Macro Afternoon

It’s an almost risk off day here in Asia as markets react to the weekend attack on Saudi oil production by the Yemeni’s, producing the inevitable spike in crude prices, gapping nearly 10% or so before moderating this afternoon. Other safe havens have seen a bid, most notably Yen but also gold which got back above the $1500USD per ounce level once more.

The Shanghai Composite reopened after a long weekend and was relatively stable, down just a handful of points to remain just abvoe the 3000 point barrier while the Hang Seng Index was not so lucky, closing 1% lower at 27062 points, holding just above former overhead resistance at 27000 points:

Japanese share markets were closed for a holiday, leaving speculation in Yen which saw the USDJPY pair gap down but not as far as expected, starting this morning at 107.50 before recovering to just below the 108 handle going into the City open:

The ASX200 acting made some gains, but only a handful of points, starting the week at 6673 points, as the  Australian dollar remains relatively unaffected despite the risk off mood, still steady  just below the 69 handle again:

S&P and Eurostoxx futures are down 0/7% to 0.9% with a quick glance at the S&P500 four hourly chart showing the inevitable risk off gap from the Saudi oil attacks, which puts any notion of getting back to the previous highs (solid black horizontal line) aside for now –  watch trailing ATR support just below to hold:

The economic calendar starts the week slowly with some Treasury auctions and very minor tertiary releases, with all eyes on the Gulf and the bowser price…

Comments

      • Mining BoganMEMBER

        Au contraire mon ami, the entitlement born of a Mercedes ride is massive indeed. A cyclist can feel the anger radiating in waves during a punishment pass.

        • Hay I’m extremely polite, make room for ninny’s on the road, and don’t give the lycra Indo – Vietnamese hassles when afoul of the road laws. Wife’s work as a para shows the Darwinian results sooner or later, just not going to be involved. Not to mention I used to ride a lot back in L.A. [bianchi days] and then in Boulder, CO. used to have a few deaths every year, especially up 14 mile road. Think there is enough pain involved due to the male anatomy and bike seat design without instigation.

        • Family car is a 2015 C200 CDI with the lot, going on 175km, my work ute is an ex fleet Toyota Hilux with 350km on it, but then again we down sized from a Q7 TDI.

          I was just noting the walk and anger displayed by the old fella, but yeah, 2 seater cabriolet sporting flops and tude is not a good look anywhere. Might the a Meds issue too … paranoid about the lycra patrol and anal experiences post op … chortle …

        • Thanks skip. Generally cringe reading Hughs stuff. Especially when “journalists” refer to Hugh Pav as an affordable housing advocate or some such trite.

    • You’re not you when you’re hungry Baby Boomers, have a snickers. 🙂

      Personally I reckon he just got off the phone from his accountant who informed him he’s in negative equity for all those apartments wrapped in flammable cladding he bought in 2017.

    • SnappedUpSavvyMEMBER

      That’s why I gave up road riding in Sydney years ago, only mountain bike now.
      At least that type drop dead from heart attacks all the time

        • ErmingtonPlumbing

          No I just checked his foot wear.

          Thongs have something that goes inbetween your big toe and second biggest toe.
          Those things he is wearing looks like slippers!
          Who the hell goes driving in their slippers!

          Fken Boomers!

      • He was preparing for a proper dust off. You must remove slippers first. Haha.

        On a serious note why do Aussies hate cyclists so much? In Europe people never yelled at me on a bike. Always looked out for me before turning a corner and generally were polite.

        Over here I’ve been yelled at many times, it really gets their goat when you cycle across a pedestrian crossing they want you to dismount. But drivers don’t have to wait as long if you cycle across.

        But it seems to drive them nuts.

        • Can’t speak for other places but in Canberra there are plenty of entitled riders on the roads. I’ve seen a pack block a busy single lane road, even twos and threes riding abreast rather than single file, creating dangerous traffic conditions. I’ve seen riders fly out onto crossings with absolutely no care then give a driver a bit of what for when they don’t stop. In my mind it’s a reflection of the entitled, all about me, society we’ve become.

          • Yep. In Australia, it’s generally the cyclists that have the entitled “w4nker” attitude – different to Europe. The abuse from Strayan drivers is simply the result of this attitude. It’s not Australian drivers that are the problem – it’s Australian cyclists.

            Strayan cyclists wonder and whinge why drivers in Europe are more tolerant, not realising it’s themselves and their own behaviour which is the problem.

          • I was on Italy last year. Schools have cycling on the curriculum and you see groups of kids on the single carriageway roads, 2 abreast. Drivers do not lose their sh*t over this. Aussie drivers are the most entitled in the world and add a extra helping of aggression and a couple of chips on the shoulder, you get what was displayed today in that vid.

            Also please have a read up on the road rules and you will find 2 abreast is perfectly legal and once you get into the sport realise it is also the safest.

        • Gav it is actually illegal to ride across a crossing, reason is because it confuses the driver if they don’t dismount. I had this happen to me once. Rider was riding along the road a little way ahead of me as we were approaching a crossing, when we were almost at the crossing he looked over his shoulder very quickly to check (he was close to me at this point, I was preparing to go around as he was on the very edge of the road), then quickly swung his bike and proceeded over the crossing. I sure as sh1t didn’t expect that (though the glance should have alerted me), he should of just continued straight, like the road rules imply, but instead I came real close to hitting him. When on your bike you are a vehicle, not a pedestrian.

          To a degree I think you’re right about Aussies and their hatred of cyclists, problem is though this is Australia, and plenty of the cyclists are absolutely fck wits too. So I think it is a culture issue from both sides. And it seems when someone wrongs you once here, (even if an accident), everyone else in similar situation is painted with the same brush. It’s because a lot of Australians are all about their pride and nothing else it seems.

          Another story. One time, I was turning right, across traffic, and a cyclist came up along the inside of me while I was making the turn. A d1ck move in my books. I had to pull to the gutter quickly when I saw him at my drivers side window. Couldn’t believe it.

  1. I have a question for the MB crowd of shut in’s :).
    I am looking at 2 potential properties.

    Property A. Involves no mortgage (even factoring in stamp duty). Currently has a small double-garage, but is on a sloping block so will be a bit tricky to develop – so even though it’s 1000sqm of land it’s mostly not that useful – meaning adding the garage workshop I want is going to be tough. The house is only 2 bed and 1 bath w/small solar panels. It’s more of a cottage feel than big house. There are many pro’s to a tiny home (without being a tiny home) but expanding on it will be difficult without ruining its existing charm / character. We may need to move again if kids come along in the next say 8-10 years.

    Train in this suburb is 30 mins in to the city.

    Property B. Involves potentially $250-$350k mortgage (depends if they accept a lower offer – about $100k below current price guide). But I honestly think it’s probably closer to its actual true market value. It has 1 acres of land, double car port (but no garage yet) but plenty of space/scope for a large 1, already has a workshop (but it’s on a hill and not practical to convert to a garage), it also has solar panels, large 72,000 litre water tanks, a veggie garden and space for more etc.. 3 bed + study (or fourth bedroom) 2 bathrooms, large kitchen and living space and is located further North East of Melbourne where you get Kangaroos and native wild life in your yard. Lots of peace and quiet (not close to neighbours) and very much a rural feel, but commuting distance to city.

    Bus to city takes 50 mins or so (along express) lane.

    So here comes my dilemma, if Interest rates remain at 3% for 10 years Property B is pretty viable. For around the same cost as my rent in Sydney I could pay it down in 12 or so years. But that’s if rates remain low for 10 years or so.. I know nobody can predict rates going higher again at the moment, but does anyone here believe interest rates will ever go back to normal? (as in 7%) in the next 20 years?

    Not being in debt would be awesome, but having a large parcel of land and the lifestyle with it has a lot of appeal also. Guess I’m just wondering what others think? I’m still mulling over making an offer on either of them.

    • Rates will be 0 or negative for the rest of your life

      You should borrow as much as possible as long as you can service it

      I know this isn’t what you want to hear since it will be admitting you’ve been wrong for so long, and you should have done it 10 years ago

      But there it is

      The best time to borrow was 10 years ago
      The next best time is right now

        • Mastering your psychological flaws is so important

          This is sort of the opposite of the sunk cost fallacy

          You’ve been long “unsustainable bubble” for so long that you’ve lost half your buying power

          But you need to look at the situation rationally and dispassionately

          We can agree that cash is looking to be a poor investment
          Sure there may be other assets that go up more than housing but you can’t leverage into those

          And leverage is basically the same as being short cash , which is a winning bet

          • Yes, I agree. Although I do think there is further downside ahead for Australian property and the economy. It’s just that sitting in cash for a long time is not an attractive option either. If I don’t buy a home soon, i’ll have to look at entering back into the stock market or bonds or gold or BTC, but not remain long cash.

    • No need to be afraid of <$400k debt Gav if it gives you what you really want. Which one do you really want though?

        • you know, in this case you could buy the larger and rent it out in the meantime instead. If a smaller house is better right now just rent one that suits, then move into the larger one when need be.

          I have a 6 year old, conceived while renting, born while renting, started primary school while renting. And everything has been fantastic. You sure as hell don’t need to own a house to bring up a child Gav, that is just stupid Aussie talk getting to you.

          • Yes, I could do that or live with the folks a while longer to help pay down the mortgage.. There is options. Only problem is this larger property has a well established garden already and renters wouldn’t want to invest the time / energy into it. So I’d need to pay someone to maintain it I think.

          • If it’s something you don’t won’t to miss out on consider a gardener. it will be tax deductible remember.

    • While being debt free is wonderful, from your description you like the second property a lot more than the first, so there is no point in going for the first one.

      • I forgot to mention the first property (in current guide range is high 600s/low700s) and would quality for stamp duty discount as a FHB. So I wouldn’t be as bothered about moving (and paying stamp duty in future) as a result. So if Property A is a mistake, it’s not the end of the world.

    • My partner and want an acre or 2 ourselves. The reason is that my partner wants to grow a crap load of fruit and veges and spend everyday of her life outside doing exactly that. She loves nothing but gardening, a damn costly hobby these days. What I’m trying to say is, do you need that space because there is no other way to enjoy your life without it? With the type of gardening my partner wants to do the answer is a yes. But, if her hobby were different and I could get a smaller place instead and then use the savings to satisfy the hobby another way I would go the other way.

      I mean, if you want the space just for your cars, there might be a different storage option that is financially more viable? If absolutely not though I would get the space, then just tell the Mrs that she has to whore herself out if interest rates shoot up.

      Also I have a 6 year old now, been renting the whole time, and not 1 single issue with doing that.

      • If absolutely not though I would get the space, then just tell the Mrs that she has to whore herself out if interest rates shoot up.

        Should have seen the evil eye I got when I suggested that 1. 🙂

    • Go property 1 and *don’t have kids* – it’s not like they’ll thank you for having them if the world goes to the poo as many of us bears think it will…

      • I actually do think about that sometimes… I love the dog, but there are times I wish i could give him away and not have any responsibilities with him. Taking him to a specialist tomorrow for a persistent ear infection. But on the flip side he does keep me company working on the car and was giving me advice the other night. hah. So I do think kids can be rewarding but I think I’ll start with 1 and decide if I really want another later..
        https://imgur.com/a/UPn1fpU

    • Arthur Schopenhauer

      Was in a similar position to you a few years ago. Big deposit and wanted minimal debt. Don’t worry about the mortgage. You’ll pay it off faster than you think. Australian tax and law works for land owners & mortgagees.
      Find something walkable to a train station, and you can’t go wrong. More population, means more traffic, means slower Buses.
      Part of the purpose of North East link is allow fire escape when the inevitable firestorm blazes through Hurstbridge, Eltham, Montmorency, etc. keep that in mind.

      • It’s about 14 mins drive to Eltham station. But Eltham has 30 min express trains to the city and I plan to eventually get an electric car or electric bike I could leave at the station. Fire risk is always a danger, this place actually has a fire bunker! But won’t save the vintage cars if that happens. :(.

    • Mate that’s not much debt, we borrowed $450k in 2009 and we still have only paid down to $380k (had LMI).

      Although now getting ahead with $2.4k repayments vs P&I requirements of $1.2k a month

      IR of 3.18% with Mortgage House

      As long as you have job security or partner works I’d say go for it. No one knows 100% what is going to happen in this market.

      • Likely yes, although if we can telecommute or work from home that would be good. I may also work part time as a panel/beater car restorer and may eventually work from the home workshop (I’m thinking in the next 5-10 years).

        • Think very carefully about the time you will save (ie: have) living closer to where you are likely to work.

          We recently made a similar decision between space (5-10 acres ~30-45min from Brisbane CBD – at least by today’s commute times) and time (15 minutes to central via train on ~1000m^2) and came down on the side of time. It’s not a decision I’ve regretted yet, but our kids aren’t big enough yet to make the space feel small.

          • Hey DrSmithy, yes a good idea. I’ve given it a lot of thought. My mum has a house close to Melbourne CBD near the South Melbourne Market. Walking distance to CBD. She plans to spend more of her time retired in the country house, so the city house is likely to be available to use and stay in if I don’t want to commute all the way further out.

            The other idea I have is to buy a small studio apartment closer in and use it as a crash pad during the week. Doable if I don’t have a big mortgage or buy a house close to outright.

            The Property A I was looking at is actually looking less viable now, contract of sale reveals road is being sealed by council and they are expecting each resident to cough up $20k, it’s going to need to be changed from Septic tank to mains sewer and solar panel inverter is broken. I’d imagine that’s another $12k on top. So $32k in work required before even expanding garage or house.

            By the time I start adding those costs in and potential stamp duty if it sells above $700k, I’m really better off looking at properties at the higher end closer to $1m.

    • Gav. Thanks for asking our advice.

      If you buy, you must – MUST – buy something you will be happy in for 20 years.

      You’ve waited this long, don’t risk signing the papers and then thinking “oh… is this it. I waited this long and now it’s just this. Can’t do my cars. Can’t do my garden. Bye bye dreams.”

      Also if you are happy to live there for 20 years it won’t matter if it halves in paper value because you will never need to sell. If you spend all your money on something you don’t love and it halves in value then upgrading will be very difficult.

      Finally a bit more house space is nice if you want visitors to stay. Some people would see the ability for pesky guests to stay over as a negative … but I love it myself.

      • Property B would eventually give me everything I’ve been looking for, once the garage is constructed, but right now it doesn’t have it. Which makes me a feel uneasy knowing my cars may not be protected fully from the elements for a time. I may have to store them elsewhere or pay to store them etc.. thing is I like the home, it’s a mudbrick with character, but it’s not drawing me in the same way as this property did… admittedly I haven’t felt this way about a house since the St Andrews home..
        https://www.realestate.com.au/sold/property-house-vic-st+andrews-129804734

        I know I have to let it go, but I am now looking at spending more than that house and feeling like I’m not getting the same kind of “feel” off it. There is things I could do to change it and give it more of that “character feel” I love and it is in better condition and better maintained, but I loved the quirkiness of the St Andrews home.

        I’m sure I won’t regret buying Property B and it’s always hard to get the same feel when you haven’t been in person (my folks sent me videos), it’s different when you see it in person.

        • Cheers, and thanks for taking the time to reply to each of us.

          Sounds like house b is not the perfect match either. Hmmm… maybe none of the above then. Maybe hodl… more listings will turn up by October!

          • It’s a very sore taking point, I refused to meet the other offer of $950k and was stubborn at $903k. Missus makes me regret it often haha

        • Gav …

          In all my decades in various aspects of the building game we have an old saw … houses are to be “lived” in … E.g. life is what happens whilst your making grand plans, what you once thought changes as time moves forward and the unforeseen unfolds.

          Hence people attempting to seek perfection or create it out of whole cloth seem inevitably to have serious anxiety issues and endlessly grind their teeth … shared with others with in close proximity. Per se brother in law that sold big Paddington house here in Brisbane, only to move into Small Queensland cottage and then renovate it got so stressed he ended up in hospital. Coped influenza A, double pneumonia, and a stroke, this is after him stating he would have his old school mate, who is a custom builder, just run the whole shebang, leaving him carefree. Sadly the discovery process was not as envisioned and his wife’s olds are having some unforeseen dramas.

          I guess what I’m saying is make a choice and then accept the unforeseen, not as a failure on your part or some deity screwing with it and move forward as best as you can without your head popping.

          Old Dear Abby article about that, write down everything weighing on your mind in a week, a week later reconcile it, note how much sorted itself, how much is reduced in priority, and out of all of it how much actually required your personal attention to be sorted, then review your psychological emotive state then and now.

          Gezz just wait till you have kids, makes everything else look easy …. I’ve got 4 … didn’t see that coming …

        • Hi Gav. Know all the areas you are looking well and may end up there myself one day. I just want to re-state what someone has already said…BUSHFIRE. This part of the world (Melbourne North East hinterland) is basically the bushfire capital of the world and large parts are ready for another burn. My view is that living there absolutely requires a survival dugout of approved construction, diesel water pump and large water supply. I mean this in town as well as on acreage. If you have that, you can stay and defend, which will be the difference between losing everything (including cars) or saving it. Also, look hard at your fire evacuation routes…anything with only one access road can become a death trap quickly.
          All that having been said, it’s lovely country and very civilised.

          • Thanks mate, yes quite a few properties I’ve seen are ill prepared. Infact even my mum’s place in Kinglake is lacking a diesel water pump. I might talk to her about that, but the property is definitely kept much clearer these days. My mum works hard to do that.

            Some photos of the land.
            https://imgur.com/a/1se0l8r

    • I bought a place on a sloping block, lived there for ten years. I found that we didn’t use the land much because of the slope yet still had to maintain it all, which was harder of course, because of the slope. Ours was pretty steep though.
      I wouldn’t do it again even though the steep block gave us a terrific view. Happily been on level blocks ever since, much more fun for kids too.

  2. Robert Cauneau – MMT France
    Ivan Invernizzi – Rete MMT Italia / MMT France

    14 September 2019

    Since its creation, MMT France has chosen to publish articles that focus mainly on the hardcore of MMT. This article is intended to be in the same vein. It is intended for people who really want to get to the heart of the system and understand it. While the authors wished, in a previous article, to provide some semantic clarification, it also seemed important to them to specify the reasons why they consider essential to focus on what they call « pure 1 » elements concerning MMT, and therefore on the language underlying it. They would like to point out that some of the elements simply referred to in this article will be developed in future documents.

    Most of the pioneers of MMT are academic people. But this is not the case for everyone. Indeed, at least one of them, Warren Mosler, was not originally a theoretician but an expert in financial markets, a successful trader and co-founder of AVM, a broker/dealer providing advanced financial services to large institutional accounts and the Illinois Income Investors family of investment funds. Its primary objective is not to seek acceptance in the academic community. He has a clear vision of the monetary system in which we live, and he provides importance to what essentially explains the dynamics of monetary and economic variables, as well as to predict them. He thus suggests reliable elements for the understanding of the monetary system, and above all totally independent of any theoretical bias. It is therefore about his thoughts and writings, as well as those of Pavlina R. Tcherneva, which is very close to him, that MMT France wanted to concentrate as a priority.2

    It should first be recalled that most economists who support MMT, before joining it, are heterodox, most often Keynesian3. In a completely natural way, they therefore feel the need to project MMT into their previous understanding of the system, using a different language from each other, but often with a heterodox tone. The aim is to promote the transmission of their message and intellectual communication to the rest of the scientific community, in particular with their colleagues who have not joined MMT but with whom they remain very close, and thus to maintain cohesion within their own community.

    And this is probably the main reason why the issue that the authors address in this article, which is by definition sensitive because it can raise susceptibilities, has never been explicitly developed before on paper within the MMT community. However, it seemed to them, within MMT France, that it was right and legitimate to do so. – snip

    https://mmt-france.org/2019/09/14/a-pure-mmt/

    Hope some take the time to have a read, not long and and quite understandable to those without the requisite groundings in various schools of thought and their terms not always being interchangeable – etymological ownership dramas.