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Weekend Reading: 15-16 December 2018

Global Macro / Markets / Investing: Dr. Elon & Mr. Musk: Life Inside Tesla’s Production Hell – Wired Economists See U.S.-China Trade War as Biggest Threat in 2019 – WSJ Major German Stock Exchange to Launch Crypto Trading Platform – Coin Desk Another Hedge Fund Veteran Is Quitting a Brutal Market – Bloomberg Steep Decline

Latest posts

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Macro Afternoon

Not a positive way to finish the week here in Asia with a broad selloff due to the slowdown in Chinese economic data, with the Aussie and Kiwi falling alongside all the Yen crosses. As markets position for next week’s FOMC meeting, where expectations are for another rate rise, it’s caution across the board due

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What to expect from asset markets in 2019

Via the excellent Bill Evans at Westpac today: What do our economic forecasts for 2019 mean for Investors? Our key economic themes are: Australian economy and markets • Growth in the Australian economy will slow in 2019 under the weight of political uncertainty; falling house prices; a contraction in residential construction; global volatility; and a

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UBS: Labor franking reform to boost buybacks

Via UBS: …Labor’s proposed franking ‘scale-back’ also makes the near-term return of excess franking credits more attractive. Figure4 ranks the franking balances of companies relative to market capitalisation in the ASX150. Among the large caps, BHP Group and Rio Tinto have already announced off-market buybacks. Our survey of UBS analysts highlights that Woolworths and Wesfarmers

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ECB turns cautious

Via Westpac: At the December ECB meeting, the Governing Council confirmed the end of net asset purchases and repeated the forward guidance that key policy rates will remain on hold “at least through the summer of 2019, and in any case for as long as necessary”. In addition, they gave forward guidance on their reinvestment

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Latest Labor MP’s China links exposed

Via The Australian: West Australian Labor MP Pierre Yang’s political mentor, influential Perth businessman Edward Zhang, is a member of five China-based organisations directly run by the Chinese Communist Party’s powerful United Front bureaucr­acy. …The Australian revealed last week that Mr Yang, the Mc­Gowan government’s upper-house whip, was a member of two pro-Beijing organisations that

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Sydney suburbs dominate nation’s house price falls

By Leith van Onselen With Sydney dwelling losses crashing through 10% this week: And losing a nation-leading 8.3% over the past year: It’s not surprising to read CoreLogic’s analysis that “the list of top 50 regions for value declines over the past year is overwhelmingly dominated by New South Wales with each of the 28

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Carrington Clarke: Mass immigration undercutting wages

By Leith van Onselen After last year demolishing Scott Morrison over Australia’s mass immigration ‘Big Australia’ policy (video above), the ABC’s Carrington Clarke has today penned an article explaining how flooding the labour market through mass immigration is eroding workers’ wages: Although the direct relationship between wages and immigration is not clear, all other things

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Dumb unions lobby to lower workers’ wages

By Leith van Onselen You can’t make this stuff up. Unions are reportedly seeking to change Labor’s platform on superannuation at its upcoming national conference, demanding an increase in the superannuation guarantee to 15% by 2030. From The AFR: The Transport Workers Union and the Construction, Forestry, Maritime, Mining and Energy Union are driving the push as

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As Auckland’s house prices fall, the rest of NZ’s rises

By Leith van Onselen The REINZ has released its house price data for November, which revealed a 1.3% seasonally adjusted increase in the national median house price, with prices up 7.1% year-on-year: Outside of Auckland, seasonally adjusted house prices rose by 0.1% in November, with prices up 7.9% year-on-year. Looking at the major cities, Auckland’s

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Grattan Institute’s urban infill utopia will make our cities hotter

By Leith van Onselen For years, ‘Big Australia’ booster, the Grattan Institute, has called for Australia’s supposedly underutilised middle-ring suburbs to be bulldozed for apartments and townhouses in order to house the many millions of extra migrants projected to inundate our cities over coming decades. This transformation into a dense urban form is to be

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Banks continue to defuse interest only time bomb

APRA released it quarterly ADI property exposures yesterday and banks continue to defuse the interest-only time bomb. IO was only 16% of mortgage flows at $14.4bn: And the stock outstanding IO loans fell sharply again to 26% of the book or $434bn: This is down from a balance of $542bn when macroprudential 2.0 began. It’s

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NSW births another light rail white elephant

By Leith van Onselen In the wake of the massive cost blow-outs and delays hitting both the Parramatta Light Rail Project and the Eastern Suburbs Light Rail Project, the NSW Auditor-General has lambasted the 2.7 kilometre light rail line in Newcastle, whose cost blew-out by 44% to $368 million and was built with a “not convincing” business

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Is your fund manager swimming naked?

Only when the tide goes out do you discover who has been swimming naked. Warren Buffett It is a market truism that a rising stock market can hide a lot of sins, and it is only when markets fall or become volatile that you can see who has been simply taking lots of risk in a

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CBA Flash Australian PMI sinks again

From the CBA: Growth was maintained in the Australian private sector during December, but signs of softer demand were evident across both the manufacturing and service sectors. New orders increased at the slowest pace in four months, with output growth and job creation slowing accordingly. Meanwhile, business sentiment was at a two-and-a-half year low. There

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The Goldie catches a Chinese property cold

Via the AFR: Chinese developer Forise is tossing up taking on a joint venture partner for its $1.2 billion high-rise luxury residential tower “Spirit” in Surfers Paradise on the Gold Coast, or sell the site altogether, as it struggles to sell apartments. …The DBI-designed Spirit 89 storey tower with 479 apartments is currently on the

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Resistance is futile: Chinese workers assimilated by The Borg

Via SCMP: Workers outfitted in uniforms staff lines producing sophisticated equipment for telecommunication and other industrial sectors. But there’s one big difference – the workers wear caps to monitor their brainwaves, data that management then uses to adjust the pace of production and redesign workflows, according to the company. The company said it could increase

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Macro Morning

By Chris Becker Caution reigned on risk markets overnight with the ECB meeting taking a dovish turn while currencies were largely unchanged alongside the other barometer, US Treasury yields although the 10 year remains under the previous “magical” 3% level. Commodity prices fell slightly, with the Aussie dollar also slipping alongside Kiwi. Recapping Asia’s session

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Lunatic RBA runs riot

The politico-housing swamp has entered a corruption blow-off. One doesn’t need to be Albert Einstein to see why. House price falls are steepening and the panic in official circles is mushrooming. This week saw two extraordinary events that illustrate the circling of the wagons among the ruling class. The first was the COAG meeting which

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Dan Andrews jumps aboard the ‘Big Australia’ idiot train

By Leith van Onselen Of all the statements arising from Wednesday’s COAG pro-Big Australia love-in, the most idiotic has to be reserved for Victorian Premier, Dan Andrews. From The AFR: Victorian Premier Daniel Andrews reaffirmed his push for a large migrant intake but hinted the federal government had to do more for his state regarding

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CoreLogic weekly house price update: Fugly

By Leith van Onselen In the week ended 13 December 2018, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, tanked another 0.35%: Values fell across all major markets except Adelaide: So far in December, dwelling values have fallen by 0.63%, driven by heavy losses across Sydney, Melbourne and

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As credit tightens, Aussie banks binge on offshore bonds

By Leith van Onselen The Australian Bureau of Statistics (ABS) has released its National Financial Accounts for the September quarter, which revealed a 1.8% quarterly decline in Australian banks’ gross external liabilities (offshore borrowings), but a large 7.6% increase over the year. One Name Paper (-$24 billion) and Deposits (-$10 billion) drove the quarterly decline