Macro Afternoon

See the latest Australian dollar analysis here:

Macro Afternoon

Markets were looking good through the lunch sessions here in Asia, following the upbeat mood on overnight share markets following the FOMC meeting but have turned late in the session, with Chinese stocks leading the way. The USD is still pretty strong against all the undollars, with the bounce in the Australian dollar starting to rollover as it absorbs the unemployment print while Euro is basically unchanged. Oil prices are drifting sideways, with Brent crude just below the $120USD per barrel level while gold is trying hard to follow through on its overnight bounce but is struggling to get off the ropes here at the $1830USD per ounce level:

Mainland Chinese share markets are playing catchup to the recent volatility with the Shanghai Composite down more than 0.8% to 3278 points while the Hang Seng Index is losing ground fast, now off by more than 1% going into close at 21037 points. Japanese stock markets however are holding on to their bounce gains, with the Nikkei 225 index closing 0.4% higher at 26449 points while the USDJPY pair has also bounced back from its relatively small losses overnight to try to get back on trend:

Australian stocks were doing well at the start of the session but managed to close in the red, with the ASX200 finishing 0.2% lower at 6591 points. The Australian dollar hasn’t been able to move forward on its overnight bounce back through the 70 cent level this afternoon, as I still contend the Pacific Peso is looking very weak here as the RBA is in a pickle (of its own making):

Eurostoxx and Wall Street futures are slowly drifting lower here with the nascent signs of bottoming not exactly turning into anything firm. The S&P500 four hourly futures chart shows price action still crushed well below the 3800 point level and the May lows (lower horizontal black line) as a swing play on reverting momentum may give some hope here:

The economic calendar will now focus on the BOE interest rate decision later tonight, followed by US initial jobless claims.

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Comments

      • boomengineeringMEMBER

        Touching wood with fingers crossed.
        Hampering my moving plans as agent has buyers for factory. Told them I needed to rent back for a year to get the stuff out.
        When are you going to show your dial on Sundries, (hoping to start a meme.).

          • boomengineeringMEMBER

            Own it outright, sorry if misconstrued. (Rent back) It’s a Pita having to travel 2.5hrs round trip to use a machine to do a five minute job, so spend 2 hrs doing it at home by hand.. Also hate paying strata levies just for them to attack me. That said the anchor round my neck of not letting go of machinery is what keeping me alive .
            .
            Your pic’s always out of focus. I have a Pinocchio nose, started off small but evertime it breaks it gets bigger.

          • boomengineeringMEMBER

            After the devastation of 89, 90s, I was too much of a scardy cat to borrow money, so just did the hard grind

          • The Travelling PhantomMEMBER

            ^^ makes sense Boom, unfortunately the lessons you learnt from that recession seem all forgotten and Aussies went on massive debt binge
            It’ll explode hopefully and H&H and LVO start writing about an actual collapse in housing market rather than the hype they keep pumping every 0.005% decline

  1. Grand Funk RailroadMEMBER

    A Market Too far
    Gunnamatta
    16 June, 2022

    The failure of the Energy ‘Market’ isn’t surprising. The surprise is that it has taken so long for the whole concept to deliver a policy failure of such epic proportions it cant be walked away from or denied. Australia’s energy ‘market’ has always been a fraud and has always been known to be one. Now that the concept, as regards energy, is wreckage in the mind everyday Australians it is time to explore more wrecks in other equally faux markets which shape out lives.

    Who’d a thunk it? Participants in Australia’s electricity market – the one providing the energy for every last thing you turn on every day – indulge in ‘unconscionable conduct’ and like ‘gaming the system’.

    There are circa 25 million Australians who aren’t shocked. The bulk of these can recall an era in which almost every State electricity generator was run and owned by a Government – usually State. Those State run operators became ideological pariahs a generation ago as the Hawke Keating era started questioning whether State controlled energy generation and distribution was in the national interest. Back then they assumed that getting the ‘market‘ in would, as in the US and EU, lead to lower prices and greater reliability. But the privatisation of energy in Australia ensured Australians never did see those lower prices, while they’ve watched on without much say as they, as taxpayers, have been taken for patsies by mainly offshore based ‘private’ companies, and with a load of marketing, a meaningless quasi bureaucracy to ’regulate’ and an entire industry of PR and spin which has never got Australians away from the possibility that their electricity system is all about ripping them off – as consumers and taxpayers – and that the organisations in that industry were never about providing reliable cheap power, but about holding Australians to ransom for their bottom lines.

    Those former state controlled outfits – the Victorian SEC first amongst them – were largely created after an initial wave of private sector failure in the 19th and early 20th centuries. The institutions themselves weren’t corporate in any way, they were bureaucratic. Haggling about the bills could be tedious, and variation to what was provided almost unheard of. But almost every decent sized town would have a couple of apprentices with the SEC, and a maintenance team somewhere close. The whole system wasn’t about ‘risk management’ it was about engineering a system with as little failure as possible. In Victoria at least from the late 1960s blackouts were unheard of unless something like a bushfire took out key parts of the system. And those maintenance teams would be dragged out of pubs, and off cricket fields, or called in the small hours to get out and fix things pronto – yes, at double time and a half on long weekends, but they’d be there, and the punters knew they’d be there. That all went out the window as Premiers like Jeff Kennett broke up the system and created private monopolies in both generation and retail and told the public the system was a ‘market’.

    The public knew from the get go that almost none of them were in any form of market. In the first instance they couldn’t swap between one provider and another, and later when they could the variations between offerings were negligible. Those operators who brought product facilities and distribution networks soon discovered that rather than selling product and ensuring supply, a better way to maximise shareholder outcomes was to ‘gold plate’ the system by investing expensively and then writing off the ‘investment’ for taxation concessions off revenues – which were essentially guaranteed by demand from juiced population growth and a world increasingly requiring a computer and range of screens be turned on 24 hours a day. The speciality became deciphering usage rates and times of day and the often surreal ‘service charges’ which padded out bills, on infrastructure which hadn’t been touched since it was installed by public entities in previous generations.

    In the late 1990s the world wised up to carbon energy generation and started on the road to renewable power. To foster that State governments encouraged feed in tariffs. Those electricity retailers and generators knew this would cream them in the long term so they pressured governments to tone down the feed in tariffs, and started talking up the instability created by people feeding into their systems. They’ve let maintenance go, they have held off on investment. They have done their level best to blackmail governments into cost free funding for capacity. If the public wanted to address climate change then the Government could pay them off first. That is what this issue has been about. They havent finished writing off their ‘investment’, and want more. And they’ve been caught short.

    The South Australian government did the right thing in taking up a massive battery rather than taking up being held to ransom. It is Mike Cannon Brookes and Twiggy Forest putting into action plans to ensure Singapore gets solar power generated in Australia at a price better than our current electricity generators and retailers provide Australians.

    But most of all it has been the ideological bedrock of the age to believe in ’markets’ which don’t fail, which deliver the best of all possible outcomes, which are comprised of participants which somehow have public interest at their core, and should be as lightly regulated as possible – all adding up to the best outcome for you. A Liberal government for 20 of the last 26 years has been just what the doctor ordered for this dynamic. A hesitant ALP, unprepared to address NeoLiberal shibboleths, under Rudd and Gillard in the wake of the GFC, was icing on the cake, a bare faced liar heading a government of tongue talking ideological nutters was the cherry on top. That ideological underpinning has neutered the collection of data and analysis of the Public sector, at a Commonwealth and State level, and embeds private suppliers and even labour hire into Public sectors across the nation, giving rise to multi billion dollar public outlays only which only really are about providing a margin for private suppliers – they game that system too. It has been a golden era for privatised providers for that which Australians need, and government has always ridden shotgun in the ideological wagon.

    Now that we have an overt ‘market failure’ all Australians can ask themselves ‘where else do we have market failure?’ with fresh eyes. Their houses aren’t really a market, their children aren’t educated in a market, and their superannuation isn’t really a market either. When they think of players in markets ‘gaming the system’ what do they see when they think of Health Insurance or pharmaceuticals, or Audit and Consulting firms in the Public sector, or property developers banking land? Or Australian gas producers placing Australian consumers at the end of the queue.

    Gaming the system is what profit seeking enterprises, and people, do. And they will do it wherever they think there is no way the buyer can get back at them for doing so.

        • Electric vehicle charging, A smart grid would mean they dump their remaining charge into the grid when you get home from work to help supply the evening peak, then start charging around midnight.

          • ErmingtonPlumbingMEMBER

            An electrician mate of mine was talking to me about EV charging requirements and the need for 40 amp fuse’s just for the slower to medium rates of charge (8 to 13 hrs)
            Faster charging requires more amps
            Charging 2 or 3 cars at a time on one household system is almost impossible.
            He reckons the widespread adoption of EVs is untenable due to the ridiculous load that’ll get placed on household and local power grids every day.
            Most people’s electricity bills will be 80-90% EV recharging.
            And As for those smart grids, car batteries like all other batteries have a heat cycle of only so many charges before the battery is fked so why would you have your cars battery half drained every night boosting the “smart grid” when this will reduce the batteries life?
            Then there is the polluting aspect of battery manufacture and disposal.
            From his Experience of setting up home charging for EVs (he lives and works on the northern Beaches) and from being a Competent Electrician he just can’t see Home charged EVs becoming a viable reality for replacing a storable fuel for a large majority of people.
            He’s quite positive about Hydrogen fuel cell EVs though.

          • drsmithyMEMBER

            Most people’s electricity bills will be 80-90% EV recharging.

            Quick back-of-the-envelope:

            The typical car drives ~200-300km/wk, which is going to require something in the ballpark of 30-40kWh worth of battery charging (per WEEK).

            A typical (fully electric) household uses something between 20kWh (couple) to 40kWh (family w/2.3 kids) per day, or 140-280kWh per week.

            So assuming the couple has one EV and the family has two EVs, charging to cover ~200-300km/wk would add somewhere around 25% to their power bills (140 to 175kWh and 280 – 350kWh per week, respectively) and represent around 20% of the total.

            TL;DR: EV charging consuming 80-90% of a power bill would be very much a corner case. I could see it reasonably getting up to ca. 50% eg: situations where everyone in the house has an EV, but those are going to be relatively uncommon anyway.

            I think your mate is looking purely at instantaneous power draw, and assuming everyone will be fully (fast-)charging their EV every night, which is simply not representative of reality. Most people just don’t drive enough to need to do that.

            My expectation is that EV batteries will be mostly used to supply the local household (ie: in lieu of a specific house battery), rather than feed back into the grid.

  2. Ronin8317MEMBER

    Today marks the 113th day since the start of the war in Ukraine. After some really stupid decisions, the Russian army is now applying the same tactic that won them the war in Syria : Encircle, starve, surrender, evacuate. The only difference is that ‘evacuate’ part doesn’t exists since Kyiv wants everyone to fight to the last man, as it means more foreign funding. Mariupol has fallen, and Severodonetsk will soon fall in the same way. Unless Kyiv decide to send troops to break the siege, the defenders in Severodonetsk are doomed. At the current rate of advancement, everything east of the Dnieper, and everything close to the Black Sea will become part of Russia, provided Russia can sustain the casualty rate.

    Despite the sanction, the Russia economy is doing well (on paper) thanks to the high oil and gas prices. What is unexpected is the trade between Russia and China : while Chinese import from Russia have increased due to gas and oil, Russian import of Chinese goods have gone down. So it suggest Russia have found a way to bypass the Western sanctions without China. How? I have no idea, but it definitely is happening.

    The Pope is now offering to act an emissary to end the war.

    https://www.cbsnews.com/news/pope-francis-ukraine-war-russia-putin-perhaps-somehow-provoked-not-prevented/

    He’ll need divine intervention.

    • I’m no expert but I don’t think Russia can sustain the casualty rate.

      Have been loosely following problems in the Russian military around conscription and bastardisation after that conscript shot up his base in Siberia:

      https://nationalinterest.org/blog/buzz/why-did-russian-soldier-shoot-eight-his-comrades-siberia-97086?amp

      (Source used was 1st google result, no idea about “dominate bias” of source, not endorsing)

      The extensive use of conscripts in Ukraine, the mass failings, the evidence provided by Russian soldiers in Ukraine courts = complete shambles, no chance of a win. Unless Vlad gets real nasty and you don’t need boots on the ground to win in that way.

      • Ronin8317MEMBER

        They are estimated to have lost 15000 so far in the first 3 month, however now that they’re no longer doing stupid things, it’ll be less. To put things into perspective : The Russian army lost 20 million in WW2, and 22 million civilians.

        Ultimately it comes down to logistics. If Russia can get around the sanction, which they seem to be doing, then the West must send more arm. So far despite all the rhetoric, the West haven’t match Russia’s spending, which is why Ukraine is losing.

          • Ronin8317MEMBER

            The Ukraine War is only the opening salvo. The West will not stop until NATO troops are in Moscow, or the world ended in a nuclear war. Russia may split Ukraine in half in the next few year, but NATO will keep pushing, and pushing, and pushing, until Russia runs out of resources.

          • Arthur Schopenhauer

            Interesting take Ronin. Autocracies fall as quick as the East Coast Energy Market, so it might be an insurrection rather than a frontal attack.

      • I’ve always assumed that the Russian will only try to hold areas with russian friendly locals. I helps if there is some geographic barriers to form new boundaries on. Odessa is the obvious bargaining chip, Ukraine will not want to lose ocean access.

    • I don’t believe Russia will ultimately win this war. Western long range Weapons on their way. That will turn the tide against the incompetent Reuski’s as they will be able to hit them from afar accurately out of artillery range.

      Sanctions are something I’m still on the fence about as to their effectiveness. Oil / Gas imports still happening but will ramp down and over time have an effect. Sadly not quickly enough to prevent unnecessary death and destruction.

      • Ronin8317MEMBER

        Artillery is used because they’re cheap. Long range missiles are more accurate and deadly, but anything with precision is more expensive. In city fighting situation, like in Severodonetsk, it’s pretty much trading live for lives.

        The most effective way to make Russia sue for peace is a low oil price, but oil prices will remain high while the war continues. It’s a chicken and egg problem. Biden is going to Saudi to convince them to pump out more oil, however the Saudi will tell Biden to get stuffed. Japan and South Korea is onboard right now, but another year of $100+ oil prices, plus EU scrambling for non-Russian oil by year-end, will make them reconsider whether national suicide is worth the price of Western Alliance. Japan and South Korea are both running trade deficits right now, purely on the price of oil and gas.

    • In countries where Eastern Orthodox Christianity is the religious belief, the Pope is seen to be an incarnation of the Devil…good luck with that!!

    • WA is good, but I don’t think adding more people will make it better. Let’s just keep the Perth is dull image going and leave it at that without inviting a population boom. Our house prices didn’t double in the last 10 years, our gas price is stable, it is possible to drive around on a weekend with minimal traffic and find a clean beach with few people to share it with. I’m good with that!

  3. For the inflation befuddled …

    Very few people really understand inflation, least of all the ones who’re supposed to, the economists. And even less so, those economists who subscribe to Milton Friedmans dictum that inflation is always caused by printing too much money.

    Blair Fix (per his own words, for the uninitiated: “Political economist. Blogger. Muckraker. Foe of neoclassical economics”.) has written a superb long form blog post/analysis about this, really recommend this and everything else he posts – original and clever thinking.

    https://economicsfromthetopdown.com/2021/11/24/the-truth-about-inflation/

    Some quotes:

    The real story of inflation — the one that goes largely unreported — is of wildly divergent price change among different groups of commodities.. In the real world, Nitzan observed, price change is always ‘differential’, meaning there are winners and losers. The consequence is that inflation is not purely a ‘monetary phenomenon’, as Milton Friedman claimed. Inflation restructures the social order.

    It is this real-world feature of inflation that is most important, because it means that inflation signals a change in society’s power structure. Predictably, it is this real-world feature that mainstream economists ignore — largely because it conflicts with their tidy theory of inflation as a ‘monetary phenomenon’. Fortunately, the evidence is clear. Inflation is (and has always been) overwhelmingly differential. Inflation is restructuring

    • Ronin8317MEMBER

      When Central Bankers raise interest rate, they don’t look at the real economy. The only thing that matters is the bond market because that affects what the private banks pays when they roll over their debt. Once you accept the notion that central banks only exists for the banking system, and not the economy, their action makes perfect sense.

      As to “inflation is restructure of the economic system”, look at Sri Lanka. It’s being ‘restructured’ into ruin because they have run out of foreign currency to pay for imported fuel and fertilizer.

      • Sri Lanka biggest problem is like Greece before it went pop … ravenous elites … everything else is a derivative of it.

        Banks and Bonds you say, would suggest looking at Hudson on that one and remind of the actions taken against the NYC bond sale back in the day by the banks at that time. Power move to get the concessions they wanted in taking over vast swaths of C/RE to support the FIRE sector agenda. Trump was a beneficiary of that tide that lifted all boats IMO.

        PS. Hence at the end of the day the IR was used as a social tool in restructuring it.

      • pfh007.comMEMBER

        Ronin8317,

        Inflation is the part of the process where bankers inflate the money supply with their credit and obtain claims on real assets via their debt contracts.

        Rising interest rates is when the bankers strangle debtors with a shortage of money so they default.

        An ancient process which most religions developed objections to very early on.

        • Pft

          Inflation is always and everywhere a distributional phenomenon, and therefore inescapably political.

          There’s a reason the subject was originally called “Political Economy” and that propertarians paid handsomely to send the history of the subject down the memory hole …

          “Notice how this evidence changes your view of inflation. It makes it hard to blame government for the problem. You see, if big business is systematically benefiting from inflation, it implies that these big corporations are raising prices faster than everyone else. In other words, it is oligopolies that are driving inflation.

          “So it seems that in the real world, inflation looks nothing like it does in economics textbooks. Yes, inflation is a ‘monetary phenomenon’ — as is anything to do with prices. But more importantly, inflation is a power struggle over who can raise prices the fastest.”

          Which would highlight the actions taken against Russia followed by the aftermath of covid and most of all the qty of rotting corpses contracts ready to sploooode …

          • pfh007.comMEMBER

            “..Inflation is always and everywhere a distributional phenomenon, and therefore inescapably political…”

            Yes – that is exactly the point I was making.

            Great to see we agree on something.

          • Best bit is yours then use this notion to advance an agenda – for them – to be the keepers of the nations currency and everything else can be a free[tm] for all mosh pit …

          • pfh007.comMEMBER

            “..Best bit is yours then use this notion to advance an agenda – for them – to be the keepers of the nations currency and everything else can be a free[tm] for all mosh pit …..”

            The only one around here who has been defending the private banks for years is good old skippy.

            That you think there is a difference between private ponzi crypto money and private ponzi bank money is the joke.

            Anyway I hope I am not keeping you from your Putin apologia. It seems to be the new black over at NC.

            ..

        • No we don’t but thanks for trying to hitch a ride to stay relevant. You can’t be beholden to the religious aspect and its economic derivatives which proceed/ed events, which then enable the money cranks to deploy their interest=usury blame cannons to cover up the social crimes they enabled from day one.

          Banks were sorted and some let them off leash, C-corps same same but then got off leash due to the cold war, all those political decisions were made by corporatists and bedfellows, Mfg begot digital capitalism and the latter was off shored whilst the dominate owners played tax haven games with the proceeds of Private Equity [now there’s a mob that would make any bankster blush] cannibalism capitalism but your entire theory is grounded in antiquity and notions about QTM devaluing ***a persons*** store of wealth … barf …

          • Your non rebuttal is noted pft as always you resort to the vulgar dialectal when challenged and can’t muster a reply.

            Your religious beliefs and your attempts at making everything all about banks is the plank in your eye and not mine. History and Economics is a much much more multivariate and dynamic set of events than your simplistic baying about usury and devaluing money. I for instance note the changes in the entire financial sector which enabled not only banks but any other corporations to act with such social malfeasance, constantly have reminded you of Plaza and the whole shebang about EMH capital distribution/s – think the data is in on that one. So now all those that forwarded those perspectives are now looking for scapegoats, oh look squirrel, that’s not what I really said back then, veritable marry go round of fexians like Summers to opine, and basically anything except responsibility on their part in creating this mess.

            If your memory serves I was like stinko on banks years ago, difference is when you make it all out to be about money creation and how it should operate in the larger/broader/inclusive economy. I remember your dislike for things like a postal bank based on a non private enterprise model. So no pft we are quite divergent on more core issues before we even get into how – any – monetary system is administrated. Just look at the social outcomes in America right now, ground zero for neoliberalism/Washington consensus export, again seems the data is in on that ideological corporatist agenda.

            But in a classic move will stick the bill to the unwashed for their moral wantings and told to self flagellate so the “virtuous cycle”[tm] can arrive.

  4. Hugh PavletichMEMBER

    Sri Lanka … economic update …

    Why Sri Lanka is Collapsing: the Coming Global Food Crisis … PolyMatters … Youtube
    … h/t PM …

    https://www.youtube.com/watch?v=W5zxYDHwf-Y

    Sri Lanka government workers get Fridays off to grow food ahead of shortages … Agence France-Presse / The Guardian

    https://www.theguardian.com/world/2022/jun/15/sri-lanka-government-workers-get-fridays-off-to-grow-food-as-shortages-loom

    Public sector employees also encouraged to find work overseas and send money home amid unprecedented economic crisis … read more via hyperlink above …

    … Earlier important April 2022 video … a sad history of poor governance …

    The Economic Crisis in Sri Lanka … Asianometry … Youtube

    https://www.youtube.com/watch?v=g70ncHcaBiE

  5. Hugh PavletichMEMBER

    Cruise stocks dive as recession fears circulate in the stock market … Yahoo Finance

    https://finance.yahoo.com/video/cruise-stocks-dive-recession-fears-205146674.html

    Mortgage Rates Surge The Most In 35 Years As Fed Hikes Hammer Home Buyers … The Street / Yahoo Finance

    https://finance.yahoo.com/m/35e49717-bd2d-3b7e-b021-f5c20604a82e/mortgage-rates-surge-the-most.html

    U.S. families grappling with ‘exponential increase’ in child care costs: Care.com CEO … Yahoo Finance

    https://finance.yahoo.com/video/u-families-grappling-exponential-increase-205134555.html

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