Houses and Holes

30

Terms of trade shock brewing?

Last week I gave extensive coverage to a range of terms of trade shock stress tests conducted by the IMF on Australia. Sadly I must now discuss the same phenomenon as a realistic prospect. Over the last few days, there’s a bit coverage about how various iron ore barons and miners are “confident” of future

7

October 18 links: Oreful

$US, Treasuries Down: Aussie, euro, metals, energy, grains Flat: CRB Hammered: ore Contagion: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year Germany

16

More on the car-house connection

I’ve dug into some more data to see what the car sales-housing connection might be able to tell us about future demand for credit and the results are striking. First is ex-refinancing monthly housing finance charted against car sales and, as you can see, there’s some kind of lead/lag correlation. The largest divergence over recent

13

Lending finance solid

ABS Lending Finance for August is out and shows growth across the board: AUGUST KEY FIGURES Jul 2011 Aug 2011 Jul 2011 to Aug 2011 $m $m % change TREND ESTIMATES Housing finance for owner occupation(a) 14 361 14 554 1.3 Personal finance 7 081 7 145 0.9 Commercial finance 32 298 32 948 2.0

2

Revisiting four dark clouds

In July this year I wrote a post called Four dark clouds. In it I described the challenges confronting the the globe’s four largest economies: Japan is far worse than markets or bullhawk economists predicted earlier this year. According to the NAB World In Two Pages report: In Japan, the tsunami and power shortages associated

2

Links October 17: Applying the blowtorch

G20 to publish SIFI 50. Bloomberg No oil speculation. Mark Thoma Cough, cough… OWS success. Binghampton (h/t Naked Capitalism) G20 tells Europe to get on with it. FT Rehn says EU close on bank recap. Bloomberg Dense or lying? Wolfgang Munchau US says no to IMF expansion. Reuters Bill Gross mea culpa. Zero Hedge Time to give up

14

Weekend links

Down: $US, Treasuries Up: Aussie, euro, metals, energy, grains Flat: CRB Down: ore Contagion: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year Germany

10

Westpac on structural unemployment

Find below a new study by Westpac into the employment stresses across different states and industries. It includes the first ruminations on structural unemployment that I’ve seen in Australia. The reason is something that Runplestatskin has been discussing for some time: labour is not fungible. Westpac continues to lead the way in institutional research. er20111014BullJobsIndustryState

11

Two speed states

I don’t use the rhetoric of the “two-speed economy” generally because it’s basically an Orwellian spin on something much older and well understood: Dutch disease. However, NAB’s monthly State by State report out this morning has a terrific breakdown of the the growth matrices in each state and makes fascinating reading. For instance, exports: And

8

Fitch installs its own Glass-Steagall

There have been times in the last couple of years when the GFC-chastened ratings agencies appeared to be racing one another back to some position of credibility faster than the world could bear. Well, that race is surely over now, with Fitch announcing after US trading the mother of all downgrade watches on, well, everybody.

5

China wrestles its slowdown

So, after some concerns and worries, the Chinese government has responded with new measures to try to solve the growing problem of tight financing for small and medium sized businesses. I would describe these measures rather as the” how to stop crazy bosses from running away because they have borrowed from loan sharks” policies. Following a meeting

3

October 14 links: Sell the fact

Up: $US, Treasuries Down: Aussie, euro, metals, CRB, energy Flat: grains Down: ore Contagion: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year Germany

9

More on unemployment

So, unemployment fell from 5.2862044% to 5.2477873%. Following are the charts. First, the larger picture. As you can see, for the past year job creation has been very patchy. If anything, it resembles the GFC period: Below is the split of part and full time jobs. There has been a lot of churning between the two

15

The RBA’s version of risk

Find below Luci Ellis, Head of the the RBA’s Financial Stability Department, speech from this morning on assessing financial risk. To be honest, I found the speech kind of worrying in terms of how risk is framed. How it’s measured. And what triggers are considered valid for action. Deep T. is going to assess the

42

Unemployment down a tad

ABS Labour Force data is out and shows .1% fall in unemployment to 5.2% in September. No doubt this will excite the bullish pundits, who, having spent the better part of a month trashing the data, will suddenly fall in love with it again. The key points are below: SEPTEMBER KEY POINTS TREND ESTIMATES (MONTHLY

39

What’s freaked Swan out?

As I posted last night, the Treasurer, Wayne Swan, released a rather dour communique to Parliament indicating that Australia was ready to take on GFC 2.0. The timing of the missive seemed fairly random, though it did obviously seek to bring pressure to bear upon Europe prior to the G20, such as it is. I

1

Credit Suisse thumps China’s banks

It’s still at the periphery, but more investment banks are flipping to China bears. Interestingly, this Credit Suisse report (h/t Zero Hedge) projections a huge jump in Chinese banks non-performing loans based upon precisely the two stress test outcomes that I described via the IMF earlier this week, a combined realty and exporters crunch. It

16

October 13 links: Romp

Squashed: $US, Treasuries Up: Aussie, euro, metals, CRB Flat: grains, energy Down: ore Contagion: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year Germany

22

A black Swan

In a Ministerial Statement released this evening, Treasurer Wayne Swan gave up on the endless China boom rhetoric and launched a new rather bearish narrative. The release appears to have three aims. First, it’s fair bet we’re seeing the ground shifted for the news that next year’s surplus is evaporating as we speak. Second, the

6

La Nina is back

From the Bureau of Meteorology today comes this: Pacific reaches La Niña thresholds Issued on Wednesday 12 October Conditions in the tropical Pacific Ocean are consistent with the early stages of a late-forming La Niña event. If the current cooling persists, as is expected, then 2011-12 will be recorded as the second La Niña in

35

Refinancing boom

ABS Housing Finance Commitments is out for August and there’s a big move on. Here’s the state by state chart for total value of new loans: As we’ve noted many times, housing finance moves in lock step with price rises so surely prices are about to rocket in Sydney and Melbourne! Well…no. And here’s why:

4

Consumer confidence bounce stalls

So, the bounce in consumer confidence has stalled, increasing by just 0.4% in October from 96.9 in September to 97.2. There is a interesting picture building around consumption at the moment. On the back of flattening expectations for rate hikes, we’ve seen a little pop in retail sales, pent up demand if you will. I’ve also

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Under attack

Dear Reader, MB comments are under attack from some unpleasant person or persons replicating user names and posting insulting comments willy nilly. No premium content details have been hacked. Of course we take this as a signal that we are doing an excellent job and upsetting some interest or another. For the time being, I’ve

7

The historic parallels for trade war

In his masterpiece, The World in Depression, Charles A. Kindleberger concludes the major cause of the Great Depression was a paralysis of leadership caused by the decline of the UK and the immaturity of the US. Neither was able to provide leadership and put themselves forward as the economy of last resort. Kindelberger argues that during

22

Chanos on China (again)

Have you ever wondered why it seems that Jim Chanos always ends up shorting Australia? He’s at it again, persisting in his big short on the ‘Chinese real estate bust’. He returns to interpret Monday’s Chinese purchase of it’s banks as a glowing endorsement of these shorts. It’s always helpful to remember that Mr Chanos

7

October 12 links: Ore breaks

Up: $US, Treasuries, euro, grains, metals, energy, CRB Down: Aussie,  ore Contagion: Greece 2 Year 5 Year 10 Year Portugal 2 Year 5 Year 10 Year Ireland 2 Year 5 Year 10 Year Spain 2 Year 5 Year 10 Year Italy 2 Year 5 Year 10 Year Belgium 2 Year 5 Year 10 Year France 2 Year 5 Year 10 Year Germany 2 Year

23

NAB survey indicates no rate cut

The NAB survey has put in a solid performance for September. Business confidence remained subdued but conditions and trading jumped. So too did the employment index. Forward orders was still in deep negative territory and exports are subdued. Given the backdrop of global volatility, I see this as a very good result. As does NAB: