Houses and Holes

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.

13

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

23

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

2

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

14

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

43

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

3

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’

2

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

11

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

2

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

3

Bank CDS on the rise

From the AFR this afternoon: Australia New Zealand Banking Group chief executive Mike Smith has signalled that the bank is unlikely to pass on a full rate cut when it reviews its interest rates this Friday, after the price of wholesale funding jumped back up on the back of nervous European markets. “The [Reserve Bank] said

4

Yes, one bank did cut 50bps

Following a stroke of marketing genius, Unicredit WA is set to become the fifth pillar in Australian banking. From Banking Day: bankmecu yesterday cut its standard variable home loan rate by 30 basis points, to 6.64 per cent. So far the only lender to cut its standard variable mortgage rate by 50 basis points is

29

Shale gas hype: Subprime 2.0

The following is by Yves Smith and is cross-posted from Naked Capitalism. It has some important implications for Australia’s own gas boom, not all of them bad.  If my RSS reader is any guide, most of the press about shale gas has focused on two issues. First, shale gas is in considerable supply, cheap to produce, and

19

The trend is Swanny’s friend

From Wayne Swan’s op-ed in today’s AFR: Australia’s economy is the envy of the world. Right now, our unemployment rate of 5.2 per cent is below every major advanced economy in the world bar one. …The IMF has forecast Australia will outperform every major advanced economy this year and next. The budget tonight will forecast

7

May 8th links: The Budget dance

Stuff Reynard the Fox found interesting today. Global macro:  The wrong kind of money. Gavyn Davies United States: More calling housing bottom. Calculated risk March consumer credit spikes on student, car loans. Bloomberg Europe: Hollande does not have long. Ambrose Evans-Pritchard Analyst reactions to Europe. Alphaville Local: Company tax cut to go. AFR As growth

18

Rate cuts don’t equal higher equities

Lower interest rates should mean higher equities, but such neat relativities apply more to a long lost era of relatively discreet national economies. In a global context, where banks heavily depend on international funding and about two fifths of the ownership of the Australian stock market is from foreign institutions, it is far too simplistic. According to Deutsche bank, it

23

The ANZ job ads balls up

From the ANZ job ad series today: The number of job advertisements on the internet and in newspapers fell 3.1% in April after rising 0.7% in March. Advertisements are around 1.7% below the level of April 2011. So, more confirmation of a sudden deterioration in the economy in April But that’s not what matters. Get this: