ASX at the close

Chris Weston, Chief Market Strategist at IG Markets

Being long developed market equites continues to be the right trade, unless of course you think ultra-short-term and scalp the markets.

Being a trend follower is working well in equities, as central bank easing/liquidity have ring fenced macro concerns, while green shoots around global growth have given a real backbone to the risk-on mentality. In the US, the S&P 500 and Russell have achieved new all-time highs despite soft data that should see Q4 GDP being revised down 60 basis points to 2%. A move in the S&P 500 to the uptrend drawn from the May 2013 pivot high at 2150 looks achievable; however when the market is trading on 17 times forward earnings (27 times on a cyclically-adjusted basis), at what stage do valuations become a concern?

My guess is soon, although the time to be aggressively short is not now and my preference is to take a more favourable stance on Europe, Japan and even the ASX 200. The trading case here is on the idea of normalising central bank policy versus easing and liquidity. One can also look at any of these markets on a comparative basis and see that US markets are underperforming. This should continue for now, unless China really shows vulnerabilities that cannot be fully addressed through easing benchmark rates, or if Greece and the European Union fail to agree on compromise, in which case you can choose practically any market (outside of fixed income) and look more favourably at short positions.

The Nikkei breaking out

The Nikkei is breaking out of key resistance around 18,000 and is looking fairly attractive on a comparative valuation basis at 13.6 times forward earnings. What’s more, we are in the midst of wage negotiations, with unions calling for 3% to 4% wage hikes (above last year’s 2.2% growth). There is also $2.3 trillion in cash sitting on companies’ balance sheets, some 43% above that of US corporates, with good buy backs coming through as well. Today’s GDP print won’t do any harm to the rally either; while growth was well below consensus at an annualised pace of 2.2% (consensus expected growth of 3.7%), the data point wont derail the view that the Bank of Japan will be easing for many years to come, and in reality Japan needs growth above 4.5% for longer-term debt sustainability. The levels of business spending (+0.3%) or private consumption (+0.1%) should even increase the prospects of more needing to be done, although additional asset purchases won’t be announced until the second half of the year.

Japan is also a good way to hedge concern around next week’s semi-annual congressional hearing from Janet Yellen given the correlation between the Nikkei and USD/JPY. One just has to look at the fact that the Fed fund future (December contract) is positioned under the move dovish end of the Federal Reserve’s projections, which suggests there are real risks around increased volatility. The risk is that Fed Chair Janet Yellen will lay a framework for a change in its ‘patient’ language around when rates go up in its 18 March FOMC meeting (05:00 AEDT on the 19 for Australian traders); in turn we could see a rapid and aggressive shift in market expectations. The likely reaction here is a new leg up in the USD, in turn bringing out gold sellers, with the US two-year treasury breaking above the driving the show.

If we look at gold, the technical set-up is looking actually quite compelling after having rallied off the former neckline of the inverse head and shoulders pattern at $1216 last week. The gold bulls will want to see a move back above the 21 October high of $1255.32 and from here I would not be surprised a new assault on $1300, although my preference is along the lines of a less conventional set-up and I would look at long silver/short gold as a pair’s trade. I still believe the current ratio of 1:71 (i.e. it takes one ounce of gold to buy 71 ounces of silver) will fall closer to 60 this year.

(Daily chart of spot gold)

ScreenHunter_6105 Feb. 16 16.02

Emerging market nations watching Janet Yellen’s testimony

I am also keen to explore the impact on emerging markets if Janet Yellen lays the foundations for a clear change in its March FOMC meeting. The reaction here could be fairly severe given the huge increase in USD-denominated debt issues over recent years; however how China reacts is of specific importance. Importantly, the spread between China’s two-year bonds and US two-year treasuries is driving the USD/CNY at present. As the market sells US bonds (subsequently causing yields to move higher), the discount the US bond market has relative to China decreases, making the USD more attractive, in turn promoting CNY weakness as capital leaves China’s economy. This is also acting as quasi-tightening of financial conditions, which is similar in effect to the falls in inflation, which has increased ‘real’ bond rates (i.e. inflation adjusted bond rates); hence we should see further easing from the People’s Bank of China over the coming months.

Turning to Europe – it’s all about Greece this week; with traders expecting a last minute deal to materialise it’s hardly surprising to see EUR/USD drift higher. The pair has found good selling around the $1.1500 area of late and traders could use spikes here in the short-term to get set for USD upside into Janet Yellen’s testimony. There have been some optimistic signs emerging in European data lately, but Yellen just needs to lay the framework down for a change in the wording in the March meeting and watch the USD fly and the outperformance of Europe and Japan continue in earnest.

Comments

  1. SHARE-MARKETS PEAKING NOW

    We have been at the tops today in Australia and the Asian region, and on Friday for the Continent and USA.

    Go short now, in a big big way. We wont see these high prices again for a long long time – Carnage ahead

    This is not investment advice.

  2. Could be right. Will personally wait for trend to change as not in business of picking tops, will leave to others far cleaver than me..

    People have been picking tops in SPX for years and been tough

  3. Cmon Chris, the Nikkei is breaking out in nominal terms whilst the Japanese economy and people are being shredded via Abenomics.

  4. John Tuld: So, what you’re telling me, is that the music is about to stop, and we’re going to be left holding the biggest bag of odorous excrement ever assembled in the history of capitalism.

    Peter Sullivan: Sir, I not sure that I would put it that way, but let me clarify using your analogy. What this model shows is the music, so to speak, just slowing. If the music were to stop, as you put it, then this model wouldn’t even be close to that scenario. It would be considerably worse.

    John Tuld: Let me tell you something, Mr. Sullivan. Do you care to know why I’m in this chair with you all? I mean, why I earn the big bucks.

    Peter Sullivan: Yes.

    John Tuld: I’m here for one reason and one reason alone. I’m here to guess what the music might do a week, a month, a year from now. That’s it. Nothing more. And standing here tonight, I’m afraid that I don’t hear – a – thing. Just… silence.

    Ace movie Margin Call. 😉

    • Ah Ortega, Watch what occurs when these banks shares which have been bid up on margin borrowing of their own frigging funds start to hear the music slowing.
      Market theory is that short sellers provide some stability at time like that,(by having to eventually cover the short)
      But it doesn’t tell us what happens when the banks start sending out margin calls for their own shares, that will be a first for me.WW

  5. Just watching the drum and Ian Verrender cuts loose batting for younger folks and pillories the older,wealthy entitled. Some of the others even join in, in a wide ranging discussion.

    • Brissy, went to watch but missed it, Jobs in general and especially for the youth are a massive problem.
      Everyone has an opinion on the cause and the effect, but I haven’t yet seen an estimation of the magnitude, I’m sure there will be a chart somewhere, somewhat like a histogram, but of jobs and working age of the population, male and female, and incorporating the effects of technology and off-shoring and immigration etc.
      I am sure the (real) differential is huge, ie the number of applicants versus the number of jobs available,
      I understand there was 800 thousand out of work before xmas. The Histogram would show us the trend and allow a forecast. I am sure there will be some readers here who could develop such a chart. for general viewing WW,

      • Wing N thanks.
        Huge problem allright, but what I would like to know is the magnitude.
        During the Qld election is was noted that some towns in QLD had a youth unemployment-of 20% plus. Now my call is that 20% is insurmountable, (with current thinking) WW

    • The Traveling Wilbur

      It’s a tie Mig. They’re both one massive bomb waiting to go off in someone’s face unfortunately.

      I think the key question here is, what are you short tonight? (and I bet it’s not guns and ammo. or BAE. or anyone else who makes missiles.)

      • The Traveling Wilbur

        Snap. (In the future tense). Should be a fun night. Rather than “Much ado about nothing.” I think it will be more a case of “Much nothing about an ado.” i.e. SWFA achieved in regard to an enormous dust bunny that’s just too big to sweep under the rug.

      • Looks like it’ll be a tough night Wilb. Considering switching to shorting cable. Took some profit from stoxx, but dicey about staying in. Staying in for now

      • The Traveling Wilbur

        I’m not in the pool yet. Waiting to see the fallout later in the arvo/evening (their time). In the mean time, if I had to pick I’d be short too, but market and fx could turn instantly on any talking head’s latest rumor.

  6. The proposed legislation Mr. Obama sent to Capitol Hill would impose a three-year limit on American action that has been conducted largely from the air and, while allowing Special Operations commandos and other limited missions, would rule out sustained, large-scale ground combat. It would also finally repeal the expansive 2002 congressional measure that authorized President George W. Bush’s war in Iraq

    #@$*. Me. Dead.

    Thanks Obama!

    http://www.nytimes.com/2015/02/12/us/obama-war-authorization-congress.html?_r=0

  7. It would appear the conservative British press has cottoned on to the generational issues ahead…….

    Young workers face 55pc tax charge in retirement

    http://www.telegraph.co.uk/finance/personalfinance/pensions/11412155/Young-workers-face-55pc-tax-charge-in-retirement.html

    One hopes that the release of the intergenerational report there will be some similar analyses make news here…..

    Ian Verrender made a start today…..

    Here’s a real plan to stop intergenerational theft

    http://www.abc.net.au/news/2015-02-16/verrender-heres-a-real-plan-to-stop-intergenerational-theft/6113898

  8. Fingers crossed for China to devalue this week into CNY to allow for time to adjust.

    $7.50 would be nice

    Daddy needs a new pair of shoes!

      • The Traveling Wilbur

        Well, I only have two things to say to the Greeks: Eat my shorts and Thanks for the eros errors uros dinar memories. At least I can say now, “We’ll always have Greece.”.

        PS I’ve just figured out what the intermediate stage is between the widespread introduction of 3d (no not you, you idiot) printers and the Enterprise elan of the cashless non-financialised society outlined in Star Trek (that the introduction of replicators combined with cheap energy will inevitably lead to). Day Trading. They’ll have to start teaching fundamentals in Year 1. Apart from having someone fix your plumbing, it’ll be the only way to earn a living left by 2050. Even bankers are being superceded by money managers (I read today). Shocking.

  9. In this adorable talk from TEDGlobal, neuroscientist, artist and educator Beau Lotto shares why he thinks children have an edge when it comes to scientific inquiry — they are able to celebrate uncertainty and ask wonderful questions. An experiment is actually a form of play, says Lotto, who invited a group of 25 students from a small school in the UK to make a useful contribution to science by asking a question of their choice.

    Cat. Meet Pidgeon…

    http://blog.ted.com/2012/10/17/9-talks-by-impressive-kids/

    • TED is not science forum, but a publishing company run by entrepreneur Chris Anderson.

      “Before streaming video, TED was a conference — it is not named for a person, but stands for “technology, entertainment and design” — organized by celebrated “information architect” (fancy graphic designer) Richard Saul Wurman. Wurman sold the conference, in 2002, to a nonprofit foundation started and run by former publisher and longtime do-gooder Chris Anderson (not the Chris Anderson of Wired). Anderson grew TED from a woolly conference for rich Silicon Valley millionaire nerds to a giant global brand. It has since become a much more exclusive, expensive elite networking experience with a much more prominent public face — the little streaming videos of lectures.

      It’s even franchising — “TEDx” events are licensed third-party TED-style conferences largely unaffiliated with TED proper — and while TED is run by a nonprofit, it brings in a tremendous amount of money from its members and corporate sponsorships. At this point TED is a massive, money-soaked orgy of self-congratulatory futurism, with multiple events worldwide, awards and grants to TED-certified high achievers, and a list of speakers that would cost a fortune if they didn’t agree to do it for free out of public-spiritedness.

      According to a 2010 piece in Fast Company, the trade journal of the breathless bullshit industry, the people behind TED are “creating a new Harvard — the first new top-prestige education brand in more than 100 years.” Well! That’s certainly saying… something. (What it’s mostly saying is “This is a Fast Company story about some overhyped Internet thing.”)

      To even attend a TED conference requires not just a donation of between $7,500 and $125,000, but also a complicated admissions process in which the TED people determine whether you’re TED material; so, as Maura Johnston says, maybe it’s got more in common with Harvard than is initially apparent.

      Strip away the hype and you’re left with a reasonably good video podcast with delusions of grandeur. For most of the millions of people who watch TED videos at the office, it’s a middlebrow diversion and a source of factoids to use on your friends. Except TED thinks it’s changing the world, like if “This American Life” suddenly mistook itself for Doctors Without Borders.

      The model for your standard TED talk is a late-period Malcolm Gladwell book chapter. Common tropes include:

      Drastically oversimplified explanations of complex problems.
      Technologically utopian solutions to said complex problems.
      Unconventional (and unconvincing) explanations of the origins of said complex problems.
      Staggeringly obvious observations presented as mind-blowing new insights.

      What’s most important is a sort of genial feel-good sense that everything will be OK, thanks in large part to the brilliance and beneficence of TED conference attendees. (Well, that and a bit of Vegas magician-with-PowerPoint stagecraft.)”

      http://www.salon.com/2012/05/21/dont_mention_income_inequality_please_were_entrepreneurs/

      Skippy…. I for one would think you would be championing this libertarian free market exchange of Ideas… for profit – Mig. o

      • The Horror!!! The Horror!!!! Its not utterly compromised academia selling lollypops masquerading as intellectual rigour to starving foreign full fee paying students!

        The Horror!!! The Horror!!!!

      • As noted below its a component of the neoliberal FIRE sector economy… brought to you by the freedom and liberty posse TM.

        For profit Academia is not all cracked up to what it was professed to be… eh…. rigor goes right out the window. Incentive thingy.

        Skippy…. Students as a commodity, staff as a commodity, education as a commodity…. trade the world mig-i…

      • So – wait – you agree academia is complete and utter fraud and still bang on and on and on about it being the apple of your eye?

        Hey, those “libertarian, free exchange ideas” didn’t pop up in academia, did they?

        You have issues…

      • Never said its complete, that’s a projection, and the effect is a direct effect of commodity it and running it as a for profit industry.

        As far as Libertarianism goes you’ll have to address the time line you reference, but, modern libertarianism was a club established with funds from corporatist. Rockefeller provided the university of Chicago and the libertarian authors [propagandists] where brought in and had their employment payed by the aforementioned.

        Skippy… you don’t seem to have a sound grasp on your own history mig-i.

      • university of Chicago

        SO….. academia? Keep spinning, it confuses everyone and means you never have to land on anything….

      • Who’s spinning, your gross generalizations which have zip detail would seem to be the axis of all the spinning, Mig-i.

        Skippy…. are you really this messed up, serous question imo.

      • You’re the dictionary definition of messed up! I. E. Incorrigibly contradictory.

        Keep spinning, there’s no traction but you don’t care…

  10. Once again friendlyjordies has a more astute take on things than MSM as a whole….

    Coal Mining is not important to Australia at all

    https://www.youtube.com/watch?v=Gz91yqC7g2E

    Skippy…. as whats her name said in an acceptance speech at the end of the Hancock mini series… Billionaires and Millionaires are what drives Australia economy… truer words have never been spoken….

      • MMT has nothing to do with RE prices, that was decided by the neoliberal free market posse as a component of the FIRE sector economy.

        Skippy… you ok mig-i… seems all you can muster these days is a sentence or two of unsubstantiated drivel in the form of a projection.

      • Pray tell, what form of money is extended to those who seek to bid up house prices? Is it gold? Is it bitcoin? No its SuperMMT the inventor of credit from thin air and great over-lord of managing inflation (and you ALWAYS want inflation) with *cough* taxes 0.o

        Dude, my two sentences are more grounded in reality that all your copious cutnpastage sprinkled with third person oddities that are often circular and self-referential. So….

      • MMT was around long before the neoliberals went ideologically berserk, so you might look into where the agency came from and not the object of your pathological mania.

        Skippy… John Laws, Tulips, et al and a never ending parade of boom bust was under bimetalism, are you so zealously blind that you can white wash history in a vane attempt to justify your beliefs.

        PS. yes Mig-i we all know how smart you are… you repetitively declare as such endlessly.

      • Yes of course, as Pfh has pointed out, that Modern in Modern Money Theory is silent. Its been there since the dawn of time and yet everything else is caveman sh#t in comparison.

        Again, contradiction much?

      • MMT is not a political stance nor an ideological tool, its simply the pay system architecture. That you want to imbue it with quality’s it does not have – is – more an indicator of your need for it to be so, than that it is.

        Per in America its not MMT that establishes laws and policy, that would be congress and how many of the pay to play congress members would even understand monetary theory or functional finance, and even the ones that do, why would they act against their ideology i.e. don’t tax wealth but use unemployment as a buffer stock instead and fiddle with interest rates.

        Skippy… as noted there is never a want for MIC, Corporatist subsidy, tax concessions to the right sorts and wars, that should be a bit of a hint.

      • as noted there is never a want for MIC, Corporatist subsidy, tax concessions to the right sorts and wars, that should be a bit of a hint.

        I see, so you’re saying you can just make up more money and spread it around just like we do wars and tax concessions? Or we have the former and not the latter? Actually, I don’t understand.

        Maybe there’s money for MIC for because wealthy people will give money to keep their wealth by force, and extract more by force? Or is it only because of the corruption of MMT that MIC has money? And you think I have a poor grasp of history? Sheesh.

      • They had bubbles under bi-metalism? Sure did.

        But did the losers get bailed-out by debasing the currencies of the time at the expense of the frugal?

        How on earth did the USA recover from the collapse of 1921?

        Doing nothing and letting the business cycle take course…

        Never ending parade of boom-bust cleans out the system to improve for next time and become stronger.

        The current model keeps the junky on the drip and encourages everyone else to just try a puff because it looks the only way to happiness.

        Until everyone is hammered and the dealer stops accepting their monopoly money.

        The business cycle can only be denied for so long.

        I pity the noobs turning up to the Commsec dealer for their first pipe of bank hybrids at these prices.

        http://www.smh.com.au/business/intelligent-investor/why-you-should-avoid-anz-notes-3-20150209-139tth.html#ixzz3RscEn7kz

      • Your convoluted rationalizations are interesting to observe mig-i but histrionics like the Volcker fund and resulting political agency does not support it nor does the works of Michael Hudson, Bill Black or Yves Smith, just to name a few.

        Skippy… you seemed to skip over the part about the same antics occurring under bimetalism, but, that does not effect your opinion on it. Strange…

      • 8~

        The term boom – bust is just a rephrasing of the biblical economic paradigm.

        Your hording [fugal] example is why they had so many issues in antiquity, especially when those of great wealth could crash the economy and then buy everything on the cheap. Why spend capital when you can let others do it with higher risk factors and then take it over for pittance. At the end you concentrate capital every time this occurs, establishing a monopoly on capital in fewer and fewer hands.

        Look you can’t just blow everything up because some wonky ideological wankers infiltrated the political system and went the full retard. If you have read at least Yves Smith book you would understand how tightly coupled the global market is i.e. the panic over Greece or maybe Italy or Spain.

        Are you to suggest a global depression is the fix for all our problems w/ all the geopolitical tensions? Good grief.

        Skippy… you might as well belly up to the bar with the neoKantians and bring rapture on.

      • Oh joy, Skip’o-the-people nails another ..debate.. turning the benign to the indifferent and belligerent.

        …now where did I put my riddle peacock and tilting thingy.

      • I see the spittle brigade has arrived to highlight the tremendous intellectual capacity of its collective powers.

        Skippy…. throwing your toys out of the playpen in a fit over being challenged for insistent Reductio ad absurdum and plethora of other rhetorical devices, in lieu of any historical or other observer based data is just further evidence of rank ideological posturing instead of informed critique. And some give Tone the treatment for the same, absurdity abounds.

      • throwing your toys out of the playpen in a fit over being challenged for insistent Reductio ad absurdum and plethora of other rhetorical devices, in lieu of any historical or other observer based data is just further evidence of rank ideological posturing instead of informed critique

        Said the madhatter to the hooker-smoker! Absurdity abounds …

      • “The term boom – bust is just a rephrasing of the biblical economic paradigm.”

        Followed by:

        “Skippy…. throwing your toys out of the playpen in a fit over being challenged for insistent Reductio ad absurdum and plethora of other rhetorical devices,”

        Stop it – just stop it please.

        —-

        Break down which countries get that 80% of our mining revenue for me Skip

        Or better – get your Green Left Weekly mate to do a ‘hilarious’ retraction of how he and his ilk don’t actually understand the difference between revenue and profit – or where their electricity magically appears from…

        88888…I’ve had enough of this crap

      • Mig-i and 7 1/2~

        When either of you two can support your positions with out resorting to blatant pettifoggery, circular logic under pined by tautology, for the want of a factual based dialogue I might stop the canning.

        In fact 50% of all Australian profit is off shored as compared to 80% in mining.

        “More than half of Australia’s trade is money being sent offshore by companies to their overseas arms – with almost a third going to Singapore and Switzerland.

        Australian companies sent more than $100 billion to related parties in the low-tax nation of Singapore and another $15.6 billion to “hubs” in Switzerland, new figures from the Tax Office reveal.

        The data, contained in the Australian Tax Office submission to the federal inquiry into corporate tax avoidance, gives a fresh insight into how commonly multinational groups shuffle money between countries.”

        http://www.smh.com.au/business/multinationals-channel-more-money-through-hubs-in-singapore-switzerland-than-ever-before-tax-office-says-20150204-1363u5.html

        Oops there is Singapore again, whats the product you make again? You know the one everyone wants, or what makes up a large part of the economy where you reside. No need for disclosure on your part is needed right, self interest in not an issue of course.

        You might be informed that laws change, some even retroactively, and there is an increasing trend for them to change. Never fear tho as the 3rd world option is always there, first come, first served tho, thems the rules out there. I know.

        Left weekly? is that the best you can do, try to pigeonhole myself with some politically charged label.

        skippy… till then show me the data or pound sand or crap as your want.

    • 80% of mining REVENUE goes overseas?

      Seriously? This loser reads too many Green Left Weekly articles.

      You called me sophomoric yesterday skip – this is like a gifted grade 9 student with an unrepentant Trot as a father sounding off.

      Coal is almost 20% of Australia’s exports

      I’m sure the revenue, taxes and jobs can be replaced with local submarines or solar farms or borrowing more or something….

      • Profit, revenue, you know its all evil unless its taxed at 100%. Then we have the environmental nirvana the soviet states had.

        More #winning.

      • You need to support your arguments with actual data 8~, in fact the kid does source his facts, unlike you or mig-i.

        But here’s a bit more…

        “Mining is credited with saving us from the Global Financial Crisis, putting food on our tables, keeping our economy strong and thousands of people employed.

        It’s been a great public relations success. A survey released by Essential Media this week showed that 67 per cent of Australians count mining as one of our top three most important industries. A typical Australian believes the mining sector accounts for more than one third of economic activity, and employs about 16 per cent of our workforce.

        Unfortunately, our perceptions of the mining industry are wildly out of step with the reality.

        Today, The Australia Institute released its new research paper Mining the Truth; The rhetoric and reality of the commodities boom, which provides a detailed analysis of the ways in which the mining boom is affecting our economy, both positive and negative.

        The true picture of Australian mining it reveals is startling, in all the parts that have been glossed over, rewritten or ignored.

        To begin with, mining doesn’t even come close to accounting for a third of our economic activity. Mining represents about 9.2 per cent of GDP, roughly the same as manufacturing. And the perception that mining employs around 16 per cent of our workforce credits the industry with nine times more workers than it actually has, about 1.9 per cent of the workforce. Despite the expansion of mining over the past seven years, mining accounts for only 7 per cent of new jobs created over that time.”

        http://www.abc.net.au/news/2011-09-08/waters-australias-mining-boom-fact-or-fiction/2876728

        “Both sides of politics have suggested that they will be tougher on foreigners buying Australian agricultural land. Concerns about ‘selling off the farm’ resonate with many voters, but the more relevant debate, largely missing from this campaign, relates to the mineral sector rather than agriculture.

        Almost 90% of Australian agricultural land is wholly domestically owned, with another 6% majority-Australian owned. Only 1% of foreign investment proposals in 2010-11 involved agriculture, forestry and fishing. In contrast, 83% of mining profits accrued to foreigners in 2009-10. Looking at the three largest ‘Australian’ miners, foreign ownership accounts for three-quarters of BHP-Billiton, over 80% of Rio Tinto and 100% of Xstrata.”

        Skippy… we already had that little talk about off shoring of profits 8~ and its public record stuff so feel free to say other wise.

        Gezz mig-i whom knew you were secretly a 3d1k fan boy…. Taxed 100%…. massive knee jerk imo, its the lowest taxed industry ninny.

      • I checked twice – the guy says 80% of ‘revenue’ is shipped offshore

        My mates who work in those coal mines and make up much of where the revenue goes do not live overseas

        I haven’t bothered to consider anything else you just posted.

        Oh and I liked the bit were he had a typo in his ‘sourcing’ from The Australian.

        This idiot wouldn’t know a profit and loss statement from a form guide.

      • Ughh I have to step in, skippy your a delightful fellow but sorry mining is a major sector backing this country.

        If you removed that 9.2% that mining makes up you may as well cut the value by half immediately what the other 90.8% produce. (In terms of just about any other currency)

        Mining means foreign currency, high TOT means the worlds banks are happy to keep ours liquid.

        Remember a good tradie makes 2-3k(usd) a week in this country. The value he adds to a crappy old house might be worth 10-15k by proxy of loose lending.

        Gdp = value added. One man was able to produce 10-15k in one week, why? Because of loose lending and bubble economics backed by foreign cash obtained by mining!

        Do not understate the importance of mining, you may as well call it this countries collateral.

        Btw for a country with a huge gdp per capita 9.2% of gdp which is based “solely” for exports is amazing. What percentage of exports is manufacturing?

      • Simplicity we don’t export dollars and as Australia is the world’s leading coal exporter w/ a global trend away from that commodity, whats your point again?

        68% of GDP is in the service sector with finical and insurance the leaders in the pack closely followed by construction.

        Ownership of dwellings is actually the leader in “INDUSTRY GROSS VALUE ADDED AND GROSS DOMESTIC PRODUCT” @ 105 895 $m where as mining comes in 5th at 95 512 $m.

        Lets not even get into the negative externalities that are not even priced in or costed properly.

        As construction is waning, how many more track houses in previous bush land or office space in the CBD’s in capital city’s can you keep whacking together til the rug goes whoosh. Mining as a tax haven, leverage vehicle and laundering enterprise will end sooner than later.

        Skippy…. there are some acute reality’s just over the event horizon, we can either start to deal with it now or practice confused looks for that day.

      • Wait wait wait wait wait! First you’re telling us Yves Smith chronicles the global integration of markets… but now we don’t export AUD?!?

        Seriously, which is it?!

      • Gezz mig-i if you don’t understand derivatives, swaps, and counterparty claims [contracts], what kinda whiz kid financial genius are you.

        The myopic goldbug mania on currency is truly a manic episode of epic duration, all human problems are one of money…. shezzz…

        You are of course are aware that the mass majority of currency is electronic [like bitcon], only a very small percentage is in physical form. So no we don’t export it, its just an accounting function, you know that thing they started in Sumerian civilization.

        Skippy…. try reading the book for yourself…. heck I’ve read heaps of stuff from your priests. Even had conversations with Hopple, David, and others. Yeah I know the devil gets in ya that way.

      • Skippy with all due respect I feel that your rhetoric is your own worst enemy.

        Firstly the world (china) isn’t moving away from coal https://stimulatedemissions.wordpress.com

        Secondly no offence but I just cant listen to someone who is so out of touch with this economy or to even correct them.

        I just don’t think you actually have a functioning and realistic picture of the australian economy. (Maybe im wrong?) but I’m pretty sure most here understand that mining isn’t just 9.2% of our gdp.

        To quote glen Stevens every iron ore ship pays for 22k flat screens (hes an idiot) but the point is the idiot has a point.

        Every few hours ships full of iron ore leave for asia, albeit for less $ now. Point is do you see anything else of that equivalent value leaving Australia every couple hours?

      • @Simplicity,

        You need to show me some source for your take on things. Roy Hill is going to be a hoot when it starts as will the RIO, BHP and Glencore shenanigans all under a deflationary head wind. Did you miss the bit about labour savings of 900 yobs through robotics?

        Yet you have a whole schmozzle of interesting factors building up.

        Mining labor productivity in Australia declined by roughly 50% since 2001

        Capital productivity also in a dramatic decline over the same period

        Return on capital employed

        Dividends to Cash flow

        SLTO and the resulting

        • Missed sales
        • Damage to reputation as a reliable supplier
        • Absorption of senior management’s time
        • Lost productivity
        • Damages
        • Increased security costs
        • Costs of settlement
        • Difficulties in recruiting talent

        Cost over runs on 60% of the projects in pipe

        Iron ore and rebar derivative volumes on Shangai and Singapore exchanges creating fat tails.

        Declining economic value retained vs. rising costs.

        Post Peak employment in this sector so associated revenues to local and state set to downward trend from here in out.

        Fraud and corruption heightened when officers are expected to deliver improved financial Performance with less capex.

        Last but by no means least water availability.

        Skippy…. look forward to more than say it ain’t so…

      • Guys you have to cut Skippy some slack here, he is correct.WW
        SYDNEY– Fortescue Metals Group Ltd. said first-half profit tumbled more than 80% and that it would considerably reduce its midyear dividend amid the downturn in iron-ore prices.

      • Skippy you are right with your last post, but a irrelevant off topic reply.

        Can anyone see what skippy is doing here? His mind and thinking is so erradict.

        I’m suprise hes able to finish a sentence let alone a paragraph with out spiraling into non sensible off topic dribble filled with rhetoric and mixed with lefty ideology.

        Skippy, do you have ADHD? Or Anxiety issues with racing thoughts? What is it?

      • Don’t go just yet! Straight from the Fed

        Thus, the zero lower bound generates endoge-
        nous volatility. This endogenous volatility leads households to increase their desired savings.
        With flexible prices, higher desired savings by households would simply lower the real interest
        rate but leave equilibrium output unchanged. With nominal rigidities, precautionary saving
        by households reduces aggregate demand further, and keeps the economy at the zero lower
        bound for a longer period of time.

        ZIRP causes deflation. Boom.

        http://www.kansascityfed.org/publicat/reswkpap/pdf/rwp15-01.pdf

  11. The Traveling Wilbur

    Only 3.057c left to parity! Eh bro. (With NZD). Bit like Phar Lapp. Late to arrive, but boy does she go when she gets here. Only a matter of time before we have posts on this site complaining about cashed up bogans with difficult to understand accents buying properties ‘illegally’ in Melbourne and Sydney.

    EDIT: New Zealand bogans to be specific. : ‘)