Houses and Holes

2

Michael Pettis: China slowing

` Exclusively from Michael Pettis newsletter: Quite a few numbers came out this week, but none of them were especially dramatic or likely to change anyone’s mind about anything. The most interesting thing to me is that there are indications that, once again, the economy may be slowing quickly. Every time Beijing gets worried about too

4

Late to the party

As governments far and wide wake up to the danger of fallout in Japan, one is tempted to conclude that the crisis is past its worst. Governments have a habit of coming late to the party. But, in this case, I’m not so sure. I continue to think that markets are underestimating the damage being

15

How Japan will hit local growth

I am surprised at the resilience of Australian equities to the global sell-off. Either the local market is confident that the crisis can be contained (for some reason I can’t fathom, it’s behaving irrationally, or, it has assessed any economic fallout from the disaster to be minimal for Australia and already priced in). The only

9

Japan’s critical moment

An hour ago the IAEA released the following: Temperature of Spent Fuel Pools at Fukushima Daiichi Nuclear Power Plant Spent fuel that has been removed from a nuclear reactor generates intense heat and is typically stored in a water-filled spent fuel pool to cool it and provide protection from its radioactivity. Water in a spent

5

The safe haven meme

There’s more argument today that the Australian dollar is now a global safe haven currency, which, I must admit, agitates my innate cringe gene. Let’s see if there is any evidence. First, the following graph is the last six months of futures movements for traditional safe havens by percentage: The $US is green, Japanese yen is

6

The RBA airbrushes history

Deputy Governor of the RBA, Guy Debelle, yesterday delivered an analysis of Australia’s recent financial history that left a few things out. Let’s take a look: Over much of the past two decades, demand for credit outpaced the growth in deposits, so that banks accessed wholesale funding markets to support growth in lending. This outcome reflected

21

History resumes

I remember the nineties fondly. They were the years before housing bubbles. The years when cricket still had meaning and moustaches were not yet the gimmick of some new age fad. The years when talent still determined who became famous. And the years when the singularity of American might gave the world a moral centre,

7

The RBA’s message on debt

In today’s Minutes of the March 2011 Monetary Policy Meeting, RBA members had something of a coming out: The household and business sectors in Australia did not appear to be under financial stress, though both continued to show more caution in their borrowing behaviour, as evidenced in slower rates of credit growth over the past

3

High risks

The US equity market held up pretty well last night but looks to me to be are underestimating risks all around. Poor Japan seems headed toward mutliple meltdowns. Live coverage is available at the BBC. New Scientist reports that assuming meltdowns are occurring then it is only a question of whether containment of the radioactivity

2

Into the maelstrom

Let me begin my reiterating my sympathies for the Japanese. There are a number of very big cross currents at work for markets today. The first, of course, if the suffering of the Japanese. Across the world, the coverage is remarkably alike, a result perhaps of diminishing foreign correspondent budgets and the secrecy of the

3

Japan fallout

Right now we do not know what is happening in Japan’s nuclear reactors. According to CNN, however, the news is very worrying: A meltdown may be under way at one of Fukushima Daiichi’s nuclear power reactors in northern Japan, an official with Japan’s Nuclear and Industrial Safety Agency told CNN Sunday. “There is a possibility,

1

Links March 10: Relative calm

More pain for PIIGS:  Greece run. Ireland, Portugal, Spain, Italy, Belgium. Obama’s no fly zone is looking like PR. FT Libyan war. FT $US sideways. Grains futures flogged. Metals crushed. Energies, gold flat. Greece reaches do or die. To Vima (h/t Calculated Risk) Ireland up for haircuts. Labour (h/t Calculated Risk) PIMCO dumps all Treasuries. Zero Hedge No OPEC capacity increase. Reuters

2

Shocked consumers

In my previous post on Phil Lowe’s speech, I noted that the RBA is hawkish and clearly still concerned that consumers will binge as mining boom income passes through the economy. The killer quote was: Not unexpectedly, this decline in the relative price of manufactured goods has caught the attention of the household sector. In

2

The RBA shows an iron hand

Assistant Governor Philip Lowe has delivered a fantastic speech for those wishing to understand the current transition of the Australian economy and how the RBA thinks about it. It’s a very long speech and I suggest you read it in full. But here, at least, are a few highlights. First on inflation and purchasing power

0

Revenge of the PIIGS

Overnight, markets received a boost from OPEC member’s declaration that they’ll fill any existing or potential supply gap. Later, there was some doubt about the veracity of the claim. The energy complex nonetheless retreated a little, as did gold, and equities jumped. Metals were sold off early then bounced to be even. However, other markets remain

8

Have the banks’ rate increases peaked?

From Banking Day today: Westpac’s chief executive, Gail Kelly, said yesterday that she intends to make out-of-cycle interest rate cuts when lower funding costs permit, which she hopes will be in 2013 or 2014. Speaking on the ABC’s 7.30 program, Kelly said she expected the bank’s average cost of funds to plateau towards the end of

6

Sell signal

I don’t know if you trade, but if you do, there are clear reasons to get cautious. There is a gathering storm over the global economy and market patterns are now making it plain that the risk of a lightening strike is outweighing the benefits of remaining outdoors. Regular readers will know that I have

5

Carr’s wrong turn

All right you lot, no more reference to myself in the third person. Today Adam Carr takes on the RBA (h/t The Lorax) in arguing that: So how is it that the household savings ratio has risen so sharply then? Surely consumption must have fallen to facilitate this? Okay, that sounds reasonable and I’m hearing

16

Ken Henry’s lucky country

On Friday evening, Treasury boss Ken Henry delivered his final public address before stepping down in March. At the University of Tasmania Giblin Lecture, Henry delivered his magnum opus, a broad review of Australian economic history spanning three centuries (full transcript below, h/t The Lorax). The document is a must read in full, but the

7

Labor’s destructive secrecy

The Age today published new Wikileak revelations about the Foreign Investment Review Board (FIRB) and it’s policy vis-a-vis China: Canberra’s foreign investment regulator has privately admitted that it is seeking to limit investment from China in response to political concern about the control of Australia’s strategic resources. Contrary to the federal government’s claims that it

4

The next domino

Predicting economic outcomes is hard. Predicting economic outcomes in conjunction with political unrest is impossible. Especially if that unrest is at the centre of global energy production. At least, that is the conclusion one should draw from last night’s US selloff. Rumours of Saudi unrest are flying, without much substantiation. Ongoing protests are planned in

6

Is gold the new global reserve?

Someone else has finally noticed that a sea change has transpired in forex markets during the oil crisis. As this blogger noted last week, the $US has not enjoyed its traditional safe haven role on the flight to safety trade. Sovereign Man picks up the theme today to argue that this is the end for

11

Housing ponzi stumbles on

The RBA’s lending January credit aggregates were out yesterday and the reading is fascinating. It is no surprise to regular readers that the rate of credit growth in Australia has slowed, a phenomenon it calls disleveraging. January’s credit was a continuation of the several months before it. Owner-occupied mortgages grew month on month at a seasonally adjusted

11

Moody’s uninformed market

After the announcement of the Moody’s review overnight, it’s something of a spectacle watching the banks swing from the line that they need to raise interest rates because of rising wholesale borrowing costs to telling us not to worry about rising wholesale borrowing costs. From the Wall Street Journal: In response to Moody’s, Commonwealth Bank’s

2

Kloppers, Marius Kloppers…

As this blogger keeps saying, not all markets are created equal. In strategic commodity markets, where governments are big players, the dynamics are not as simple as the balance of supply and demand determining equilibrium. In strategic commodities, when prices go up, demand does not fall. Rather, it increases as governments panic about security of