David Llewellyn-Smith


Links August 29

United States: Case Shiller rises. Calculated Risk Jackson Hole is going to disappoint. Zero Hedge Consumer confidence falls. The Oz Europe: Draghi skips Jackson Hole. CNBC Germany and France make friends. FT Asia: Japan downgrades self. Reuters China’s bad debt nightmare. Alphaville For more China-focussed links, check out the post by Sinocism later today. Australia:


Interest rate markets rallying again

While the equity markets sail blithely on, there are signs that the crunch under way in Australia’s terms of trade is beginning to strain interest rate markets. The Credit Suisse rate futures market for the next twelve months has added more than one cut in the past week or so: And rate path probabilities from


$12 billion Budget black hole

From the AFR comes some old news but worth repeating: Treasury will have to look for up to $12 billion in savings this financial year if the Gillard government is to deliver its promise of returning the federal budget to surplus in 2012-13, an analysis by Macquarie Bank has found. Treasurer Wayne Swan forecast a budget


New home sales head back down

HIA New Home Sales for July are out and, contrary to recent RBA hopium, the new year started with a whimper: New home sales posted a very disappointing result in July 2012, losing nearly all the modest ground made in late 2011/12, said the Housing Industry Association, the voice of Australia’s residential building industry. The HIA New


Macro Investor: Shorting the battler

As the Australian stock market approaches former highs on a very fast rebound, complacency from this optimism is clouding the medium and long-term economic reality. This is reflected in falling sovereign credit default swap (CDS) prices, now at very cheap levels and the higher Australian dollar against most major currency pairs: Add in concerns about


All quiet on the iron ore price front

All quiet on the ore front yesterday with little movement anywhere (though swaps haven’t updated yet): As some buying support appears to be coming back into the market, I thought it worth revisiting a chart from Morgan Stanley from last year’s falls: Take a close look at the very sensitive relationship between the iron ore


Why you’ll get no QE3

As Jackson Hole approaches so too does disappointment on QE3. It’s one simple word: oil. Here is the history: Here are the charts for US gas and diesel prices: The more things change the more they stay the same. Why give more destabilising QE when the “QE put” is inflating everything already. Or, from the


Bears under the beds!

It’s all very entertaining. Last week it was Chris Joye at the AFR condemning some bearish menace looming over housing. Sadly too, the Governor of the Reserve Bank of Australia has recently taken to bear bashing, reckoning that Australians are more worried about the economy than the Greeks. Yesterday in his weekly drivel, Wayne Swan


Coking coal still sliding

From the ANZ: Newcastle FOB physical thermal coal prices were steady last week at USD89.05/t. Although market activity remained subdued, the end of the Muslim holiday of Eid al-Fitr in Indonesia should see more movement this week. Having hit a low of a low of USD81-82/t in late July, thermal coal prices have held up well. The same cannot be


Macro Investor Volume 1, number 9

Macro Investor Vol 1, No 9. is now available at the website and in PDF. War is peace, ignorance is strength, there was no mining boom… The mining boom has transformed Australia’s political economy in ways that will be felt for years to come as what has been forecast as a structural revolution will, in


Credit crunch seizes iron ore price

Friday’s ore price movements showed some stabilisation: With 12 month swaps catching a break, there is some hope that last’s week’s heavy dump was the capitulation phase for the ore price. There is not much hope in the fundamentals, however, with rebar falling to a new low and little discussion so far of Chinese steel-makers


A history of terms of trade errors

The government spent the weekend in damage control about the forthcoming black hole in the Budget. Apparently: Australia’s mining boom is not even halfway over, federal Trade Minister Craig Emerson has declared, days after his cabinet colleague Martin Ferguson said the boom in commodity prices had reached its peak. “We’ve got a lot of projects


Macro Investor this week

Find below the contents page of the past week’s Macro Investor report for you to consider a 21 day free trial subscription. Macro Investor Volume 1, No 8 MACRO: Running with the Draghi put Risk, Europe and equity markets are running with an enthusiasm that would impress even the crowds at Pamplona. Nonetheless, investors will need much more


“Keep taking the pills, Nev”

Fresh and cross-posted  from FT Alphaville, comes this unusually frank assessment of Fortescue and iron ore. Remember the joke about the $120 iron ore price floor? How we laughed. And for continued amusement here’s Nev Power, chief executive of Fortescue Metals,the highly-leveraged poster child of the Australian resources boom, discussing iron ore at Wednesday’s annual results announcement. From


Glenn Stevens in the Parliament

Capt’ Glenn this morning. More of nothing, really. At least on economics. I must say, though, the one statement that has a gigantic question mark over it is this: After that the rate of resource investment is likely to decline, while the export shipments of the resources themselves will pick up. By then we might


My endless boom

By David Llewellyn-Smith It’s playing out as expected with the Pascometer leading off a chorus of nay-saying insiders yesterday afternoon and today. The boom isn’t over. Oh no! This is the endless boom, don’t you know. It’s entering a new phase, a third, fourth,fifth…twelfth stage. The AFR is wall-to-wall miner drivel this morning. The consensus now


China Flash PMI tanks

Uh oh. The HSBC China Flash PMI for August is out and the world economy is in trouble: Flash China Manufacturing PMI™ at 47.8 (49.3 in July). 9-month low. Flash China Manufacturing Output Index at 47.9 (50.9 in July). 5-month low. Here’s the chart: That’s not a happy trend. And the internals are ugly: Where’s


HIA: Housing affordability improves (and?)

From the HIA comes this quarter’s improved housing affordability measure: The improvement in housing affordability continued unabated in the June 2012 quarter, said the Housing Industry Association, the voice of Australia’s residential building industry. “Excluding the GFC period when interest rates dropped sharply, housing affordability is at its healthiest level since 2003,” said HIA Chief Economist, Dr


Fortescue embraces the hope

Fortescue is out with a good result. With the market giving it 3%: But from the annual report the following is woefully inadequate: That’s the Fortescue assessment for iron ore prices. I know ore is going to bounce some time, perhaps soon, but this is ridiculously thin coverage of the primary risk facing the company.


And now for coking coal…

I have been a bit confused by some of the spot versus contract pricing going in the market for coking coal. It appears I got my quarters mixed up. From ANZ today, there’s clarity, sadly: Newcastle Sept coal futures fell mildly to USD91.5/t. China’s total coal imports fell 10.3% m/m to 20.2mt in July, but is still


Government at a loss

A few Ministers are out this morning trying to make sense of the growing questions around mining investment. First they seem unable to get their story straight. According to the AFR, Martin Ferguson has said: Resources Minister Martin Ferguson has declared the mining boom is over, a day after BHP Billiton shelved the $US20 billion-plus