Macro Afternoon

A mixed day to end the trading week here in Asia with the PBOC keeping the Yuan nice and weak, still well above the 7 handle against USD, with most stock markets putting in scratch sessions.

Meanwhile, the Shanghai Composite has been unable to gain any momentum, slumping and down over 0.4% since the return of the long lunch break to 2784 points while the Hang Seng Index is also off and unsteady, down 0.2% to 26073 points. This keeps it just  above the January lows at 25000 points where it remains in trouble with very poor momentum:

Japanese share markets are doing the best in the region with the Nikkei 225 currently up more than 0.5% to 20709 points, despite a firmer Yen that has pulled back the USDJPY pair below the 106 handle. This risk proxy is looking to breakdown here as the bearish descending triangle pattern on the four hourly chart nears competition:

The ASX200 is currently up only 0.25% or so to finish a topsy turvy week, unable to breach 6600 points while the Australian dollar continues its comeback to hover just above the 68 handle as its strong swing move higher has the potential to breakout even further:

S&P and Eurostoxx futures are flat here with the S&P500 four hourly chart still showing a tentative bottom as it bounces off 2800 points but its a little ahead of itself and ripe for a pullback that could turn into a dead cat bounce:

The economic calendar has a few big releases tonight to watch, namely the German trade balance and UK GDP print then Canadian unemployment and the US PPI numbers. Have a good weekend!

Comments

  1. When did shopping centres switch from practical flooring to slippery AF tiles? My trusty pair of dunlop volleys may not be the most scientifically engineered grip tech, but they’ve never failed me like they have lately. Can’t even walk without fear of death at my local mini-mall.

    Some Brisbane anecdata: Oxford Street, Bulimba – 3 eateries closed and 1 still trading but with ‘for lease’ sign in the window. The Murican bar one was brand new and only lasted a few months, nice food but way overpriced. I don’t know why people keep trying to open new food venues, the evidence abounds that it’s very difficult to stay open even if you have a quality product. Wait for boom times if you want to do hospitality. Also, my local IGA still hasn’t been replaced after closing unexpectedly.

    Add to this the job drone at my job shop keeps marvelling that I can’t get kitchen work seeing as I live so close to popular eat street and have my resume, I point out the closing businesses and maybe economy not doing so well and she struggles to grasp the situation, “But the computer has job ads, that means jobs are out there”. Sigh, off to submit my 50th application for this month, maybe should’ve kept my mouth shut about the safety at that temp job lol.

      • Thanks. Sad to say but I’m used to the grind now and live accordingly, I can handle nearly any lack of income due to debt free and easily satisfied lol. Made many a bad decision prior to 2008, could’ve been doing a lot better but truly learned my lesson from those hard times and just keep trucking along these days. Now I’m reading this blog and others and getting a bit more clued in on economics and might make some good decisions in life for once. A rich foreign lady seeking visa marriage wouldn’t hurt lol.

    • over this side of the paddock you’d still have your temp job…just notify worksafe anonymously…
      I’m thinkin’ worksafe inspectors here must be on a commission of the fines

      • Kind of hard to keep the job when you threaten to punch people lol. My fault but needed to be done, worksafe went in on my complaint and rang me to tell me, was good to know they follow through. Was less happy when no fines were handed out. Ah well, at least they’re being watched.

    • Then some are befuddled about 90%+ small businesses going bust in the first 3 to 5 years …. bootstrap yourself or die …

    • Rents are too high. MFs like Westfields are notorious for demanding financial returns so they can raise rents close to the point of business failure.

      PS: I find myself tiptoeing in Sketchers even on slightly wet surfaces. Something not right with modern day rubber shoes.

      • Westfields model was as a tax haven – offset with investor driven agenda to gain market share … cap ex was facilitated by financial spaghettification to burnish balance sheet metrics which translates to equity price …

        Then some wonder why he punched out ….

      • No he was just playing the game that neoliberalism promoted e.g. an environmental condition that necessitates people do things to accrue wealth or be a loser e.g. wealth is its own virtue and the natural rule of human society … goat said …

    • TailorTrashMEMBER

      Someone who can write like you should not be looking to wash dishes …. there is more to your story ? ….
      Care to disclose a little teensie bit more ?

      • Here begins the tale of woe lol. May expose myself, open myself up to ridicule or overindulge in self pity but meh, on the wine, feeling the need to share.

        Grew up small town up and down qld coast. Settled sunshine coast for high school. Did well but was massively disengaged due to boredom, fell through the cracks a bit playing with naughty kids cause didn’t fit with squares (didn’t fit in with the rough crowd either but more fun and easier to blend in) and still got A’s without showing up. Then grade 11 and 12 showed up and I realised I wasn’t the natural
        genius I thought I was, slid to C-B student but still doing ranked subjects (physics, maths, etc). Wasn’t too bothered as my plan since small child was to join Army, did cadets all through high school, excelled but maybe resisted pointless bereaucratic authority a little much for the army lol.

        Also worked all through high school due to poor family (not so poor I had to help out but no money for anything but quality necessities) so worked kitchens at local hotel. Mum was cleaner there and got me job, she says I was never the same after first shift, this statement draws immense laughter in every kitchen I tell it. Kitchens are crazy, but probably the closest place to fitting in for me, which isn’t good! Anyway, hanging with rough crowd, working kitchens, disengaged at school, fairly financially independent from 14 and less parental monitoring due to so much working/being out of the house for all involved, classic outcome – regular drinker from 14-15, dabbling in all drugs (mostly disco bikkies, oooohhhh yeah 2000s raves!!!!).

        So graduate, go for officer entry to army at 17, do the whole selection panel, feedback was good, but not ready – need better fitness and some “life experience” lol, come back in a year. A year at 17 is a long time, I worked and partied heaps and started to realise cooking was a good way to earn money and I enjoyed the comraderie. Had a bunch of mates who were becoming fully qualified chefs at 18 and I realised I was behind schedule by finishing school instead of doing apprenticeship. Realise joining Navy to do apprenticeship kind of cancels the missed time because of better pay and provided accommodation, so inform recruiters no officer, want to cook in Navy, stop partying, lose 15kg and get fit as. They tried in vain to convince me otherwise but my mind was made up. Go through recruitment process and do real well until I make the mistake of being honest with psych and freely tell about my drug use. I had nothing to hide, I was done with it and ready to move on to a career, they weren’t down with that, rejected. Cvnts. I like to point out all my serving mates were high as kites 24/7 but knew not to tell the truth, my mistake sorry for being honest.

        So for next 10 odd years I worked real hard and partied even harder. I started and failed to finish my apprenticeship and also worked a lot of trades/skilled jobs (casualised through labourhire, thanks Howard) with no formal training/qualifications but learned on the go. I’ve cooked in the tropics, I’ve done big infrastructure, I’ve done pointless jobs and I’ve worked on projects I’m proud to put my name to. I am a real jack of all, master of none, I have no passion for any particular skillset but excell at organisation/time management in high pressure roles. This leads to more “relaxation” in downtime, shorter fuse, more disengagement, more stupidity, lots of brushes with the law. I feel my problems are 50% my fault 50% getting robbed by the system lol, I may be wrong but this has made me someone who calls a spade a spade and I live and die by my morals. The brushes with law got thicker and nearly got banged up for the dumbest stuff.

        Through one good egg in the system, they recognised my offending was boredom, and got put onto uni. I never considered uni becuase all I wanted to study was history and couldn’t see a career path with that. Anyway, loved it, BA, Sociology Major, Politics Minor, smashing it for first 2 years, but then get a job offer from a friend, qld govt, ministerial staff short term offer with extension if minister wins govt – the year is 2012 – epic fail. I bombed a whole semester trying to work full-time in Brisbane and commute to Sunshine Coast to study, grades suffered, try to recover but everything gets on top of me, drinking, drugs, family stuff, dormant undiscovered medical issues. Bam. breakdown. Been trying to get back to finish degree ever since but money money money.

        I’m actually doing pretty good but just need some long term, well paid work go get back in front. Never gnna happen with the immigration ponzi….

        sorry for massive post lol

      • Thanks for the story. I reiterate, there but for the grace fo god go I.

        And makes me sick for the state of the country.

      • @WinningFailing. You can write. I would have paid to read that long comment (or at least felt good about reading it in some literary arena I had paid for…oh wait, I did!). MB seems to be unique. Not many places you can read stuff like this.
        I hope things fall into place for you soon. Life gives several chances to most of us, the only one not to miss is the last one

      • @WinningFailing. You can write. I would have paid to read that long comment (or at least felt good about reading it in some literary arena I had paid for…oh wait, I did!). MB seems to be unique. Not many places you can read stuff like this.
        I hope things fall into place for you soon. Life gives several chances to most of us, the only one not to miss is the last one.

        OH FFS web guys. Please fix this damn unintentional double-post ing bug! All you need to do is JS deactivate the submit button after it’s been clicked once. Or just ask me and I will come in and do it for you. It really annoys me.

        PLUS I would fix your really flaky subscription-expired/renewal messaging system which sends confusing and contradictory emails

    • Thanks for the story below. This site is a good portal for beginning to understand the economic forces that shape our lives. Luck plays a larger role in our lives than many acknowledge but having an understanding of economics and finance means you can begin to negate some shitty luck and bad decisions with some smarter decisions and a bit a of patience. Good luck!

  2. The recent market shenanigans may have been a temporary blip on the way to new record highs, but I’m not betting that way at the moment.

    I think I’ll be staying away from equities until at least sometime after Brexit has done whatever it is that Brexit is gonna do.

    • – You’ve got to be NUTS buying equities at current multiples in this environment.
      – If it wasn’t for share buy backs in the US it would be wipe-out time already.

    • in my view everything feels like about to break.
      If FED hikes markets will collapse and gold will go through the roof as people start to default.
      If FED cuts markets might go higher but everyone knows this is the last hooray as people already started losing faith in the fiats – gold goes through the roof.
      Simply, there is too much global debt and no way out without major reset.

      • I reckon that if the Fed hikes, everyone will dump everything else and run to the USD – it will be VERY hard for gold, denominated in USD to hold up against such a tsunami – I think gold will tank in such a scenario.

      • Concur Burb ….

        Its the short horns that pile into the narrow gold market in panic due to mythological truisms about special powers to store labour. Worst part is due to this dynamic heaps of short horns then experience the preceding gold crash with all their eggs in one basket.

      • skippy – I am one of the short horns. I am aware of the risks as I am old enough have seen it happens before. US has record high debt too and will people really see USD as safe heaven this time as well?
        I might be wrong and I happy to take one on the chin if it turns out to be.
        “..due to mythological truisms about special powers to store labour.” – nope. because people this time might actually lose faith in all fiats. Do you think all these CBs that started buying gold they are doing due to mythological truism.. I never said this to anyone but you can really be an rse.

      • You can evaluate risk, but, you can’t evaluate uncertainty Nikola.

        I think your bimetallism [law] perspective is not served well considering fiat is law, not that both historically are political acts first and foremost. The only difference between the two is what anchor point the accountancy is attached too, not to mention both have draw backs and management seems more prevalent in outcomes than any notion of intrinsic worth depending on your beliefs.

        Then again this devolves into money crankery and not multidisciplinary economic introspection without ideological millstones around ones neck …

      • Nik, I think the USD is going to have to inflate itself to death, which I don’t think will happen at first – I mean that there will (in my opinion) be a run to USD during the rout and THEN there will be QE, MMT/print, bail ins, etc.

        I think it’s the latter, not the former, that will erode faith in the USD. Hence, some may think that the former will destroy the USD, and flock to gold prematurely, and I think that it will bubble again, then pop with a global shock. I am currently on this train for FOMO and cynical capital gains, but I will jump in and out, selling into rallies occasionally if i smell a good whiff of a rout and USD run…but I don’t believe in gold yet, but will probably do later.

        Maybe you could reduce your gold holdings as gold rallies with USD interest rate declines (until a global rout?). Not advice, just thinking out loud…

      • this is a case where past performance really is the best indicator of future performance.
        annual real return on gold since about 1980 has been negative pretty much. Which makes perfect sense since it is permanently in a bubble,
        In a crisis why are people going to buy a bubble asset when they want safety?
        When the economy is good why are they going to buy an asset yielding nothing?

        ie. there is never a good time to buy gold. It is bought for ideological reasons.

      • TBW – I am thinking along same lanes and hence why I shed some of my early gains in order to collect profits and insulate myself. I also have very substantial paper profit that will give me few seconds to respond. I am setting conditional sells in order to get out with one black eye and one missing arm perhaps but with my shirt on.

        Sweeper – if only skippy could have been so elegant in his criticism. But yeah, you are probably right. I have taken that in consideration but I just can’t help myself thinking that this time is really different. It just feels that way. I don’t have any ideology or bias. I am just trying to respond to the turmoil that is ahead of us. This macro is playing out now, I can see it and I am responding to it in the best way I know. I saw it coming long time ago as many on this blog.
        Yes there are much smarter heads than me here and all over this planet that will play it better and there are smarter heads than me that will get it wrong too.

    • Who know what will happen because this is not a free market. I have never seen an advanced economy like US cut rates so soon after raising them all the while the economy is ‘booming’… bullkrap. For decades they only cut after a recession never pre-emptively to stall the onset of one. The economy is a zombie. This next collapse will be uuuugggeee worldwide so I think the west is trying to align the chips in their favour so stalling recession till the time is right unless an accident happens. Brexit might come and go but if the reserve buys up the shares they will probably still rise.

      • It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair…

      • How does it feel, how does it feel?
        To be without a home
        Like a complete unknown, like a rolling stone

      • An old man knows no more
        where he is going;
        On these wild hills, footsore,
        he will not hurry! – Tu Fu

      • Again ad infinitum …. the has not and never has been a so called “free” market as it would necessitate no rules or laws at all … market are not self regulating – en fin.

        When Adam Smith was talking about Free Markets it was in the classical sense of free from rents, oligarchy hates that, hence the need to bastardize the term out of context to mean free from government oversight which might diminish rents …

        What do you think the whole Chicago School agenda was and Milton Friedman’s good works … aka neoliberalism … sigh~~~~~~

      • Footsore ….

        I remember and old sales pep talk I heard here in oz back in the mid 90’s … boys were going to NZ to expand our market share in shoes. Concerned young sales bloke asks boss …. they don’t ware shoes in NZ …. boss … just think how many we will sell – !!!!!!!

        On that note its curious that no humans staff parking lots anymore, seems paying less than living wage has a propensity to incentivize theft – so the solution was to spend squillions on automating it, with some long term financialization to offset the initial capital costs …. based on expectations [tm] of future cash flows …. chortle ….

      • The Traveling Wilbur

        He who leaves the last post

        shall be remembered.
        which is true, skippy is hard to forget

      • TTW ….

        Your lack of rebuttable or engagement with out any means to evaluate its origins is noted …

        Being in an elevator with you would be a concern considering gases ….

    • reusachtigeMEMBER

      Yep this is why investing in property is always the safest and most profitable strategy!

  3. … CHINA …

    US trade war drives China’s producer prices into deflation, as pork prices send consumer inflation higher … South China Morning Post

    https://www.scmp.com/economy/china-economy/article/3022075/us-trade-war-drives-chinas-producer-prices-deflation-pork

    Asia shares mixed as Chinese food inflation soars, Japan GDP beats expectations … CNBC

    https://www.cnbc.com/2019/08/09/asia-stocks-august-9-china-inflation-data-yuan-us-china-trade-war.html

    China “Faces The Worst Of Both Worlds” As PPI Deflation Arrives While Food Inflation Soars … Zerohedge

    https://www.zerohedge.com/news/2019-08-09/china-faces-worst-both-worlds-ppi-deflation-arrives-while-food-inflation-soars

  4. Arthur Schopenhauer

    Anecdata point: Caught an early evening flight from Sydney to Melbourne this week. It’s normally full of business travellers returning to Melbourne after a day in scintillating meetings with the good burghers of Sydney, but this week it wasn’t even half full. (Ah, the luxury of a row to oneself! 🙂 )

    • Maybe they were a bit concerned when they realized it’s windier up there than in their spivvy offices. I saw a plane land well sideways at Merimbula today & everyone who got off was Grey as……. Rex Sicked ’em good!

    • Mining BoganMEMBER

      Was at Melbourne airport Thursday. Flights Mel-Syd cancelled. Flight Mel-Bne half full. Asked if wanted to sneak onto earlier flight because ‘plenty of seats’.

      Place is stuffed.

      • Friend works at a private school here… primary level is reducing from 4 classes to 3 next year. Presume less equitymate means more little Sebastians and Olivias have to slum it at the local public primary now…

  5. TailorTrashMEMBER

    One of the things I love about America ( sorry !) is buying trousers .
    In Straya you get a choice of 4 sizes ..SET…THATS IT !………in America you get about 44 different combinations …..waist size …leg size …pleat …flat …..slim ….generous ….and on and on and on …….love it
    So whenever I’m in America I buy trousers ….(no not jeans …..I’m too old and I’m not John Laws )

    Recently I thought time for a few pairs .

    I contacted my son who lives there and give him the specs . He bought them and posted them …fit like a glove ……..
    ..high quality ……..and not made in China …..but made in Nicaragua. Employment in Nicaragua might be a tad more in America’s intrest .

    I can see more of this in the future as America redirects its consumer honeypot away from China to other places .

    I love my Nicuraguan pants ………….and they don’t have a pushy Navy do they ?

    • haha, China pants is easier to say, rolls off the tongue.

      I was thinking if $AUD crashes enough that would make manufacturing here attractive again. More difficult to outsource to China, but hey. I’ll be willing to accept that. We used to make quality things here years ago. Especially engineering equipment like lathes etc.. all gone now.

      • Why would Mfg be attractive to multinationals at the end line of logistics [far away from consumers] and not as malleable to regulatory arb as some developing country.

        Australia has always been a resource extraction economy with a side of exporting surplus labour historically – brief post WWII expansion w/ nice surrounds for Asian regional administrative HQ.

        The cookie cutter economics is a dead end ….

      • The future of Australia should have been in selling luxury stuff to Asia.

        Luxury education. Luxury apartments. Luxury wine. Luxury meat. Luxury milk and milk products. Luxury holidays. Luxury medicines and vaccines (at least we got that part right with CSL).

        Instead we have gone absolute bargain bin. Its such a shame. Even Burma has a minimum total package price for a holiday there.

        The brand is ruined now. Talked to a Bulgarian who complained that their trip to Brisbane was sh!t because the city and the entire countryside was overdeveloped and overpopulated.

      • Arthur Schopenhauer

        Skip, Aussie Corporate decision making is far more banal than you think. Generally petty, unimaginative & short term. You give them too much credit.

        Gav, most of the plant has been sold and shipped offshore. The capital to replace it is sitting in a million overstuffed mortgages. It’s not that we couldn’t do it skills wise, it’s that the cost of rebuilding the plant is prohibitive. The big four no longer have the staff to assess the risk of lending to manufacturing businesses.

        Andy Grove’s essay applies here too:
        https://www.citizenstrade.org/ctc/wp-content/uploads/2011/05/20100701_howtomakeanamericanjob_bloombergopinion.pdf

        (The people that seem to be investing real money in Australian manufacturing are Indians.)

      • Oh you don’t have to tell me how shareholder value and equity remuneration incentivized short term thinking w/a side of Gresham law. I’ve known and been around enough big 4 bank and accountancy people around here since 95, watched the old guard retire and the new crop push things even ludicrously more, not to mention wealth managers for the financial elite.

        This is after watching the whole thing previously in the U.S., once was bad enough ….

      • mmm…lathe…milling machine….mmm….gonna get me some of that good stuff as soon as I get my shed. Soon, can taste it

      • TailorTrashMEMBER

        Thanks H ….bet I could blend into Newtown in them ….
        Much better than my usual attire of Flannies and trackydaks…..very unhip ….

    • My old neighbour used to come to the gate to have a chat with me. Sans pants. His mum would tell him to go put them on but he’d refuse for there was something Marvel that had to be shown. His mum would again implore him to go and add some pants to his ensemble of Captain America t-shirt and Hulk glove combo. He wouldn’t have any if it. And we forgave him and envied him. For he was still young enough to not have to suffer the tyranny of social norms. Oh, to be three years old again. Once he hit four it was all pants all the time. He thought he had moved up in the world yet we knew that what he had lost could never be regained.

  6. Look — I don’t get it. When I look at the China articles, I see MB praising our government for acting “in the national interest”, and then when I read any other article, I see MB excoriating the government for acting blatantly and shamelessly against the national interest. Why do you think the government gives a stuff about the national interest in relation to China? Whether they are right or wrong (and I do think they’re right), they’re almost certainly only doing it because the US and its military-industrial complex wants it so badly. The same people laying waste to the Australian standard of living, day-in-day-out, without ever taking a holiday, really do not care about how China affects Aussie Joe Blow, it’s just another rent-seeking exercise, possibly yet another attempt to liberalise a big closed economy.

    • Know IdeaMEMBER

      There is something about democracy that is messy. It allows you to challenge everything. That is, if you find something cannot be challenged, that is where you know your democratic right is being compromised.

    • Do buy the Monsanto brand pop corn [sorry but no means to evaluate] and then use toxic bleach tissues [river and creek effluent] to sort lower orifice weeping …. good times …

  7. The Traveling Wilbur

    Got to love bonds. And watching US equities implode again tonight. (hence tissue run)

    Would suck to be holding them atm.

    • See Hudson on bond holders and historical perceptive …. something about wars … and political gerrymandering …

    • Lest we forget what affords bond holders senior rights under law … aka government force …

    • When you think of the hype around equity markets over the past 40 years, wall to wall reporting of every movement, retail trading, passive investing blah blah blah. And after all that, starting from 1980 you would have made a higher real return in bonds. (even before adjusting for risk)

      • TTW …

        You do understand the relevance of slave holders and bond holders – right – ???? – from a historical perspective and what that has wrought E.g. they got payed out for loss of income on an asset so they could not take a profit loss ….

    • The very fact that watching bond yields move is actually exciting – and they do it every time one hits Refresh – should be all the proof anyone needs that markets are now completely f#cked.

      • The Traveling Wilbur

        And/or that some of us have serious issues that only long term psychotherapy will be able to resolve.

        The meds don’t work anymore so that’s pretty much the only healthy option left! 😉

      • Yes indeed.

        The other infallible sign of a) market madness and b) personal madness is:

        a) the existence of a DAILY INDEX for HOUSE PRICES
        and
        b) reading it.

        😉

  8. haroldusMEMBER

    I want to die like my grandfather did, asleep and smiling, and not shouting and screaming like the passengers in his Uber.

    • I was having trouble with my computer at work so I called IT Support.

      He said, “Have you tried disabling cookies?”

      I said, “Well, I once bit the legs off a gingerbread man?”

      • The Traveling Wilbur

        Why did the chicken cross the road?
        To get to the other side.
        Why did the chicken then cross the road again tweeting militant union propaganda?
        It was a Polish chicken.
        Why did the Polish chicken cross the road again but backwards?
        It was a reverse Polish chicken.
        What was so terrible about the reverse Polish chicken crossing the road again and getting run over?

        You should have seen the expression on its face.

      • haroldusMEMBER

        It’s difficult.

        My soapy car washing/bikini/influencer work is still very important to me.

        But I do want to give something back in the non-profit space.

    • Hi all,

      I currently own an investment property, purchased about 3 years ago [currently tenanted]
      It is negatively geared [I pay around $6,000 to keep the property – this does not include deductions etc.]
      I did no real research before buying the property and had no real financial goals
      It is only now that I have started to think about money and setting goals for the future etc.
      I am starting to think buying a property is/was not the best investment (for me)

      1. I have been losing money and negative gearing actually makes littles sense unless the property is going to increase in value (it appears the property is worth less than what I bought it for) – if I sold it today, I would make a substantial loss (taking into account extra repayments, my deposit, LMI, maintenance etc.).
      2. Dealing with strata and tenants can often be frustrating.

      Do I sell at a (significant) loss and re-invest the money somewhere else? Bonds etc. I have calculated that if I re-finance to a better interest rate and use the savings sitting in my off-set, I can neutrally (or just positively) gear the property. Assuming the worst case scenario (the property is worth the same or slightly less than the purchase price), in 10-15 years’ time, I should still come out on top if I sell, but not by much. This leads me to ask: how do you actually make money from property? Is the end goal to own a property that provides passive income unencumbered? If so, should I hang on?

      Oh F’me, that’s funny and unAustralian. Kick him out! Dutton get him off this continent now. Every Australian, I mean every single 1 of them that’s worth anything at all knows that you keep losing money on property to keep your negative gearing benefit, then when you’re an old fart you sell it to buy stocks that pay a dividend to get those sweet sweet franking credits and live it large forever on. ;D