Weekly RP Data Australian house price update

ScreenHunter_3870 Aug. 21 15.34 By Leith van Onselen In the week ended 21 August 2014, the RP Data-Rismark 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.43% (see next chart). Growth in this week's home values was fairly broad-based, with all capitals except Perth experiencing rises (see next chart). So far this month, home values have risen by 1.04%, with gains across the board but strongest growth in Sydney (see next chart): Values are up by 6.06% so far in 2014, with all major capitals except for Perth experiencing growth, and particularly strong gains...
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As China diets, one country is the biggest loser

imgres I've noted many times that the framework through which China is discussed in global markets is completely wrong. For three years, every time we've seen any slowdown in growth, Western "analysts" pile in with calls for broad-based monetary easing as they reference the need for "recovery". What is being missed is that China is not interested in a cyclical "recovery" given it will only lead to a bigger bust further down the track. China is engineering a structural adjustment away from credit-led growth and towards one driven by productivity. Today, Goldman Sachs describes it beautifully: Better...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston is Chief Market Strategist at IG Markets The USD is king again, with the USD index (a basket of currencies comprising predominantly made up of EURs) currently at the highest since 2013. We are approaching key support on EUR/USD, with the 38.2% retracement of the July 2013 to May 8 rally in focus at 1.3227 – a break here would naturally bring the 1.30 handle into play. USD/JPY has really blown expectations out of the water, and while I was expecting a move higher in the pair earlier in the week, I certainly wasn’t expecting a test of the 104 level. It’s worth remembering that...
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Why Goldman cut its last cut

imgres From Tim Toohey: Economy evolves as we expected, but RBA indicates a reluctance to ease In late 2013 we outlined our rationale for why the RBA cash rate would be lowered one final time in 2014. Our expectations of a sharp fall in commodity prices, a disappointing recovery in non-mining activity, the resumption of fiscal consolidation, the commencement of a multi-year decline in mining investment and delay in the ramp-up of LNG exports, a compression in labour income growth, a forecast peak in the inflation rate in mid-2014 and a rising unemployment rate were all key aspects of...
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UK rail shows pitfalls of natural monopoly privatisation

ScreenHunter_30 Jul. 02 10.28 Cross-posted from the UK Conversation: The announcement that rail fares will increase by up to 5.5% is yet another indictment of the failure of the country’s privatised railway industry. Railway privatisation was sold to the public on the basis it would “provide better value for money for the public who travel by rail”. The government’s White Paper in 1992 that heralded the break-up and privatisation of Britain’s state-owned railway network ultimately promised a lot but in reality delivered very few benefits for the passenger or the tax payer. In particular, as far as rail fares...
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Beheading WTF

sfda I wasn't going to touch this this morning given it was only a distant act of irresponsible journalism. But it's suddenly evolved into an outright assault on local liberalsim.   This morning the Daily Tele ran an egregious cover of the beheading of journalist James Foley by ISIS in Iraq. This stuff is not new. It's happened before. So, what does giving us all good dose of beheading achieve. Well...this: Horrific acts of terrorism such as the ''truly sickening and utterly evil'' beheading of journalist James Foley could happen in Western countries including Australia, Prime Minister Tony...
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The $20 billion medical research slush fund

ScreenHunter_3869 Aug. 21 13.17 By Leith van Onselen Finance Minister, Mathias Cormann, has given an interview on 2UE radio where the proposed $20 billion Medical Research Fund was discussed (my emphasis): STUART BOCKING: Joe Hockey keeps telling us it is about safeguarding Medicare. But not a single cent of that extra $7 will find its way back into the Medicare system. Instead $5 from that $7 goes into the Medical Research Fund. Would that not have been something we would have been better off setting down the track when we are back into surplus, we have paid off some of the debt? Would we not be better off using that $5...
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Key reversal in miners as iron ore futures fall

imgres It was all going so well! Some bloke recommended an FMG long and iron ore miners took off this morning, up 2% plus, ignoring the dire price action in the commodity. After all, it's only what they sell, it's not the actually the company! Alas, then came the China PMI and it all went horribly wrong! The seniors all turned south: As did the juniors: Of course, AGO doesn't fall these days because some dill is going to buy its broken business model, apparently (certainly the Chinese might but what's the rush?). The culprit was Chinese markets where the PMI shoved Dalian iron ore...
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Taper tantrum 2.0?

zdfs Last year's spectacular "taper tantrum" in markets is something of a misnomer. It was an episode of "risk off" behavior driven in part by the Federal Reserve move to begin tapering quantitative easing (QE). US bond yields suddenly soared as higher interest rates became an expectation. That saw capital repatriated from emerging markets economies to the US and, as the MSCI emerging markets (EM) index shows, equity was hit hard (so was debt and forex):   But there was another very important factor in the tantrum that is usually forgotten. The timing coincided with a sharp slowing in the...
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China Flash PMI splats

images101-200x200 The August HSBC Flash PMI is out and has come in weak at 50.3 versus 51.5 expected: “The HSBC Flash China Manufacturing PMI moderated  to 50.3 in August, down from 51.7 in July. Both domestic  and external new orders rose at slower rates compared  to the previous month. Meanwhile, disinflationary  pressure returned as input and output prices contracted  over the month. Today's data suggest that the economic  recovery is still continuing but its momentum has slowed  again. Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued  path. We think more...
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Kiwis continue to flood home from Australia (members)

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Statistics New Zealand has today released its permanent & long-term migration figures, which revealed that New Zealand net migration is booming and Kiwis continue to return home from Australia: New Zealand had a seasonally adjusted net gain (more arrivals than departures) of 4,500 migrants in July 2014. This is the highest net gain since the record of 4,700 migrants in February 2003. Net migration has increased in most months over the past year. The difference between the net gains in July 2013 and July 2014 was mainly due to: more non-New Zealand citizens...
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IMF endorses, AFR slams, macroprudential

imgres The kool aid is flowing today in Pyrmont: A new paper by the International Monetary Fund is likely to raise further doubts that Australia should impose stricter debt limits on banks and borrowers, because such tools have been found to be ineffective in preventing a crash in asset prices. And here's what the actual paper concluded: Recent theoretical advances and policy thinking support a role for macro-prudential policies in safe-guarding financial stability. Such policies can reduce the buildup of vulnerabilities and can help mitigate the impact of adverse cycles by encouraging a greater...
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Pilbara pop

images As usual, we must go offshore to find any decent Australian media and it's at the FT today that a great story is playing about the raging bust gripping Pilbara towns: In a dusty industrial estate next to the world’s biggest iron ore port in Western Australia’s remote Pilbara region, business has never been so bad. “The rents got so high in the town that when the boom ended, businesses began to die off everywhere,” says Jo Woodward, owner of Jems, a ramshackle building with an eviction notice stuck to its padlocked gate that was recently Port Hedland’s only legal...
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Rentiers gorge at Newman asset smorgasbord

ScreenHunter_05 Apr. 15 22.08 By Leith van Onselen It's good to see the nation's parasite industries feasting at the trough of the Queensland Government's planned $30 billion of asset privatisations: If it was not for Campbell Newman’s Queensland government, our investment banks, law firms and accountants wouldn’t know what to do with themselves. Bankers, lawyers and accountants are in Brisbane this week, doing their best to secure a role in the state’s mooted $30 billion asset sell-off. It is fair to say there have never been so many advisers crawling through Queensland Treasury’s Brisbane office, or groups...
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Citi: Dovish or bust at Jackson Hole

imgres From Citi: The consensus expectation is overwhelming that Fed Chair Yellen will deliver a dovish message at Jackson Hole.Macro investors have largely eliminated their short Treasury position and look to be long risk, particularly via equities and EM. FX positioning is long USD and long EM, the long USD largely because the euro zone economy is slipping again and the ECB is hinting at further ease. Our question is whether Yellen can be more dovish than what is now priced in, not whether she will be dovish on the Richter scale of dovishness. We would go into this week long USDJPY.  There is...
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World steel production slows sharply

Production 07 Fresh from the World Steel Association for July: World crude steel production for the 65 countries reporting to the World Steel Association (worldsteel) was 137 million tonnes (Mt) in July 2014, an increase of 1.7% compared to July 2013. China’s crude steel production for July 2014 was 68.3 Mt, up by 1.5% compared to July 2013. Elsewhere in Asia, Japan produced 9.3 Mt of crude steel in July 2014, the same level of production as in July 2013. South Korea produced 5.9 Mt of crude steel in July 2014, up by 6.2% on July 2013. In the EU, Germany produced 3.4 Mt of crude steel in July 2014, an...
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Buy iron ore, says some bloke

imgres From CNBC: "It is time to tactically get long iron ore swaps and Fortescue Metals," Conor O'Malley of independent research firm View from the Peak said in a note. While a weakening real estate market in China, which accounts for around two-thirds of global iron ore purchases, coupled with a flood of ore supply suggests further gloom for the market, O'Malley said this shouldn't put investors off. "Accepting all of the above, it is still time to buy iron ore exposure as we move into the Chinese winter," he said. But View from the Peak's O'Malley is confident that the market's dynamics...
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Grey gouge prepares to fight (members)

dfas By Leith van Onselen The lobby group representing older Australians, Council of the Ageing (COTA), will today launch a campaign against changes to indexing arrangements for the Aged Pension, which were announced in the May Budget. From The Australian: COTA Australia chief executive Ian Yates said the campaign, Hands Off The Pension, was in response to the feedback COTA was receiving from older people deeply worried about how they would l manage if the changes announced by Joe Hockey in the May budget came into effect... “The first stage of the campaign will be to target all senators to...
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LNG price slump signals warning for future

zdfad From LNGworldnews: Prices of spot liquefied natural gas for September delivery to Asia plummeted 33.1% year over year to an average $10.702 per million British thermal units (/MMBtu), the latest Platts Japan/Korea Marker (Platts JKM) for month-ahead delivery showed. The drop came as increased supply in the region continued to outweigh lackluster demand. On a month-over-month basis, the September JKM was down 5.8% from August. The data reflects the daily Platts JKM for September assessed between July 16 and August 15, and expressed as a monthly average. “The results of Australia’s North West...
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It’s called losing the global currency war (members)

.oub No doubt the Pasconomical RBA will today be celebrating a little move down in the Aussie as the US warms up to tightening next year. A job well done! Only one problem, the Australian dollar is falling FAR LESS SWIFTLY that any of our competitor countries. In terms of commodity producers, here's the USD versus the Aussie (in black), Brazil, Chile and South Africa: Notice the widening spread between us and the rest. And versus developed economy competitors Japan, Britain and Canada: A little better on the euro but now turned for the worse and buggered against the others. It is exactly...
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Rents set to tumble in Sydney, Melbourne ghost cities (members)

ScreenHunter_06 May. 06 09.27 By Leith van Onselen The AFR has produced a detailed report on the apartment glut hitting Australia's major capitals, whereby recent purchasers are finding it increasingly difficult to secure tenants and are having to either drop their asking rents or offer so-called New York-styled incentives, such as providing the first month free. The oversupply situation is reportedly worst in Melbourne: Central Melbourne has over 17,000 new apartments in the pipeline and 5260 are under ­consideration for development approval... “There’s chronic oversupply,” say Margaret Lomas, a founder of...
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Politico-housing complex sets course for final great inflation (members)

images Goldman Sachs gave up on its rate cut call for this year last night, beating me to it after the Glenn Stevens testimony yesterday which clearly showed the RBA is waiting for Godot. I no longer expect a rate cut before Christmas either given my outlook for iron ore isn't too dour until next year. However, MB is not lifting its easing bias, and still expects the next rate move to be down given the terms of trade shock will roll on and the risks presented in China are growing not receding. It's worth revisiting the key statements from yesterday by Captain Glenn: The low returns on offer on safe...
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Moody’s poops on QBELMI party

party_pooper   From Moody's today: Moody's Investors Service has today affirmedthe A2 insurance financial strength rating of QBE Lenders' Mortgage Insurance Limited (QBE LMI). At the same time, Moody's has changed the rating outlook to negative from stable.The rating action follows the announcement by QBE LMI's parent, QBE Insurance Group Limited (QBE, Baa2 senior unsecured rating) on 19 August 2014 of its intention to sell a partial stake in its Australian mortgage insurance operations in an initial public offering (IPO).The ratings of QBE Insurance Group Limited are not affected by...
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Grantham on the everything bubble

Today's Beta Desert Not sure what the original source for this is given the GMO quarterly newsletter does not appear to be out but the quote is priceless as usual from Jeremy Grantham: We have been writing quite a bit about why asset allocation today is in one of the toughest investing environments we’ve ever encountered. And it’s not just because we think equity markets are overvalued. No, we’ve seen that plenty of times before over the past decade or so. Remember the technology bubble of the late ’90s? That was challenging, sure, but what got lost in the shuffle was that while U.S. large-cap stocks were...
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Daily iron ore price update (the bleed) (members)

anvil That's a bad day. The 12 month swap took out its all time low. Dalian was weak too. Rebar futures were poll-axed and sit at 2991. That's free fall in the three main futures. In physical, rebar average held up but the backwardation is widening and it should keep falling too. Spot iron ore cracked and looks destined to retest its June low below $90. Rumours are that port stocks are selling well below $90 so more downside in spot still looks good. The BDI cape resumed its rocket, for what it's worth! Right now technicals and shitty demand are giving the bird to seasonality. The...
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