Macro Afternoon

See the latest Australian dollar analysis here:

Macro Morning

Kayaking in the Cook Islands, 2019: Photo by H. Becker

Another mixed day of trading in Asia with most stock markets declining or putting in minor scratch sessions as Wall Street futures pulled back in the wake of a probable Democrat victory in the special Georgian elections that will decide the fate of the Senate.  Bitcoin continues to surge, now above the $35000 level while gold looks a bit toppy as it holds onto its recent gains after being overbought since the start of the week, currently just below the $1950USD per ounce level:

The Shanghai Composite is floating along again, up only a handful of points at about 3520, while in Hong Kong the Hang Seng Index has slipped, down 0.5% to 27516 points. Japanese stock markets are mixed with the TOPIX gaining while the Nikkei 225 lost another 0.3% to finish at 27091 points while the USDJPY pair has had a minor blip higher but remains below the 103 handle and previous key support at the December lows:

The ASX200 eventually finished down over 1.1% to 6607 points as Wall Street futures declined while the Australian dollar was able to match its previous session highs to be at the 77.70 level going into the London session, a little overbought but on track:

Eurostoxx and S&P futures are struggling weak going into the European open as the news of a probable Democratic victory in Georgia is absorbed by risk markets. The four hourly chart of the S&P500 has been pushed below the 3700 point level after Wall Street with price unable to get above short term resistance at 3725 points and looking in trouble here:

The economic calendar tonight has two important releases, namely the latest German inflation print, then the release of the latest FOMC minutes.

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Comments

        • I’ve only bought $200 worth. I’m up $15 today alone lol. So for now just the exchange. But I will move to cold storage if I increase my investment. This is really just to dip my toes in and get a feel for how it all works. Low risk if I make mistakes right now.

          • I have had what is at current prices literally enough in AUD and crypto to pay my mortgage in an exchange for years with no problems. Admittedly this also owes me nothing having procured it MANY years ago and got my initial investment back manyfold.
            I also have some stored in a wallet as a diversification strategy and hedge against problems with the exchange. The reality is it needs to be in the exchange for you to trade it, although if you are long term holding like me the reality is it doesn’t matter. Storage in the exchange also acts as a hedge against potential loss of wallet on my end as well which is a risk that needs to be considered.I’m sure hundreds of thousands of btc from the early days has been lost with lost wallets if not millions. Finally I’d imagine the BTC transaction fee on the network is a significant amount for $200 of bitcoin at current value, that needs to be paid both ways.

          • Thanks, it would be tempting to pay off the Mortgage with your winnings. But if you also believe BTC is the future I guess you wouldn’t want to sell either.

          • Paying of the mortgage would be nice, but not life changing. Hopefully btc will appreciate to the point I can retire in the next few years. If it peaks up towards $100,000 AUD before crashing again I can probably pay the mortgage and then buy most or all that I am willing to sell back again if the price drops enough. I’m not willing to sell it all though, in case it doesn’t drop.
            I guess I have some risk aversion lol. I was merely pointing out that cold storage probably isn’t necessary and has potential risks as well.
            At this point I am already regretting selling all the way up the price rise. Last bubble I regretted the fact I sold not much at all because I had set paying my mortgage with 1/2 my btc as the sell point and we peaked about 500 or 1000 short from memory 🙁 although I did make a tidy profit and buy virtually all of it back as prices collapsed. Patience is a virtue they say.

          • I remember around 2015 when BTC price went from $900 to around $2000 and I thought I should have bought, but my old work manager said it was a bad idea to buy BTC lol. If I had bought say $10k worth back then I’d have made some decent money now. But I would have been tempted to sell in 2017 with the price rise. So I can’t have regrets. My plan is to buy and hold for long term and just keep buying small amounts each month. That way I increase my share over time but hopefully don’t notice the money going out.

  1. Georgia Runoff Results

    Candidate Party Votes Pct.
    Raphael Warnock Dem. 2,207,791 50.41%
    Kelly Loeffler* Rep. 2,171,794 49.59
    97% of estimated votes reported
    * Incumbent

    Candidate Party Votes Pct.
    David Perdue* Rep. 2,190,203 50.01%
    Jon Ossoff. Dem. 2,189,284 49.99
    97% of estimated votes reported
    * Incumbent

  2. GunnamattaMEMBER

    For anyone with time to sit through a reasonable presentation/podcast

    Someone put me onto this Zeihan dude on the weekend and he has put this up on youtube within the last few weeks

    It covers a lot of issues worth thinking about. His style may irritate a few but it isnt bad coverage

    https://www.youtube.com/watch?v=_LgO-W-JGjM

    ‘Geopoliticist Peter Zeihan looks at the economic trends for the dairy industry and his predictions for the future the Wednesday, December 9, 2020’

    Circa 25.50

    ‘Of the world’s top twenty consumption led systems only Australia is not facing a health collapse, and Australia is under lockdown, so it really doesnt matter from an economic point of view. Consumption led economies of the world are all off line, and they are desperately bringing their manufacturing needs in house for reasons of health national security, populism and jobs. Which means that if you are an export led system you have nobody to sell to. And this is going to last for at least the rest of this calendar year. I’m sorry, the next calendar year. And in the case of the developing world into 2022.

    Which means this is it. It’s over. Most coutnries will never return to where they were in calendar year 2019, and the export led systems that were hoping to make the adjustment before 2022, when the bottom falls out. They have lost all the time. Globalisation is done.

  3. Nasdaq has got 0-6 months left I think.
    Its right at the blow off phase similar to 1999.
    This is very tricky as in 1999 the index went up 70% in 5 months!
    That’s a huge gain to miss out and sit on the side lines.
    However it only took 3 month to drop 40% from peak!
    It going to be interesting
    https://invst.ly/tcwxz

      • I think Governments would love it if interest rates stayed at 0% for 4-5 years. I’ll be interested to see what ‘Reality’ has to say about that.

      • That’s the question nobody seems to address. If interest rates are zero or negative and if central banks are willing to intervene every time there is a market tremor could there be a new, much higher P/E (or whatever metrics you choose to value stocks by)?

      • Its the interest rate of change that’s important not the actual print.
        The issue in this cycle is that there has not been enough room to drop rates; hence QE.
        Now the the economy has climatized to zero rates and slight drop in QE or a very slight rise in rates can cause havoc.

  4. New Zealand housing bubble …

    Affordability crunch: Will house prices hit a limit ? … Miriam Bell … Stuff NZ

    https://www.stuff.co.nz/life-style/homed/real-estate/123882486/affordability-crunch-will-house-prices-hit-a-limit

    … extract …

    … CoreLogic head of research Nick Goodall said on Tuesday that the potential flow-on impact of such strong growth would eventually be outright unaffordability, which would reduce the pool of buyers able to borrow enough to participate in the market.

    Long-time housing affordability campaigner Hugh Pavletich agreed, saying housing in New Zealand was already severely unaffordable and 2021 was likely to be crunch time for the market.

    “When Ireland’s housing market crashed in 2007, the house price to income ratio was about 4.7 across the metro areas. In New Zealand it is now hitting the 8.0 mark, although some markets are more unaffordable than others, with Auckland at 8.6 for example.”

    While there are differences between Ireland’s pre-crash market and New Zealand’s market, New Zealand’s was currently a bubble and heading towards a crash, he said. … read more via hyperlink above …
    .
    .
    … Subsequently … the Central Bank of Ireland imposed a general DTI (debt to income) cap of 3.5 times gross annual household income … as the Banks research found excessive multiple mortgage lending a substantially greater problem than high LVR (loan to value) lending …

    Mortgage Measures – Central Bank of Ireland .

    https://www.centralbank.ie/financial-system/financial-stability/macro-prudential-policy/mortgage-measures#:~:text=The mortgage measures are aimed,-income (LTI) limits.

    • Jumping jack flash

      There’s no limit if the debt grows fast enough, and after a bout of price inflation supported by debt, enough debt flows into wages as wage inflation. Then increased wages are used to increase debt which is secured by increased house prices.

      This is the fundamental operation of the debt engine of the New Economy.

      Oh, and everyone works in services so it is really easy to raise prices to whatever the market will bear.

    • Just to unpack that a bit more ….

      The bigamy conviction got a lot of the attention but Lai Xiaomin received a death sentence on Tuesday over a much more serious issue troubling China.

      Lai oversaw China Huarong Asset Management Co. from 2012 until he ran into trouble in 2018. He was found guilty of receiving 1.79 billion yuan ($277.3 million) in bribes, with bigamy thrown in for good measure. Still, capital punishment for this kind of white-collar crime is unusual, legal experts say. Wu Xiaohui, former chairman of Anbang Insurance Group Co., whose clean-up is costing Beijing billions of dollars, was sentenced to 18 years in jail over a $10 billion fraud in 2018.

      So what is Beijing trying to signal? Who’s the intended audience of this harsh sentence? Other rich and privileged people? Should Alibaba Group Holding Ltd.’s founder Jack Ma be worried? Though he hasn’t been charged with any crime, he has disappeared from the public eye since the suspension of his $35 billion Ant Group initial public offering in November.
      AD

      At first glance, it may be meant as a reminder to naughty business tycoons of Beijing’s lethal legal arsenal. But the punitive measure against Lai is more likely part of the Communist Party’s internal housekeeping. With Donald Trump and the Covid-19-related economic slowdown out of the way, President Xi Jinping is going back to his war on shadow banking, which he started in earnest in late 2017. Beijing wants to set an example for bureaucrats, to show what can happen to those who do not heed their corporate deleveraging mandate.

      Unlike Anbang, Huarong is a proper state-owned enterprise. Backed by the Ministry of Finance, Huarong was established to clean up the bad debts on the books of commercial banks. As such, the distressed debt manager enjoyed many privileges, including quasi-sovereign creditworthiness and a wide array of financial licenses that the private sector covets and can’t get hold of.

      But instead of dealing with the bad debt, Lai went rogue, dabbling in everything from private equity to junk bond trading. At the end of 2016, distressed loans accounted for only 25% of Huarong’s total assets, down from 34% two years earlier. Instead, other financial products rose as a percentage of assets, including bonds, which could be easily turned around for profit. _ snip

      https://www.washingtonpost.com/business/why-china-is-sentencinga-tycoon-to-death/2021/01/05/4209bd62-4fb2-11eb-a1f5-fdaf28cfca90_story.html

      • At first glance, it may be meant as a reminder to naughty business tycoons of Beijing’s lethal legal arsenal. But the punitive measure against Lai is more likely part of the Communist Party’s internal housekeeping. With Donald Trump and the Covid-19-related economic slowdown out of the way, President Xi Jinping is going back to his war on shadow banking, which he started in earnest in late 2017. Beijing wants to set an example for bureaucrats, to show what can happen to those who do not heed their corporate deleveraging mandate.

        Unlike Anbang, Huarong is a proper state-owned enterprise. Backed by the Ministry of Finance, Huarong was established to clean up the bad debts on the books of commercial banks. As such, the distressed debt manager enjoyed many privileges, including quasi-sovereign creditworthiness and a wide array of financial licenses that the private sector covets and can’t get hold of.

        But instead of dealing with the bad debt, Lai went rogue, dabbling in everything from private equity to junk bond trading. At the end of 2016, distressed loans accounted for only 25% of Huarong’s total assets, down from 34% two years earlier. Instead, other financial products rose as a percentage of assets, including bonds, which could be easily turned around for profit. _ snip

      • Our genuine Reusa ought to be shaking in his prophylactic seeing how his twin brother from a chinee mother laid anything that stood in one place for too long and accumulated some serious moolah on the way …

      • Apparently he broke the law and with it his position of responsibilities which had sovereign ramifications, just in it for self enrichment regardless how his actions could blow up in everyone elses faces down the road …. you know like the GFC – ??????

  5. If Mr Market does not correct because of Biden’s taxes and rally because of Biden’s stimulus then I am in trouble. Well not really in trouble but will look really silly for selling much of my positions.
    Gold already turned around. 😒

  6. At some point, I think Australians will yearn for stability. I think ‘Living Life’ will become just too extremely volatile. Setting up a business will be pointless because the environment will be too volatile. Im wondering if things get so volatile that people just pull there money at some point.

    I think its truly fascinating to watch Bitcoins literally sucking money away from Gold and Silver. I guess we could call this, ” The Crypto Bubble “.

    I think people are getting pretty desperate for yield these days. We will do and trade almost anything to capture that next profit. That worries me a little bit. If something terrible was to happen ( like a crash ), everyones money could evaporate very quickly.

    This Bitcoin Crypto Bubble is historically fascinating. I find it even more fascinating that its pulling money away from Gold / Silver to continue its Bubble. If US doesnt regulate it ( are they even capable? ), then I wouldnt be surprised if BTC goes beyond $130k . Its volatile as hell and could rise / fall in spits and spurts but generally, I think its going to rise high. At some unpredictable point, I think BTC will pop and when it does, you might see a massive flow of money into Gold / Silver . Im thinking if BTC pops at some indeterminate future, Gold prices are going to soar. You’ll see people selling out of BTC and shifting it to Gold.

    I think the worlds becoming very volatile and its becoming hard to commit to anything. I really dont like all this risk and I think domestic economys need stability. These are unstable times and I think when you reach a point of too much instability, you may just see people pull there money. Either way, none of this feels very ‘safe’ to me. We seem to be living in a world filled with extremes.

    If huge money goes into Bitcoins, doesnt that mean downward pressure on Fiat Interest Rates? Im wondering if BTC goes into mega-bubble territory, will it collapse interest rates around the world? Time will tell, I guess.

    Everyone seems to be playing the ” Ride the Momentum ” game. I seem to be more concerned about ” Avoid the Risk ” game. Im happy to stick to gold and let the younger traders take on that risk.

    • I’ve jumped on the crypto bubble because it’s better to dip your toes in than to sit it out and potentially miss a huge upside. Everything else is already over bought. Real Estate, Stocks, Classic Cars etc.. cash in the bank ain’t doing nothing. May as well put it somewhere.

      But I’m not willing to go all in on Crypto despite Ermos encouragement. I’m putting in money I’m willing to lose.

      • Yeah, I am very risk averse. I mostly own Gold/Silver with some currency trading on the side. I limit my currency to a balance and shift it to Gold/Silver at certain points.

        I agree entirely. Stocks overpriced, Real Estate overpriced.

        I think we have Trust. We have Trust that water will come out of our taps and that it wont be poisoned. We trust that the air we breath isnt full of cyanide. We trust food comes from a shopping center. We trust that people arent evil and all very good friends. We trust that a Stock on the Stockmarket wont devolve into Bankruptcy as the owner funnels all that cash into a shell account, drains the company dry for retirement and leaves shareholders high and dry. We trust that if we speculate on Australian Assets that we can make a little money ( in a no interest rate environment ) AND get our money back at the end should everything go tits up. We trust many things.

        I think at some point, the Government/Boomers are going to run out of other peoples money to spend so they’ll fraudulently bankrupt a stock, steal peoples savings or use some means to extract peoples money. If and when this stuff happens, Australias Legal System will be so piss weak that aside from a sympathetic article in the newspaper with a photo of people crying over lost savings, nothing will be done. Just look at Mascot Tower and how efficient the follow up has been to that. The Legal System hasnt resolved anything. Its just allowed the funding of hoardes of Lawyers who have fed off the cash, done virtually nothing and the people involved have basically lost everything. If anyone of us ends up in the same predicament today, whether it be a stock bankruptcy, fraud or whatever crime to steal money, I wouldnt be holding your breath for any recourse. The system is broken. You’ll end up being the victim and I doubt anyones going to be crying a rainbow for you. You might get a photo in the news if your lucky but otherwise, nobody gives a toss and your effectively on your own.

        I think Growth is deteriorating in Australia. We do a great job at covering it up with Migrants and Money printing but its been on a downward trajectory from 2005. As growth deteriorates in Australia, Im of the opinion that at some future indeterminate time you’ll start seeing more aggressive crimes to extract money from people.

        I personally see Australian Society breaking down in years to come. I see it getting worse, not better. We have drugs flowing through our streets and crime going uncheched. Its not a far cry to assume there might be unchecked crime in our Financial Industries.

        Ask yourself a question, ” How would I be if I lost everything? “. How big of an outcome would that be? If the past is anything to base Australia off, then I see Australians becoming a$$holes. This country has no respect for anything except itself.

        The other thing I’ve been thinking lately is Human Rights may start to deteriorate. All this talk about Baby Boomers, Euthenasia, Murdering off the Young into Suicide is likely going to see a future world where your average Australian Citizen is far less valuable then has been in the past. Your just another car on the road. Another body taking up space. Another Pension Cheque or mouth to feed which Australia could do without. I think your value as a human being in Australia is going to deteriorate and frankly, if you die or get murdered ( young or boomer ), nobodys going to care. Your death means less traffic on the road for the other guy so I think a persons ‘human value’ to society is going to be almost worthless. In some cases, I suspect certain people will be more valuable dead then alive. The Liberals are happy to see the Leftys die as it means better votes for them. Your no longer Australian anymore, your part of a political identity and whether you deserve to live or die in this country has now become a product of whether someone else can derive benefit ( votes? ) from you.

        Woman will be the same.

        Reminds me of video called Animal Farm where Boxer was the strongest horse on the Farm. They used him up to pull large stones up the hill and when his health failed, they tossed him into the butchers van for horse meat.

        I dont think Australias sitting on solid foundations and yeah, Im expecting desperation when the idiocy realises there’s no money left to spend.

        Animal Farm – https://www.youtube.com/watch?v=XXkicQRl6vg

        • robert2013MEMBER

          Thanks for sharing. I know how long those kinds of replies can take to write. I think it’s far from clear that real estate and stocks are overpriced. I think it’s more likely that consumer goods and services are underpriced.

  7. Arthur Schopenhauer

    Just spoke to a mate in shipping: after Christmas there’s an overflow of containers at the Port of Melbourne due to the number of goods imported prior. And yeah, all go back empty. Tells you something about the sophistication and complexity of the Oz economy. Advanced manufacturing? We’re shipping nothing but hot air! 👩‍🏭 😂

  8. As a sub to China’s decision in sorting out a few above, suggest people inform themselves about the details and not be distracted about the personal relationship aspect – just a bolt on to show low personal moral standards.

    “Ross So, the world is incredibly divided, as we know. But it’s divided on different lines now, isn’t it? Because this multipolarity is here to stay. However, in the Beltway in Washington, the Americans think that unipolarity is here, which is laughable. But this multipolar world is split between, let’s say, finance capitalism and everybody else, because the West, the developed west, wants financial capitalism, doesn’t understand that it’s sowing the seeds of its own demise. Just elaborate on this a little bit – the West and financial capitalism versus growth economies that create real value.

    Michael Hudson Well, that’s exactly what’s happening. Countries are beginning to say no to the US demands that they neoliberalize their economies and follow the Washington consensus. So you’re going to have China, Russia and the Shanghai Cooperation Organization nations essentially going their own way, de-dollarizing and creating their own economy on non-neoliberal lines, as opposed to the United States. In United States, there’s going to be a lot of people losing their status. And when people lose their status and they’re impoverished, that’s the breeding ground for fascism.

    Ross Why is it that the US as a political class, have never understood that meeting other nations halfway is way better than trying to throttle them into economic submission?

    Michael Hudson Well, it’s a mentality. Donald Trump said America has to win every deal, that we won’t be a member of any deal that we won’t. The American mentality also for one hundred years, actually, since the beginning of the republic, says we will never follow what other nations tell us to do. We will not join the World Court. We will not join any international organization unless we have a veto power in it. So America has veto power in the International Monetary Fund, the World Bank and the United Nations, and it refuses to compromise with other nations because we’re the exceptional country.

    “Exceptional” means that we don’t have to abide by the treaties we signed. We don’t have to abide by international law. We can do whatever we want, because we’re America. That spirit has increased, especially as people are impoverished, living on the street and homeless. They think, well, at least we’re exceptional and we can do whatever we want.” – snip

    https://www.nakedcapitalism.com/2021/01/michael-hudson-looking-forward-to-2021.html

    All of which makes the banter about bitcoin et al or trading in non economic metals a hoot to observe as the represent the neoliberal mind set too a T – pure financially driven trading which has little or zero real economic activity or benefits. Yet these sorts are the loudest proponents of so called free markets and liberty/freedoms on one hand and then on the other wobble on about the big corps rents/increasing market share of everything [ownership].

    Diabolically absurd ….

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