Houses and Holes


Don’t bet on a European resolution

By David Llewellyn-Smith Over the past few weeks, as equity markets around the world have awoken to the renewed dangers of Greece by falling 4% to 5%, there’s been a growing chorus among the usual bullish suspects to buy the dip. Over the weekend, this line of thinking received some heavy duty support in the


Weekend links

Stuff Reynard the Fox found interesting today. Global macro:  Moody’s to go after bank model arbitrage. Naked Capitalism Is Mega Bank worried? S&P warns on $46 trillion refinancing challenge. FT Sovereign currency issuers are always solvent. NEP Doesn’t mean you have no problems, however… In praise of dumb rules for banks. Felix Salmon Too right United States:


China links

Courtesy of Sinocism: We hear a lot about Weibo and censorship. Baidu, which failed in its own attempt to run a microblogging service, has in some ways benefited from the rise of Sina and Tencent Weibo, as so much of the regulatory focus, pressure and costs have shifted from Web 1.0 to Web 2.0, and specifically


Chinese inflation a very Western 3.4%

No surprises today with Chinese CPI printing on the button of consensus at 3.4%: The PPI, on the other hand, undershot consensus by a couple of points at -0.7%: A good result for the CPI then and some evidence of ongoing weakness in the industrial economy in the PPI although at least the sharp price


Bulk weakness spreads

Australia’s balance of trade is getting beaten up again. Two of out three bulk exports are still sliding. Iron ore 12 month swaps are accelerating downwards: The spot price is following: China steel prices have also rolled over. Rebar: And hot rolled: Thermal coal fell too: Coking coal appears to be stable. The aggregate value


It’s the student loans, stupid

Cross posted from the excellent Sober Look: The mainstream media has once again completely missed the reasons behind the US consumer credit growth. CNN/Fortune: – U.S. consumers had long been known for their love of credit until the financial crisis changed everything. Credit cards and loans were suddenly out of favor as credit markets tightened


When the blood is up

by David Llewellyn-Smith Ten years of running The Diplomat magazine, and following many civil and military conflicts in detail, taught me one very important lesson about political economy. Times of crisis and conflict always begin innocently enough. As tumult develops, leaders of various stripe represent the crisis as “under control”. But if whatever it is


May 11th links: Greeks with gifts

Stuff Reynard the Fox found interesting today. Global macro:  BIS and the OTC market. Alphaville United States: DOL goes sideways. Calculated Risk US trade deficit increases. Calculated Risk Bloomie Consumer Comfort falls again. Bloomie It’s student loans, stupid. Sober Look Europe: Poll shows anti-bailout coalition surging. Zero Hedge Syriza letter to Europe. Zero Hedge Greek bluff


Economists & market throw salt over jobs report

The bank economists are unanimous that today’s jobs print is misleading. My own view is that the employment market is clearly in flux between sectors, as well as full and part time positions based around Australia’s informal kurzarbeit labour market. Having been burned for several months earlier this year I had already brought in my


China trade underwhelms

Chinese trade balance figures for April just came out and surprised to say the least, with expectations of a $9.9 billion positive balance blitzed by coming in at $18.42 billion: The year on year growth figures were not impressive. Whilst export growth remained positive, it has decelerated markedly, with y-o-y growth of only 4.9% (expected


ASIC insolvencies

Cross posted from Mark the Graph: Each month ASIC releases data on the number of companies entering into a form of external administration for the first time. The latest March 2012 data (link) continues the high count for 2012 compared with earlier years. I have applied a home brew seasonal adjustment, which demonstrates a clear


S&P confirms Australia has no private debt

Apologies but missed this yesterday. The Standard and Poors reply to the Budget was exactly as forecast here at MB: Bulletin: Economic And Political Risks Could Undermine Australia Budget’s Fiscal Consolidation Strategy MELBOURNE (Standard & Poor’s) May 9, 2012–Standard & Poor’s Ratings Services said that the Labor government’s proposed 2013 budget will have no immediate


Gross: QE3 cometh

From Bloomberg: Pacific Investment Management Co.’s Bill Gross and Jan Hatzius at Goldman Sachs Group Inc. (GS) say investors should prepare for additional bond purchases by the Federal Reserveto combat a slowing U.S. economy. A decision to buy more debt is “getting closer,” Gross, who runs Pimco’s Total Return Fund, the world’s largest mutual fund, wrote on Twitter yesterday. Hatzius, the chief


Nice plant

There’s not much new on the Budget today, with the haters gonna hate and the populists relaxed and comfortable but I did notice this video from the doyens of political commentary at The Australian. I liked their coverage yesterday but this habit of using hidden cameras in dirty hotel rooms just has to stop.


May 10th links: Greeced

Stuff Reynard the Fox found interesting today. Global macro:  Time for helicopter money. Willem Buiter United States: The Fed owns the stock market. Jim Grant Europe: What Hollande must tell Germany. Martin Wolf Spain leaves Italy spreads behind. Sober Look Tipping point in EU crisis talk. Alphaville Greek moratoria. Alphaville Greece again. Tim Duy Asia: Extrapolating


Where does all of that iron ore go?

ANZ has produced a useful note on the outlook for iron ore. Regular readers will recognise plenty of conventional wisdom at work here, with the basic argument being that ongoing modest growth in Chinese demand and the cost curve for supply will support prices in the $120 to $160 range. That’s fair enough if more


China links

Courtesy of Sinocism: China has expelledMelissa Chan, an excellent reporter who was the Beijing-based correspondent for Al Jazeera English. Instead of adding to the mass of commentary I will just quote from the New Yorker’s Evan Osnos: China is moving backwards. In fifteen years of studying and writing about this place, I’ve rarely had reason to reach


Are bulk commodities in a bear market?

If you’ve read MacroBusiness Morning, you’ll know that iron ore prices fell last night. In the past couple of weeks, the ore price has retraced modestly some 4.4% to $142.70. I’ve asked The Prince to give me a technical take on the bulks and the news is not all that great. First iron ore: There


Budget hits foreign property investors

In a move that must go down as rather bold for the nation and downright upsetting for Melbourne,  last night’s Budget included the following, from PWC: Removal of CGT discount for non-residents The Government will remove the 50 per cent capital gains tax (CGT) discount for non-residents on capital gains accrued after 7:30pm (AEST) 8


Fitch endorses (warns) on Budget

Fitch just released its verdict: The Australian government’s fiscal consolidation plans are positive, says Fitch Ratings. Aimed at balancing the FY2012-13 budget, they should bolster the country’s fiscal position and reinforce its future flexibility. Balancing the Commonwealth budget is part of the federal government’s medium-term fiscal consolidation plan, which is already factored into our ‘AAA’


Moody’s endorses (and warns) Budget

Moody’s has endorsed the Federal Budget but has also uttered something of a quiet warning against the Budget’s forecast current deficits, as well as the levels of private borrowing that they will represent. There is reassurance and disquiet in this note. New York, May 08, 2012 — Moody’s Investors Service says that, by demonstrating continued commitment


May 9th links: Golden austerity

Stuff Reynard the Fox found interesting today. Global macro:  Time to buy commodities? Zero Hedge Th subpriming of commodities. Alphaville United States: House prices rise in March. Calculated Risk Europe: Credit risk surges. Zero Hedge Spain to spend billions on rescue. FT Strong numbers but German risks remain. Sober Look Budgetmania Coverage is fascinating. Reflecting


Roy Morgan unemployment unchanged

Roy Morgan unemployment for April was unchanged: Unemployment was 9.3% (unchanged since March 2012) — an estimated 1,149,000 Australians were unemployed and looking for work. A further 8.2% (up 0.3%) of the workforce* were working part-time looking for more work (underemployed) — 1,010,000 Australians. In total 17.5% (up 0.3%) of the workforce, or 2.16 million