David Llewellyn-Smith

3

SoMP hedges its bets

Today’s quarterly Statement on Monetary Policy is, like the economy, a balancing act. The RBA’s confirmed its central medium term bias to raise interest rates by confirming its expects above average rates of growth ahead: In the short term, the GDP outcomes for the next few quarters are expected to be boosted by arecovery in

8

Bank CDS holding up (down)

We noted recently that there had been a worrying blow-out in Australian bank CDS prices. Taking a look today, amidst the advancing global turmoil, we can see that things have not so far deteriorated: Over the longer term, however, prices remain quite elevated:

34

The centre cannot hold

It’s quaint you know. Analysts faith in the system, I mean. There are a couple of really smart articles out this morning from really smart people about really smart things. And they’re making reassuring noises that there is no recession coming and that you should stay in your trades, that yesterday’s money making strategy is

43

August 5: The crash we had to have

Rockets: $US Pulverised: CRB, energy Only smashed: Aussie, grains, metals, gold, euro Up: ore Ragin’ 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

48

PC report spanks online retail

In its monster retail report, the Productivity Commission has recommended (among a great many things) that the government lower the tax free threshold on online purchases of foreign goods. Thankfully, however, it has also amply demonstrated the practical foolishness of the idea with an assessment of the costs involved in monitoring the parcels at the

37

Double Dutch continues for tourism

From the ABS, here are the June short term arrivals and departures. Wonder why tourism hasn’t tried a “Buy Australia” campaign yet. Double Dutch powers on: JUNE KEY POINTS SHORT-TERM VISITOR ARRIVALS TO AUSTRALIA Trend estimates: Short-term visitor arrivals during June 2011 (475,600 movements) decreased 0.5% compared with May 2011 (477,800 movements). This followed monthly

10

SMEs unhappy too

Yesterday NAB released its quarterly SME Business Survey. It’s not generally something I follow but given my conjecture on the likelihood that we’ll see job losses ahead, I thought it might be useful to examine the report this morning. SMEs employ 7.3 million Australians, some 64% of the work force. Not surprisingly, the headline results

46

Is unemployment about to jump?

Yesterday, Roy Morgan Research released their latest poll on unemployment and and it caused a minor stir amongst market watchers: In July 2011 Australia’s total unemployment as measured by Roy Morgan was 885,000 (7.6%), up 40,000 (0.6%) from June 2011, and up 148,000 (up 1.3%) since July 2010. The Roy Morgan July 2011 ‘underemployed’* estimate was virtually

5

ex-Fed trinity muse on QE3

  Below find the video that triggered last night’s equities bounce back. I’m not sure why it stimulated any such thing. There’s not much that’s bullish in it in my view. The phrase that comes to mind for me is ‘old men talk while young men die’:

9

August 4 links: Dead cat sups the milkies

Rockets: Euro, gold Up: ore Down: $US, grains, Aussie, , CRB, energy, metals Italy, Spain ease: 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

31

In-credible retail falls

ABS June retail sales are out and it’s more of the same with the seasonally adjusted estimate falling 0.1%. This follows a fall of 0.6% in May 2011 and a rise of 1.0% in April 2011. On to the charts. The first shows that the result was a big miss versus market expectations, God only knows

1

Services sector still in recession, or is it?

The AIG PSI Index for July is out this morning and makes interesting reading with the services sector still in recession, but without the same collapse seen in Monday’s manufacturing gauge: ■  The services sector contracted in July, with the latest seasonally  adjusted Australian Industry Group/Commonwealth Bank  Australian Performance of Services Index (Australian PSI®) rising 

35

Whither now the US?

I’ve been warning for a couple of months that the US economy is in trouble. It’s hasn’t really been that hard to see, so long as you recognise its underlying condition. The US economy is in a depression. It’s not quite the kind we saw in the 1930s but it’s a depression nonetheless, just slower

6

August 3 links: Stall speed

Rockets:$US, grains, gold Up: ore Down: Aussie, Euro, CRB, energy Smacked: metals Italy, Spain hit record yields, spreads to Germany: 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

1

RBA commodity index up again

Below is the RBA July Index of Commodity Prices hitting a new record high in SDR terms. However, in Australian dollar terms, the index is now sliding. Preliminary estimates for July indicate that the index rose by 0.9 per cent (on a monthly average basis) in SDR terms, after rising by 1.7 per cent in June (revised).

5

Up, down and sideways

  Here are four bank takes on today’s rate decision, the pick being the first, from Brian Redican at Macquarie Securities. Macquarie The RBA Board’s decision not to raise rates at its August policy meeting will obviously be welcomed by those firms struggling with weak consumer demand, as well as some mortgage holders with stretched

11

Building approvals by state

Following are a series of charts drawn from today’s ABS Building Approvals numbers. First up, is the national chart for dwelling approvals, which doesn’t look too bad, though is obviously in a significant declining trend, giving back after last year’s stimulus dragged forward demand: When we break down by state, however, we get a very

62

The agony of the bullhawks

As the bullhawks (Joye & Carr) withdraw to their high eyries, dragging the bloodied corpse of Terry McCrann with them, they should take a moment to raise their razor sharp beaks a few points above the strictures of yesterday’s war. Strict adherence to an inflation band is sensibly modified by an appreciation of imminent risks, whether

66

No hike

Statement by Glenn Stevens, Governor: Monetary Policy Decision At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent. The global economy is continuing its expansion, but the pace of growth slowed in the June quarter. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity

11

Building approvals fall again

ABS Building Approvals for June are out and the best one can say is that there’s more space for mining to grow into. The ongoing fall is broad based and takes in both residential and commercial construction.  The drop is not as bad as last month thankfully but there is still considerable downward momentum, even if

18

ABS house price falls moderate

Here are the ABS results for June Qtr house prices. All capitals fell slightly, except Sydney and Canberra, which eeked out small gains. JUNE KEY POINTS ESTABLISHED HOUSE PRICES Preliminary estimates show the price index for established houses for the weighted average of the eight capital cities decreased 0.1% in the June quarter 2011. The

42

A modest proposal for manufacturing

If there’s one thing that bugs me about the Australian economy and business it is rent-seeking. It is that practice of big businesses wielding political power for shareholder and personal gain. It is a doubly toxic pursuit because it not only means that Australians often have to pay extortionate prices for goods but it retards

9

August 2 links: ISM wakeup call

Up: ore, $US, grains, CRB, Flat: Aussie, Euro Down: energy, gold, metals Sovereign easing: 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

23

The US debt deal

Find below details of the US debt deal, direct from the White House: Fact sheet: Bipartisan Debt Deal: A Win for the Economy and Budget Discipline Removes the cloud of uncertainty over our economy at this critical time, by ensuring that no one will be able to use the threat of the nation’s first default

34

New home sales tank

The mining sector is about to get a whole new batch of construction workers to choose from if the HIA new home sale report for June  is any guide. The index collapsed to GFC levels. The HIA has this to say: New home sales suffered their heaviest monthly decline in five years in June 2011, providing

14

Manufacturing tanks

The adjustment we all had to have is going gangbusters now. Having been in recession for the better part of a year, manufacturing activity fell off a cliff in July. Here’s what the mild-mannered folk at the Australian Industry Group had to say about the ongoing extinction of their members: ■ Manufacturing activity slumped in

39

Turning a soft landing hard

Sigh. I apologise for the ceaseless battery of bearish outlooks this morning but damn, that’s the way the world is going, and I’m not going to “pull a Yardney” and pretend it isn’t so that yours and my hard earned capital goes up in smoke. This morning we have two excellent pieces on the debt-ceiling

5

Deadlines, debt and downgrades

Find below an excellent note from Westpac covering the fallout from various scenarios emanating from the US debt-ceiling debacle. The note is both useful and entertaining, with Russell Jones of the rates strategies team nicely capturing the absurdity of the situation.