S&P warns on increasing mortgage risks

ScreenHunter_30 Oct. 10 06.15 By Leith van Onselen Standard & Poors (S&P) has released a new report warning of increasing risks for the Australian housing market due to rising investor participation, slowing income growth and softening employment prospects, which could create mortgage repayment pressures for recent, highly leveraged, purchasers: All else being equal, falling interest rates have brought improvements to lending serviceability and, after a brief period of balance-sheet restoration, renewed lending demand, with Australian households--and investors especially--at the forefront. These easing conditions,...
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Victorian iron ore dreams eat dust

imgres This one was always in the deep hopium category. From the ABC: The company proposing a new iron ore mine at Nowa Nowa says it will have to re-evaluate the economics of the project. Eastern Iron had hoped to export the ore from Eden but the owner of the bulk wharf facility, South-East Fibre Exports (SEFE), has withdrawn its offer. SEFE exports woodchips and timber from the wharf but it announced earlier this year it will stop sourcing timber from East Gippsland. The managing director of Eastern Iron, Greg De Ross, says he is investigating a smaller naval wharf near Eden or other port options...
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GS: High dollar to force rate cut

images From the AFR: The Reserve Bank may be forced to cut the official cash rate before the end of the year to beat back of a wall of foreign money that has driven the Australian dollar higher, according to Goldman Sachs Asset Management’s bond expert Phil Moffitt. Mr Moffitt, a 30-year veteran of the bond market and one of Goldman’s most senior Australian partners was speaking at the sidelines of the $935 billion asset managers’ client conference in Sydney. He said the confluence of weak domestic growth, an expected fall in inflation as the carbon tax is discarded and the high currency was...
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New home sales have peaked (members)

zxfgfda The HIA is out with its new home sales index: New home sales took a step higher in the month and quarter of June 2014, said the Housing Industry Association, the voice of Australia’s residential building industry. The HIA New Home Sales Report, a survey of Australia’s largest volume builders, shows an increase of 1.2 per cent in the month of June 2014 and a rise of 2.0 per cent in the June quarter. Sales of multi-units drove the monthly result, surging by 15.9 per cent. Detached house sales fell by 1.0 per cent in June. “Detached house sales increased by 2.6 per cent in the June...
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Consumer confidence highest since January

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has more than recovered from its Budget-induced slump, rising another 2.7 points in the week ended 27 July to 116.2, and is now at its highest level since late-January and some 2.7% above its long-run average reading of 113.2 (see next chart). According to ANZ chief economist, Warren Hogan: While the improvement in confidence was relatively broadly based last week, households’ perceptions about ‘financial situation compared to a year ago’, a subindex most closely correlated with consumer demand, has...
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No Nick, FHBs should not be allowed to use super (members)

ScreenHunter_3508 Jul. 29 09.47 By Leith van Onselen Independent senator, Nick Xenophon, has announced that he will introduce legislative changes in the Spring session of parliament to allow first home buyers (FHBs) to access their superannuation savings to pay a house deposit: Such a scheme successfully operates in Canada, called Home Buyers’ Plan, leading to improved housing affordability... In Canada up to $25,000 can be accessed for a first home, and it’s made a dramatic difference for housing affordability there. However, Senator Xenophon will be moving for changes to Superannuation Act 1976 to allow the...
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LNG price crash persists

GLNG_chart2 From Reuters today: Asian spot liquefied natural gas (LNG) prices edged lower last week as buyers low-balled sellers amid ample supply from Papua New Guinea and Australia, while bets of a winter price pickup spurred some into floating storage plays.Spot LNG prices for September delivery slipped slightly to $10.50 per million British thermal units (mmBtu) last week, compared with $10.60 per mmBtu on the week ended July 18."I think buyers are bidding around $10 for Sept delivery, perhaps up to $11 for October. So there may still be further downside, or we could have reached the floor," one trader...
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Platinum founder warns on property “act of faith”

ScreenHunter_3505 Jul. 29 08.50 By Leith van Onselen The founder of Platinum Asset Management, billionaire investor Kerr Neilson, has released an interesting report warning about Australia's frothy house price valuations and the risks of a correction once "conditions change, [and] a lot of the assumptions are found wanting". The report highlights four "facts" about Australian housing: 1. Returns from housing investment are often exaggerated and flattered by inflation. 2. Holding costs of rates, local taxes and repairs are estimated to absorb about half of current rental yields. 3. Long-term values are determined by...
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Business warns on Work for the Dole

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Business groups have raised concern that the Abbott Government's planned expansion to its "Work for the Dole" program (outlined yesterday) could create a deluge of sham job applications. Under the beefed-up scheme, the unemployed would be required to apply for 40 jobs a month in order to continue to receive benefits. According to The Guardian: The Australian Chamber of Commerce and Industry’s director of employment, education and training, Jenny Lambert, said she understood the government had set the job search target to encourage activity. “[But] what we don’t...
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Residex: House prices cooling (members)

ScreenHunter_07 Mar. 20 20.55 By Leith van Onselen Residex has released its home price results for June, which revealed an acceleration of growth at the national level, with national house values rising by 0.92% over the month and unit values rising by 1.66% (see below tables). In the 2013-14 financial year, dwelling values rose by 7.09% (houses) and 7.70% (units) at the national level, led by Sydney (15.37% houses; 13.30% units) and Melbourne (8.32% houses; 6.04% units). According to Residex founder, John Edwards, despite the solid increase in values in June, the Australian housing market is cooling (see Chart...
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Chinese developers pull up iron ore miners (members)

wfwq The Wall Street Journal has a story today on the sudden and steep rally in Chinese shares, especially large developers: As China's real-estate market slows, investors are turning bullish and buying up stocks of large property developers, betting they won't only ride out the storm but also grow. The MSCI China Real Estate Index, which tracks the stocks of mainland developers, has surged 16.5% from the start of July through Friday, on pace for its best month in nearly three years, as local governments have started to ease restrictions on housing purchases to boost sales. The index remained down...
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Daily iron ore price update (closed)

,jhb Singapore was closed yesterday so there is no spot or 12 month derivative prices. Dalian 6 month iron ore futures jumped 1.5% to 689 yuan: The BDI cape fell a little more to near record lows and rebar futures didn't do much. Stimulus hopes seem to be winning over fundamentals at the moment and there's not much else one can say. The often bullish Clyde Russell puts a brave face on things: One thing has become clear from the latest production reports from the big three iron ore miners: They appear intent on ensuring their dominance by boosting low-cost output...The three global iron ore...
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Mining confidence hits rock bottom

sdS The annual Newport Consulting mining outlook study is out and is sickly reading. Future outlook reaches a new five-year low. An overwhelming 93 percent of mining leaders in this year’s report were not optimistic about their growth prospects for the next 12 months – up by more than 50 percent compared to last year. Most hold low hopes of the sector resuming large-scale projects in the next 12 month, and only 7 percent believe they will see some large-scale projects return during this time. New federal government embraced, but industry wants more action. A sizeable 70 percent of mining...
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Polls swing to Tony

5707-vote-2pp From Roy Morgan: The L-NP (45.5%, up 2%) has increased its support after the Abbott Government’s strong response to the downing of Malaysian Airlines flight MH17, but still trails the ALP (54.5%, down 2%) on a two-party preferred basis according to today’s multi-mode Morgan Poll conducted over the last two weekends  –  July 19/20 & 26/27, 2014. This Morgan Poll on voting intention was conducted with an Australia-wide cross-section of 3,296 Australian electors aged 18+. Despite the L-NP gaining on a two-party preferred basis, primary support for the ALP improved to 39% (up 0.5% from...
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More thin objections to macroprudential

ScreenHunter_3268-Jul.-11-11.45 From the AFR today, Massey University’s director of the centre for financial services and markets, associate banking professor David Tripe reckons on New Zealand macroprudential that: “I think the RBA can be a little more sensitive to public opinion; in fact the RBNZ can strike you as singularly insensitive,” he said. “Every time you intervene you create some market distortions; the question is whether the distortions are worse than the problem you are trying to solve.” He also said: “If and when the restrictions are eased, there will be a surge of activity by first-time home...
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Links 29 July 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: Small caps have been underperforming around the world - FT Alphaville War and Markets - FT Alphaville Will rising interest rates really hurt the stock market? - Barry Ritholtz Is the Fed fueling a giant stock market bubble? - USA Today Are asset managers systematically important? The pros and cons - FT Alphaville Why people believe hedge fund managers - Medium North America: Three reasons Janet Yellen remains dovish - Sober Look An FOMC preview - Calculated Risk What happens to population patterns if the drought continues unabated in 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 Asian markets are off to a fairly good start to the week, despite some soft leads from US trade. While the economic calendar is relatively quiet today, it seems China has taken on the jump in industrial profits and run with it. There have also been some reports suggesting China is considering opening the capital account to allow access between the Shanghai Composite and Hang Seng in a plan labelled ‘Shanghai-Hong Kong Connect’. China released its June industrial profits data yesterday and the data showed a 17.9% jump...
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Adani’s monster coal project gets go-ahead

imgres The Guardian is reporting that: The Australian environment minister, Greg Hunt, has approved a $16.5bn resources project that will lead to the creation of the largest coal mine in Australia, and one of the largest in the world. Hunt has imposed 36 conditions, primarily aimed at protecting groundwater, on the Carmichael coal mine and rail project, which will dig up and transport about 60m tons of coal a year for export. The huge Carmichael project, overseen by the Indian mining company Adani, will consist of a network of open cut and underground mines in the Galilee Basin region of central...
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Pascometer burns red on neutral cash rate

imgres30 Weeoo, weeoo, weeoo. Well, it's confirmed now, interest rates aren't going to get anywhere near 4% in this cycle. The Pascometer today quotes Shane Oliver to argue that that's where they're headed: As you watch you may wish to recall Shane Oliver's strange bubble two-step. In 2011, we had the same dance, with Dr Oliver describing a bubble beautifully yet unable to use the term. In 2008, Dr Oliver reckoned it was a bubble, and the valuation is much the same today. When rates hit 3% and it starts to come apart it will no doubt be a bubble again! But enough truth. Let's just be...
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Build up or out? Auckland needs both

ScreenHunter_02 Jun. 14 21.43 By Leith van Onselen Hayden Duncan, the head of New Zealand's largest real estate company, Harcourts, has provided an interview to Interest.co.nz, in which he expressed alarm at Auckland's expensive home prices and urged the city to build up instead of out in order to cope with population growth and improve housing affordability: The average price of homes sold in Auckland by Harcourts last month was $721,553... "There's no doubt that's a frightening number," Duncan said. "It's not being driven by cheap money, it's not being driven by reckless borrowing, it's not speculation," he...
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Chanos, Garnaut: China anti-corruption serious

Jim-Chanos-inside-small From Bill Bishop at Sinocism today: Over the weekend John Garnaut, Fairfax Media's Asia Pacific editor and star China correspondent, posted interesting comments on Twitter in reaction to a recent Financial Times column arguing that Xi’s corruption crackdown would fail: Methinks the world is still under-estimating Xi Jinping's corruption purge bc Xi sees himself as clean http://on.ft.com/1tzxhQ8 And: under-estimating Xi's resolve, his own sense of moral standing and consensus that CCP was rotting to its core 25 months ago Bloomberg documented the wealth of Xi’s extended...
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Iron ore futures fly on stimulus hopes

logo Via Forexlive, China Securities Journal  reports on the price monitoring center of the National Development and Reform Commission: Chinese economy is expected to improve further in the second half of 2014 Inflation is seen stable – full year CPI growth estimated at around 2.3% Said the PBOC should not boost overall liquidity any more via monetary policy given the fast M2 growth at the end of June Said the government should look to gradually relax or totally lift housing purchase limits to prevent a sharp and overly-rapid fall in prices The Chinese press is reporting that as many as...
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Coalition to pull back military pork?

ScreenHunter_3500 Jul. 28 11.40 By Leith van Onselen I noted previously how the Coalition had flagged spending tens-of-billions of taxpayer dollars to local defence manufacturing, comprising locally built armoured vehicles, submarines and warships. Today, it has been revealed that a defence discussion paper to be released tomorrow by Defence Minister, David Johnston, will question the notion that Australia’s next fleet of submarines should be built at home. From The Canberra Times: “There is significant debate emerging about the future submarine and whether it should be built in Australia. This debate must consider the...
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Coalition declares war on the unemployed

ScreenHunter_3499 Jul. 28 09.49 By Leith van Onselen The Abbott Government is set to expand its controversial "Work for the Dole" program to include all job seekers between the ages of 18 and 49 years of age. Under the new program, which is set to begin from 1 July 2015, those aged 18 to 30 will be required to work 25 hours per week for six months out of 12, while people aged 31 to 49 will have to work 15 hours for six months out of 12. Those between 50 and 60 will be required to participate in an approved activity for 15 hours per week for six months every 12 months, but will have the option of participating in the Work...
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Has China shut the money laundering pipe?

HSBC money laundering Apparently HSBC has shut off its Chinese yuan exchange service: I can't find any external corroboration of this, nor any new news about the money laundering scandal in China so any shift in the environment around Chinese money flowing into Australian real estate is best treated as apocryphal at this...
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