David Llewellyn-Smith


Weekend reading

Merkel wins, Europe loses. EurointelligenceEQE ramp for Spain. TelegraphContagion today: Ireland, Italy, US inventory rebuild done. And how. Zero HedgeUS leading indicators going nuts. ECRI, LEIMultipolarity is here. Phillip StevensChina’s aircraft carrier. FTInflation under control says China. FTWA surplus boom on ore. SMHBank’s crocodile tears. Michael WestMore ore. Robyn Bromby



You can see what regulators have been trying to do for eighteen months. And clearly, they are well intentioned doing it. Having reduced Australian banks’ reliance on short-term funding by $140 billion or so, pushed up interest rates and talked down housing, and recently pushed back a credit-mad government, they have now announced a new


AOFM risk

As Delusional Economics mentioned in his brilliant assessment of the senate inquiry into banking competition yesterday, the AOFM very recently supported a Wide Bay Ltd securitisation. Wide Bay is a largely Queensland based building society with considerable exposure to the Gold Coast and Cairns. Needless to say, ground zero for the correction that is underway


Links December 17: US recovery

Buiter of Europe. AlphavilleUS bad news. Good news.Growl of a bear. Zero HedgeIs America sick? ReutersCommodity speculation. PragCapFarm bubble. BPACommodities for pros only. Gavyn DaviesLapping up IMF drivel. SMHChaney defends sovereign rating. Of course. NAB’s sunk without it. The OzToday’s contagion worst in: Spain, Italy


The great straddle inches wider

In the last two days, both the FT and WSJ have carried stories about a burgeoning global trade in the yuan. The FT was first out of the blocks: In spite of its infancy, interest in the market is growing quickly. Caterpillar, the US-based maker of earthmoving equipment, launched a Rmb1bn ($150m) bond issue last


Link December 16: US data

Bullish Roubini. But more QE. TelegraphBullish Tim Duy. But no more QE. Tim DuyWhen will the Fed hike? EconompicChina cash squeeze. Zero HedgeChina still pilin’ into Treasuries (via UK). Zero HedgeChina’s empty cities. The Unconventional EconomistGermany stiffens against bailout. BloombergContagion today: Portugal, GreeceGlobal mining boom. FTOil joins the rush. BarchartWine gets Dutch Disease. SMHDeclining productivity.



Regular readers will know that this blogger’s arch nemesis is Ross Gittins! As a member of Generation X, some of that enmity arises from the naturally hostile posture one should adopt towards ones baby-boomer betters. But, in all honestly, this blogger cannot hold himself entirely responsible for his Gittins! rage. The man himself must take


Pascoe’s bank failure

Michael Pascoe has an entertaining piece today on banks. He begins with the sharp observation that once again this Labor government has completely stuffed the politics of reform: For the usual petty political reasons, Wayne Swan dumbly tried to pre-empt the Senate banking competition inquiry – a decision that has come back to bite him


Symond versus Laker

Yesterday at the Senate Inquiry into bank competition John Symond, the household name behind Aussie Home Loans, gave the new banking reforms a roasting. Symond, the jocular non-banker renowned for his forthrightness, delivered on cue: I’m disappointed that the Treasurer, in announcing his initiatives, has failed to consult with that sector that brought on competition,


Links December 15: China readies yuan

Global yuan trade. FT, WSJUS/China trade pressure. FTHedge funds are psychopath factories. HBR (h/t nakedcapitalism)US retail approaches 2007 peak. Calculated RiskOn petrol prices. EconompicExposure to PIGS. Zero HedgeContagion rife: Ireland, Portugal, Greece, Spain, Italy, Belgium5 biggest 2011 risks. PragCapMore credit juice for China. FTSoros backs Munchau plan for Europe. FTGittins: No Dutch Disease, commodities boom


Round one to regulators?

Today, John Laker, Chairman of APRA, joined Glenn Stevens in what appears to be a coordinated (and admirable) paean against excessive government-supported competition in financial services. From the SMH: The banking regulator has cautioned that too much competition in the market could lead to increased risks for the safety of the financial system. Australian Prudential



The parallel universe that is Australian banks and houses took a new turn yesterday when Glen Stevens warned of the consequences of US-style intervention to support housing markets. According to the SMH: In the first hearing of a Senate inquiry into banking competition yesterday, the Reserve’s governor, Glenn Stevens, maintained that competition was more fierce


China’s undead growth

Something has been bothering your blogger for two months. During early October’s furious discussion of the end Bretton Woods II (BWII) and an accelerated global rebalancing, this blogger quoted Micheal Pettis: Most probably Beijing will do the same thing Tokyo did after the Plaza Accords and Beijing did after the renminbi began appreciating in 2005.


December 14 links: China’s loose credit

China slowdown is end of all. ForbesChina’s credit expansion for 2011. BloombergNo China rate rise. BloombergUS-China trade talks. ReutersCommodity divergence. WSJ$US Dollar smashed. BloombergUS credit bubble bust cross-section. Global Macro MonitorLet Europe die. Ambrose Evans-PritchardSaving the euro. Wolfgang MunchauContagion upish: Ireland, Portugal, Spain, Italy, Belgium, GreeceThe derivatives cabal. Felix SalmonSwan’s dud. Henry ErgasBalancing the Great


Property plateau visualised

This blogger has been arguing the likelihood, all things being equal (that is, no external shock) that property is headed for plateau not collapse. The kicker being that the flattening out of prices could last a long, long time. This belief is based upon the extraordinarily deep faith Australians have in property as a long


A singular achievement

This blogger will not add to the ubiquitous negativity around Wayne Swan’s bank reform package. The larger process around the reforms has achieved something important. For the past two years, the Australian bank debate has floated on a cloud denial. Beyond the efforts of the “six economists” who called for a Son of Wallis Inquiry,


Links December 13: Reform day

Bank reforms minimal. SMHFallout for small lenders. Adele FergusonBank reforms squibbed. The AgeMedium banks to be squeezed. The AgeReform all politics. Michael Stutchbury, Jennifer Hewitt, Richard Gluyas, Bring on Son of Wallis. Sinclair Davidson, Ian Harper (in the AFR)Swan’s big reforms. Robert GottliebsenPros & cons of the package. Chris JoyeRosenberg’s 2011. ClusterstockWeek ahead for the


Lowe biffs Macfarlane

As this blogger has noted before, former Reserve Bank governor Ian Macfarlane enjoys an unchallenged reputation as a pioneering asset-bubble buster, despite being in some significant part, responsible for same said bubble. Not any more. Last week, Deputy Governor Phil Lowe stepped up and during a speech dedicated to the subtleties of inflation targeting, delivered


Two pillar miners

Today’s Wikileaks are again confirmations rather than revelations. The SMH reports today that: The cable confirms an account by the Treasury’s former top China economist, Stephen Joske, who last year said Mr Argus and other BHP executives targeted the then prime minister Kevin Rudd, Mr Swan, the Resources Minister, Martin Ferguson, and their advisers over


Weekend Reading: Big mining power

BHP’s Canberra power. The AgeRio sold out Hu. The AgeGillard has condemned herself on Wikileaks. Shaun Carney You bet.US trade deficit shrinks. BloombergThe Fed and moneyness. Doug NolandTiberius’ financial crisis. Businomics (h/t nakedcapitalism)China condemned at Nobel. FT, SMH (but Swedes doin’ fine on Assange?)Rising yields. FTChina raises bank reserves. FTASX catches Dutch Disease. WSJWLI edges


Global bond backup

There’s a big move afoot. Very big. Nobody seems to have noticed yet but there is a backup in government bonds everywhere. And when this blog says everywhere, it means everywhere: United States: United Kingdom: Germany: China: Japan: South Africa: Australia: Brazil: Thailand:Ironically, the obvious trigger for this co-ordinated slump was QEII. Markets have been


Links December 10: Bond rout

Internecine European leaders. German bonds out. EurointelligenceEU slithers toward fiscal union. FTECB buying the lot. Zero HedgeUS housing shrinking. More to come. Calculated Risk. Rates rising.US unemployment easing slowly. Calculated RiskRise of behavioural economics. Fund StrategyChina curbing inflation. Jim RogersChina’s great steal. FTChina fury at Defence White Paper. The AgeRecord job growth. Peter Martin, Michael


Securitisation is innocent

This blogger recommends that you zip over to Delusional Economics and read Deep T. on securitisation. The piece is detailed and this blogger won’t go into the technicals of it. The point it wishes to make is not technical anyway, it’s philosophical. Deep T. begins: The 60’s were a time of great change in attitudes


Reporting anomaly

Yesterday, while rooting around in the ABS 5232 National Accounts: Financial Accounts (yes, I’m bored) this blogger turned up an extraordinary fact. Sometime in the June quarter of 2008, the national government appears suddenly to have deposited $12 billion into Australian ADIs. A quick look at the above chart showing the history of such deposits,


Wikileaks in our trousers

The extraordinary material on display in the Fairfax papers today from Wikileaks rips a hole in the seam of what this blogger has consistently described as the “Great Straddle”: The national interest divergence that Australian leaders have allowed to develop between our strategic imperatives with the United States and our economic imperatives with China. This


Links December 8: Assange’s war

Julian Assange speaks. The Australian.And Wikileaks to the Herald devastate Rudd. SMHThen Beazley in The Age.Assange arrested. SMH Which looks like poor politics. Poll, PollChina fallout. John Garnaut Good news, bad news on US austerity. The EconomistUS rail volumes down. Money Game, Calculated RiskNo answers for Europe. Gideon RachmanIn: Ireland. Out: Spain, Portgual, Italy, Belgium,


ABA revelations (updated)

What a morning! Your blogger spent it wading through the Australian Business Association’s submission to the Senate Inquiry into bank competition and the corresponding ABS data. The focus of this post is on the section of the ABA document dedicated to liabilities, which forms the key to the banks’ claim that their rising cost of