Weekend Reading: 24-25 February 2018

Global Macro / Markets / Investing: Economists cannot avoid making value judgments – The Economist How Will Blockchain Change The Economy? – Forbes Inflation Is a Bigger Danger to Stocks Than Rising Rates – Bloomberg Amazon Is Taking Over the Stock Market, Too – WSJ Robinhood Opens Cryptocurrency Trading – Bloomberg Why “Free Trade” Agreements

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Macro Afternoon

A mixed end to the week here in Asia with stock markets outside China rising even after a poor overnight lead from Wall Street. The USD continues to build strength although the Japanese CPI print for January came in slightly stronger than expected, moderating the fall in Yen and sending stocks higher. Here in Australia,


No solid research or theory supports cutting company taxes to boost wages

Cross-posted from The Conversation: The argument that cutting the Australian company tax rate will lead to higher investment and wages, more employment and faster GDP growth does not have solid empirical or theoretical backing. A close look at the economic research in this area shows a lack of consensus. Different studies, looking at different samples


Fed gets ready to run US economy “hot”

Cross-posted from Tim Duy: Fed speakers continue to reiterate that policy remains on a gradual path of tightening.So far, the inflation data and brightening economy has more emboldened their commitment to gradual rate hikes than a faster pace of hikes. What about fiscal policy? That train has left the station, but central bankers don’t seem too


Chaos as Abbott labels Morrison “inept”. Joyce to quit

Via The Australian: Tony Abbott has intensified his attack on Liberal colleagues critical of his stance on immigration, saying comments by Scott Morrison, Mathias Cormann and Steve Ciobo this week were “inept” and suggested the Turnbull government was “floundering”. …Mr Abbott suggested Mr Morrison, Mr Cormann and Mr Ciobo were “living in a Canberra bubble”


AMP: Australian dollar to tank

From Bloomie: One of Australia’s biggest money managers is betting the Australian dollar will slide, just as hedge funds ratchet up bets on the currency appreciating. The Aussie will drop to 73 US cents before the end of the year, according to Ilan Dekell, head of macro for global fixed income at AMP Capital Investors.


Lousy ASX profit season says it all about Australia

Via UBS: Good Results but Still Lagging the Global Earnings Boom So far just over 130 members of the ASX200 have reported earnings (of around 170 due to report) making reporting season around 80% complete. Reporting season has, as always, been mixed, but overall quite decent with FY18 and FY19 estimates basically holding, which is


Turnbull embraces Trumponomics

More political suicide today from Do-nothing Malcolm: Malcolm Turnbull has used a meeting with United States Treasury Secretary Steve Mnuchin to bolster his argument for his proposed company tax cuts by claiming up to 70 per cent of the benefit will flow to workers. Speaking to reporters following his meeting with Mr Mnuchin, Mr Turnbull said


Grattan: Building more homes will help low-income earners

By Brendan Coates and Trent Wiltshire The conventional wisdom among many affordable housing advocates is that boosting the supply of market-rent housing won’t help low-income earners. They argue that most new housing built in Australia is too expensive for low- and middle-income earners. They believe that building more homes won’t lower the rents paid by


Nothing Energy Guarantee unravels

Yes, he’s done it again, at the AFR is Ben Potter: Is the National Energy Guarantee really the best chance we have of – at long last – ending 15 years of incompetence and political infighting in energy and climate policy making? Or is the NEG a face-saving fig leaf to cover for the Turnbull


Markets waver as yields worry

The USD gave up some gains last night: AUD bounced: Gold modestly: Brent was stronger but still looks toppy: Base metals were mixed: Big miners rallied: EM stocks were stable: Junk too: Treasuries were bought: And Bunds: Stocks rallied modestly: Yields are clearly worrying stocks even thought the technical correction is over, from JPM: First, we


Abbott rips into front bench

Tony Abbott maintains the immigration rage today at The Australian: You’d think a government that’s lost the past 27 Newspolls might be curious about how it could lift its game. You’d think a government that has too few ­policy differences with Labor might consider a change of ­emphasis that would make clearer the choice of


What’s the “optimal” immigration intake for Australia?

By Leith van Onselen “Dr Demography”, the ANU’s Dr Liz Allen, was at it again yesterday, claiming that Australia’s “optimal” immigration intake is between 160,000 and 210,000, after which Australia will suffer from diminishing returns. From News.com.au: Liz Allen, a demographer and social researcher at the Australian National University, said the facts speak for themselves.


IA: In order to save Sydney it’s become necessary to destroy it

Just wow: Infrastructure Australia, the nation’s independent infrastructure body, on Friday released landmark report proposing three alternative visions of Sydney in 2046, when the population is projected to hit 7.4 million. The modelling provides a side-by-side comparison of managing Sydney’s rapid growth, either by maintaining the urban sprawl to the city’s fringes, by heavily densifying


Stutchbury debases Hawke and Keating

The AFR continues to rot from the head as Editor Michael Stutchbury today debases the legacy of Bob Hawke and Paul Keating: Under Bob Hawke and Paul Keating in the 1980s, Labor’s wage “Accord” with the unions deliberately cut real wages to restore the profit share of national income, stimulate business investment and promote job


Sydney house prices fall for 24th consecutive week

By Leith van Onselen The deflation of Sydney’s housing market has continued for the 24th consecutive week, with CoreLogic’s dwelling values index registering another 0.18% decline, and values down a cumulative 3.8% over that 24-week period, and dwelling values also down 3.7% over the past 29 weeks: Sydney’s quarterly growth rate remains firmly negative, down


CoreLogic weekly Australian house price update: Still melting

By Leith van Onselen In the week ended 22 February 2018, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, fell another 0.12%: Values fell across all major markets: So far in February, dwelling values are down 0.29%, again led by Sydney: So far in 2018, home values have


Links 23 February 2018

Global Macro / Markets / Investing: Amazon Is Taking Over the Stock Market, Too – WSJ Why Self-Taught Artificial Intelligence Has Trouble With the Real World – Quanta Magazine Why Apple Is The World’s Most Innovative Company – Fast Company The Rise of Tech Giants May Be Bad News for the Economy – Bloomberg Traders


Macro Afternoon

Following the poor lead from US stocks overnight, its been a rough day here in Asia, although the return of Chinese markets stopped a sea of red across the board. Its all about bond yields with Treasuries spiking and about to breach 3%, taking the USD with it, although Asian currencies like Yen and the


Trump: Arming teachers solution to school massacres

My brain hurts: US President Donald Trump suggested on Wednesday that arming teachers could help prevent massacres such as last week’s mass shooting at a Florida high school. Trump voiced support for the idea during an emotional White House meeting with students who survived the shooting and a parent whose child did not. “If you


Abbott canes Morrison, wedges entire front bench

Tony Abbott has slammed Scott Morrison just now: Meanwhile, more immigration defense at Domainfax: Acting Prime Minister Mathias Cormann, Trade Minister Steve Ciobo and Home Affairs Minister Peter Dutton have now dismissed the position championed by their former leader, adding weight to comments made by Treasurer Scott Morrison earlier in the week. “Tony Abbott is


Average weekly earnings climb out of gutter

By Leith van Onselen The Australian Bureau of Statistics (ABS) has released the Average Weekly Earnings (AWE) data for the six months to November 2017. A breakdown of the key changes are provided below: According to the ABS, on a seasonally-adjusted basis, national total AWE increased by 1.7% in the six months to November 2017,