Houses and Holes

1

China PMIs tank into recession

China is slowing fast. It’s some combination of lockdowns and structural reform. The manufacturing PMI just expanded: But new orders contracted at home and abroad: The services PMI cratered on lockdowns: Again, new orders were hammered: Construction was still booming at 60 but new orders were flat for a second month. The steel PMI is

2

Nomura: Emerging markets are a money pit

Another terrific note from Nomura today sticking its thumb in the eye of the Goldman, BofA and Jeremy Grantham EM bulls. 100% right: We disagree with those who believe that EM is in a more resilient position now than it was on the eve of the 2013 taper tantrum. EM has developed new sources of

36

Mirabile dictu: US ends war in Afghanistan

It’s over thankfully: The U.S. officially ended its military presence in Afghanistan on Tuesday with the final flight out of Kabul, concluding two decades of American involvement touched off by the Sept. 11 terrorist attacks. Bravo. Only fifteen years too late. The US will be immeasurably stronger for the withdrawal in every way. It will

8

China intensifies property sector crush

I am starting to admire this. The rebooted Chinese determination to force structural reform onto its economy is precisely the same as that needed in the “capitalist west”. It’s all about ending property capital misallocation and restoring productivity growth as the prime income driver. And it is NOT over. First up, the grand political narrative

112

Mad Gladys and Psycho Scott must resign

COVID apartheid is tearing Australia apart. Some are depressed: Australians are more worried about job losses and their mental health than they are about a large breakout of Covid-19 cases and deaths, according to a landmark survey that reveals sharply changing attitudes to lockdowns and the pandemic. The poll also finds strong support for keeping

14

Australian dollar falls despite FAAMG time!

Forex markets calmed down last night as DXY firmed and EUR plus AUD fell: The Australian dollar eased on all crosses: Most commodities fell: Except for the copper bubble: Big miners eked out another small gain: As did EMs and junk: As yields fell: And FAAMGS took flgith: Westpac has the wrap: Event Wrap US pending

1

US fiscal stimulus marches forward

Morgan Stanley with the note: As Congress reconvenes, we expect progress to our base case of more fiscal expansion and identify key risks to our view. Recent news on spending plans offer hints on bill structure. We adjust our deficit growth estimates to~$1tr over five years and~$1.5tr over 10, but as low ramp in year

5

Wall Street turns bearish

This week’s Wall Street strategists wrap is, for the first time this year, wall-to-wall bearish.  BofA is now in the bunker: Pandemic: COVID-19 pandemic by the numbers…5.1 billion vaccinations, 214 million cases, 4.5 million deaths (Chart 3); the policy reaction…$32 trillion of monetary and fiscal stimulus; the Wall St reaction…global stock market capitalization up $57 trillion

1

Australian dollar goes nuts on dovish Fed

Forex markets reacted in the usual fashion to a dovish speech from Jay Powell Friday night. DXY was flattened and EUR bounced: The Australian dollar went nuts: All commodities, miners and EMs took off: The dash for trash ripped: As the curve flattened again: Growth stocks launched: Westpac has the wrap: Event Wrap Fed Chair

122

Australia’s political psychos die of Delta

The Saturday Paper has finally produced a piece of journalism worthy of the name with leaked material from the National Cabinet that is damning of the preparations made by Mad Gladys and Psycho Scott for reopening: On Friday, Scott Morrison’s national cabinet met with state and territory leaders to discuss a new paper that details

5

Stay short iron ore

Stay short iron ore. Why? Nomura explains: Executive summary Beijing’s recent regulatory blitz on several sectors, including off-campus tutoring and internet platforms, has garnered investor attention. However, markets may have become so focused on the regulatory storm that they ignore the elephant in the room: Beijing’scurbs on the property sector, which makes up one-quarter of

67

Battle of the COVID models

Good luck figuring it out because it’s become polarised. At The Australian: Reopening Australia with thousands of Covid-19 cases active in the community will not lead to more deaths over six months than waiting for virus numbers to be contained at low numbers, updated modelling by the Doherty Institute has found. The Australian can reveal

0

Australian dollar sags as Kaplan demands taper

Forex markets reversed course with Fed Governor Robert Kaplan last night. He wants taper. DXY rose and EUR fell: The Australian dollar fell: The usual followed with commodities, miners and EMs sagging: Junk is still OK: But the curve resumed flattening: And stocks rolled over: Westpac has the data: Event Wrap US Q2 GDP’s second

22

China’s old economy is headed for a hard landing

Even by China’s capital misallocation standards, this one is a doozy. In April, Evergrande’s EV division was worth $120bn. Today it is worth $10bn: Everything Evergrande is being annihilated as it moves to sell (that is, liquidate) assets to meet the Three Red Lines policy. This is going to weigh on property starts as a

81

Matt Barrie: Pollies lying about Doherty model “garbage”

Via Freelanceer CEO, Matt Barrie: The “Doherty Report” is being sold as an economic & health model “created by experts” to move Australia from suppression to opening up and “living with Covid”. On the 19th of August, Premier Gladys Berejiklian said in the NSW daily update “as the Doherty Report says once you get to 80% double doses and you

0

Schvets: Emerging markets stuffed

Viktor Schvets of Macquarie with another superb note. I agree with this 100%: EMs are likely to continue delivering lower returns with higher vols Next month marks the 11th anniversary of the highest relative peak of EM vsDM equityperformance. Powered by the post-GFC recoveryand China stimuli, EMs were resting at double the levels of’04. It

5

Gas cartel farce complete with coal power subsidies

It’s wondrous what can pass as rational if you have no memory. Decontextualised information can be made to sound…sound…even though it is completely bonkers. Take this from the poisonous Australian: Special payments will be needed to keep ageing coal-fired and gas power stations in business to avoid future spikes in electricity prices, under a national

108

Sydney heads for overwhelmed hospitals

Let’s hope that the lockdown curtails cases soon or Sydneysiders are about to get a dose of reality unlike anything seen in Australia for a century: Two major hospitals in western Sydney have been turning coronavirus patients away due to bed shortages. Paramedics say the city’s healthcare system is buckling under the Delta outbreak, with

8

China’s “Volker moment” to destroy iron ore

Why is China suddenly seeking to share prosperity? This chart has something to do with it: If you want to rebalance your economy from investment-led crony capitalism and an increasingly risky export dependency to consumption then you’re going to need strong households, not the above. The way to do it is to shift more of

6

Australian dollar roars on easy Fed

Forex markets continue to forecast a free and easy Fed at Jackson Hole as DXY falls and EUR rises: The Australian dollar is roaring off the bottom: Oil and gold eased back: Base metals have repaired the recent damage: Not so big miners: Nor EM stocks: Junk is fine, though: The curve steepened: But growth

6

Where is green steel at?

TSLomberd with the note: We buy a basket of five ‘green steel’ stocks: ArcelorMittal, ThyssenKrupp, SSAB, Fortescueand Voestalpine (MT NA, TKA GR, SSABA SS, FMG AU, VOE AV), equally weighted at 20% each relative to selling the SPDR S&P Metals and Mining ETF. While the green steel movement is still nascent today–saddled with high initial

4

Is Fed taper coming or not?

Is Fed taper coming or not? Goldman says it is. Or does it? The Fed’s Jackson Hole Economic Policy Symposium will take place this Friday. The theme of the conference is “Macroeconomic Policy in an Uneven Economy.” Chair Powell will give a speech on the economic outlook at 10am EST on Friday that will be

29

Doherty modelling does not end lockdowns

An excellent poddy from Dr Norman Swan and Professor Allan Saul: Allan has worked on Infectious diseases since 1979. Before retiring in January 2020 and returning to Australia, he was the Institute Director of the GSK Vaccines Institute for Global Health since its inception in 2007 working on vaccines for Typhi, Paratyphi A, Shigella, invasive

8

Evergrande doom loop accelerates

Readers will know that China’s Evergrande group has become a central part of the story of the current economic slowdown in China. Evergrande has been reeling all year as it struggles to meet the terms of China’s Three Red Lines policy aimed at deleveraging property developers to end, once and for all, the misallocation of