Weekend links: Yeh! Nah! Yeh!

Global Macro:

  • Oil rockets. Bloomberg
  • US exempts China and Singapore from Iran oil sanctions. Raw Story
  • Big banks, big deceit. FT

United States:

  • Chicago PMI, consumer confidence miss. Calculated Risk
  • US corporate profits fall for first time since the GFC. NYT

Europe:

Asia

Local:

  • Mystery over DJ’s bidder. SMH
  • Poor recover quicker. Ross Gittins
  • A hoodwinking for BHP. SMH More Kloppers M&A waste…
  • Generation rent. Jessica Irvine
  • Dud year for shares. AFR
  • Combet to cut green schemes. AFR
  • Housing rocks. Bassanese

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.

Latest posts by David Llewellyn-Smith (see all)

Comments

  1. Bassanese, finally, understands! “…It is the high cost of buying land …that is the major support to the current level of house prices…. Australia lacks structural drivers for another boom like that enjoyed from 1995 to 2004….cyclical corrections in real prices are more likely to be associated with nominal declines than in the past – as has been evident the past couple of years.”

    • Janet, you beat me to a comment on the “…high cost of buying land…”

      Surely the whole point of a housing market crash is that the cost of land plumments? Why does he think that expensive land prevents rather than causes this? I don’t think he gets it at all.

      • I read it as though he, too, sees that the edifice is supported by the high cost of land ( without it, prices would/will fall), but maybe I’m attributing more to his words that I should. Still, for a bull, like him, to see real price adjustments to come though nominal prices falls is a step in the right direction!

        • “Still, for a bull, like him, to see real price adjustments to come though nominal prices falls is a step in the right direction!”

          Agreed – it seems like a lot of bulls are now talking about prices “remaining flat” in most markets for a few years.

          • The Patrician

            “Growth in rents has outpaced growth in house prices for several years – as investors demand higher rental yields to compensate for diminished capital gains expectations. This is a healthy sign.”

            I still don’t think he gets it.

  2. An important issue in NSW for the prospects of house prices in the medium term is that the State Government seems to have now settled in and is actually doing something or certainly appear like they are serious.

    Faster land releases
    Direct incentives to new homes not existing homes
    A new planning act on the cards to limit NIMBY holdups etc.

    After 16 years of housing supply constipation it is hard to remember what flexible supply looks like.

    If they deliver, the outlook for housing price speculation in NSW is even softer than it already appears.

    That is an excellent thing as an efficient housing market is the most critical item on the economic reform to do list.

    • I think we will see similar planning reform in QLD from Chairman Newman. That is a serious risk from housing, and given the total domination of the coalitition in QLD parliment, there is nothing anyone can do to stop it if they decide they will proceed.

  3. It looks like the dd done by the djs board pre the release looks a little thin at best.This “disclosure” could now lead anywhere.

  4. innocent bystander

    A hoodwinking for BHP. SMH More Kloppers M&A waste…

    big companies with big money get lazy.

  5. > Global Macro: Big banks, big deceit (FT):

    The article in Rolling Stone (I think it was listed in China links last weekend), “The Scam Wall Street learned From the Mafia” describes similar egregiously deceitful behaviour by financiers.
    http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620

    BBC’s ‘The Forum’ 16 June 2012 ‘The Power of Connections’
    (Podcast available for another 17 days: http://www.bbc.co.uk/podcasts/series/forum)

    On ‘The Forum’, discussion with British economist Paul Ormerod, at 13:00 – 23:00 mins, refers to the need to use peer pressure and peer influence to change acceptable or normalised, but ultimately antisocial behaviour. (Paul’s 60 second idea is also worth listening to – 23:00 – 24:00 mins.)

    In her address for the 2011 ‘Cranlana Australians of the Year Speaker’ series, Professor Fiona Wood refers to the need for our society to foster personal accountability and responsibility.
    http://www.abc.net.au/radionational/programs/summertalks/professor-fiona-wood/3758564

    The Rolling Stone article is long, but well written.
    A few excerpts:

    … the reason no one was whispering isn’t that their actions weren’t illegal – it’s because the bid rigging was so incredibly common the defendants simply forgot to be ashamed of it.
    ….
    Almost every executive involved in the trial was absurdly young; many were just out of college when the bid-rigging scam started in the late Nineties. …
    The extreme youth of some of the conspirators was an obvious subtext of the trial, underscoring the fact that far more senior executives from bigger banks like Chase and Bank of America had been permitted by the government to evade testifying.
    …..
    … the heart of the defense, … center[ed] around the definition of the word “fair.” The men and women who run these corrupt banks and brokerages genuinely believe that their relentless lying and cheating, and even their anti-competitive cartel­style scheming, are all legitimate market processes that lead to legitimate price discovery. In this lunatic worldview, the bid­rigging scheme was a system that created fair returns for everyone. If a bunch of Pennsylvanians got a 5.00 percent return on their money instead of 5.04 percent, and GE and CDR just happened to split the extra .04 percent, that was a fair outcome, because that’s what the parties negotiated. True, the Pennsylvanians had no idea about the extra .04 percent, and true, they had hired CDR precisely to make sure they got that extra 0.4 percent. But hey, it’s not like they were complaining: Until someone told them they were being brazenly cheated, they were happy with their bond service. And besides, it’s not like ordinary people understand this stuff anyway. So how is it the place of some busybody federal prosecutor to waltz in here and say what’s a fair price?
    …..
    This incredible defense, which the attorneys for all three defendants led with, perfectly expresses the awesome arrogance of the modern-day aristocrats who run our financial services sector. Corrupt or not, they built this financial infrastructure, and it’s producing the prices they genuinely think are fair for us – and for them. And fair to them is the customer getting the absolute bare minimum, while they get instant millions for work they didn’t do. Moreover – and this is the most important part – they believe they should get permanent protection from the ravages of the market, i.e., from one another’s competition.
    …..
    America’s biggest banks ripped off the entire country, virtually every day, for more than a decade!
    ….
    This is the world’s biggest banks stealing money that would otherwise have gone toward textbooks and medicine and housing for ordinary Americans, and turning the cash into sports cars and bonuses for the already rich.

  6. “More questions than answers Gavyn Davies”

    A good article, as usual, from Gavyn Davies.

    I’ve had a read through a number of other articles on the outcomes of the EU Summit. Here are a few paragraphs which I found interesting.

    http://uk.reuters.com/article/2012/06/29/uk-eurozone-idUKBRE85R19G20120629

    Eager to avoid the impression that she had blinked first, Merkel said strict conditionality would still apply to the use of rescue funds and countries would face stringent monitoring by the EU Commission and the ECB.

    Asked if she had yielded to pressure, she said: “There is clearly pressure from financial markets. Some countries are in a difficult situation. The high interest rates affect the debt but also the real economy. We had an interest in finding solutions.”

    ……

    The ESM’s ability to inject capital directly into banks will come too late to help Spain recapitalise its debt-laden lenders immediately this year, but it should allow Madrid to remove the cleanup from state books next year, euro zone officials said.

    Merkel said finance ministers would have to work out whether the state or the banks would be legally responsible for repayment of the loans thereafter.

    http://www.ft.com/intl/cms/s/0/27a0ef34-c20a-11e1-bffa-00144feabdc0.html#axzz1z9OlXEHK

    Ms Merkel told the Bundestag that the summit decisions were “good and sensible”, even if she had to concede that “differing communications” from various eurozone leaders about what exactly had been agreed had “led to a whole number of misunderstandings”.

    • From the Reuters article, the last quote from Merkel seems to say that a decision has yet to be made on whether the state or the banks would be legally responsible for repayment of the loans.

      There seem to be 3 possibilities:

      1. A decision really has yet to be made, in which case they have effectively just kicked the can down the road one more time.

      2. It has been agreed that the sovereign will be responsible, in which case nothing substantial has really changed.

      3. It has been agreed that the banks will be responsible, in which case it could be called a major breakthrough.

  7. The Patrician

    Further to my recent blurb on supply in the Brisbane Highrise market and HRH the other day I thought I had heard there were at least 3 Mega towers due…. and I was right.

    “In Brisbane’s CBD, Melbourne-based developer Billbergia unveiled plans to develop the failed Vision site into a 90-storey residential tower with about 800 apartments, a hotel and a 34-storey commercial tower.”

    800 apartments in one tower! Wow. Makes HRH look …well…inadequate.

    Does anyone know any more about this monster?