Macro Afternoon

See the latest Australian dollar analysis here:

Macro Morning

Share markets are steady across most of Asia, with most putting in scratch sessions or minor losses (except the ASX200) in line with a hesitant overnight risk complex – sans the crazy NASDAQ! This looks like changing tonight however, as futures are indicating big jumps ahead for Europe but not the US, so this may be shortlived. Gold jumped higher again this morning, as it wants to get back to its former historic and weekly highs above the $2000USD per ounce level, a little shy but looking stronger now:

In mainland China, the Shanghai Composite is putting in a scratch session to be unchanged just below 3400 points while in Hong Kong the Hang Seng Index is doing the same, up only a handful of points to be at 25181 points. Japanese stock markets are also limping along doing nothing, with the Nikkei 225 closing 0.01% – yes you read that right – lower at 23138 points, as the USDJPY pair falls back after a very short term bounce post the Abe resignation last Friday:

The ASX200 continues to be the odd one out, pushed significantly lower to closing 1.7% down at 5953 points as earnings season comes to a close just as Parliament winds down Jobkeeper. Meanwhile the Australian dollar has not yet peaked after its big surge on Friday night, wanting to push back above the 74 handle but finding lots of resistance overhead:

Eurostoxx futures are up 0.8% but are falling back already with the S&P500 four hourly chart still indicating a sideways trend here just above the 3500 point level as traders take another big deep breath before looking around for anyone else to sell to:

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Comments

    • Arthur Schopenhauer

      There are a couple of flat section in that graph (2014 & 2017). Interesting that prices paused on the flat and yet increased on the fall.
      Fewer loans, but to people less sensitive to risk?

      • I don’t think that data captures foreign cashed up buyers – corrupt foreign gov officials, Arab sheiks who are buying plan B in an event of popular upraising in their homeland or when the country runs out of oil, drug dealers, African warlords..

    • do you know if it ever fell below 2? I’d say even below 1.5 will cause serious issues as long as foreign cashed up buyers stay out.

  1. I can see the US/China biffo and QE pushing gold into the 2500 range in a few months from here… Does anyone see scenarios that will keep a lid on GP ?

  2. Arthur Schopenhauer

    What happens if the US chaos devolves into civil war? An awful lot of mischief could be created between November 3 and January 20.

    (A bifurcation in public discourse, is one of the important precursors to civil conflict.)

  3. The RBA statement was poor they are too focused on banking and credit when the real problem is a monetary one. They have undershot inflation for 5 years. Inflation has averaged around 1.5%. On a cumulative basis money is now very tight. Now the Fed has announced they are abandoning inflation targeting to correct past mistakes, and the RBA doesn’t even mention it in their statement.

    • happy valleyMEMBER

      The RBA happy clappies live in a parallel universe of milk honey? How’s their $250 million “ivory tower” splurge refurb going?

      • What the government can do is limited if the CB is effectively capping inflation at 1.5%.
        Yes they can run huge deficits but the stimulus effect is offset if the CB is just draining demand.

        eg. I part ways with MMT here.
        Interest rates do effect demand. An excessively high real interest rate v full employment rate offsets the stimulus from deficits

        • Bwaaahaaahaahaa!! When was the last an appropriation bill had to go before the board of the RBA?

          • right so tell me what happens in this thought experiment.
            An MMTer becomes Treasurer, they roll out a huge deficit/stimulus.
            At the same time an Austrian bitcoiner becomes governor of the CB, and they decide to immediately buy back the entire monetary base.
            You think the bitcoiners actions have no offsetting effect on demand?

          • Hang on a minute

            You used to insist that the CB needs to sell bonds before the government can spend

            Now you’re telling us that the CB will be buying back the monetary base AFTER the prime minister deficit spends

            Which one is it ?

          • Please Sweeper you know the CBO operates on a hard currency account on social perspective and a soft on MIC et al.

          • The Treasury sells bonds through AOFM and puts the proceeds into its deposit account at the CB. when they are spent and go into circulation the bitcoiner buys them back.
            Imagine what I’m saying is completely operationally possible (which it is), do you also think the bitcoiners actions have no offsetting effect on demand?

        • pfh007.comMEMBER

          Sweeper

          “..What the government can do is limited if the CB is effectively capping inflation at 1.5%.
          Yes they can run huge deficits but the stimulus effect is offset if the CB is just draining demand…”

          Capping inflation? You keeping making that evidence free statement.

          Inflation has been undershooting the RBA target range for years and that is not because the RBA has been trying to make it undershoot. Inflation is dead because the leftists and the rightists have turned the world into a giant swap meet for cheap labour and computers are so very clever these days.

          The RBA has been doing as much as it can within the role that it plays. While I give the RBA a hard time it is not because I think they can do stuff they clearly have not been given a green light to do.

          The RBA have been trying to run the economy red hot with cheap bank credit for the last 20 years just as they have been told to do by a series of bank deregulating governments – ALP and LNP.

          The problem is that cheap bank credit is sprayed at people with a low propensity (i.e lack of urgent needs) to spend who give it to other richer people with even lower propensities to spend. The net result is that there is a lot of money in the hands of people who don’t really need it and those who need it don’t have it.

          Low inflation is no surprise.

          But we know all that and we all know that nothing is allowed to change because no one is allowed to criticise the role of banks in the current model.

          For those who like a bit of democracy in their monetary systems

          https://theglass-pyramid.com/2020/08/15/myrba-the-quick-guide-and-helpful-links/

          • why guess what Phil Lowe is thinking when you can see what he has done. he has failed to hit the inflation target every year since he took over.

          • Sweeper,

            Why do you call it an inflation target that the RBA are trying to hit?

            Inflation has NEVER been a target.

            It has only ever been seen as a limit on how hot the economy can be run.

            If it goes up too much the RBA puts on the brakes but too low has never been a “problem”. That has always just been an invitation to load up the punch bowl with even cheaper bank credit to support activity and provide stimulus.

            That is exactly what the RBA has done over the last 20 years and the technique is broken. Mostly because the banks were let free to pump asset prices rather than productive activity.

            I appreciate that this impotence is upsetting to those obsessed with regulating the price of money and private bank domination of capital allocation but it is what it is.

          • It is a target. Yes Lowe has treated it like a ceiling but it is meant to be a target. If they didn’t care about low inflation to begin with they would have set a lower target.

          • pfh007.comMEMBER

            https://www.rba.gov.au/inflation/inflation-target.html

            “….The Governor and the Treasurer have agreed that the appropriate target for monetary policy in Australia is to achieve an inflation rate of 2–3 per cent, on average, over time. This is a rate of inflation sufficiently low that it does not materially distort economic decisions in the community. Seeking to achieve this rate, on average, provides discipline for monetary policy decision-making, and serves as an anchor for private-sector inflation expectations…”

            “.. This approach allows a role for monetary policy in dampening the fluctuations in output over the course of the cycle. When aggregate demand in the economy is weak, for example, inflationary pressures are likely to be diminishing and monetary policy can be eased, which will give a short-term stimulus to economic activity…”

            The Included link to Bernie Frasers speech In 1992 has an interesting final comment

            “.. At the same time, while it might be inconvenient to some, the fact has to be recognised that low inflation is not an end in itself and will not, in itself, be sufficient to ensure growth and bring down unemployment. There are many other elements in the framework, including those which come under the general rubric of micro reform. It is worth remembering that the good pace of growth between 1983 and 1990 followed action to bring the budget deficit and real wages back into kilter; those changes contributed to the business confidence which drove the growth (in its later stages, too fast). It is an old dilemma, but it needs to be resolved afresh in its current setting; we do not want the 1990s to become a decade of low inflation and low growth…”

            What Bernie might have said about the 2000s was

            “…..we do not want the 2000s to become a decade of low inflation and low growth and zero interest rates…”

            But that is what deregulation of bank credit has delivered.

            A result papered over by mass immigration.

            But that is not Lowe’s fault.

          • 007 if you go back and read the debates at the time when they were setting the target, the overwhelming view was that a lower target would not have been compatible with the original mandate of full employment. The RBA selected a target which was higher than other CBs.
            Maybe you think it is sheer coincidence that since adopting the target and up to Lowe’s tenure inflation has more or less averaged the target rate, and since Lowe has been well below target. That is an interesting view, however I don’t agree with it.

  4. Geez the QBE CEO must have done something outrageous to get the sack. Or maybe they just have different standards to AMP and Seven.

    • pfh007.comMEMBER

      Easy !

      It is right next to New Canterbury Road.

      Lots of cafe’s and BBQ chicken shops for a vibrant lifestyle.

      2 km around a station is about a 10 minute walk. Rezone the circle up to 20 storeys with ground level store fronts for tattoo shops, hipster beard oil merchants and kombucha stand up bars.

      The entire inner west to Lidcombe could get really cosmopolitan with some easy rezonings.

    • That really is f’ed up. I google mapped it, expecting to see like monstrosities dotted along the street….nothing but houses. If that was my street, I’d feel obliged to conduct regular drive-by turd lobbing.

      Good luck getting 695 a week [email protected] – esp if some bloke is throwing sh!t on to your balcony every other day.

    • pfh007.comMEMBER

      Easy !

      It is right next to New Canterbury Road.

      Lots of cafe’s and BBQ chicken shops for a v-star lifestyle.

      2 km around a station is about a 10 minute walk. Rezone the circle up to 20 storeys with ground level store fronts for tattoo shops, hipster beard oil merchants and kombucha stand up bars.

      The entire inner west to Lidcombe could get really cosmo with some easy rezonings.

    • reusachtigeMEMBER

      What I don’t get is why there’s still any free standing houses in that area at all. It’s a prime apartment location. WTF has been going on there for the last few decades? Sweet FA obviously. Now finally some advancement.

      • pfh007.comMEMBER

        Correct.

        Petersham died when the Roller Disco closed and the lingerie waitresses were shipped out of the Oxford tavern.

        The best thing they can do now is raze the lot (except for the cute old shop fronts) and reach for the skies.

        It could be the Rhodes of the Inner West.

      • I’m guessing you’re not a fan of Marrickville’s hippie food markets Reusa? Must make you sick seeing those quinoa eating hippies slinking around on Saturdays.

        • pfh007.comMEMBER

          Hippies in Marrickville?

          They haven’t been sighted in 20 years.

          Hipsters and assorted woke middle class progressives yes. Hippies not so much.

    • Ukraine fnMEMBER

      Imagine owning the houses next to it while they were building..would make the reno’s down from you Harry look like bliss.

  5. Took a look at gumtree to see what was happening with all those “land nominations” out North-west Melbourne from sellers with Indian names. Looks like there are even more now and some are sounding pretty desperate trying to make their deposit back… “URGENT! Cheap land for sale at contract price”