Macro Afternoon

See the latest Australian dollar analysis here:

Macro Afternoon

Risk is sliding back here in Asia, in line with the reversal on Wall Street overnight, with Chinese shares falling back the sharpest. The USD continues to firm against the majors and gold, which remains below the $1900USD per ounce level after its sharp fall overnight:

The Shanghai Composite is falling sharply going into the close, down 0.7% to 3335 points while in Hong Kong the Hang Seng Index had returned from its holiday to decline 0.3% to 24573 points.  Japanese stock markets are mixed, with Nikkei 225 putting in a scratch session while the TOPIX fell back over 0.3% as Yen buying kept the USDJPY pair stalled just above the previous weekly lows at the 105.30 level:

The ASX200 followed suit with other Asian markets, eventually closing 0.3% lower at 6179 points, unable to extend on its start of week gains as it fails to breach the previous June highs. The Australian dollar is treading water despite the consumer confidence report and remains below the 72 handle but unchanged from last night:

Eurostoxx and S%P futures are rising slightly into the European open with the S&P500 four hourly chart still looking to consolidate here after being overextended as it hovers above the 3500 point level:

The economic calendar includes a few more ECB speeches, the last US PPI print and the API crude oil stock count.

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Comments

  1. bought few shares in FGR. they lack cash flow so will need to raise more money unless they start selling but they do have manufacturing capacity and therefore no need to invest heavy and they do have unique product. Check their site and their announcements.

  2. My boomerang won’t come back
    My boomerang won’t come back
    I’ve waved the thing all over the place
    Practiced till I was black in the face
    I’m a big disgrace to the Aborigine race
    My boomerang won’t come back

    • I still think the banks are quite worried about how this is going to play out. Comyn seems very nervous trying to boost confidence. If prices start falling, I don’t think they will want to be holding sinking mortgages.

      • To be fair I think everyone is wondering how smoothly the Feds can simultaneously manage to produce a recovering economy with stimulus bled off sufficiently slowly to not cause it to stall. Given the one-offs e.g. super withdrawal in Q3, even the very generous budget still means a lower stimulus amount in Q4. Requires the kind of co-ordination seen in putting a manual car into first gear without a stall or a bunny hop. Wishing the Feds the best of luck and watching from a safe distance.

      • To be fair to be fair, some mortgages will need to remain on hold because it’s likely they sold them to dead people and the dead eventually run out of money to deduct from their accounts. So better to put it on hold before anyone finds out, or at least until the next CEO steps up and can take the hit and the old 1 has gone off until the sunset and stashed their bonus on a Cayman Islands bank account somewhere.

      • Says the banks will not foreclose on anyone. No forced sales to hurt prices because the banks need house prices to go up to cover the balance sheet hit from lots and lots of non performing loans.

  3. So, spent last week negotiating on a house, 6006. Sellers bought 5 years ago, just at the peak, and, including stamp duty, were an estimated $150K out of pocket when they signed my offer. This is not including any renovations they might have done.

    Negotiations were fairly straight forward. They were expecting offers over a certain amount, and when I put my offer in just below that threshold, was told by the REA that they had clear instructions not to present any offers under that threshold. They have apparently committed to buying another house already and needed to get out, but needed the old one sold at a certain price to make the deal on the new one.

    So, verbal “non-offer” offer went in, was knocked back, and I was told that the offer had to be above the threshold. Since the difference was 1.1% between my initial and the threshold, I agreed to raise it but called it “best and final”.

    Next came the phone call with a sad story how the sellers paid so much for the house and really needed another bump on the offer price to make the deal with selling/buying, and fair value, and all that. I listened to the story, said I will have to consider it, let them think for half a day and refused to budge. The deal was called off then. For about 15 minutes, after which the sellers were going to seek alternate arrangements for additional funding. The deal was done Fri arvo.

    Thing is, sellers have been trying to sell for over 18 months, listing and de-listing the house a couple of times. They have, if I believe the REA story, already rejected two offers, both higher than my final (one by 8%, second by 3.5%), and watched the value of their house slide. Not willing to give it away.

    I am not gloating, this is all about emotional attachments and the perceived value of one’s property, I guess. Glad it turned out the way it did, had been renting for a while now, and with liquidating some of my physical, the loan amount is the same as rental, plus I get a nicer bigger house I can call my own and settle in with the family.

    • Well done, this story is exactly why I didn’t want to be over-leveraged (balls on the line), because I’m a firm believer that when I go to sell something it’s only for sale at the price I will accept (not have to accept). Same with my cars. I could list a couple for potentially $30k above their market value, and people will tell me I’m an idiot I have rocks in my head etc.. but unless I have to sell it’s not really for sale. But if I get a price I feel makes it worth the effort of selling, then I’ll consider it.

    • Diogenes the CynicMEMBER

      Sounds like you have a decent strategy. Work out the comparable value according to recent sales and pay something less than that – if they have a sob story then even better give them a box of tissues with your low offer. I bought in 6010 last year – it was the 33rd house we visited. Family is happy to be done with renting.

      • Nice area, 6010. Looked there as well, we are in 6008 at the moment.

        I’m with you, renting has its positives and negatives, but the last house rental experience almost did my head in.

    • Reckon they would of accepted your initial offer. But only 1% difference so not a big deal if you’re ‘happy’ to pay.
      They say something is worth what someone else is prepared to pay, so I guess you paid what it was worth ,,, at the time,

    • innocent bystanderMEMBER

      interesting. thanks.
      sounds like inner suburbs are struggling to sell then? 6006, 6010 , 6008.
      Perth Hills still going nuts. multiple offers at 1st home open. Prices up.

      • Inner suburbs are moving well. A house three doors from us went under offer in one day. Older 3×2, and right next to the rail line, but was priced at rental return slightly more than loan servicing on P&I with 100% LVR. Don’t know what it sold for but listed price was somewhat reasonable. It is hit and miss from my observations, fairly priced homes (in current market) move fast, others sit for weeks and weeks.

        Land in the inner suburbs got expensive quickly after fed and state stimulus, and build prices have gone up $30K for single story and $50K for double story houses. Build durations are stretched as well, mainly due to influx of applications being processed by the councils. Land at $1500 to $2000 per sqm depending on suburb.

        • innocent bystanderMEMBER

          oh ok. from the tone of yr buy it sounded like things were slow.
          how surprising stimuli went straight through to prices.
          Perth Hills land that was sitting on the market for yonks starting selling quickly, and family homes real fast. even the top end (over $1.5m up here) is finding buyers.
          prices are up 10% – 20%

          will be interesting to see how the newbies handle their 1st bushfire season and the new builds deal with all the new regs around building in bushfire zones (its pushed building costs through the roof).

  4. I’ve stayed clear of this far left cesspool for a while now but I think it must be known that MB has been extremely wrong in their position regarding:
    -CV
    -Vic’s lockdown
    -NSW non lockdown
    -US politics
    They are on the wrong side of history. I am disappointed as I truly used to like this site but may they keep spewing the same garbage like the msm till it bites them on the backside.

  5. As there was a bit of a debate about “sound money” on the weekend I would draw attention to a more comprehensive view of what that term means and its application. Waves at EP.

    ref: Maintaining sound money amid and after the pandemic – https://www.bis.org/speeches/sp201008.htm

    Basically as far as I can tell this is code for private sector led recovery or nothing at all, stagnation would be preferable to any government impediment in the privatization agenda.

    I think our recent budget bares this out, quite OK to funnel in funds to businesses, bigger the better, whilst increased selling off of state assets, all whilst the looting continues. See NSW PM dramas and now the LNP Qld shadow PM or the Postal service issues.

    For my part if some want to couch the conversation in “sound money” they might want to start with the corruption aspect and bang for buck. What good is sound money when society is coming apart with vast swaths left behind for eternity.

    In a response to the above I received an unsolicited response too it:

    I’m reading the transcript of this guys speech and I hit found this to be the key give away…

    “I will argue that the best contribution monetary policy can make is always to maintain sound money, to focus squarely on preserving price and financial stability. Support for the government is justifiable in the pursuit of these goals. Otherwise, the risk arises of real or perceived fiscal dominance undermining central bank credibility as the foundation of sound money.”

    in other words, don’t let them find out TINA is BS.

    As always it can be a bit difficult to pierce the dialectal rhetoric of such offerings because its meant to keep the unattuned head nodding lest they seem stoopid*.

    • Off topic skip but saw a nice old house on Banks street in Enoggera getting all the weather boards replaced and repainted. Your mob doing this or is it somene else?

      Pretty happy to see these old houses being preserved and modernised without losing the charm.

      • Naw were pretty much from Graceville up to Clayfield way corridor, presently I’m stuck in Red Hill for months finishing the one I’m on and then one down the street. I’m the Qld’er guy and others get the small jobs or post war to 80s builds, they float in and out on my jobs as flow dictates.

        PS yeah this new stuff is build around original owner warranties and 10 years of structural and reads like a white good.

  6. THE DESTRUCTIVENESS OF NEGATIVE INTEREST RATES … AMBROSE EVANS – PRITCHARD … UK TELEGRAPH …

    Negative interest rates have failed everywhere and are the path to Soviet-style banking … Ambrose Evans – Pritchard … UK Telegraph
    … behind paywall … hopefully Australian and New Zealand media will reprint …

    https://www.telegraph.co.uk/business/2020/10/13/negative-interest-rates-have-failed-everywhere-path-soviet-banking/

    If the global experiment with negative rates has taught us anything, it is they are a cancerous tumour on the free enterprise system …

    … concluding …

    … Professor Richard Werner, a bank expert at Oxford University, said the outcome is progressively ruinous for Germany’s 1,250 savings banks and cooperative lenders, which rely on deposits from savers and have intricate ties with local business.

    These banks account for 90pc of lending to small firms (SMEs). They provide credit for much of the Mittelstand engineering and machine tool family firms. Prof Werner said they are the lifeblood of the Wirtschaftswunder, arguably the reason why Germany has had such a successful industrial economy for over 200 years.

    “What do negative rates do? They kill the banks. Smaller firms are being gradually frozen out of the lending markets,” he said. …

    … The NIRP structure favours mega-banks with no local or intimate ties to the productive economy, and which have a strong incentive to pump up the parasitic property market and to make their living from speculative capitalism.

    “What’s more, central banks have a conflict of interest since they want to step into the arena themselves as a player by offering current accounts, which they call a ‘digital currency’ to confuse everybody. This is how we end up with centrally-planned credit and the Sovietisation of banking,” he said.

    Has the ECB been at all chastened as NIRP hits the “reversal rate”, the point where it demonstrably does more harm than good? Apparently not. Christine Lagarde wants to go even further. She has floated the prospect of minus 2pc. But to do that you have to start taking coercive measures to ban cash and outlaw safe-deposit boxes.

    There are good arguments for or against quantitative easing. But steeply negative rates are something quite different. They are a cancerous tumour on the free enterprise system.

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