As Aussie dollar busts, stocks boom

By in Australian Dollar, Australian Shares

| 20 comments

The Aussie dollar is still selling:

As bonds take off:

With stocks:

Led by the Big Iron melt-up:

Big Gas is up on OPEC and Russia:

Big Gold is losing steam at DXY regains it:

Big Banks are back. They ought to run on the yield trade for a bit, right into a crumbling economy…

Big Realty is mixed. There’s not a lot of reason in DHG crashing while REA firms up:

Blessed is the RBA.

Houses and Holes

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.

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Comments

  1. bcnichMEMBER

    Lots of players are underweight ASX
    interest rate lower much lower
    Hedgies are short banks
    No margin lending in shares
    Where else is there to go
    Companies have better balance sheets than pre GFC
    Think we are headed to test 2018 highs and have a look at 7,000
    I’m going to hold back my prediction of 8,000 ASX and potentially 10,000 in this cycle
    Cash rate to zero
    RBA QE
    Look what happened overseas with QE

  2. Bonza

    Bcnich true this was also the case in Venezuela and Zimbabwe in the end if a country’s currency is worthless so goes their sharemarkets !

    • bcnichMEMBER

      Agree Bonza
      Worthless pacific pesos chasing better returns
      It’s not about PE anymore
      It’s just bubble mania and understanding how to trade
      You buy when everyone is bearish and sell when everyone is euphoric
      Every man and his golden retriever were short at 5500
      Wait until the hedgies bottle from their bank shorts
      I am going to short banks it’s maybe 2 years away
      Think you need to short when every player who has shorted just gives up
      It’s like a guy on this site wrote yesterday
      He was too scared to short AUD because it’s bounced so many times
      Everyone still thinks buy AUD on dips
      I think this time around we are going to test lows in AUD and break
      Think low 60s this year
      ASX at 7,000
      10 year bond at 1.60/70%

      • bcnichMEMBER

        Don’t think anyone cares
        We will lose AAA
        What a joke
        Household debt 125% GDP and we are AAA
        No one listens to rating agencies that are full of BS
        Cash rate is going to zero
        Think we have to do QE to pump liquidity into our dxx shxxx banks and share price will go through the roof
        I don’t fully understand what they’ll do with QE, but Gov bonds ?? MB will know this but think we will see 10 years mid 1’s if not lower and AUD caned at that stage
        Think we could see 10,000 this time around and DOW at 40,000
        Think Europe and Jap might blow up
        Jap is QEd out
        Not sure when RBA will start QE
        Guess cash rate might be 0.50/75 this time next year

      • DanMEMBER

        I just posted the official ASIC short sell numbers. It turns out “they” weren’t really. AMP and BOQ yes, the big four not so much.

        Earlier in the year the numbers were around 4-5% but most short covering happened around the interim Hayne report. Its just a good story to sell papers.

      • chino

        Dan, thanks for the short interest report. But what really stands out on the first page is “No responsibility is accepted for any inaccuracies contained in the matter published”

        They are the corporate regulator. Why aren’t they responsible if they make an error on such a report?

      • bcnichMEMBER

        Dan
        No offence but you don’t need to see a report to know everyone was short.
        There are two types of shorts
        You can borrow stock and sell or direct short I believe?
        They were short and I don’t think all have got out

      • DanMEMBER

        You mean naked shorting? Basically illegal in Australia.To short you either go through a prime broker who will arrange loan stock, or use a derivative (e.g. a warrant that will usually be hedged against borrow stock). Any of the big prime brokers or market makers, even international ones, will have very good compliance with ASIC and report automatically on their client’s trading (this would apply to most large hedge funds). Its possible that someone could borrow stock another way(e.g. direct from its owner) but I suspect this is more likely to be shonky operators in small cap stocks. They will not move a big four bank’s share price.

        Hence why ASIC disclaimer says the exact number may be inaccurate, but looking at the trend is a good indication of what’s happening in my experience.

      • Arrow2MEMBER

        Bcnich isn’t it the case that losing the Aaa triggers automatic selling of bonds by conservative funds that only allow themselves to own Aaa paper… so bond prices should drop and yields rise (to reflect increased risk) …

  4. HadronCollision

    What would happen if all debt was extinguished overnight. Who ultimately loses. Ultimately.

  7. Hugh PavletichMEMBER

    CHINA: Workers’ Activism Rises as China’s Economy Slows. Xi Aims to Rein Them In. – The New York Times

    https://www.nytimes.com/2019/02/06/world/asia/china-workers-protests.html

    BEIJING — Factory workers across China are staging sit-ins demanding unpaid wages for “blood and sweat.” Taxi drivers are surrounding government offices to call for better treatment. Construction workers are threatening to jump from buildings if they don’t get paid.

    With economic growth in China weakening to its slowest pace in nearly three decades, thousands of Chinese workers are holding small-scale protests and strikes to fight efforts by businesses to withhold compensation and cut hours. The authorities have responded with a sustained campaign to rein in the protests, and most recently detained several prominent activists in the southern city of Shenzhen late last month.

    Such protests are a glaring example of the challenges the sharp economic slowdown poses to China’s top leader, Xi Jinping, who has aggressively promoted the “Chinese dream,” his signature vision of greater wealth and a fairer society. … read more via hyperlink above …
    .
    .
    China steps up efforts to close failed zombie companies by 2020, but faces harsh economic reality | South China Morning Post

    https://www.scmp.com/economy/china-economy/article/2185186/china-steps-efforts-close-failed-zombie-companies-2020-faces
    .
    .
    China’s hopes of becoming the world’s largest economy are hitting a major roadblock | Markets Insider

    https://markets.businessinsider.com/news/stocks/chinas-hope-to-become-worlds-largest-economy-hitting-major-roadblock-2019-2-1027931209