ASX at the close

ScreenHunter_31-Jun.-04-16.424-200x200 Stan Shamu for Chris Weston, Chief Market Strategist at IG Markets The positive momentum witnessed post Barack Obama’s speech in US trade has extended into the Asian session, and seen most of the major Asian bourses edge higher. While US equities finished the session in negative territory, this is actually quite deceiving as markets managed to gain significant ground from their lows. Equities sold off heading into an Obama speech on the Russia situation, but the speech didn’t have an impact as it merely reiterated what markets already knew. We had already seen a degree of caution in...
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Kohler slams the super gravy train

ScreenHunter_2952 Jun. 24 12.41 By Leith van Onselen Business Spectator's Alan Kohler has written a stinging critique of Australia's superannuation system, slamming the high level of fees due in part to compulsory contributions and the lack of price regulation: A chart in the Financial System Inquiry’s interim report shows that since 2009 the average super fund has increased in size from $1.5 billion to $3.5bn, while the average fee has fallen from 1.3 to 1.2 per cent. That means the average fees received by each fund have doubled from $20 million a year to $40m. What better business can there be? Contributions are...
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Captain Glenn on the crisis

imgres Below find Captain Glenn's much anticipated speech this afternoon at the Anika Foundation. He's sorely let down markets which were primed for some more dollar jawboning and the currency popped 30 pips during the speech. It is good to see the Captain not using the egregious "North Atlantic" framing of the crisis any longer, as well giving some credence to Austrian economics. Thank you for once again coming to support the Anika Foundation[1], on the eighth of these annual fundraising occasions. Once again my topic is ‘challenges for economic policy’. It always seems as though there are some...
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Phat Dragon sees Chinese housing shortage

sger From Westpac's Phat Dragon: House prices remain under downward pressure across the board, with the negative impulse gaining further strength through June. The net balance of 70 cities seeing month-onmonth price appreciation in new dwellings has declined sharply to -67.1% (9 rising, 56 declining), not far from the previous cycle trough of –75.7%. The secondary market ‘cracked’ earlier but it now appears to be stabilising at a weak absolute state. Elsewhere in the space, Phat Dragon observes that year-ended sales growth is down, but by a lesser margin than in May, a comment that also...
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“Mad” Adam versus Ross Garnaut

mismatch "Mad" Adam Carr today launches a broadside at Professor Ross Garnaut: Australia does not have a debt problem. Professor Ross Garnaut should stop saying that we do. ...Professor Garnaut’s Melbourne Economic Forum appears to have adopted an unnecessarily alarmist position on Australia, our prospects and our prosperity. Debt is only one aspect of their alarmism, but it’s an important one as we come into what may be a rising interest rate environment. Professor Garnaut’s view, for instance, is that the country is ‘unusually vulnerable to international interest rates rising above their...
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Should Australia invest in mass public transit?

ScreenHunter_3402 Jul. 22 11.12 By Leith van Onselen Business Spectator's Rob Burgess has written a spirited post slamming the Abbott Government's roads fetish and advocating a massive lift in public transport investment: In the past decade there has been a shift back to public transport as sprawling Australian cities make commuting by car more expensive -- both in terms of fuel, time spent battling congestion, and skyrocketing parking costs... Infrastructure Australia... recommended recently: “Australia's transport systems are especially struggling ... with public transport growing rapidly in recent years and reaching...
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China leading index bounces

images17 I can take or leave these leading indexes but the Conference Board version for China just posted a strong result, up 1.3% in June, to 294.0. Forexlive reports that: Follows a 0.7% increase in May and a 1.1% increase in April Five of the six components contributed positively to the index in June Andrew Polk, resident economist at The Conference Board China Center in Beijing: “June’s pickup in the leading economic index for China is unlikely to be fully felt until the final quarter of the year, even though slight monetary loosening and better export performance could underpin more...
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Should markets be discounting conflict?

583381c7-3d7b-42a3-b6d4-cd1eada2c822 Chief Economist at Saxo Bank, Steen Jakobsen, thinks they should: “There are causes worth dying for, but none worth killing for” – Albert Camus The world is increasingly becoming engaged in civil wars and general turmoil where Camus' words could and should play a central but never will. This article is one of the hardest to write as war is never about right or wrong. They are per definition always wrong and extremely personal and emotional. The fact is, however, that we need to put "the risk of wars" into our macro outlook as they are increasing not only in intensity but also in the numbers...
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BDO fast retail index firms

kj With the solid bounce in Roy Morgan consumer confidence over the past two weeks, I thought I'd take a look at the BDO fast retail index, which tracks same store sales week-on-week. Here's the headline index showing an slightly positive ongoing struggle for momentum   Fashion especially appears to be struggling:   Other too: But furniture and homewares are riding the bubble to post-Budget recovery: And so too recreational goods: You might describe that a positive a non-discretionary...
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Consumer confidence recovers post-Budget losses

ScreenHunter_15 Mar. 18 16.24 By Leith van Onselen The ANZ-Roy Morgan Research (RMR) consumer confidence index has now more or less recovered from its Budget-induced slump, rising another 4.8 points in the week ended 20 July to 113.5, and is now basically in line with its long-run average reading of 113.7, and only some 2.2% lower than April’s pre-Budget high (see next chart). The below chart, which plots the most recent Westpac-Melbourne Institute’s Consumer Sentiment index against the ANZ-RM Consumer Confidence index, highlights the mood of the Australian consumer more clearly: Expect next month's Westpac...
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Modelling falling living standards

sock By Leith van Onselen The inaugural Melbourne Economic Forum was held yesterday, which brought together a wide range of economists to discuss the Australian macroeconomic outlook and policy choices following the end of the mining boom. The discussion was centered around new modelling by the Centre of Policy Studies at Victoria University, which found that real per capita incomes and consumption will continue to slide for the rest of the decade and beyond as the fallout from falling commodity prices and the terms-of-trade takes hold, with real income per Australian forecast to be around 2%...
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WSJ gives Australian LNG a deserved caning

MK-CO009A_AUSGA_G_20140721120604 From the WSJ today comes an overdue examination of the Queensland LNG white elephant: Big export projects each need thousands of wells to be viable. Unexpectedly weak flow rates at some wells have forced companies deeper into the Australian Outback to hunt for resources. The process harnesses sophisticated computer-directed drills that pinpoint pockets of gas trapped in coal seams buried hundreds of feet underground. Because salt water mixed with the gas is sucked out to depressurize the seam, the drilling process risks contaminating groundwater used by farmers. ..."There's still uncertainty...
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Mirabile dictu: MS says short Fortescue

anvil Now they're getting it. From Morgan Stanley today: We believe the share price will fall in absolute terms over the next 15 days. This is because the stock has traded up recently, making short term valuation much less compelling. Data points from the Chinese steel industry suggest the recent restocking cycle may be concluding. Total steel inventory of traders and mills combined has dropped below 12 days of production, down from the peak of 17 days in February, which suggests demand has eased as we enter the slow season. Also 37 days of iron ore inventory at ports is the normal operating level...
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Blundell-Wignall warns on China bubble

imgres From the AFR, Australian economist Adrian Blundell-Wignall, special advisor to the OECD’s Secretary-General on Financial Markets, and one smart cookie: “What people are doing when you have zero interest rates around the world is they go into higher risk assets and at the moment it’s basically corporate debt in Asia. There has been a huge super highway of money flowing into emerging market credit because it has got much higher yield. The question is whether this super highway is a dual carriageway.” ...“Things are fine at the moment, but when people try to get out of it, you get big...
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Kiwis flood home from Australia (members)

ScreenHunter_10 Mar. 29 12.46 By Leith van Onselen Yesterday, Statistics New Zealand released its permanent & long-term migration figures, which revealed that New Zealand net migration is booming and Kiwis are returning home from Australia: In the June 2014 year, permanent and long-term (PLT) migrant arrivals numbered 100,800 (up 14 percent from 2013), the first time more than 100,000 arrivals have been recorded in a year. Migrant departures numbered 62,400 (down 22 percent). This resulted in a net gain of 38,300 migrants, the highest annual gain since the October 2003 year (39,300)... In June 2014, New Zealand had...
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Bloxo on Australia’s kick-arse Asian future

Capture HSBC's Paul Bloxham has nice report out today looking at the Asian integration trends that are a "key reason for our continued optimism about Australia’s growth prospects": In the past six years, Australia’s economy has grown 16%. By comparison, the US has grown 6%, while the British economy has not grown at all and Europe’s is 2% smaller. China's economy has grown by 65%. No other OECD economy has a larger export exposure to Asia than Australia and the largest part of this is to China. Around 73% of Australia’s exports go to Asia, and we expect this to rise to 80% by 2020e. Three...
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PC slams Abbott’s paid parental leave scheme (members)

ScreenHunter_3079 Jul. 02 09.04 By Leith van Onselen The Productivity Commission (PC) has today released its Draft Report into Childcare and Early Childhood Learning, which explicitly criticises the merits of Tony Abbott's Paid Parental Leave (PPL) scheme, and recommends that some of the $5.5 billion earmarked for PPL would be better spent on childcare: The Commission considers that it is unclear that the proposed changes to the Paid Parental Leave scheme — which is more generous than the existing scheme and that recommended in the Commission’s 2009 report on paid parental leave — would bring significant additional...
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It’s crazy politics alright, Dick

11_166 There's nothing like the smell of a plutocratic barny in the morning. From the chairman of the Government's Renewable Energy Target (RET) review, Dick Warburton: The RET review, due to be handed to the federal government in the next two weeks, is expected to reduce the minimum amount of Australia’s electricity required to be produced from clean energy sources such as wind and solar. ...He said the legislative barriers in the Senate, with major budget items being vetoed by the Palmer United Party and others on the cross benches, did not augur well for possible changes to the RET. “It would be...
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Is it time to revisit gold? (members)

imgres The gold market is both simple and complex. It is basically a play on the prevailing reserve currency of the day. It used to be the reserve itself, and is now the unreserve, the shadow of intrinsic value against which the extant hegemonic currency is measured. That's the simple part. The complex part is that any attempt to calibrate the relationship between gold and the reserve currency is doomed if it looks for a one-to-one relationship. Gold is a relative measure of the market's view of the stability or otherwise of the reserve, including all of those variables that go into such an...
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Daily iron ore price update (property problem) (members)

dgrwa Here are the iron ore charts for July 21st, 2014: Paper markets have broken down. Rebar futures especially have choked. Physical is not much better. Spot is falling, port stocks rose slightly on the week and are rock solid, and the BDI cape fell another 3%+ to only 20 points above its post-GFC low. We are signalling a renewed destocking here on two factors. The property slowdown is not under control and we've entered the Q3 seasonal construction slowdown. Texture from Reuters: Stocks of five major steel products held by Chinese traders fell to 13.13 million tonnes on Friday,...
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China wrangles the property monster

Godzilla_king_kong_small A new article from the People's Daily warns that property price falls are set to continue: National house prices continued to weaken basic foregone conclusion. Recently, the National Bureau of Statistics released the June 70 cities housing sales price changes, according to preliminary estimates, the first, second and third tier cities in new commercial housing prices were mostly slightly lower, and the front line north of Guangzhou-Shenzhen prices also fell, adding price ranks. Experts said that in the credit crunch, high inventories in the background, the property market will take time to digest...
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The lesson of Wenzhou

imgres Cross-posted from Investing in Chinese Stocks Wenzhou businessmen have been going bankrupt, on the lam, or jumping off of buildings since 2011. One major reason, perhaps the reason, is the decline in real estate prices. Wenzhou's prices have fallen for more than 30 straight months and prices are down 20% city-wide, leaving plenty of room for much deeper declines in many areas. Prices for commercially built new homes peaked at ¥33289 per sqm in 2011; in January 2014, there were at ¥19374 per sqm, a drop of more than 40% and prices have fallen further in 2014. In Wenzhou, it is...
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Sanctions won’t work on Russia (members)

images From MB's well-placed Russian source. Yesterday the Western press declared that Russia's billionaire's were in a panic about their wealth, thereby implying that sanctions are an effective form of negotiation with the Great Bear. Russia's richest businessmen - I have met some of these people and numerous numbers of their underlings, and there is not (with the arguable possible exception of Anatoly Chubais) anything about any of them which makes them worthy in any way of being Russia's richest businessmen - apart from the fact that they have shown themselves better at killing, embezzling, bribing...
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Links 22 July 2014 (members)

ScreenHunter_01 Apr. 02 06.19 Global Macro / Markets / Investing: The Fed’s intervention in biotech and internet stocks - Financial Times Speculators cut bets on higher oil prices - Financial Times Regulators split on too-big-to-fail banks - Financial Times Hedge funds braced for some of their worst returns since 2008 - Financial Times Emerging market debt issuance hits record high - Financial Times The Boom Is Coming, and Sooner Than You Think - Bloomberg View North America: The Chicago Fed National Activity Index slowed in June - Calculated Risk How much are demographics affecting wage growth figures?...
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ASX at the close

ScreenHunter_31 Jun. 04 16.42 Chris Weston, Chief Market Strategist at IG Markets Weekend news flow has centred predominately on geo-political events and while clarity and answers have been hard to come by markets have opened on a fairly sanguine note. The search for answers about flight MH17 will continue, and as such, Russian assets will remain out of favour, but judging by price action on Friday and today’s economic data, corporate earnings could be the bigger driver of markets. Developed market bonds stole the limelight last week and the depressed long end of the curve is still one reason why USD bulls can’t go...
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