Houses and Holes


Buy Coles, short Wesfarmers

Some thin-sliced Chanticleer today: …perhaps the best supporting evidence for Scott’s big Coles spin-off comes when you examine the returns on capital each division of this conglomerate is producing. At Bunnings, which will officially be crowned the flagship of the Wesfarmers fleet after the Coles demerger, return on capital was a staggering 49.4 per cent, up from 41.8


Aussie energy future born in Whyalla

It may come as a shock but the former One Steel/Arrium dog is now the birthplace of the Australian energy future, via the AFR: British billionaire Sanjeev Gupta expects to begin construction of the Cultana solar energy project which encompasses 780,000 solar panels near the revived Whyalla steelworks early in 2019 as part of a broader $1.37


Australian dollar breaks, ASX hits new high

AUD breaks again: Mid-71s looming as crucial support. Long bond yields are falling too as wages go precisely nowhere: ASX lovin’ it: Dalian is sniffing at those Chinese house prices: Big Iron is down anyway: Big Gas looks toppy: Big Gold is in trouble as DXY powers: Big Mortgage is enjoying falling yields but CBA


Idiot gate-crashes immigration debate

I really did not want to touch this poison but the media is going nuts so here it is: Queensland senator Fraser Anning has praised the White Australia Policy and called for a plebiscite as “the final solution to the immigration problem” in the most inflammatory maiden speech to an Australian Parliament since One Nation


Westpac consumer sentiment reverses

Via Bill Evans: The consumer mood deteriorated in August, giving back about half of the surprisingly strong gains seen in June and July. Those gains look to have been partly a positive response to the tax cuts announced in the May Budget, which passed into legislation in June, the first round of cuts coming into


Ken Henry should resign

Via the AFR today: The scale of NAB’s inability to report licence breaches on time has been revealed in a document published by the Hayne royal commission which shows the bank breaking conditions of its licence at the alarming rate of around once every week between 2014 and 2017. Of the 297 breaches the bank


How far will house prices fall?

Via Gottiboff today: Let’s assume such a major overseas event will not take place and concentrate on the events we can control which are contributing to the housing mess in Sydney and Melbourne. We’ll start with the banks and their regulators. The banks now have a set of rules that have been imposed on them


China apologists seize their moment

“Beijing” Bob Carr is back: Australia was “unimaginable” without the dynamic presence of Chinese-Australians. Those were the words of Malcolm Turnbull last week, resetting the rhetoric of Australia-China relations. The new language is welcome, especially to someone such as Kun Huang, who might be wondering if it had been a mistake to have been born


APRA, ASIC “captured” by banks

This is old school AFR from Alan Mitchell: Economists call the problem “regulatory capture” and, as well as being under-resourced, it seems the financial sector’s main regulators, APRA and ASIC, may have fallen prey to it. None of these problems are new. The failures of governments and regulators to protect the public from the behaviour of industry have


Turnbull to take Gillard strategy to election?

Via the AFR: The nation appears headed for an election over emissions reductions and power prices after a majority of Coalition MPs endorsed the National Energy Guarantee and set the scene for a showdown with Labor. …Last night, the states, which must pass separate legislation to establish the mechanism for the NEG but were awaiting


Australian dollar tumbles despite global bounce

DXY is off to the races. CNY held and EUR is cooked: The Australian dollar tumbled again versus developed markets (DM): And emerging markets (EM): Gold held on: Oil didn’t: Nor base metals: Big miners are breaking down: EM stocks sank fingernails into the clifftop: EM junk bounced: Treasuries were sold: Bunds too: Italy is


Turns out Bitcoin is like gold after all

That is, it crashes with risk as the USD climbs, which makes sense since it really is just an effusion of liquidity: My God that is one ugly bearish descending triangle! And let us not forget that BTC is the strongest of the cryptos: A Reddit enthusiast captures the moment nicely: Just wanted to say


APRA responds to Deep T.

Remarkable news: The Australian Prudential Regulation Authority (APRA) has sought industry feedback on potential approaches to adjust the capital framework for authorised deposit-taking institutions (ADIs) to make capital ratios more transparent, comparable and flexible. The prospective approaches are outlined in a discussion paper released today for industry consultation. The approaches would not change the amount


Turkey to smash commodity prices

Vai Damien Booey at Credit Suisse: Europe goes “cold Turkey” We have just published an article explaining why we are concerned about contagion risks from Turkey (attached). We argue that Europe is going “cold Turkey” in two respects: 1.    The ECB has warned us about banks’ EUR exposure to Turkey. 2.    The ECB still plans to go ahead with


MB forces immigration-conflicted Willox into retreat

Via the Australian Industry Group: Wage theft inquiry headed into dangerous ground Statement from Australian Industry Group Queensland Head, Shane Rodgers The Queensland Parliament’s inquiry into what it terms “wage theft” risks turning mathematical errors into criminal offences, Australian Industry Group Queensland Head Shane Rodgers said today. The Parliamentary inquiry, which begins public hearings this


Coalition energy scab grab intensifies

Has a political party ever torn itself apart so spectacularly as the Coalition on energy? The AFR says the NEG will pass the party room: The Coalition party room is expected to endorse the National Energy Guarantee on Tuesday despite last ditch efforts by former prime minister Tony Abbott and former Nationals leader Barnaby Joyce to torpedo the policy.


Zombie Turnbull chops company tax cuts, immigration next

The beauty of politics is that it is so predictable. The phrase “always back self-interest” is a pure truth in the political arena. Hence this is no surprise at all, via the AFR: The federal government is no longer committing to take any unlegislated company tax cuts to the next election. Finance Minister Mathias Cormann,


Daily iron ore price update (orgy)

Iron ore prices for August 13, 2018: The stimulus party rolls on, largely confined to futures markets. This is still not inconsistent with seasonal patterns, especially so since the Winter shutdowns bring forward demand. Rebar inventories are still falling at a decent clip even if well above last year. My outlook remains unchanged. Overnight Chinese


China is fantastically reliant upon Australia

We all know how it ends. Eventually China is overwhelmed by its own bad debt. The dreams of empire crumble to empty vestiges, wealth greys with demographics, dynamism sinks into the rentier bog and endless growth into secular stagnation. This is China’s destiny and Australia will suffer for it. But in the meantime we are


Gottiboff: John Howard wrecked the public srvice

Via Gottiboff today: There are no simple answers as to how our corporate and government decision-making ran off the rails. …I reckon the rot actually started in Canberra around 1999, when the Howard government changed the public service policy. Until that time public servants, like executives, were required to give “frank, fearless and honest” advice


RBA slashes inflation forecast

Via Bill Evans at Westpac: The Reserve Bank’s August Statement on Monetary Policy provides few surprises. Of most interest in the Statement is the update in the Bank’s forecasts. In particular, this update includes another six months of forecasts to cover the whole of 2020. The GDP growth rate forecasts through to end 2018 and