Links 8 February 2019

Global Macro / Markets / Investing:







  1. US trade deficit with China narrows, as effects of trade war-induced export front-loading begin to fade | South China Morning Post
    Workers’ Activism Rises as China’s Economy Slows. Xi Aims to Rein Them In. – The New York Times
    China’s “Operation Cloudhopper” Infiltrated Norwegian Software Firm | Zero Hedge

    • That article was posted on 8 Nov 2017. No idea why Leith posted it here now.

      And why is Norway allowed to put massive taxes on petrol cars? LCT is the same thing!

  2. You know the party is snookered when you can’t even do a scare campaign right.

    ‘Retiree group’ lobbying against Labor unmasked as Liberal Party and trucking industry operation

    A lobby group masquerading as a grassroots organisation of disgruntled retirees is actually a network of professional lobbyists involved in the trucking industry and the Liberal Party, with a history of campaigning against Labor government policies.

    Defenders of Self-Funded Retirees says it was formed by “hard-working Australians who reject Labor’s proposal to impose double taxation and to demonise us”. However, the association is managed by Liberal Party member and ACT Senate candidate Robert Gunning, along with a number of Mr Gunning’s friends from the trucking lobby.

    • It’s odd. The words ‘Self-Funded Retiree’ should invoke some kind of respect…worked hard all their life and all that. But it doesn’t. I instantly think they’re just on the take, all of them. Perhaps I need to learn more respect.

      • The ‘self funded’ bit doesn’t seem to apply to use of Medicare, PBS, transport concessions, consumption of publicly funded arts/entertainment … But yes, other than all of those things, you should definitely learn some respect!!

  3. “Letters to self-managed super fund trustees from Liberal MP Jason Falinski, seen by the The Sydney Morning Herald and The Age, show the House economics committee member using the inquiry to entice voters to donate to the Liberal Party in exchange for an audience with committee chair Tim Wilson.”

    It’s now a frenzy of bare-faced corruption by the LNP.

    What does this ‘Tim Wilson’ think he’s doing?


  4. “The task of finding a new (NAB) chairman should be expedited… This is the most important decision the bank will make for possibly the next decade”. (Yes, it is)

    “There are plenty of obvious candidates out there, including Gail Kelly, David Morgan and John McFarlane”. (Heaven help them if it’s one of them)

    “The bank needs someone at the head of the board table with 20 to 30 years experience in banking and a deep understanding of the importance of the right culture.” (Umm? Isn’t that the problem? The last thing the NAB need is someone with 20-30 years contemporary experience?)

  5. “U.S. Banks Win $21 Billion Trump Tax Windfall Then Cut Staff, Loaned Less” [Bloomberg]:

    Major U.S. banks shaved about $21 billion from their tax bills last year — almost double the IRS’s annual budget — as the industry benefited more than many others from the Republican tax overhaul.

    By year-end, most of the nation’s largest lenders met or exceeded their initial predictions for tax savings. On average, the banks saw their effective tax rates fall below 19 percent from the roughly 28 percent they paid in 2016. And while the breaks set off a gusher of payouts to shareholders, firms cut thousands of jobs and saw their lending growth slow. …

    Yeah … the good guys are in power …

  6. A few weeks ago Andrew Charlton (former labour economist) mentioned the government calculates house price fair value using total mortgage costs vs household income, rather than listed house price vs income. Assuming this is the correct metric, here is my quick attempt at determining fair value:
    – Since mid 90s Sydney house prices have doubled vs household income
    – Over the same period, mortgage rates have dropped from 8% down to 5%. This means you can service a 30% larger mortgage.

    2.0 / 1.3 = 1.54 = 35% overvalued

    If we were to get ZIRP, mortgage rates would drop to 3.5%-4% before eating into bank margins? It would increase borrowing capacity by a further 15%.

    2.0 / 1.5 = 1.33 = still 25% overvalued.

    You could probably deduct 5% off those figures to cater for wage inflation, stamp duty concessions, FHOG, etc. That would be a 20-30% nominal price fall to reach the government’s interpretation of fair value. That is of course assuming that historical prices were at fair value.

    • “.. fair value using total mortgage costs vs household income”
      Cool! And what if The Unexpected happens, like it did in the 80’s? You know, when mortgage rates went to 20%? How’s that going to work versus ‘the better’ calculation against actual house capital price? Answer: It’s won’t.
      Sure you can have an Interest-Only loan on your house for $10,000,000 at 0% and have to make no repayment. Good, eh! But that can’t last forever, and the longer this mess goes on with lower and lower interest rates, the closer we get to the end of the cul-de-sac of economic disaster.

      • File under when you make RE a major pillar to the FIRE sector with investment income dynamic feed back loops …..

      • If interest rates rise due to wage inflation then anyone whose wages rising fast enough to keep up with repayments will end up with a free house or five as occurred for the boomers. If interest rates rise due to a dollar collapse then who knows. Leith has repeatedly mentioned that Australia’s foreign debt is denominated in AUD and hence can be replaced with QE if things turned really bad.

      • Replacing the foreign debt with QE is just a BS idea. Debt has consequences. We would be sitting in a time with a massive CAD. Nobody would be wanting A$ – we’d be at this stage because nobody would be wanting anything, including businesses, we would be wanting to sell. So flooding the world with A$ at that stage would just drive the currency to zero. Think Venezuela! Maybe when our currency is near zero the Chinese and Yanks will come in a fi8nish buying all the assets. If we don’t pay for the debt in real terms then our kids, in real terms, will pay for the debt.

        This idea that we can just print to coeve our debt is just BS writ large.

  7. Townsville update: Flood maps to be revised??? Experts were wrong???
    There are suggestions; falls in the Ross River Dam catchment could exceed a one in 2000-year rainfall event.
    Townsville floods were 5x bigger than initially thought, > data revealing the disaster was greater than a one-in-500-year event.??
    The Townsville outcome shows anyone that the experts have no idea.
    But on the bright side, its good that this is happening to someone else, cos WHEN it happens to the GC we will get exactly the same result. No one takes responsibility.
    Punters cop it in the neck and the hip pocket.
    Now, how about all the experts who say tapping into the Great artesian Basin for water to allow Adan to wash coal, wont affect the Basin,
    same as the mob who set up the murray darling fish kill scenario.
    Common sense isn’t living up to its title, it seems rare indeed.
    And don’t even mention the govt cover-up of flammable cladding WTF WW

    • “Noone takes responsibility” who do you think should.
      Floods happens and if you dont want to get flooded then move somewhere higher????
      Fires happens and if you dont want to get burnt then move away from the trees.
      Not upto the government to protect every idiot that live in flood areas.
      Now am pissed offthat my insurance premiums will probably rise cos people decide to live where water goes.

      • You have to accept that the average 90%, is a drongo
        They exist only as a source of income for the 10%
        But if you tell the punters an area to live is above flood level Q100, or polystyrene on the outside of your building is safe, then you have an obligation to make good on those statements.
        All the experts will have PI insurance and the punters who have been affected by this incorrect advice, should take the experts to the cleaners. For everything they have.
        It is just a matter of getting organised, something the 90% struggle with.

      • You can move above the flood line, plus a bit, and pay ‘$5,000,000’ for your home, or live on the flood plain that has an expected risk factor of 500/1 and pay ‘$1,000,000’ for exactly the same home. What would you do? (Oh, and it is the Governments job to protect people on a flood plain – otherwise they’d be doing nothing about it, right now)

      • J you have mis understood the issue
        the experts produced a map showing the flood boundaries
        punters relied on that advice, and so did insurers, when they seleced thier home location
        Parts of those townsville estates were built among the swamp and bull-rushes, an urban punter driving his air-conditioned vehicle looking at the estate, would most likely get a vastly different conclusion from a seasoned prospector like WW, who has learnt to gauge geography by the lie of the land and the geology.
        bottom line is, if you rely on the advice of others especially experts, it is necessary for you to sue the wrong advice giver for any loses you sustain as a result of that advice.
        It is almost guaranteed that topography and geology was not considered in determining the flood levels up in townsville. A very costly mistake-oversight indeed.

      • and natch *somewhere higher* is zoned residential…and equally natch floodplains are always declared uninhabitable.

        its a racket for skinning plebs. nevermind suing..start jailing

    • Queensland State Government will conduct a full review into the Townsville flood and whether floodgates should have been opened earlier. Ie should the Townsville council have released water from the Ross River dam earlier, as an attempt to ease flooding.
      QLD Premier Palaszczuk responded by deflecting the question saying the Ross River dam was a Townsville City Council asset. “You should direct that question to the Townsville City Council because they own that dam,” she said.
      “They are the asset owner of that dam.”

      We can expect the review by the Govt will be of the same rubbish quality as the Granthan flood review.
      A full class action is needed here.

  8. interested party

    Canada was the recalcitrant party in the USMCA deal negotiations. Last week Trump signed an EO to place Made In USA before external business on Gov infrastructure projects. Some are now waking up to the harsh reality that now faces them. These two items above are very closely connected.

    I don’t think Australia has a hope in any US AUST negotiation if one does eventuate…….Downer and co ( via 5eyes ) may have poisoned that waterhole. I also think that the 5 eye debacle is the leverage the US has over Australia to push the huawei buttons.