arguing for a substantial expansion of public infrastructure investment across the US in a bid to boost the economy: The American economy is not performing to the satisfaction of the American people... The single most important step the US government can take to reverse these discouraging trends is to mount a concerted, large-scale program directed at renewing our national infrastructure. At a time of...
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CSJ: Yuan depreciation to protect against QE

imgres China Securities Journal editorial via ForexLive: Recent yuan depreciation will provide a cushion and leave room for future increases should China face intensive capital inflows again if both Europe and Japan expand their quantitative easing programs. Said the Chinese economy can’t cope with any more sharp appreciation because of weak exports so depreciation provides a cushion for possible inflows, noting signs that funds are already returning to emerging market economies and a rebound in China’s foreign exchange purchase number in March. The PBOC fixing for the yuan yesterday was the...
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Taxi rent seekers hit back at Uber competition

ScreenHunter_2173 Apr. 24 11.03 By Leith van Onselen I wrote last week how Uber was taking the fight to Australia's taxi cartel by expanding its offering in Australia, introducing a range of budget vehicles that will undercut traditional taxi fares, and how consumers stood to benefit from more reliable, clean and affordable transport options. As expected, the rent seeking taxi industry is opposing competition, claiming that Uber is endangering customers and demanding greater regulation. From The SMH: The NSW Roads and Maritime Services has requested a meeting with Uber to discuss how the NSW Passenger Transport Act applies...
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Goldman: Mining’s future is cost cuts

GS Here's a timely report by Goldman Sachs supporting my spray at iron ore delusion this morning: Time to digest an investment binge in excess of US$2 trillion We have long argued that commodity supply cycles can be divided into investment and exploitation phases that create a full 20-30 year supply cycle. In the decade to 2012, commodity markets were in an investment phase, characterized by rising prices and, more importantly, attractive returns for producers that induced investment in new capacity, which eventually overwhelmed demand growth and created an exploitation phase, where the market...
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House prices rocket, but “no boom” says APM

ScreenHunter_15 Mar. 05 15.42 By Leith van Onselen Australian Property Monitors (APM) has released its March quarter house and unit price results (below), which recorded a 2.0% increase in house prices over the quarter at the national capital city level, and a 1.3% rise in national capital city unit prices. In the year to March 2014, APM recorded an 11.3% increase in national capital city house prices and an 8.3% rise in unit values. Looking at the capital city breakdown, you can see that Sydney and Melbourne led house price growth, with prices jumping by 3.1% and 2.8% respectively over the quarter. Adelaide (+1.3%)...
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Iron ore enters late cycle delusion

.kjbjub Delusion appears to have seized iron ore markets. In recent days we've had Padbury Mining and its fantastic backer, Colin Barnett selling the same revival of Oakajee via Asian dough and now BHP is out selling the idea of more greenfields developments for the Pilbara. BHP Billiton iron ore president Jimmy Wilson at the official opening of its new Jimblebar mine reckons: ...greenfield mine developments are still possible in Western Australia this decade, even though the sector has crimped capital spending to shift focus on boosting production from existing assets. ...Jimblebar delivers 35 million...
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Hockey palms super reform to second term

images By Leith van Onselen Being a Budget commentator is never dull. After expending significant effort this morning slamming the Government for failing to include Australia's egregious superannuation concessions in its "war on entitlements", Treasurer Joe Hockey has now flagged changes to superannuation and an increase in the preservation age, which will be taken to the next Federal Election. From The AFR: Treasurer Joe Hockey has flagged changes to superannuation tax concessions and an increase in the preservation age over the medium term... Mr Hockey said on Thursday that while the government...
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RBNZ hikes, gets hawkish

ScreenHunter_2167 Apr. 24 08.26 By Leith van Onselen The Reserve Bank of New Zealand (RBNZ) has once again hiked the official cash rate (OCR) by 0.25% to 3.00% on the back of growing strength in the New Zealand economy. From the Statement: New Zealand’s economic expansion has considerable momentum, with GDP estimated to have grown by 3.5 percent in the year to March. Growth is gradually increasing in New Zealand’s trading partners, but inflation in those economies remains low. Global financial conditions continue to be very accommodating. Prices for New Zealand’s export commodities remain very high, though auction...
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Mirabile dictu: A mention for manufacturing!

gva The wholesome MB effect on the mainstream echo chamber continues today at Business Spectator as Rob Burgess picks up the manufacturing banner: Commodity producers are price-takers, and Australia’s shortish terms-of-trade boom (which is now ending) has given us the false impression that we have a sustainable competitive advantage in the things that have made us rich: predominantly iron ore and coal. ...Sorry to dampen that romantic nationalism, but we can’t. A trade surplus is one thing, but to pay for our imported food, wine and clothes (and everything else) sustainably we need a current...
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Joe outlines Budget pain for all except the rich

ScreenHunter_152 Nov. 07 10.05 By Leith van Onselen Joe Hockey has outlined the Government's program of expenditure cuts in a bid to return the Federal Budget to surplus. There will be tighter means testing of welfare benefits, along with co-payments for some government services (e.g. GP visits), all of which are designed to reduce real spending growth to 1.75% per annum, eradicate the budget deficit in five years, and deliver a surplus equivalent to 1% of GDP by 2023-24. It's a monumental goal, which will be without precedent, according to Fairfax's Peter Martin: By way of comparison spending grew 7.6 per cent per year...
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Public servant fat cats won’t share Budget pain

ScreenHunter_23 May. 30 09.38 By Leith van Onselen The Australian Public Service's (APS) top brass is sadly starting to look like their private sector brethren, where excessive pay is the norm. While an axe is taken to rank-and-file public servants and pay rises are being held back, top executives of the APS won't share the pain or lead by example, enjoying 5%-plus pay rises this year. From the Canberra Times: Australia's top public servant will get a $42,000 wage rise in July as industrial strife looms over pay rises for the Commonwealth's 160,000 rank-and-file bureaucrats. Ian Watt, secretary of the Prime Minister...
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Holden, Ford subsidies to shift to tanks?

ScreenHunter_2166 Apr. 23 16.27 By Leith van Onselen The Abbott Government continues to take contradictory positions on industry support that risks undermining its legitimacy. After talking a tough on assistance to the car industry, and arguably hastening its demise, the Coalition has ear-marked tens-of-billions of taxpayer dollars to local defence manufacturing, including a $10 billion program for 700 locally produced armoured vehicles, as well as locally designed and built submarines for around $40 billion, and a multi-billion dollar warship program. While I acknowledge that there is an argument for retaining our own...
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Corrupting Piketty in the 21st century

images The media attention surrounding French economist Thomas Piketty’s new book Capital in the 21st Century is growing ever more fervent. Here are my two cents. To me three things are clear to be about this book. First, it is a timely reminder that distribution of resources within society matters. This is especially important for an economics profession who has often ignored the issue and whose core analytical framework is a completely inappropriate tool for its analysis. Second, and this is quite a surprise, the mainstream economics profession seems to be rather accepting of the book, which,...
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Baptists and bootleggers back gas lie

imgres A strange alliance has formed between manufacturers being killed by higher gas prices and the gas industry which is doing the killing. Both want more gas. The Australian Petroleum and Exploration Association (APPEA) continues its campaign expand coal seam gas production: Today’s draft decision on regulated gas prices by the Independent Pricing and Regulatory Tribunal (IPART) highlights the urgent need for increased natural gas exploration and production in NSW, the Australian Petroleum Production & Exploration Association (APPEA) said in a statement. Australia’s second biggest...
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Will a US shale bust save Australian LNG?

ifu1NaUawHck Bloomberg has a credible assessment today of US shale longevity that is worthwhile vis our own LNG boom: The problems arise when you look at how quickly production from these new, unconventional wells dries up. David Hughes -- a 32-year veteran with the Geological Survey of Canada and a now research fellow with the Post Carbon Institute, a sustainability think-tank in California -- notes that the average decline of the world's conventional oil fields is about 5 percent per year. By comparison, the average decline of oil wells in North Dakota's booming Bakken shale oil field is 44 percent per...
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Curtis Island module mechano

Picture-of-the-Day-LNG-Module-Arrives-at-Curtis-Island Courtesy of Bechtel, here's out latest LNG major projects...
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Andrew Forrest as Nietzschean ubermensch

imgres The entrepreneur as Nietzschean ubermensch is one of the more unfortunate features of contemporary business journalism. It is generally an ignominious experience for the writer, misses the real tensions and lessons in the entrepreneurial process and, worse, universally suppresses the function of markets in favour of the incumbent, ironically debilitating the core usefulness of capitalism. Today we have an example at the AFR where Julie-Anne Sprague offers some nice texture on Andrew Forrest but misses the real point of the story of Fortescue: In a rare one-on-one interview, Forrest opens up...
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Daily iron ore price update (Goan delays)

edfgvwed Here are the iron ore price charts for April 23, 2014:   More paper market weakness though tailing off. Rebar futures managed another small bounce. Physical too is eroding but the Baltic Dry capesize component is up another 3%, and is not at rock bottom levels, suggesting buyers are around. The news of week is get more textured too with India's return to exports not imminent. From Bloomie: “The Supreme Court order is too little too late,” said Fonseca, referring to the 20 million tonne-a-year mining cap imposed by the top court. The threat of job cuts still looms...
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Links 24 April 2014

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets: Who’s in the Bubble Basket? - sl-advisors.com North America: US housing sector slumps in March - The AFR New-Home Sales in U.S. Unexpectedly Slump to Eight-Month Low - Bloomberg For some U.S. states, budget woes are on the horizon - Fortune An unemployed aid program could help millions. Why aren’t more states using it? - Washington Post Banks’ Profit Measure Hits Decade-Long Low - Wall Street Journal Obamacare’s Medicaid expansion just got cheaper for states - VOX Europe: Accounting rules unravel the mysteries of Britain’s economy -...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets US and European markets have naturally taken heart from the raft of M&A deals (and speculation) in a number of geographies. With sentiment where it is, new all-time highs in the US benchmark look relatively assured. There will be a time to be tactically short US markets, but with the trend clearly higher, companies beating the relatively low earnings expectations, M&A activity lifting sentiment and the prospect that we get a decent weather-related payback in the economic data flow in the near term  all suggests that the time is not...
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Real Aussie house prices 1.8% below peak

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen RP Data’s Cameron Kusher has produced an interesting post this afternoon on Australian housing values in the wake of today’s March quarter CPI release from the ABS: Over the 12 months to March 2014, combined capital city home values have increased by 10.6% however, when you adjust for inflation the rise has been a lower 7.5%.  Across each city the rate of capital growth over the year is somewhat lower when you adjust for inflation and markets such as Hobart and Canberra which have recorded low levels of value growth have actually recorded value falls. Home...
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Joint Strike Fighter targets rent

unnamed From Crikey's Bernard Keane comes a tale of Lockheed Martin entitlement in Australia's quest to dominate SE Asian skies: The problem is, the F-35 program is not under control, even according to the US government. In September, thePentagon Inspector-General issued yet another in a long line of scathing reports about the program, having found over 700 separate problems with the program's administration that led to over 300 findings. "The F-35 Program did not sufficiently implement or flow down technical and quality management system requirements to prevent the fielding of nonconforming hardware and...
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Bassanese sees rate cuts!

imgres According to David Bassanese: As a result, the RBA is likely to remain comfortable in retaining its neutral policy bias. Indeed, if the Australian dollar remains uncomfortably high and business confidence continues to wind back, the RBA remains well placed to even consider a return to an easing policy bias. To my mind, the RBA has already been too spooked by the recent narrowly based rise in Australian house prices and was too quick to abandon its jawboning strategy of talking down the Australian dollar. The result is that there has been across the board strength in the Australian dollar so far...
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Roy Morgan consumer confidence bounces

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has been released for the week ended 20 April, which registered its first rise in four weeks, jumping 3.4 points (+3.0%) to be above its long-term average (113.0) but well below the highs reached after last year’s Federal Election: The improvement in the week was driven by strength in consumers’ perceptions of ‘economic conditions next year’ and ‘financial situation compared to a year ago‘; with the latter sub-index most correlated with household consumption growth. Below tracks the ANZ-RM...
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PBOC: No change to “prudent policy bias”

china-slow-down-red-flag-sign From ForexLive: People’s Bank of China (PBOC)  will cut the deposit reserve requirement for rural financial institutions: 2% cut for rural commercial banks and a 0.5 percentage point cut for rural cooperatives Will take effect from Friday This takes the reserve requirement for rural commercial banks to 15%; rural cooperatives to 13% (compared to most large Chinese institutions, required to maintain a 20% deposit reserve ratio) Note: From MNI, quoting an unnamed source: “In 2010, the PBOC launched the differential management of the reserve requirement for banks. This reserve cut for...
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REIWA: replace stamp duty with land tax

ScreenHunter_2162 Apr. 23 13.54 By David Collyer, cross-posted from Prosper Yesterday REIWA president David Airey issued a call in the West Australian newspaper for the WA government to abandon Stamp Duty and fund this by removing the many wheezes from the tattered State Land Tax. Hooray! Airey says: “It’s time to recognise that stamp duty on property as a means to raise revenue is clumsy, inefficient and out-dated. “REIWA calls on the Government to have a serious look at broadening the land tax base to all property owners with a view to abolishing stamp duty altogether. “The benefit to property owners is the...
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Australian dollar timbeeeer!

imgres The Aussie is still falling now, down a cent on the day: This looks to me a pretty decent move in the making. After all, if there's no inflation then there's no expanded carry coming. On the downside, there are few serious supports before 92 cents: It would probably take more bad news or a turn in the global "risk on" phase to take it below 92 cents but here's...
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