Macro Afternoon

See the latest Australian dollar analysis here:

Macro Afternoon

A solid start to risk taking here in Asia with the usual Monday morning gaps absorbed with aplomb, especially viz currencies as investors look towards the Powell Put over the weekend, as the US Federal Reserve turns Japanese.

In mainland China, the Shanghai Composite is up over 0.5% to start the week almost reaching 2900 points, while the Hang Seng Index is up about half that or nearly 0.3% to 23872 points, holding just above the recent daily lows as resistance proves still looms overhead:

Japanese share markets bounced back with the Nikkei 225 able to keep above the 20,000 point level, rising 0.5% to 20133 points, while the USDJPY pair was relatively steady from the usual Monday morning gap open, currently just above the 107 handle and looking contained but positive going into the London session:

The ASX200 was the standout again, moving some 1% higher to start the week on a very positive note, closing at 5460 points, while the Aussie dollar was able to gain a little traction given its slump on Friday night but is still floating just above the 64 level against USD going into the London open and looking weak:

Eurostoxx futures are up over 1.7% with S&P futures up nearly 1% as Wall Street wants to close the gap back up to the start of week highs with another rally for the S&P500 up to 3000 points on the cards here:

Latest posts by Chris Becker (see all)

Comments

    • The Traveling Wilbur

      Next time offer up a glass of champagne and put some Barry White on the sound system first then?

    • migtronixMEMBER

      Ha. Newcrest – welcome to 2013.

      Thomickers, bullionbaron, Nudge. We all played that game…

      • Don’t they say where you get Copper, you get Gold..? I’m sure we have Copper Miners in Australia, mebbe they should focus on how they put that dirt through the blender/mill process?

      • The $30k will get scaled back because of the bump. And because I didn’t have a bunch to start I am likely not to end up with much. Would have been better if it was a first come first served basis like MCR did late last year.

        • Ah right

          How much do you need to get the full allotment you reckon ?
          was also thinking of selling down $30,000 of existing shares as I’m getting a bit overweight in it

          • No idea. It is totally at the discretion of the Board. It’s all a bit unsatisfactory actually. It’s like doing a rights issue without doing a rights issue.

            Keep an eye on the NCM announcements. The SPP closes next week I think so usually they give updates on what they are proposing or, ideally, they will announce that the offer is closed early!

      • the only thing I see as risk with NCM is they have assets in countries that don’t have swap-lines. So, if they hit $38 or thereabouts I am out.
        I was surprised not many analysts are not including this in their research. Perhaps they don’t see it.. these days people focus on numbers only but have zero understanding of geopolitics. Numbers are very important but they count for very little if you don’t get the macro. And macro, in my view, is driven by geopolitics – at least over 60%.

        • BigDuke6MEMBER

          They were always teasing NCM could be a take over target a few years ago. It’s now too big?

        • PNG is not a particularly safe place for international gold miners lately

          Yes I never know when to take profits on gold and gold miners

          • I’m focusing on some producers (SAR, NST) and some that should be producing within the next 2 years (BDC, AMG, and possibly BLG), though I did buy an explorer recently too (NML, has some very promising results in Vic and is reasonably cashed up, I’ve had CHN since last year). I think that the near term producers will get a good share price lift from not having hedged production at lower prices, but they are obviously medium term plays, which suits me. There are a few companies pursuing a strategy of exploring around old mines and restarting them with higher gold prices making them economic, which I like as it lowers start up costs and often there hasn’t been any exploration using modern techniques so there is likely to be more gold in the ground. I probably should add some more current producers to the mix but I’m waiting for a major pullback for that. However the explorers and near term producers were a bit more time sensitive as they are all still drilling (AMG might not be, I think they are focusing on starting mining before year end) and therefore could announce results that push the price up

        • Ukraine fnMEMBER

          @Niko had seen a good Utube report about that with George Gammon ?? I think?. It’s all to do as with what you say if the

          country has swap lines to USD . Any goldie that is mining in a non swap line country is a risk.. good call.

          • Is the rational that countries without a swap line will be short of USD so will nationalise gold mines or increase tax to get their hands on hard currency? If so what miners on ASX have least exposure to such countries?

          • I heard it from Brent Johnson and it made perfect sense. I am big on geopolitics and immediately saw problem with swap-lines. It’s bit early to worry too much about now but people should be aware of the risk.
            NCM’s biggest risk with this is their stake in Lundin Gold – very high grade mine in Ecuador. PNG is an issue too but I get a feel Australia has fair bit of influence in PNG.

        • Yeah I sold my NCM on Friday mainly because of that. I’m in the process of restructuring my portfolio. I’m only buying gold stocks with projects in Oz from now on both current and near term producers. There are enough of them and they should have a really good outlook over the next few years. It’ll take a while for the sovereign risk to ramp up, but it is something I’m not interested in dealing with. Plus with Marin Katusa banging on about it recently I think the negative swap line investment thesis will get out into institutional investors soon enough and it might start to influence prices.

          • 25% discount hard to resist though !

            Who are the local ones you are looking at ?

    • … Sorry Skippy … NZ has to face reality at some stage ! …

      … LEARNING TO LIVE WITH CORONAVIRUS …

      How does New Zealand, in reacting to Professor Neil Ferguson of Imperial College coronavirus modelling in following an elimination policy, and not allowing community / herd immunity to build, expect to re – engage with the rest of the world ? …

      What is the development performance history of vaccine for earlier viruses ? …

      European leaders are blunt: Coronavirus vaccines won’t come soon enough … AP / Stuff NZ

      https://www.stuff.co.nz/world/europe/121540706/european-leaders-are-blunt-coronavirus-vaccines-wont-come-soon-enough

      In separate, stark warnings, two major European leaders have bluntly told their citizens that the world needs to adapt to live with the coronavirus and cannot wait to be saved by the development of a vaccine.

      The comments by Italian Prime Minister Giuseppe Conte and British Prime Minister Boris Johnson came as both nations around the world and US states are struggling with the increasing need to reactivate economies blindsided by the pandemic. With 36 million people newly unemployed in the US alone, that economic pressure is building even as authorities acknowledge the risks of kicking off new waves of infections and deaths from a virus that people have no immunity to. … read more via hyperlink above …
      .
      .
      … What lessons are being learned from the Swedish response model ? …

      Sweden’s Coronavirus Strategy Will Soon Be the World’s … Nils Karlson, Charlotte Stern, Daniel B Klein … Foreign Affairs
      … h/t PH …

      https://www.foreignaffairs.com/articles/sweden/2020-05-12/swedens-coronavirus-strategy-will-soon-be-worlds

    • Everyone will get coronavirus, virologist warns

      Coronavirus may infect up to 70% of world’s population

      In New York state, just over 86% of reported COVID-19 deaths involved at least one comorbidity

    • Sorry Hugh but letting it rip would do more damage short and long term, why the hell do you think its a world wide shut down … sigh.

      Maybe some should understand its never going back to – the good old days – and being maladaptive will only make it worse.

      • migtronixMEMBER

        “only make it worse” – wow! What do you have planned? Because I’m still OK with boomers dying in droves instead.

        • Just the infection rate alone create all kinds of economic and social psychological problems, not to mention getting data on a new virus before allowing it to cause real havoc, not to mention were not even half way through the thing.

          Even then this will take more than likely two years to wash before anyone can say we’ve got some sorta grip on it, never know when local or regional social quarantines will be needed as necessary.

          Best bit is expect ***more*** new and exotic stuff to pop up due to AGW, your age bracket could be next.

      • People should listen to Norman Swan not Coming and DrX

        There’s no herd immunity

        NYC natural immunity 10-15% with 30,000 DEAD

        • reusachtigeMEMBER

          Meh. Don’t care. Remove lock downs 100% now! The strong will survive and they can all get back to pashing each other. It’s the way it’s been for eternity. Not some fakely introduced social distancing Orwellian rubbish!!

          • Skippy … as one of the experts at John Hopkins University in the United States made clear, when asked if the spread of covid 19 can be stopped medium / long term … responded with ‘Can you stop the wind?’.

            At some stage we have got to open to the world … and when that happens covid 19 will just flood in from countries with medium / high community / herd immunity.

            Likely with so much infection globally, New Zealand and Australia (being the community infection laggards) will get particularly hard hit. On top of sadly weakened economies.

            The leaders of the UK and Italy (as the article I posted above makes clear) deliberately went out of their way to ram home some reality to their public’s.

            Isn’t it well past time our Australian and New Zealand leaders did the same ?

          • No.

            Keeping rates low is key whilst adapting to a transitional economy, the old is on the way out.

            Not that as usual, the Right are organized and forward-looking putting assets into strategies that will take their agenda to another level. Under the smokescreen of the crisis, they are working to cement changes that will make it even harder for government to advance general prosperity.

            I’ve provided some links about that aspect of late if you had not noticed.

          • Before just signing up for it, you might want to give them time to do a bit more research into those reports of low sperm counts in Covid19 survivors…?

            😉

    • Do you think it’ll have a pullback to the breakout range? I listened to this and thought it interesting.
      https://www.youtube.com/watch?v=QH8rXsSxZJ4
      I know there are a lot of people who think gold should have a pull back before going higher. It’ll be interesting to see if that actually happens. I’ve been hedging my bets by buying some new gold stocks recently but also making sure I’ve got some cash so that if there is another global liquidity event and gold gets sold off again in a mad scramble for cash (and USD) then I can pick up some gold stocks at a discount. I’m really hoping that pull back happens!

      • many think there will be pull back but most admit there aren’t sure. I am not sure either. CBs are relentlessly printing so this time we may not see another pullback. Maybe the one we had in March was the one. US is now guaranteed to print another $3tn and that’s not part of the election promises. Wait until Trump and Biden start the “mine’s bigger” game.

        • Yeah I know, it is so uncertain. However given that investing in gold requires nerves of steel and there has probably been a trickle of new money into the space I think that the chances of a large pullback are high as it will shake out the weak hands of new entrants. Gold seems to like doing that. So I am finally going to make sure I have some cash to take advantage of that if it happens (I didn’t have the nerve and nor had I done my research enough, to buy in the March pullback, but I’m ready now, I also didn’t sell anything I had then so I guess there is that).

  1. NEW ZEALAND RECKLESS LENDING: DELIBERATELY EXPANDING MORTGAGE SLAVERY AND POVERTY …

    New Reserve Bank figures show that household debt to income ratios continued to blow out right up till the lockdown – and first home buyers were in the frontline … David Hargreaves … Interest Co NZ

    https://www.interest.co.nz/property/105068/new-reserve-bank-figures-show-household-debt-income-ratios-continuing-blow-out-right

    Probably encouraged by the fairly strong upswing in the housing market at the start of this year, the first home buyers were increasingly gearing themselves up to get into their own homes.

    The latest Reserve Bank figures on residential mortgage lending by debt-to-income ratio (DTI) show that the FHBs were continuing to borrow more money on high debt-to-income ratios right up to the March lockdown. … read more via hyperlink above …
    .
    .
    … Following Ireland’s 2007 housing crash, that sent all its Banks to the wall requiring 70 billion euros of bailouts, subsequently the Central Bank of Ireland generally capped mortgage lending at 3.5 times annual household incomes. Access background research which found excessively high multiple lending caused the greatest destruction …

    Mortgage Measures – Central Bank of Ireland

    https://www.centralbank.ie/financial-system/financial-stability/macro-prudential-policy/mortgage-measures

    • … and as the 16 Annual Demographia International Housing Affordability Surveys illustrate year after year, housing should not exceed 3.0 times annual household incomes with sensible mortgage loads of about 2.5 times.

      Calculate how much you and your kids are paying in excessive mortgages … in essence making donations to your Bank.

      All Editions – Annual Demographia International Housing Affordability Survey

      http://www.demographia.com/db-dhi-index.htm

      • Thanks Hugh.
        Either the housing ponzi is mad, or I am.
        This makes me feel like I am the sane one

          • Back in 2009 I wrote ‘Housing Bubbles & Market Sense’ quoting writer Michael Lewis … just so you two know that you are not ‘nuts’ … but that others are ! …

            Housing Bubbles & Market Sense – Hugh Pavletich – Scoop News

            https://www.scoop.co.nz/stories/BU0901/S00046/housing-bubbles-and-market-sense.htm

            … extract …

            … Michael Lewis, author of Liars Poker wrote recently within a Portfolio com article The End of Wall Streets Boom – most within the finance and investment sector, appeared to be oblivious to the existence of housing bubbles and even less aware of their consequences. As Michael Lewis explains – during late 2004 – only a few, such as Steve Eisman, Ivy Zelman and Meredith Whitney understood that the core problems were the inflating housing bubbles –

            “At the end of 2004, Eisman, Moses and Daniel shared a sense that unhealthy things were going on in the housing market. Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1% was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing market analysis at Credit Suisse, had seen the bubble forming very early on. There is a simple measure of sanity in housing prices, the ratio of median house price to income. Historically, it runs around 3 to 1, by late 2004, it had risen nationally to 4 to 1.’All these people were saying it was nearly as high as some other countries’ Zelman says ‘ But the problem wasn’t just that it was 4 to 1. In Los Angeles it was 10 to 1 and in Miami it was 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators’. Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. ‘It wasn’t that hard in hindsight to see it’she says ‘It was very hard to know when it would stop’. Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. ‘You needed the occasional assurance that you weren’t nuts’ she says. She wasn’t nuts. The world was.”

  2. migtronixMEMBER

    “Japan dived into its first recession since 2015, according to official data Monday, with the world’s third-largest economy shrinking by 0.9% in the first quarter as it wrestles with the fallout from the coronavirus.

    The drop in gross domestic product followed a 1.9% decline in the fourth quarter of 2019 as a tax hike and typhoons hit Japan hard – even before the pandemic shut down much of the economy.”

    Since 2015 🤣

    https://asiatimes.com/2020/05/japan-1st-quarter-shows-recession-q2-to-be-worse/

  3. Question for Brisbane shutins – Anyone tried the Black Sheep bottle shop across from the Newmarket hotel?

    Been hitting that intersection a lot lately but only just noticed it. All the usual claims of excellent craft beer and fine wines but it’s a bugger of a spot to travel to. Don’t wanna waste my time if it’s all just newstead/green beacon craft and run of the mill wines.

    • DingwallMEMBER

      I haven’t and don’t get out that way much but if you do get there, let me know what you think. I don’t think you can avoid seeing Green Beacon or Newstead in any Brisbane bottle shop.
      Have you been to Saccharomyces Bottle Shop at Taringa. It’s got a pretty wide range of craft beers although the prices can get pretty eye-watering.
      For wine I quite like Spiros at Paddington – their craft beer selection is on the small side though. The guys there are very knowledgeable too

      • Thanks for the tips, all new info for me. First time living north of the river for me so a bit of adjusting is in order, Taringa used to be too far away to consider but now it’s doable. When I was in Woolloongabba I was spoiled by having Brisbane Brewhouse a block away with real deal craft, totally ruined me for all this mass produced “craft”. Green beacon is still good if I’m at the brewery but as soon as I found out they’d sold up to the big brewers I can’t bring myslef to buy it in a bottle shop.

  4. More wage theft. The penalties are a joke considering that Fairwork gave the employers an additional 20% reduction on their fine for being cooperative.

    https://www.afr.com/work-and-careers/workplace/hero-sushi-fined-900-000-for-wages-fraud-20200518-p54txv

    A sushi chain and its owners have been fined a record $891,000 for deliberately paying staff as little as $12 an hour and engaging in an elaborate cover up when they were investigated. Federal Court judge Geoffrey Flick likened Hero Sushi’s actions to “fraud” after it sought to disguise $700,000 in underpayments at three of its outlets in NSW, the Gold Coast and Canberra through hundreds of manufactured payroll documents.

    The court heard that over six months in 2016, on nine separate occasions, the chain gave false documents to the watchdog purporting to show it paid staff correct rates. It was only at the end of a meeting with the FWO in August, at the chain’s head office, that a payroll manager admitted Hero Sushi had “reverse engineered” the pay documents.

    Many workers at the chain were on visas and worked 50 to 60 hours a week on flat rates of $12 to $15 an hour. One worker who had just one day off a week received $1000 a week even if he worked more than 55 hours. The workers would share accommodation with up to 10 people rent-free but had to pay to cover the cost of utilities.

    The ruling follows FWO audits of the sushi industry in 2018 that found 87 per cent were underpaying workers and there was “widespread use of false records”.

    • But but without his army of slaves paid below minimum wage, how else could the owner of Hero Sushi, Deuk Hee Lee, afford his multimillion vaucluse house?

    • The Traveling Wilbur

      She’ll be right mate. NRL bad-behaviour off-season stories are leading the news again, and footy’s back on.

      • Mining BoganMEMBER

        You know, I have absolutely no interest in the footy of any code starting again. None whatsoever. This is also an opinion shared by a lot of people I know.

        Going cold turkey broke the addiction.

        • Fellow Demons supporter made the comment he can’t remember being this stress free in May

          I didn’t want to bring 2000 up
          Still too traumatic
          Fk you Michael long

        • Hate Football..There, said it…Hate the bloody question, “Did you catch the match on Saturday?”…Hate the game, regardless of pointy ball, round ball..bloody waste of time..

          • Not my thing either mate. Or Cricket. But love motorsport. Haha.

            And love the world cup, since I was a soccer player.

        • hardly ever watch any games now. sometime may watch EPL or champions league if I really have nothing else to do and am too tired to read. World Cup is another I’d watch but not with same excitement from years ago. I do see it as waste of time now. It became too commercial and over analysed. Any code that is.

        • The Traveling Wilbur

          Welcome to the club. (heh)

          For me, it was around the time when a chicken wing stopped being something you ate and started being something to do with tackles.

    • Hardcore libertarians don’t care if anyone can produce medical equipment because they don’t care if people get sick. Or rather, they reckon we should let everyone risk death from a virus in order to ensure that everyone’s right to go to a pub is not interrupted even briefly.

  5. The FNG.MEMBER

    A few sobering paragraphs in this one.
    The Great Decoupling.
    “If you try to stymie the system in one area, the forces of globalization—whether pandemics or migration—they are not going to go away,” he said. Gum up the global trading system, and you dampen growth prospects for the developing world. Lower growth leads to more migration. More migration leads to more political stresses in the developed world. “It’s like squeezing a balloon,”
    https://foreignpolicy.com/2020/05/14/china-us-pandemic-economy-tensions-trump-coronavirus-covid-new-cold-war-economics-the-great-decoupling/