Houses and Holes

7

The pincer tightens

You will perhaps be unsurprised to hear that the twin measures of Australian vulnerability both deteriorated overnight. On the housing side of the economy, bank CDS prices rose another 10 pips or so and are clearly at levels associated with closed markets for Australian bank bonds, approaching 190bps: Gotta love that Budget surplus. Except, maybe

67

A China hard landing?

Perhaps I’m wrong but today it looks to me like China is heading into a hard landing. There are three stories that you must read to make this case. Happily, all three are available at MacroBusiness. The first is Zarathustra’s description of the monetary pain that is growing in China. It describes the capital outflow

63

BHP’s bitter pill

Cross posted from Henry Thornton: In early March of this year, Henry was sufficiently concerned to spend several hours quizzing the man who manages his equity portfolios. Key assumptions were as follows.  The US economy is recovering but not yet strongly; Europe is mired in recession and could yet trigger a major global setback; China

19

Rate cut flops with consumers

It appears consumers are not easily bought at the moment with the Westpac/Melbourne Institute Consumer Sentiment reading a measly gain of 0.8% following a 50bps rate cut and cash splash Budget. Here are the major components: Nice pop in family finances which reverses April’s dump. Otherwise, nada. Full details below. er20120516BullConsumerSentiment

7

China chart pack

ANZ has a released its monthly China chart pack and for the chart-loving sinophile you can’t go past it. Enjoy! ANZ Greater China Economic Insight Incl Monthly Chartbook – 15 May 2012 (1)

26

Now Treasury confesses

It’s Treasury’s turn today to confess how they got their economic forecasts so wrong over the past eighteen months. Treasury head Martin Parkinson describes the Treasury’s errors at length in the attached speech. In short, they made the same errors as the RBA, over estimated exports, under estimated imports and assumed lot’s of capital gains

8

RBA Minutes alert to risk

Find below the Minutes of the May meeting of the RBA board. Nothing new that I can see beyond concern over Europe and the weakness spreading form the housing market at home. Minutes of the Monetary Policy Meeting of the Reserve Bank Board Sydney – 1 May 2012 Members Present Glenn Stevens (Chairman and Governor), Philip

38

Australia’s pincer is closing again

Regular readers will know my obsession with two prices: bank CDS and iron ore. These may seem unrelated but they are not. Bank CDS prices are the cost to ensure Australian bank bonds and as such are a good guide to the global perception of Australian bank risk. Iron ore makes up roughly a quarter

23

How much does Greece owe?

Cross-posted from the excellent Sober Look: As discussed earlier, Greek exit from the Eurozone may be the only way the nation could gain some control over its monetary system. Given the complete “credit isolation” of Greece’s banks and the private sector from the rest of the Eurozone, the ECB is powerless to improve liquidity conditions in

11

ASX shares daily

By David Llewellyn-Smith in for Chris Becker Remember to read “Trading Week“, published Saturday morning, to put these events and ideas in context. Asian markets were all marginally up today. The local market, the S&P/ASX200, bumped around all day before finishing up 7 points to 4292. Telcos led the charge up almost 1% with financials up almost a

35

The RBA’s confesses

Deputy Governor of the RBA, Phil Lowe, delivered a speech today in which he explained why RBA forecasts for growth, inflation and capacity constraints have been wrong and what that means for monetary policy. The Deputy put the missed forecasts down to three factors. Exports were weaker than expected, especially for coal. Housing construction was

11

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

33

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:

0

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

0

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

0

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

13

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

47

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

15

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

22

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

4

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

7

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

15

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

17

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

7

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.