Macro Afternoon

by Chris Becker

The lack of volatility as safe havens are bid up left right and center is still pushing stock markets down across Asia today, as tensions over North Korea remain high. The Yen is nearing a year high while gold remains highly elevated as managers switch from cautious mode to risk-off mode leading up to the ECB meeting later in the week. The disappointing Aussie GDP print didn’t shake up the dollar as much as expected as commodity markets remain well bid under a weak USD.

In mainland China the Shanghai Composite is putting in its near fifth straigh scratch session to be steady at 3382 points, now in full stall mode here in its attempt to reach up to 3400 points.  The Hong Kong based Hang Seng Index is cracking however, falling nearly 0.7% to break the low moving average on the daily chart. This is setting up for a correction down to daily support at the 27000 point level:

Japanese stocks has a slight reprieve as Yen remained steady throughout the Asian session after its big rally overnight. The Nikkei only lost a handful of points to close at 19357, still below the very firm resistance at the 20,000 point level.  The USDJPY pair is hovering above last week’s intrasession lows at the mid 108’s but for mind is setting up for a further fall:

S&P futures are steady in anticipation of what could be a volatile session as Irma makes here way across the Atlantic:

The ASX200 once again tanked on the open, but stayed there for most of the day, eventually closing down 0.3% to be at 5689 points.  Once more we have this dance above and below and around the 200 day moving average again, with broader losses than in the previous session, particularly CBA which looks set to head back down to $70 per share again:

The Aussie dollar fell below 80 cents against USD and on the other crosses on the less than spectacular GDP print in the morning session and remains below that level going into the London open. The medium term setup is still pushing higher to break through and stay above the 79.80 level, but I’m closely watching the low moving average at 79.65 for a breakdown:

The data calendar has a few releases to keep an eye on, first up in Europe its German factory orders for July, then the Canadian central bank meets later on in the session.


  1. AUD is interesting at the moment. A slight sniff of positive news and it powers upwards. Some bad news and it drops only marginally.
    That damn carry trade maybe.

    • It’s been range trading for over 2 years since QE tapered. Question is who is losing money, the people who bought RE at 73 or the people who bought USD at 73?

      • Rational RadicalMEMBER

        No, that’s “your” question Mig. “The” question is whether or not we are ALL going to be f*ked over by a crisis that we should have done something about 5 to 10 years ago, and who bears the largest moral responsibility – as separate from how many folks’ investment decisions make them feel smart.

      • Errr no, THE QUESTION is why are you still hiding your head in the sand about a problem that has escaped your constraints 5 – 10 years ago…

        Hint: it’s the fucking credit expansion policy idiot

      • More and more I blame those on both the defence and prosecution side who have pointed to fundamentals to either dismiss the idea it’s a bubble, or even more absurdly to support the idea that it’s a bubble. Both positions are wrong, only one position is logical.
        those on both sides who have pointed to population growth, choked supply, low interest rates, tax settings, credit availability, foreign buying are to blame.
        Because you have all been telling the same investment story – that prices are supported by fundamentals. And that has fed CG expectations not supported by a realistic forecast of cash flow – ie. the bubble.

      • I was thinking today: it is staggering that MB has spent the last 10 years studiously ignoring the mechanisms of private bank money creation, and the mechanism of government spending

        Never once did they stop to question their hypotheses or their understanding of the world

        “oh, its because japanese government debt is domestically held”

        “oh, its because the USD is the world’s reserve currency”

        I really think this website needs to stop publishing daily updates of the iron ore price, and go back to square one

      • Last I heard, Sweeper, cash flow is determined by available credit, taxation policies, asset valuations and demand. You know, FUNDAMENTALS.


      • Cash flow is determined by fundamentals. Expected growth in CG > expected growth in cash flows = bubble. So anything which does actually support current and future discounted cash flows cannot be pointed to either to dismiss or explain a bubble. It’s just confusing two unrelated questions – ie. 1) What supports the intrinsic value 2) is the asset above its intrinsic value.
        I can restate the anti bubble side who have pointed to fundamentals to explain the bubble like this: ‘the asset is in a bubble because it has a high intrinsic value’. It’s a completely incoherent and idiotic way to think about it.
        Cameron Murray got it right when he looked at it purely from a valuation point of view by comparing interest rates (I think it was the mortgage rate) with gross rental yields. If that had of been hammered home this thing would have burst 5 years ago. Instead the anti bubble side has studiously discredited itself and prolonged the agony by trying to adopt the arguments of developers and other pushers (who while wrong are at least logical) in its own cause.

      • Rental yields are income. Payment on debt is negative income. How do you realise real income gains from stagnant employment distribution and sky rocketing asset valuations? By borrowing against it idiot who loves private credit…

      • 10yr bond yields are 2.6%
        Very recently have been as low as 1.8%

        What do you expect housing yields to be ?

      • Sweeper,

        “… If that had of been hammered home this thing would have burst 5 years ago. ..”

        Why don’t you set up a blog and do just that.

        Must have been frustrating over the last 5 years walking around with that mighty hammer of yours and a big juicy bubble sizzling away but unable to strike the blow that might have saved the nation.

        Perhaps you need someone to really cut through. Someone who can grab attention, win the crowds and get John Laws on team.

        Someone like Keating?

      • Wow mig – i…. simple memes for simple ideologues [both far right and left suffer].

        E.g. its all the governments fault, central banks, private credit, add infinitum, try its a bit of everything and nothing at the same time drawn out over decades. Yet you can’t even and never have question such things as why did productive and wages diverge, why has wages stagnated for decades whilst wealth concentrates to a small cohort, et al.

        Naw its money crankery and economic homilies to unpack events.

        disheveled…. how about neoliberal economics operating without an operational and functional model of the monetary or financial system, but go right ahead and use it to establish policy formation regardless. Next thing you know you’ll start forwarding Grover Norquist memes too….

      • I must be going crazy, I could’ve swore I have seen this covered many many many many many times on this blog.

      • Skip-tard. The day you have an original thought is the day your wife and children leave you as a fraud…

      • RR & skip have the right of it. What does it matter who is playing the short self interest game best, when the larger game is being lost on every front. Collectively, we’re a nation of losers.

      • If I could be bothered doing a blog I wouldn’t post about housing.
        This topic is always going to be out of kilter. Because there aren’t well resourced people with an equally large short position in housing who are motivated enough to step up. There’s just a heap of over worked, hyper distracted proles who all have tiny short positions in the market. And so the Pavletich, Phil, Bob Day line tends to become received wisdom even among those on the short side.
        But the ass about thinking really has not helped.
        “How do you realise real income gains from stagnant employment distribution and sky rocketing asset valuations? By borrowing against it idiot who loves private credit…”
        So it’s all because there’s more credit? And what about the creditors? Any thoughts? That there’s been a credit build up only says that its been the net debtors who’ve been doing a lot of the buying.
        What if the creditors had of bought the houses at the same prices (rather than lending) and then leased them to the would be debtors?
        What if the creditors were to forgive all the debts in exchange for the debtors houses pledged?
        What if the banks were to convert the mortgages into equity in peoples homes and likewise their own borrowings into equity?
        Would any of those things change the fact that houses are worth less than the buyers think they are worth? Because they would certainly effect the qty of credit.
        Like all bubbles it’s psychological. Seeing the scam, the top end has placed itself at the top of the pyramid. And you guys, with your endless justifications have only added to the mass mania.

      • Sweeper: do you think bonds are in a bubble too ?

        What do you think housing yields should be relative to bond yields ?

      • Skippy,

        We all know your copy and paste theories backwards.

        According to you what we are faced with is simply old fashioned greed under a new name with better marketing.

        What a remarkable revelation!

        So what is your point?

        You spend all your time telling everyone that all their suggestions are a waste of time because we are up against greed and it’s got money, guns and Bernays.

        Everything is hopeless as it just treats the symptom and not the level boss huh?

        Don’t kick the banks because banks are just a thing and if they were run by people who were not greedy and only directed credit to productive purposes they would be fine?

        Peddling misery always gets a crowd, especially around these parts, but doesn’t it get boring when you reckon everything is waste of time.

        Do you seriously think you can beat Bernays and the level Bosses with the grok, thingy, head meets desk, mind thunk, stripes, mob routine.

        Can just imagine you in France late 1780s.

        Forget it fellas the Royals have the crossiants and the best tunes.

      • A lot higher than bond yields. And definitely not lower; ie.
        Camberwell 1.8%
        Blackburn 1.7%
        Burwood 1.9%
        Mount Waverley 1.8%
        Balwyn 1.4%

      • “There’s just a heap of over worked, hyper distracted proles who all have tiny short positions in the market.”
        Bwaaahaaahaahaa! No wait Bwaaahaaahaahaa
        How big was their position before NIRP? Dickhead

      • Sweeper

        “…Like all bubbles it’s psychological. Seeing the scam, the top end has placed itself at the top of the pyramid. And you guys, with your endless justifications have only added to the mass mania….”

        “….Seeing the scam, the top end has placed itself at the top of the Pyramid…”

        Magical bunch that “top end” huh?

        Extra powers of perception – nothing psychological about the “top end” – immune to mass mania.

        By the way what is this top of the Pyramid?

        What exactly do you mean ‘placed itself” what are they doing there ? Are they buying property? Selling property? Arranging credit? Do they work for banks? Do they have factories.

        No wonder you and Skippy bond so well.

        Everything is just so simple but entirely unfixable.

        Why? Because people.

        And people wonder why right wing clowns win elections.

      • Greenspan says there is a bond bubble. which says there is no bond bubble.
        It doesn’t make sense imo anyway. Because the yields are fixed, so if investor’s are buying for capital gains rather than yield it’s just a bet on falling interest rates. And these expectations are always going to be supported by the economic forecast. Eg. real growth rate, inflation, risk premium people want to move out of bonds etc.
        I think bond prices have to be at intrinsic value but this will move about depending on the economic outlook. When inflation and growth is low and when business investment is seen as super risky it makes sense to expect safe interest rates to stay low or fall lower. Therefore expectations are valid.

      • Sweeper compares bonds with residential housing and finds they are different.

        Goodness you should share that discovery with Dr Spock, he will find it most curious as well.

      • What are you talking about I was just answering Coming’s question. It is an interesting question and not at all obvious. If you think it is obvious I would suggest that maybe it isn’t as obvious as you think. Many very important people think there is a bond bubble. Especially on your side. I’m surprised you don’t.

      • Pfh: why should bond yields be so different from housing ?

        Sweeper: I am admittedly not from Melbourne but I don’t know where you’ve cherry picked those yields from
        I live in Sydney which should be the heart of the bubble and I am seeing yields around 3%

        Perhaps the examples you are looking at are un(der)developed lots with a higher future income potential ?

        I think the dangerous thing about calling housing a “bubble” is that it implies there will be a reckoning which will leave the meek and humble enriched
        This is a false sense of inevitable justice and security

        High house prices should really be seen for what they are: the rational and inevitable result of the neoliberal nightmare

        They won’t drop without a major change in ideology and the monetary/banking system

      • “Gaussian expectations – ?????” no such thing! More skippy bullshit to confuse the *cough* proles.

        Gaussian distribution is a thing – look it up skip

        “If the number of events is very large, then the Gaussian distribution function may be used to describe physical events. The Gaussian distribution is a continuous function which approximates the exact binomial distribution of events.”

      • Yeah why should they be different 007? While your putting down your flippant one liners to answer that. Maybe you’d also like to explain why you believe bonds are or aren’t in a bubble. Something which is obvious to nobody (except yourself).
        More I think about it the less I think it is possible. And the less obvious it becomes. Provided some investors are buying to hold to maturity it can’t be in a bubble because the cash flows are known and are risk free – the known cash flows + fixed maturity makes it different to gold for example which is arguably always in a bubble. Plus because the bonds act as the safe component of the required return on all assets the bubble would spill over into all assets and there would be no way to value the fundamental value of the bond v other assets. All other assets would include cash because cash becomes more attractive at lower yields. Unless offset by more cash this spillover would effectively force the economy to adjust around the bond bubble.
        ie. I don’t think bonds can be in a bubble because the economy will always adjust around the demand for bonds which will change the fundamentals to ensure bond prices are always at fundamental value.
        But unlike 007 I am definitely not sure about it.

      • Black-Scholes model the notion that changes in stock prices follow a bell curve distribution, despite the fact that power-law (skewed) distributions are fairly common in finance mig-i. We had this discussion years ago.

        Disheveled…. this is yours and oo7s drama, you can’t keep your story’s straight and I have no clue about your crap about originality, considering your ideological bias.

      • Sweeper,

        “…Yeah why should they be different 007? ………..Maybe you’d also like to explain why you believe bonds are or aren’t in a bubble…..”

        You tell us – you are the one with the theory that everything is explained by the psychology of stupid people driven mad by people talking about ‘fundamentals’.

        You are the one who seems puzzled that anyone could make a decision for reasons beyond yield.

        Tell us about the public debate that is creating bubbles of mania in the financial sector.

        As I said, talk to Dr Spock he finds humans most curious as well.

        “…ie. I don’t think bonds can be in a bubble because the economy will always adjust around the demand for bonds which will change the fundamentals to ensure bond prices are always at fundamental value…”

        Lol – perhaps on Vulcan they do.

      • The Sweeper definition of a non-response is one that requires Sweeper to address an issue that Sweepers wishes to ignore.

        I am not interested in ‘bubbles’ though I appreciate that an “equilibrium man” like you would find them deeply fascinating and confusing.

        My interest is in the productive, equitable and fair investment of resources in the public interest with an open mind as to the best way to achieve that result.

        Good luck with popping that irrational bubble of psychological mania.

      • “Maybe on Vulcan” you do realise I just described a standard Keynesian story where excess demand for bonds causes a recession validating bond prices?
        Who knew Keynes was writing about Vulcan.

      • Yeh like all good Austrians your interest is in correcting the “mis-allocation of capital” and fixing the “structure of production”.

      • Sweeper,

        The only people not concerned about the unproductive, inequitable use/allocation of resources are you and your buddies in the FIRE sector.

        No surprise that the FIRE sector is packed full of Austrians as well.

        Despite your protestations you and Austrians have plenty in common – public money out of the hands of the public.

      • oo7…

        The public money shtick is the cornerstone to your narrative, remove that and try again, pole turtles have a propensity to have only one view of complexity. So that begs the question if your narrative is concocted to white wash all the stuff that would challenge or invalidate it or its a view based on an opinion with the stake driven irretrievably in to the ground.

        Thought the whole congress thingy and power over HPM and distribution was sorted, this is highlighted by years of the CBO being staffed by the ideological and the ramifications of it. Yet out of all this complexity spanning decades, we have some banging on about central banks and personal nomenclature like “public money” ™.

        Disheveled…. I would also add that as Sweeper notes you don’t have much to say outside a very narrow set of talking points.

  2. Mining BoganMEMBER

    Good heavens! Scummo just accused the AGL boss of lying to the stock market. Isn’t that kinda serious?

    And speaking of serious, newly determined and responsible Dave Warner got his hundred and Australia lead with five wickets left. Doesn’t make up for the Thai horror last night though, and I’m not speaking of dinner.