Macro Afternoon

Asian share markets responded in kind to the poor mood on Wall Street overnight with the focus on rising tensions in Hong Kong and global trade concerns to blame. Locally the unemployment rate ticked higher leading to a fall in the Australian dollar while the PBOC kept the Yuan largely unchanged.

Chinese share markets diverged today with the Shanghai Composite holding steady to remain just abovee the 2900 point barrier, while the Hang Seng Index continues its retreat as protests rage on the streets outside, falling another 0.6% to 27129 points. The daily chart is showing price wanting to retest the former lows but there is some internal buying support holding on:

Japanese share markets are deflating now after a spate of scratch sessions with the Nikkei 225 falling over 0.5% to close at 21032 points. Part of this is due to the strength in Yen with the USJDPY pair melting lower after rejecting overhead resistance and falling towards the 108 handle:

The ASX200 was the best performer, only falling a handful of points to close at 6542 points, absorbing the unemployment print, which sent the Australian dollar flopping straight down to the 69 handle, making a two week low:

S&P and Eurostoxx futures have fallen about 0.3% with the four hourly chart of the S&P500 chart still rejecting strong resistance at the psychologically important 2900 point level as it slowly melts towards tentative daily support at 2870 points:

The economic calendar includes a slew of second rate and second tier prints tonight with most of the focus on the next round of voting for the new Tory PM, with Trump-lite Boris Johnson likely to prevail. God help the Mother Country…

Comments

      • Yep. Give the approval and then see him build nothing becuase it is not viable.

        Nightmare scenario = Annastacia subsidising every tonne of coal that leaves the port to the tune of $20 per tonne.

        The mine should not be allowed for the sake of the black throated finch.

    • yeborskyMEMBER

      I haven’t voted for either for quite some time but, until as a society we grow a pair, we’ll have one or the other hopeless mob. What a depressing future the lucky country has.

      • J BauerMEMBER

        I get that all they care about is keeping their jobs, but it’s too late for that, they will now lose the city voters and not gain the country Queenslanders back (adani jobs are going to 457 visa holders). They’ve shown they stand for nothing but self interest.

  1. Question for the bond and debt experts. State governments have a credit rating and can issue bonds, right? If our state governments look like going bust on the stamp duty decline, might they default on their bonds? Or are they somehow linked to / backstopped by the RBA and so the RBA printing money or buying their bonds (QE) can save them too?

    • The Traveling Wilbur

      Any like ANY bond issuance can fail to be honoured/cancelled. A little while ago MB was running a little commentary on a couple of countries markets were starting to speculate on not paying the next ‘coupon’ payment of something hideous like 14% on some of their bonds. Around when Venezuela started making the news.

      That said, if a state government here failed to pay back a debt (because it couldn’t find anyone to loan it more money) then I’m sure a whole bunch of commonwealth law will kick in to say that the Feds and the GG/Queen are all in charge directly now. It’s the vibe in other words. The instrument (bond, loan, liability, etc.) would be irrelevant as long as the recourse for that instrument is unlimited – which bond issuances can be (limited).

      • Thanks. Yes. My assumption is the Commonwealth would end up on the hook for the debt in the end. RBA would probably buy them all. So bondholders would be fine. The AUD maybe less so.

  2. I actually quite liked the totally locked articles – at least I knew where I stood. Now, they’re all ‘open’ but some are more open than others!

      • How many dildos per person would you suggest? And what’s your policy on sharing them?

      • yeborskyMEMBER

        Under this particular regime, it may be my last subscription (after the next 161 days). I don’t want to have to pay in order to see the incoherent ramblings and massive cut-and-paste extravaganzas of the disheveled one, and others, everywhere I look.
        While on the subject of commenters, I have to say that, although I’m genuinely broad-minded, have been around the block many times and am very much acquainted with all the naughty words and usually enjoy the banter in the comments, I cannot recommend this site to some people who, I know, would be offended by the almost constant prevalence of bad language. I sometimes wonder if it’s to the detriment of the number of investors in the MB funds.

      • Sorry, but what changes have happened as of late? I seem unaware of any major changes.

      • Have to agree with Yeborsky, after being an on/ off again supporter…the commentary, whilst mostly good has turned to a point that is uncomfortable, and if faced to a point , would the commentator be ok if their partner, parent, child read it, would they be ok with it? I don’t know…?

      • Gav, non members (or non logged in members) can now read the first para or so of every article.

      • Donna – as the most obvious recent offender I apologise, i can see it probably would scare off sone worthy potential members.

      • TailorTrashMEMBER

        This site is two guys in a garage …. sometimes they are
        right sometimes they are wrong …but their hearts are in the right place …..they call out bullsh1t when they see it …and a lot of the time it’s against “real” journalists …so cut em some slack …..if they get a little clickey bait now and then …so what …the MSM is mostly nothing but paid advertorial …….at least the lads try

        As for the complaints on bad language …how nice that we have some people who are earthy in their tone …most dinky dye strayans …I know are too ….so ken oath Mate !!…..it’s what we are … at least for now ! ..enjoy it …it may not last ….

        And if the few hundred bucks subscription a year
        Is too hard to keep these guys pointing out the absurdity of much of the miracle strayan economy
        …..well that’s sad too … what?… can’t we afford it ?

        There has never been a better time to be an Australian……Malcolm said so …..

      • i didn’t mean that in the way it reads. what i meant was that i’d have to click every article to see if it’s unlocked. i expect their open article read count to drop dramatically. i won’t for example be bothered to see if i can read the article and the follow on promotion of sticking it on my fb feed goes away. dead end clicks on a web page are no good.

      • You make out like you are doing MB a favour by reposting their unlocked articles on FB.

        How about doing them a proper favour and buying a membership. It ain’t that expensive and you get all the best bits.

      • There’s something special about this site that inspires its paid users to constantly promote memberships to unpaid users.

        I’m never going to pay to access an economics blog, especially when half the articles are updated reposts of previous articles. Often I just skim right to the comments which is where the real enjoyment is.

      • ToWhom it’s because we are a cult. We are 57 shut ins and always trying to trick number 58 into joining us because the newest member has to clean the dunnies, feed the trolls and listen to Skip.

      • The Traveling Wilbur

        I really don’t think it’s fair to take peak shut-in count and also not factor in those shut-ins who were shut-out (if you know what I mean). 😉

      • I think it’s always 57 Wilbs. Every time someone joins someone else leaves (or is “disappeared”). But still we keep hoping the mythical number 58 will join us.

    • Sebastionbear

      Indeed, now totally unusable to the poor saps who can’t afford a membership. To be honest, I most enjoyed reading the comments and opinions of the readers, but I’m not going to click each story to see if it ‘open’ to the low caste, non-paying plebs such as myself. So au revoir MB, you finally did it, after being a reader from the start, no more morning reads for me.

      • Ditto for me. I was considering putting some funds into the MB Fund once I settle on my SMSF next month.
        Too may pop up adds and too many cut and pastes from more credible sites.

      • I’ve reaped back my subscription costs many times over in investment returns from listening to MB – that says “worth it” to me, even if they are not perfect.

        They do a good job with not a lot of resources and time.

        We need more of them in this country.

      • Looks like it! I’ve never been a gold bug, but man, this sh*t stinks to high heavens.

        It’s almost like the Irish are another Petri-dish alongside Cyprus.

      • I know you can eat it drink it wear it live in it even make a hat for your enormous head with it what’s not to like lol

      • thinking same.. or buy shares in gold mining companies and few junior explorers.

    • Phillip McCracken

      Deutsche bank has $300 Billion EUR saved up – costing it almost a $1 billion in NEGATIVE interest rates every week. Congratulations. Literally the worst thing you can have for your financial well being – is wealth. Money.

      Deutsche is the derivatives ground zero, and its been said for almost two years that if Deutsche goes – the Euro will fail (the currency).

      Everyone was looking at Greece, Italy, Spain, Brexit – even France with the Gillet Jaunes – but everyone forgot to look at the same place that caused the last great crash – the most powerful economic market on earth – the US. Now its Germany.

      Quantitative Easing – people are asking all about it, great idea !

      There is 50% more debt in the world today than at the GFC – wages have not grown, cost of living is drowning people and economies, infrastructure is collapsing, cost of infrastructure is exploding – the only thing which has worked – are American banks.

      Economic warfare – Germany wasn’t even aware it was being bombed.

      The lols.

      • I know few people hate Zerohedge but these guys were among the first to call it on Deutsche.

  3. Phillip McCracken

    As a result, over the last 10 years, the value of US corporate bonds outstanding has tripled from about US$2.5 trillion to US$7.5 trillion. And of that amount, roughly 45 per cent is rated “BBB” – just one grade above junk.

    US banks are not allowed to hold these bonds – they are sold to foreigners… just oh my god. So if the US economy slows and these BBB rated bonds get down rated then they MUST be sold as they are no longer investment grade.

    This is exactly how contagion starts and spreads. Except this time the US will be immune. Any super fund, retirement, state, council, union etc around the world invested in these should be investigated for stupidity on a gargantuan scale.

    Shocking stuff.

    At least the US wont be taken down by subprime this time – only the moronic foreign investors. US are banned from touching it.

    • Are you saying US banks can’t hold BBB bonds? Or are you saying if they are downgraded to Junk they have to sell them – in that case who buys them?

    • J BauerMEMBER

      That’s simply not true.

      The US banks and foreign banks in the US all hold subinvestment grade bonds. The underwriting banks hold a portion to maintain a relationship with the borrower, and also to show the market they have confidence in what they are underwriting. The banks also hold these bonds in funds that they own and manage.

      The sub investment grade market is scary to aussies as they don’t know the asset class, as all we invest in is government bonds, cash and the asx 200 (which is really only a dozen companies). Aussie banks are too scared to do cash flow lending and want real estate security (that’s where the real contagion will come from as real estate backs everything in Australia).

      Typically these bonds aren’t that risky, as seen by default rates (which were minimal even during the gfc, from memory it was less than 1% of what was on issue) there is 40% equity in these deals, strict covenants and they are structured to be properly senior to the equity holders. these companies present their financials to the bond holders monthly or at a minimum quarterly so performance is closely monitored.

      Sleep easy young man, the next crash won’t be because of subinvestment grade bonds.

  4. GunnamattaMEMBER

    There has been talk of some sort of mega gas deal coming out of Moscow for a while……..

    But I reckon there is sweet FA overall net negative telling the players at Gladstone that their future is as a gas reservation valve, and that Australia knows

    coal is going out the door
    gas is going to have an oversupply issue unfold
    iron ore is reliant on a single party state continuing to build symbols to its own modernity as it eases into a new cold war against an adversary (liberal capitalism) Australia is culturally tied to.

    and we are going to need to find something to earn a crust

    Russia intends to quintuple LNG output to feed Asian demand
    https://asia.nikkei.com/Business/Energy/Russia-intends-to-quintuple-LNG-output-to-feed-Asian-demand

  5. GunnamattaMEMBER

    There has been talk of some sort of mega gas deal coming out of Moscow for a while……..

    But I reckon there is sweet FA overall net negative telling the players at Gladstone that their future is as a gas reservation valve, and that Australia knows they are the biggest of white elephants

    coal is going out the door
    gas is going to have an oversupply issue unfold
    iron ore is reliant on a single party state continuing to build symbols to its own modernity as it eases into a new cold war against an adversary (liberal capitalism) Australia is culturally tied to.

    and we are going to need to find something to earn a crust

    Russia intends to quintuple LNG output to feed Asian demand
    https://asia.nikkei.com/Business/Energy/Russia-intends-to-quintuple-LNG-output-to-feed-Asian-demand

    • Given that China will have a shrinking population in 2024, perhaps steel production in China will peak soon?

      I wonder what they use steel for – rebar?

      Surely real estate prices in China can only go down from now on. Just look at Japan – shrinking population and shrinking house prices. The population of Japan peaked in 2008 and the population of Tokyo will peak in 2025 (incredibly, the population of Tokyo is still increasing).

      Thermal coal was supposed to be dead already – but unfortunately solar panels are not cheap enough yet and WA, USA, Britain, Germany, and India still burn coal.

  6. Phillip McCracken

    To go along with the 500 hectares of land released around Melbourne over the weekend, several hundred more have just been released.

    Holy crap – PAAAAAAAAAAAAAAAAAAAAAAAAAANICK !!!!

    Edit:

    Just to add to this hundreds and hundreds of hectares have been listed around Geelong – Lara, Little River and the Peninsula proper – Drysdale etc

    Something serious is going on – its everywhere.

  7. The Traveling Wilbur

    What I admire the most was how members’ thoughts and views were canvassed and their preferences reflected preferences in the final outcomes.

    • MB: Of the members, for the members, by the members. There should have been a long and drawn out referendum. Sides could have been picked. Abuse hurled. Unhinged rants from morning until night. It would have been beautiful.

      • The Traveling Wilbur

        Opportunity lost.

        Not long now until MB starts posting our credit scores against our usernames instead of “Member” and assigning x number of comments per article / per day for every 100 points. I really, really wants to see Reusa’s credit score.

        The REALLY REALLY funny thing is that the reason I originally took out a memebership, the main and almost only, is now freely available to all. Cheers!

        Now all that DVO has to leverage for my next sub is my sense of fair play and my ethical standpoint on life.

        I cannot wait to see what changes come next once the latest batch of punch-cards are run. Hope no one’s invested in any expensive dentistry lately.

      • The Traveling Wilbur

        I can literally do this in pictures (saw your earlier post).

        💻📄🔓☑

        Obvious init.

        You might not have noticed articles aren’t showing lock icons anymore…

        Yay!

        No.

        Now, as a non member, you have to open the things you might be interested in that you don’t know if you’ll be able to read until you do. As a member, you’ll never see what happens next if you don’t have access. For you, it’s seamless.

        Note: there are No lock icons, but everything is still just as much member only material… so…

        Not a problem for me personally as for anything I am interested in I just google using a copy of the snippet showing on the main page to find the source material for posts and read it in the original.

  8. The main reason I have an MB subscription is to keep them solvent, fed and keeping doing what they are doing…

    I don’t actually mind if the articles become free – it will help them, and help their general economic messages for Australia – which is another reason I pay them: they say some of the things I want said, but don’t have the time and voice to.

    More than good enough reasons for me to keep up the small annual sub (which I charge to my SMSF anyway!)

    • I pay MB as my economic advisors, so far judging by the massive losses properties i have been looking at have taken. I’d say it was well worth the $200 odd quid it’s cost me the last 2 years.

      If I bought in 2015/2016 etc.. I’d be in negative equity by now or would have lost $200k+ easy I think.

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