Inflation stirring

Find above details of today's ABS CPI release for the March quarter. Broadly speaking, I have two observations. First, if you look at the above bar graph, it is entirely clear that this is an outlying result vis-a-vis the trend. Roughly 23% of the jump came from fruit and vegetables alone, which is clearly flood related and temporary. Much more worrying, however, and far from temporary, was the 21% contribution from oil prices, which we saw last week are already hitting producer prices. So, if fruit and vegetables are the only exceptional item then it looks rather like CPI has suddenly...
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Trading Day – 27th April

Not my desk... Summary After peaking sharply on the open, the market has settled slightly up after the almost week long Easter/ANZAC break, at 4918 points. NOTE: as I was compiling this report, the PPI figures came out and the market has sunk over 20 points after midday. The short term trend remains weak but positive on momentum, as it reverts to the medium term trend (note red line on graph below). BHP weighs on the market (down 0.6%) whilst the banks are mixed, but generally up. [embed]http://www.scribd.com/doc/54017452/Trading-Day-27th-April-2011[/embed] Click on full screen icon to view report or...
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Victorian troubles

Vic In my recent budget analysis piece I spoke about public final demand. Forecast 6: Public final demand, having risen strongly in 2009‑10, is forecast to moderate in 2010‑11 and 2011‑12, reflecting the unwinding of the Government’s fiscal stimulus measures and a broader moderation in spending growth across other levels of government. Analysis: I am going to give them a tick for this one, but at the stage the country is at in the economic cycle I am not sure that is a good thing. With the loss of government stimulus spending and the mandated aim for a surplus budget this was a bit of a no...
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Pettis on yuan

From Michael Pettis this week: On Friday last week the National Bureau of Statistics released the eagerly anticipated first quarter data.  As has been widely reported, first quarter GDP was up 9.7% year on year. CPI inflation 5.4% in March, a 32-month high, and up from 4.9% for the first two months of this year.  For the first quarter as a whole CPI inflation was 5.0%.  PPI inflation for March was 7.1%. Here is what the NBS said: According to the preliminary estimation, the gross domestic product (GDP) of China in the first quarter of this year was 9,631.1 billion yuan, a...
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April 27 links: Of greed and fools

Down: metals, energy, grains Flat: $US, Aussie Shock! Greek deficit gets worse. Calculated Risk Spain too. Business Insider Shanghai breaks 50 DMA. Bespoke What Bernanke should say. Gavyn Davies US is slowing. Gavyn Davies Grantham on the commodity paradigm shift. Alphaville Son of Wallis lite draws to laughable conclusion. SMH Manufacturers turn to protectionism. The Oz Miners want Chinamen laborers. The Oz Pity the negatively geared. Glenda Koporaal Please Oz too expensive for Poms....
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Boomers need out while Sydney joins in

retirement-homes Well it seems the last fortress of denial is starting to see some real estate trouble with the Daily Telegraph reporting recently on Sydney's market. Sydney's great property divide is being turned on its head, with the wealthy Eastern Suburbs suffering a shock 15 per cent slump in property prices, while values in the city's west continue to soar. Property monitors and analysts are stunned by the sharp reversal in fortunes in traditional real estate hot spots, claiming the nine-month plunge has wiped billions from the collective wealth of the city's richest homeowners. And it could be just...
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“Negative equity” hits thousands of WA homeowners

Earlier this month, the Western Australian (WA) Chamber of Commerce noted that the WA economy had fallen into technical recession, experiencing two successive quarters of negative economic growth in the last six months of 2010:  Western Australia is generally regarded as Australia's economic engine room with its booming resources sector, but its manufacturing and retail sectors are struggling. The WA Chamber of Commerce says the state's economy experienced a technical recession in the last six months of last year. "The state of Western Australia very much mirrors the broader national...
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April 26 Links: A few surprises

DE Again Week ahead for the DOW Calculated Risk Up: gold, metals, grains Down: energy, Aussie  Flat: $US Analysis Bloomberg , Reuters Syria Crisis BBC US mulling sanctions Reuters Yemen still bubbling CNN China raising capital requirements again Bloomberg Gillard is there ABC Oz Government confident of free trade deal with Sth Korea ABC Japan's car production down 60% ABC Portugal's debt even bigger than thought SMH Budget Watch: Swan's secret $15.5b TheOz Labor has wasted mining boom Andrew Robb (Liberal) US New home sales up, market weak Reuters But almost...
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A warning to Canberra

From the ANU's East Asia Forum comes this sobering assessment of the challenges facing the Chinese economy: China recently wrapped up the National People’s Congress (NPC) and Chinese People’s Political Consultation Conference (CPPCC) with the approval of the 12th Five Year Plan (FYP) (2011-2015). At the top of the new blueprint is a commitment to transforming China’s development model from the current low-efficiency, high-growth model to a more balanced model that seeks to address a whole range of increasingly important concerns. The targets of the new model include economic growth,...
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More on NCCP (Updated)

Kathy_and_Chris I first mentioned National Consumer Credit Protection back in early January when I suggested it could have an effect on the housing market. This certainly reads like it should improve credit standards, especially if any of these things were actually allowed previous to this new legislation; and we applaud this legislation if this is the case. However, if that is true then this is pretty terrible news for lenders and the housing market because it just adds to the other lack of drivers for new debt issuance I then mentioned it again a couple of times in February when the first pieces of anecdotal...
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Here comes the budget pain

Last week's article, Hooked on property, provided some detailed facts and figures from RP Data highlighting how Australia's state and local governments are addicted to property-related taxes, and discussed how these revenues are expected to fall precipitously as housing sales decline and prices stagnate. The article concluded with the following statement: Over the past decade, Australia’s state and local governments have rode on the back of skyrocketing property prices. The revenues received have funded all kinds of expenditure – from public servants’ salaries to health care, schools and...
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Easter Musings: China Protests, RBA remuneration, Other Follow-ups

EasterEggs As you can probably tell we are all having a bit of a break over Easter. But just while I have a bit of time before the Easter Bunny arrives and my yard apes turn into sugar crazed lunatics I thought I would share a few stories I am watching. China Protests Over the last couple of days there has been a strike by truck drivers in China . At least hundreds of truckers held protests over rising costs in China's commercial metropolis, illustrating the potential for inflation to fuel unrest in the world's No. 2 economy, a response China's leaders fervently seek to avoid. The protests began...
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Australian Dollar Weekly Wrap

aud3 Another stellar week for the AUD, if you are a bull or long, and another new post float high and weekly close at 1.0738. The combination of a weak USD after the warning by Standard and Poors about the future of the United States AAA rating combined with solid terms of trade data and a general ebulllience in markets. I would normally expect pre-holiday trading to be thin and after such a good run higher I would have expected a counter-trend move as traders and investors took money off the table. But that was not the case this week as many markets across the globe pushed sharply higher after a...
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Looking beyond interest rates

ScreenHunter_02 Apr. 22 19.55 Sam Birmingham runs a top quality networking site for young professionals called WeBe, which provides up-to-date information on financial matters, work-related issues, lifestyle news and reviews, and current affairs and opinion pieces. WeBe also provides a platform where members can have their voices heard, express opinions and share ideas with other like-minded Young Professionals. Yesterday, Sam published an article on WeBe questioning if Australia has become too obsessed with interest rates and whether the RBA has the right tools at its disposal. Sam’s article is reproduced below for...
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Easter Friday Links: AUD High

DE Again, Up: gold, metals, energy, ore , grains Aussie Up too , with a new new new record Down: $US Analysis Bloomberg Obama looking for fraud in US energy Reuters Robots to do US dirty work in Libya News.com.au As Libyan rebel push on BBC $1b axe to fall on  Oz Fed public service  SMH Origin signs $90b LNG deal SMH Citi helping with Greek Probe WSJ. An e-mail stirred debt restructure rumours ? Have they looked at their own bonds ? It is a farce Alphaville Domain plays catch up on the FHBG Domain AUD love fest Elizabeth Knight We love term deposits...
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Triguboff sounds the alarm

triguboff I haven't mentioned Harry Triguboff previously. For those who aren't aware he is also known as "High rise Harry" and is the head of Meriton. Meriton are the largest developer of apartments in Australia with around 50,000 under their name. Harry is a huge supporter of "Big" Australia and is obviously a person who would usually "talk up" property.  This penchant for property has lead Harry to make so pretty poor calls on Australian property in the past, such as this one from late 2009 about the future of the Gold Coast. High-rise king Harry Triguboff, confident that the Brisbane and Gold Coast...
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Will the RBA step in front of the train?

I’ve raged against the fact that the AUD is hollowing out our import competing industries and our non-mining exports but today, as the AUD careens towards 1.10, I want to focus on whether the RBA is going to do anything about it.   Just now, the dollar is being buoyed by two major themes. The $US is falling and the investment world can't get enough of Chinese growth. With its rich commodity exposure, Australia is a leveraged bet on China. Throw in high interest rates, low sovereign debt and rocket-like technicals and we have the recipe behind the current tearaway rise. So against this...
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Trading Day 21st April – green across the board

Not my desk... Note: anything in quotation marks is a reference to earlier notes that I've made. These comments are read in context of an investor/trader with a medium term timeframe. The S&P/ASX200 Index (and others) Its green across the board: all stocks, futures and commodities are up and gold has surpassed $US1500 and change - but paradoxically it makes a great time for Australian buyers to step in. I'll be posting on how Australian's can hedge and possibly profit from gold (using ETF's and other vehicles) over the Easter break. The S&P/ASX200 is back to its medium term trendline after...
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Woolies vs Coles

There has been a lot of commentary about Coles' improved performance when compared with Woolworths'. Stephen Bartholomeusz enthuses about the "renaissance of Coles" although he is careful to  say that Woolworths is doing alright as well.  Elizabeth Knight enthuses about the "dazzling sales number from Coles raises the stakes in the mother of all supermarket battles between it and Woolworths". Brokers, meanwhile, are getting sceptical about Woolworths' strategy. But what is not getting much attention is that this is an uneven competition. One company, Woolworths, is just a retailer and mainly in...
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Dow set to pop the champagne

What a difference a couple of days can make. Earlier this week we had global inflation concerns, with a tightening from China weighing on markets. This was followed by growing sovereign concerns on restructure talk in Europe’s periphery and S&P’s downgrade to the outlook for the US’s sovereign debt rating. While these fundamentals are still ever present, which was evident overnight by the sharp move wider in bond spreads for Europe’s periphery, markets, with thin volume, are clearly trading in the here and now.   Another round of earnings reports, which in general were better than...
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Houses and holes forever!

The press is full of condemnation of Wayne Swan's preliminary Budget speech yesterday. Personally, it didn't strike me as so awful. In parts, it was a pretty candid take on the conundrum facing the economy: But this phase of the mining boom, mining boom mark II, will be very different to mining boom mark I, the boom my predecessor presided over in the middle years of last decade. Today I want to explain these differences because they matter greatly for our Budget. First of all, mining boom mark II carries with it some of the legacies of the GFC. This is a feature of the economic landscape that...
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Negative Gearing for the chop?

housing_bubble I can't quite believe what I am reading, but here it is from the SMH: The Gillard government has sounded out unions over steps to cool Australia's housing market, with measures that range from a new sales tax for investors sitting on large property portfolios, to curbing the popular strategy of using negative gearing for multiple properties. Senior federal Labor figures and key union backers are believed to have discussed the plan as a way to tackle housing affordability. Details of the proposals, which would apply to home owners with two or more investment properties, have not yet been developed....
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April 21 Links: Rebound and budget

DE Again Up: gold, metals, energy Rocket: Aussie , new new record Down: ore, $US Mixed: grains Analysis Reuters Angola to offer sovereign bonds Bloomberg Euro economists expect Greek default Reuters Euro Chamber of Commerce unhappy with China Telegraph UK France/Italy to send troops to Libya BBC , but only for "advice" There is a war of a different kind at Qantas ABC on top of the fuel levy The other guys aren't doing much better TheOz Ex-Woodside boss lashes out at East Timor TheOz Opposition on Wayne Swan after speech TheOz David Uren on the same David...
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Irish bust video

Max Keiser yesterday posted a video exposé (below) on the damage caused by the bursting of the Irish housing bubble and how the bad debts of the Irish banks have been transferred to Irish taxpayers (h/t Mish and Rota Fortuna). For readers unfamiliar with what happened in Ireland, consider reading my December article, Unluck of the Irish, where I documented the rise and fall of the Irish housing market. Max, as we know, is a bit of a nut. But this is well put together and revealing viewing. It makes one wonder just how long the Irish polity can't stand before demanding their government...
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Disleveraging hits the Budget

It is that time of year again where the government, specifically the treasurer gets to tell you what a wonderful job they/he are doing. This year the Treasurer seems to be using the old "it was the last guys fault" strategy to cover up his own inadequacies. His latest speech in Brisbane was a definitely a "softening up" affair. The real show is taking place at 7:30pm on 10th of May. It is still far too early in the spin cycle for any specific details, but it seems that Wayne Swan has taken the approach of "soften early, sweeten later". First the overview. It is estimated that the budget will be...
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