Links October 23

 

Global Macro

North America

Europe

  • The €153bn cost of Europe’s lost generation. Guardian
  • BP board approves sale of THK JV stake to Rosneft. Now the oligarchs have Putin as a partner. Quartz
  • Elsewhere, the James Bond of finance is about to clean up Vatican Bank. The Economist
  • Banking union will not end Europe’s crisis. Wolfgang Munchau. In case you missed it yesterday.

Asia

Local

Interesting/Other

  • Ayn Rand outsells Marx in India by 16 to 1. Quartz. Not exactly outstripping the Bhagavad Gita though.
  • The renaissance of geographic history. New Yorker
  • Are reality shows worse than other TV? New York Times
  • A journey to India’s north-east. The Economist

Comments

  1. The tricks used yesterday to give the mid year fiscal analysis a good spin are very disingenuous (actually quite disgusting), and the MSM has such a soft analysis.

    Surely the headlines should read: ‘more bullsh8t from corrupt party politics’.

    • Tim Colebatch’s analysis is the best of the bunch. He doesn’t pull any punches showing this is an anti-business, anti-prosperity budget. Its a terrible outcome for the nation.

      • Colebatch has another cracking piece today: Australian dollar dearest of top economies

        Australia’s relative prices have soared from a decade ago, when goods and services that cost $100 to produce in the US could be produced here for $73. Most of that rise is due to the rising dollar. And some reflects wages and prices rising more here than in other countries.

        The high dollar has been great for Australian consumers – it allows us to take overseas holidays or buy imported goods cheaper.

        It has allowed Treasurer Wayne Swan to skite that Australia is the world’s 12th biggest economy. But real output can be compared only by adjusting for price levels. And on the PPP measure, over 10 years, Australia slid from 15th to 18th, between Iran and Taiwan.

        The same rising dollar that makes us wealthier as consumers makes us poorer as producers. It has seen a sharp deterioration in the competitiveness of Australian producers selling in global markets.

        Some countries hold down their currencies.

        The IMF says Taiwan now almost equals Australia in output and GDP per head. But its currency has been held down to a third of our dollar’s value, to keep its manufacturing competitive with China.

        • So … the fabulous mining boom and super strong dollar has delivered the following outcomes since 2002:

          – Our competitiveness has been smashed
          – We have slipped from the 15th to 18th largest economy on a PPP basis

          And before the loony right chimes in with nonsense about rising wages and greedy unions, most of our loss of competitiveness was due to the rising dollar.

          I remember 2002. Houses were more affordable, commodity prices were in the toilet, the dollar was in the 60s, and Aussie exporters were very competitive. What have we achieved in the past decade?

          • In response to the loony left;

            “What have we achieved in the past decade?”

            Between 2002 and now there was a small event called the GFC. Now , if you possibly can, imagine if we were a country bereft of mineral resouces and how we may have faired during that period. Say – like Spain or Portugal. Greece perhaps? Yes, you would have had your housing price collapse – but at what cost?

            Enough of the whining. While the outcomes of today are far from perfect, this outcome you so despise is better than what we see elsewhere- by far. And considering it was, during that period, the only viable game in town it’s not as if there was much choice in the matter. Go for economic devastation or a mining boom? No brainer I’m afraid.

            Where to from here is the real question , not whingeing about the past.

          • Now , if you possibly can, imagine if we were a country bereft of mineral resouces and how we may have faired during that period.

            New Zealand. i.e. not too bad, and nowhere near as bad as Spain, Greece, Portugal et al.

            this outcome you so despise is better than what we see elsewhere- by far.

            I would argue that while the mining boom supported our economy and housing bubble in the short term, it has delivered devastating structural change that will have a much bigger impact in the long term.

            Where to from here? Well, we bet our economy on China and minerals with no Plan B, so either China continues on its current path of manic over-investment, or our national income falls sharply in the future. Because, unlike a decade ago, we don’t have strong non-mining tradeables sector that can pick up the slack.

          • Lorax – your living in the past mate. No good reminiscing – in the real world you’ve got to deal with actualities of the day.

            No question we have had some very good years in recent times, particularly in comparison with other developed economies. We may be about to face a period of structural adjustment, something RBA and Treasury have forewarned of, alas not likely to be of the kind they were thinking.

            Regarding manufacturing, given the enormous change globally in manufacturing capacity it is a minor miracle we have any left at all – unlike Taiwan we never positioned ourselves of a global player so as usual Colebatch’s examples come from a flawed perspective.

            http://www.tradingeconomics.com/australia/gdp-per-capita-ppp

          • We may be about to face a period of structural adjustment

            About to? Its happened mate. We’ve restructured from a diverse mixed economy to a quarry for China.

            You’re living in the past because the manic investment phase of Chinese development is now behind us, and Australia needs to figure out what else we’re going to sell the world.

            Unfortunately the boffins in Canberra believed the mining boom would last forever, and decided it would be a good idea to sacrifice our non-mining tradeables sector because we weren’t going to need that anymore.

          • Lorax, I’m afraid you are wrong. We remain a mixed diverse economy. Alas in the evolving global environment we have largely failed to secure a ‘point of difference’ in terms of global demand. Well, other than our resources…

            I would be delighted to see the statistics you have to hand disaggregating exports over say twenty years. I linked to report a few months ago that appeared to demonstrated, over the longer term, surprising stability!

          • it has delivered devastating structural change that will have a much bigger impact in the long term.

            Agreed Lorax. And this all thanks to grossly inept management.

  2. “Buyer’s advocate David Morrell said sales in the top end were often done in secret …. He said the recent results…. were due to sellers dropping their prices to meet the market.”

  3. I just finished watching the MMT talk at the Naked Capitalism link…Recommended viewing…Many Thanks ..Cheers JR

    • This almost blew my mind. I’m still digesting what it all means. I’d appreciate if MB did an article on this critiquing their assertions. They just seem so right!

    • Great link thanks Yorrick.

      3d1k dont listen from 7 minutes in.

      “the singular focus on commodity exports, and hence prices, has led Australia’s economy to become unbalanced. By over relying on one sector, we have let other critical sectors go into structural decline….we have penalised others….
      “the focus on energy exports….means we lack competitive domestic energy and power, in a country that has both in surplus, because we want to export all this gas overseas to other countries…which have then used this to build their own competitive manufacturing industry and created 1000’s and 1000’s of jobs overseas – all to the detriment of our own…”

      On our singular focus on commodity exports to China:
      “I run a $60 billion company – but I dont sell one product to one customer – that doesnt make sense for my business in the long run”

      More:
      “nations seeking a robust and diversified economy – and I know Australia would like to become one of these – cannot standby and let their manufacturing industry go into terminal decline.”

      • I know Liveris’ views well. He was in Oz around six months ago with the same message and no doubt will be again in the future. He recognises the tremendous potential this country has and, unfortunately, our almost total disregard or intent to do anything about it.

        The boom has given us many good years over and above those experienced elsewhere – and we have little to show for it (apart from world class mines and miners) and entrenched entitlement progams. No government in recent times has applied itself to regenerating the industrial base of the country. None. Indeed the current government has sought to apply a tax regime disadvantaging the very industries Liveris would like to see take hold and god forbid should they became successful and make ‘super’ profits…

        If we are serious we need do something along the lines of Ireland’s approach to corporates and new technological/industrial development – anything less is spruik to make you puke. Disingenuous.

        As an aside, he also recently joked about the difficulty getting past some government departments with the ‘Chemical’ as part of your name!

        • Indeed the current government has sought to apply a tax regime disadvantaging the very industries Liveris would like to see take hold

          What are you on about?

          Liveris says we’ve become over-reliant on one sector and one customer and allowed other critical sectors to go into decline — precisely the points I made above — and you come up with something about the mining tax?

          For your spin to be effective it has to have some connection with reality! I think your algos need a rewrite.

          • The carbon tax!! The industries Liveris sees value-adding are energy intensive. Not just the carbon tax: the regulatory and environmental mountains that must be surmounted before any sector the likes of which he is talking of can get off the ground.

            And then, if too successful, something like the MRRT.

          • Another example of this government’s disastrous policies towards industry in the super trawler link above: “THE Gillard government banned the super-trawler in defiance of Fisheries Department warnings that this would expose taxpayers to legal action and damage the credibility of Australia’s fisheries management.”

          • Oh I see the carbon tax. I didn’t realise you’d switched algos.

            Well, can I suggest that any industry that depends on the availability of cheap carbon-based energy is probably doesn’t have a long-term future.

            Chances are climate change will still be an issue in 10, 20, or 100 years.

          • Super trawlers should be banned everywhere. In fact, in many places they are. The fault lies with the Fisheries Department (and the government) not putting a stop to this much earlier.

            What is the greater risk here: Exposing taxpayers to legal action or wiping out a fishery forever?

            Long term thinking has never been a forte of the right.

          • So would you like to talk about the massive amounts of NOX pouring out of the mining industry or the super Trawler…

          • The allowed catch is the same regardless of whether one trawler or fifty are involved.

            The size of the trawler is completely irrelevant to the impact on fisheries.

          • There’s no such thing as a certainty in science. There is only theory, backed by evidence and experimentation.

            Darwinian Evolution is about as close to a certainty as is possible in science, but many people still prefer to believe a 2000 year old creation myth. Many of those same people are also climate change “skeptics”.

          • The allowed catch is the same regardless of whether one trawler or fifty are involved.

            The size of the trawler is completely irrelevant to the impact on fisheries.

            I’d be willing to bet a supertrawler causes a) a lot more concentrated damage and b) a lot more collateral damage.

      • “because we want to export all this gas overseas to other countries” Yep. Perhaps the NT Labour Government would like to explain why they sold off every last bit of gas to Inpex for 2000 short term construction jobs and 150 long term jobs. The net benefit to the NT in future years will be minimal. Japan was the winner here. How are we expected to compete in a region that think in decades and we think election cycles?

  4. innocent bystander

    Graincorp shares soar on US bid. Ninemsn. An early Macro Investor stock tip.

    what MI actually said:


    We await a clearer entry signal for GNC and would wait to perform further analysis at that point in time.

    and
    Indeed our proprietary risk management system indicates that investors should take profit at current levels based on analysis of such technical indicators

    sry.

    • Yep – not a time to buy more, but a time to sell down some of your existing holdings – i.e take profit.

      From September onwards, FARM was signalling a “Hold”.

      We’re going to weekly signals updates of all stocks covered (and within our “Investment Grade” universe list) to make this more actionable for readers.

  5. For those with an idle CNC
    http://www.wikihouse.cc/

    “WikiHouse is an open source construction set. It’s aim is to allow anyone to design, download, and ‘print’ CNC-milled houses and components, which can be assembled with minimal formal skill or training.”