David Llewellyn-Smith


Links January 17: Inflation nation

China trade tensions vs consumers. Wharton (h/t nakedcapitalism)China’s gigantic white elephant. Credit WritedownsIssues 2011. Doug NolandWeek ahead for the DOW. Calculated RiskOil shocks. EconbrowserCoal shock. The OzPIMCO goes for MBS. Zero HedgeCommodities and dollar inflation. Calafia Beach PunditChina bears. TelegraphChina must buy dollars. ReutersWhither next food riots? Business InsiderThe FED on housing in 2005. Tim


Weekend Reading: Seventies bogue

China: credit and bank requirements surge. FTKorea innovates on macroprudential. Gillian TettCommodity speculation. FTNo to position limits. Zero HedgeJim rogers goes for rice. Zero HedgeWeather worries. AR Screencast (including our own Flashman)Indian inflation on charge. BloombergGerman inflation up. BloombergUS inflation up. Calculated RiskSustainability of recovery. Tim DuyUS demand is all about exports. EconompicChina bust. Colin


Cash explosion

Reuters reports today that: Mining giant BHP Billiton Ltd has begun auctions for spot iron ore shipments to Chinese steel mills, local media reported on Friday, marking the latest shift in its pricing strategy to cash in on rocketing prices. BHP, the world’s third largest iron ore producer, has started to auction a 170,000-tonne spot


Guest post: La Niña, the black swan

This week’s disastrous floods in Queensland have tragically claimed many lives in addition to leaving thousands homeless and without businesses to return to, but the biggest cost economically may be felt abroad. I’m not talking about reinsurance here – though that is indeed an issue considering the estimated $5 billion damages bill – but about


Links January 14: Food crisis

US crop downgrade. WSJLooming food price shock. FTUS PPI goes bananas. EconompicAgencies warn on US debt. WSJ$US smashed. BloombergBoooooring. France, Germany veto EFSF extension. AmbroseAll PIIGS bonds rally.US trade deficit shrinks. Calculated RiskOil shocks. EconbrowserAustralia’s employment flood. Peter Martin, The OzChinese auto bubble. CNNOre soaring on cyclone, supply. ReutersThis bastard’s headed for records. Bloomberg


Inundated houses

In the year following Hurricane Katrina, something unexpected happened to New Orleans house prices. They rocketed 27% over a period of months. According to USA Today “displaced residents bid up median prices”. This blogger thinks it unlikely that we will see such a dramatic price escalation in Brisbane. The floods are not as serious nor


Links January 13: 11th hour euro

Portugal sells bonds. Rehn indicates expanding EFSF. ReutersIn a lot: Ireland, Portugal, Greece, BelgiumIn a little: Spain, ItalyItaly in the gun. Zero HedgeEuro to fall most. Ken RogoffPerhaps. US debt spike. Econompic.Geithner ramps China rhetoric as Hu approaches. FTSo does China. IMarketNewsMy former baby making waves on China’s J20. The Diplomat (h/t nakedcapitalism)US begins rifle-shot


Links January 12: Random walk

Mish calls Australian bubble bust. MishUS foreclosure pipeline. AlphavilleUS housing headed for new low. Calculated RiskMacroprudential goes global. FT, Stephen BartholomeuszMcKibbin demands flood stimulus. The AgeMore capesize carnage. Dry ShipsContagion today: Belgium out. All else in. Gold not a bubble till $2k. BusinessWeekAlcoa sees China slowing. BloombergChina rampaging credit growth. ReutersChina’s great pile of paper.


Uh oh, euro

Yes, that pattern could be seen as a nice head and shoulders top for the euro. No surprise, really, with Europe’s bail-ins rolling inexorably toward Portugal. As FT Alphaville illustrated so nicely overnight: …it took Greece and Ireland less than a month to request EU/IMF aid after their 10-year bond yields breached that all-important 7


Links January 11: Next wave

Out: Spain, Italy, BelgiumIn: Ireland, Greece, Portugal, Timeline Portugal. AlphavilleEurope’s combined solvency & competitiveness crisis. Wolfgang MunchauRosenberg sticks with bonds, buys dollar. Globe and MailDollar bull. The SourceWill oil stuff the recovery? Tim DuyEra of cheap capital over. The SourceBrazil embraces trade war. FTCapesize hammered again. Dry ShipsChina December ore imports up. BloombergOMG, that’s another


What’s up (or down) with the BDI? (updated)

Coal, iron ore and grain prices are all headed one way – up. Yet the Baltic Dry Index, the generally reliable gauge of demand for bulk commodities is collapsing. Last year the BDI correctly foreshadowed and tracked the mid-year slowdown in the global economy, despite being given short shrift by many bullish commentators seeking to


S&P spoils the party

It’s an ‘happy new year’ all around this morning. Except, apparently, from Standard and Poors who, according to Banking Day are about to downgrade our financial system: Persistently high rates of credit growth relative to GDP and seemingly high property prices could filter into lower credit ratings for banks as Standard & Poor’s revises its


Links January 10: The more things change…

US law versus the banks. nakedcapitalismRecent US data. Calculated RiskJobs and the Fed. Tim DuyStrong Dec ISM. EconompicWeek ahead for the DOW. Calculated RiskHow the copper bubble will bust. Zero HedgeJ.P. Morgan shifts into the White House. Baseline ScenarioAnd Volcker jumps ship. DealbookIs the Loonie priced in? Forex Blog70’s bogue here again. FTFull blown contagion


Holiday Reading

Dear Readers, I will be away until January 10th, 2011. Hopefully the world will not implode in that time. For your reading pleasure over Christmas, following this post are the nine leading entries to the Son of Wallis Challenge. The winner, Kaon Li, is first but the others are not presented in any particular order.


SOW – Sam Birmingham

1. Wholesale Debt: Risks & Benefits Australian lenders have increasingly relied on wholesale debt markets to fund the expansion of domestic loan books. Benefits of wholesale debt issuance include: • Expanded Lending: There is a finite pool of domestic funding (equity capital, customers deposits, etc) available to retail lenders. In the absence of further capital,


SOW – Rory McKeown

Individuals and companies have been incentivised perversely across the banking industry, and being led by a corrupt banking ideology, Australia has paid a price for this. It could should shape itself as a role model for banking leadership by implementing the following proposals, and creating incentives for small banks, and securitized bonuses. Until these factors


SOW – Andrew Selby Smith

1) What are the risks and benefits of large bank wholesale debt and how should each be addressed? The risk is that the capital borrowings by the large banks to meet their prudential liquidity requirements are generally shorter term than the mortgage assets that the banks are borrowing against. This leads to bank risk as


SOW – Robert Coulter

1. Background 1. What my comments address. 1.1 The thrust of the 4 published questions (Business Day 24/11/10-David Llewellyn-Smith) raises basically 2 issues against a GFC backdrop. 1.2 First Issue -The risks and benefits of Australian 4 pillar banks (“4PB”) and their present wholesale debt fund raising strategies including the use/future use of Federal Government


SOW – Heath Behncke

Australian politicians reacting to out of cycle mortgage re-pricing perceive a lack of banking competition as the reason. The more likely answer is a rising cost of capital and ongoing structural change in bank funding globally. The evidence is clear when you look at banking systems around the globe. We are not alone. In fact,


SOW – Russell Bradshaw

This article mainly relates to the following terms of reference for the Son of Wallis Challenge: 3. Given securitisation was at the centre of the GFC, what role should it play in renewed competition?

4. How can competition be returned to the financial services sector, as well as balanced against the need for stability in the


SOW- Martin Haggas

1. What are the risks and benefits of large bank wholesale debt and how should each be addressed? The benefits of wholesale funding are quite straightforward: assuming global wholesale debt markets are operating in an efficient manner, they represent an almost endless source of funding for a bank that faces pressure raising sufficient retail funding


SOW – Peter Rieder

The international economic and financial crisis revealed several inadequacies in Australian banking and financial regulation. Large Australian banks remain dependent on international investors to secure wholesale debt. Demand for securitisation increased in the decade before the economic and financial crisis. The Australian Government responded to the unprecedented uncertainty after the collapse of Lehman Brothers by providing


Son of Wallis Challenge – winner

The Government’s response to the Opposition push for a debate on post-GFC banking reform has been to throw a blanket over the issue. Rather than open up discussion with a wide “Son of Wallis” inquiry leading to ‘root and branch’ reform, Wayne Swan has rushed a minimal package of regulatory changes and corralled debate in


Links December 22: Henry’s irony

Ken Henry. Barry HughesMiners win on MRRT. Malcolm MaidenFed exit strategy. Calculated RiskChina supports euro. BloombergAn executive defends executive remuneration. Judith SloanContagion today: Ireland, Portugal, Greece, Spain, ItalyNew record for copper. ReutersArse departs BDI. Dry ships


Risk 2011

For those that don’t know, every year Saxo, a Danish investment bank, publishes a list of ten “outrageous predictions” for the following year. This year’s are out and they contain a nasty surprise for Australia. At number 5 is this little doozy: AUSSIE-STERLING DIVES 25%The UK returns to the values of the old days; they


Links December 21: China in 2011

What is credit creation. Qfinance (h/t nakedcapitalism)Ten economic questions for 2011. Calculated RiskOther big bond moves. Alphaville Brazil financial crisis. BloombergContagion today: IrelandChinese chess. Weekly StandardGold rush. BloombergChina cracks down on land prices. China DailySaxo’s ten outrageous predictions for 2011. AlphavilleChinese growth for 2011. Michael PettisDon’t buy commodities. AlphavilleDon’t buy the Aussie. BloombergShift 25% of


Up against it

The RBA’s great experiment of attempting to shift Australia from unproductive investment and overspending to productive investment and saving is about to confront a new challenge. One of the more powerful sectors in the gun is retail. The rumblings of household heros such as Gerry Harvey and Solomon Lew are congealing into an RSPT-like campaign


Links December 20: Retail rent-seeking

Here comes the retailing rent-seekers. The Oz, SMHFinancial vs sovereign interests. Michael Hudson (h/t nakedcapitalism)Before you get too excited about the US ‘recovery’. Calculated RiskWeek ahead for the DOW. Calculated RiskThe 2011 bullish consensus. Bespoke, EconompicWhy long rates are rising. macroblogNo more immigration. Gittins!Haunted by slowing China. The Age