Houses and Holes

10

Why are equities so bid?

Courtesy of Global Macro Monitor. U.S. retail sales fall for the three consecutive months.  Chairman Bernanke disappoints the easy money crowd during his Congressional testimony.   Weekly jobless claimscome in much higher than expected. Companies miss big on the top line yet their stocks move higher.   Sovereign yield curves in the  European periphery moving toward inversion.   Equities keep

1

Westpac: Q2 CPI to bounce

Westpac has an interesting note out that is forecasting a big bounce in Q2 CPI to 0.7% on rebounding food prices. Still not overly high in the scheme of things but a decent rebound. My own view is we will see weaker but I don’t think the CPI is all that relevant this quarter anyway.

0

NAB China monthly

Find below NAB’s China Monthly by James Glenn. There’s not a lot that’s new for regular readers but it is useful wrap of the data flow. It is also striking just how differently mainstream Western economists see China versus a contrarian like Michael Pettis. For Glenn (and Phat Dragon) it’s all about monetary easing leading

21

The labour shift is on in China

Courtesy of Also Sprach Analyst. By now I’m sure you’re familiar with stories about weakening external demand and rising costs in China. This places enormous pressure on manufacturers. Yesterday, Addidas announced its intention to close its only fully owned factory in Suzhou.  According to Yicai, more and more manufacturing companies are moving their production lines away

22

Central banks piling into Australian dollar

From the WSJ: Germany’s Bundesbank is expected to begin adding Australian dollar assets such as government bonds to its foreign reserve holdings before the end of September, bankers say. The decision, which follows a two-and-a-half year review by the Bundesbank, adds to a wave of central bank demand for Australian-dollar exposures that has swelled over

7

Retail gets some tax-payer funded propaganda

It always pays to be an interest in Australia. From the The Oz: The online shopping habits of Australians will be tracked for the first time by the Australian Bureau of Statistics. The Gillard government today announced $2.1 million over four years for the ABS to get a better picture of online spending habits and

7

NAB June QTR Business Survey collides with RBA

Today’s June quarter NAB survey shows just how ridiculous the RBA Minutes were earlier this week. Here are the vitals: Confidence down, conditions down, trading down, profitability down, employment down, capacity utilisation down. Labour prices, exports, forward orders were flat at poor levels. Capex was up a smidge. Business conditions are falling in every sector

7

Fairfax serves a whopper

The AFR has just announced that Gina Reinhart allie, Jack Cowin, is to be appointed to the Fairfax board. However, the Chairman, Roger Corbett: …warned that there was no connection between Mr Cowin’s appointment and Mrs Rinehart’s campaign for a seat on the Fairfax board. …It is understood Mr Cowin has agreed to Fairfax Media’s governance

0

Macro Investor: Harvesting Graincorp

Notwithstanding its strong run to date, GNC still stands to gain in the soft-commodity bull market. Better yields locally come as conditions worsen overseas, particularly in the US and Russia. Demand for grains globally remains high, and especially from China where winter crop was poor. Graincorp Ltd (GNC) provides grain industry related services, through bulk/grain

135

Rudd is coming

The headline story today at the AFR is a neat investigative report into union power brokers shifting towards the return of Kevin Rudd: The top leaders of the trade union movement discussed the prospect of Kevin Rudd returning to the leadership of the Labor Party as they prepared a battle plan against Coalition leader Tony Abbott.

6

Pettis: China headed for hard landing

Exclusively from Michael Pettis’ newsletter: Inflation in China seems to have been licked. This is just what one would have expected in a financially repressed system, in which inflation creates its own correction by increasing the financial repression tax on household savers (thus reducing consumption) and lowering the cost of capital for manufacturing borrowers. Of

6

Links July 19

United States: QE has limits. Zero Hedge Manufacturing onshoring. WSJ Beige Book beige. Calculated Risk Housing starts up. Calculated Risk Asia: Wen sees “severe” job prob. Bloomberg Chia’s transmission problem. Alphaville Sinocism’s excellent set of China Links will be out later today… Local: RBA pleads guilty. The Age Rio stuffed it in China. The Oz

11

Czechs buy Australian dollars

In more poor news, the AFR reports that: The Czech Republic central bank is buying Australian dollars for inclusion in its foreign exchange reserves. …According to one trader, the Czech National Bank has been buying Australian dollars in the 2012 calendar year of amounts that add up to between $US500 million and $US1 billion. Let’s

85

Revenge of the Nanny state

Two stories this afternoon at the AFR shows how happily populist our politics is, not to mention how well Nanny State politics goes down with the battlers. Both are stories about Coalition intervention into government payments.  The first is about a plan, or at least an intention, by the Coalition to police carbon tax rebates

2

China’s house prices stabilise in June

Reuters reports that: New home prices fall in 21 cities in June versus 40 in May * Market expects home price to rise in H2 -Reuters poll BEIJING, July 18 (Reuters) – China home prices were flat in June versus May, calculations based on official data showed on Wednesday, breaking eight straight months of decline in

13

Market yawns at RBA backflip

The Australian Dollar may have popped on the back of the RBA’s latest rhetorical flip-flop (in yesterday’s Minutes) but interest rate markets have given it an almighty yawn. There was a move in the implied probability for a move at the next meeting: That’s fair enough but is no real surprise, as I wrote last

2

Leading Index rises from canvas

The Westpac/Melbourne Institute Leading Index for May is out and accelerated from its recent lows: The annualised growth rate of the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 1.6% in May 2012, below its long term trend of 2.6%. The annualised growth rate of the Coincident

8

Zombie Bernanke

I’m not sure why stocks drew comfort from Ben Bernanke overnight. I’ve attached his testimony to the bottom of this post and there is nothing in it to suggest an imminent shift to QE3. Although Bernanke expressed a clear intention to deliver more stimulus if jobs growth slows, there is not much yet that can

2

The commodity rally is all about grains

Courtesy of Sober Look. Here is a good summary of commodity returns as of the end of last week. Overall the CRB commodities index is down 3.1% year-to-date. The index was down as much as 12.5% back in June but recovered as the North American drought pushed up agricultural commodity prices (10.8% rally in less than a

17

Links: Wednesday July 18

Global Macro Bad things are going to happen. Hugh Hendry at the FT United States: US inflation flat. Calculated Risk Goldman says Bernanke “non-committal” Zero Hedge HSBC compliant dude resigns in front of Senate. FT Europe: Germans in breach of Maastricht 8 out of 10 years. Credit Writedowns Asia: Should you pay attention to Chinese

19

Iron ore is breaking down

Find above the latest spread of key iron ore prices. Chinese steel prices have rolled over and are falling, both billet (green) and rebar (pink). 12m iron ore futures have busted support and are threatening new lows vis-a-vis last year’s plunge. Iron ore spot is sitting right on the support that has held since last

22

Hawkish RBA backflips

Whoa! The RBA Minutes are out it’s another about turn. These Minutes are a reaffirmation of last year’s hawkish RBA. The mining boom is back. The consumer is back. Everything its back! Except rate cuts, which are history. The dollar went to the moon: What do I think? This is more lurching by the RBA.

7

APRA holds the line on securitisation

From Banking Day: The securitisation industry has lost its campaign to persuade the Australian Prudential Regulation Authority to take a hands-off approach to the capital treatment of subordinated securitisation tranches on the balance sheets of approved deposit-taking institutions. Last November, APRA issued a discussion paper proposing an amendment to its prudential standard for securitisation (APS

2

Insolvencies peak?

Courtesy of Mark the Graph. ASIC has released the data for May on companies entering into external administration. The headline series is pretty noisy. So I apply some herbs and seasonal adjustment to look at the underlying trends. The good news is that with the exception of Victoria and Queensland the number of new insovencies per

8

Macro Investor Week 2

For those that don’t know or are yet to investigate, last week MB launched its new paid investment advice newsletter, Macro Investor. The third edition will be published 8.30 Monday morning. In the mean time, find below the contents page of the past week’s edition for you to consider a 21 day free trial subscription. Remember,