David Llewellyn-Smith

45

WTF AIG

Sigh…I’m having an angry week. Regular readers will know that I’m no fan of vested interests. But I make one exception. Right now, the nation DESPERATELY needs a new vested interest body to support the non-resource tradable goods sectors of manufacturing, tourism and education. I can’t remember a peep out of either the education sector

3

Risks to the Aussie

The question I asked last week about Chinese growth and iron ore demand seems to have been answered for now. That question was the following: Not only has the market not priced a significant, if cyclical, China slowdown, if it comes, Chinese steel makers may very well enter an inventory cycle that liquidates some portion

77

House buying strike!

The above headline can’t have escaped the attention of many Australians yesterday. It sat at the top of the SMH, The Age, Brisbane Times and WA Today websites all afternoon. I can’t remember the last time I saw 500 comments on a Fairfax story (I literally can’t remember so it may not be that long).

8

Jobs point to restructure

The ABS released its Job Vacancies for February survey today. The overall release was a slight seasonally adjusted fall. More interesting is the industry split. The first chart below is for sectors with rising job ads for the month: And the second is for sectors with falling job vacancies for the month: This industry sector split

25

The aliens have landed

An alien has landed in Australia and is confusing the hell out of everyone. That alien’s name is lack of system growth. In the old system, as the pie got bigger, there were no losers, only degrees of winners. Corporations in Australia’s dominant finance, realty and retail sectors could swap 2 per cent market share

19

The bulls circle the wagons

Today on Smart Company, Craig James of Commonwealth Bank offered this brief article: The Reserve Bank Governor was asked a question on Australian home prices when he delivered a speech in London on March 10. The comments weren’t well reported, but he highlighted the fact that home prices aren’t rising strongly at present, that arrears

4

Tough day for banks

Banking Day today has a string of interesting articles that dramatically underline the increasingly dour future for the major banks, not to mention the broader services deconomy. First up, the possibility that the banks will, after all, be dragged into the new international measures demanding extra capital for systemically important financial institutions: Global financial regulators

16

Here come the rate cuts, not

From Banking Day: The Australian Government will set the cap on the percentage of assets that can be used to support covered bonds at eight per cent, the Financial Review reports – up from the cap of five per cent suggested by the Government back in December. For some weeks, talk in banking and government

14

RBA warns banks on expanding risks

Back in March 2009, former Reserve Bank Governor Ian Macfarlane gave a now famous speech in which he outlined why Australian banks had avoided the worst consequences of the GFC, because of dumb luck. One of his principle insights in drawing this conclusion was that the banks had benefited from the ebbing of competitive pressures

4

Rio has a whinge

Some days rent-seeking is a challenging business. Take Tom Albanese, CEO of Rio Tinto, who today held forth on the evils of government intervention in mining. According to Reuters: Besides, technical constraints, we are also seeing human constraints. We are seeing a combination of resource nationalism in some cases,” he said, citing “difficult governance” in

4

Gotti is wrong on oil

But should be congratulated for staking out a position, a rare event in today’s world of commentary flip flopping. As Deus Forex Machina likes to say, disagreement makes a market so let’s rip in. Gotti asks: Why should oil prices rise in response to the latest turn of events in Libya? We are already seeing

2

Michael Pettis: China slowing

` Exclusively from Michael Pettis newsletter: Quite a few numbers came out this week, but none of them were especially dramatic or likely to change anyone’s mind about anything. The most interesting thing to me is that there are indications that, once again, the economy may be slowing quickly. Every time Beijing gets worried about too

4

Late to the party

As governments far and wide wake up to the danger of fallout in Japan, one is tempted to conclude that the crisis is past its worst. Governments have a habit of coming late to the party. But, in this case, I’m not so sure. I continue to think that markets are underestimating the damage being

15

How Japan will hit local growth

I am surprised at the resilience of Australian equities to the global sell-off. Either the local market is confident that the crisis can be contained (for some reason I can’t fathom, it’s behaving irrationally, or, it has assessed any economic fallout from the disaster to be minimal for Australia and already priced in). The only

9

Japan’s critical moment

An hour ago the IAEA released the following: Temperature of Spent Fuel Pools at Fukushima Daiichi Nuclear Power Plant Spent fuel that has been removed from a nuclear reactor generates intense heat and is typically stored in a water-filled spent fuel pool to cool it and provide protection from its radioactivity. Water in a spent

6

The RBA airbrushes history

Deputy Governor of the RBA, Guy Debelle, yesterday delivered an analysis of Australia’s recent financial history that left a few things out. Let’s take a look: Over much of the past two decades, demand for credit outpaced the growth in deposits, so that banks accessed wholesale funding markets to support growth in lending. This outcome reflected

21

History resumes

I remember the nineties fondly. They were the years before housing bubbles. The years when cricket still had meaning and moustaches were not yet the gimmick of some new age fad. The years when talent still determined who became famous. And the years when the singularity of American might gave the world a moral centre,

7

The RBA’s message on debt

In today’s Minutes of the March 2011 Monetary Policy Meeting, RBA members had something of a coming out: The household and business sectors in Australia did not appear to be under financial stress, though both continued to show more caution in their borrowing behaviour, as evidenced in slower rates of credit growth over the past

3

High risks

The US equity market held up pretty well last night but looks to me to be are underestimating risks all around. Poor Japan seems headed toward mutliple meltdowns. Live coverage is available at the BBC. New Scientist reports that assuming meltdowns are occurring then it is only a question of whether containment of the radioactivity

2

Into the maelstrom

Let me begin my reiterating my sympathies for the Japanese. There are a number of very big cross currents at work for markets today. The first, of course, if the suffering of the Japanese. Across the world, the coverage is remarkably alike, a result perhaps of diminishing foreign correspondent budgets and the secrecy of the

3

Japan fallout

Right now we do not know what is happening in Japan’s nuclear reactors. According to CNN, however, the news is very worrying: A meltdown may be under way at one of Fukushima Daiichi’s nuclear power reactors in northern Japan, an official with Japan’s Nuclear and Industrial Safety Agency told CNN Sunday. “There is a possibility,

1

Links March 10: Relative calm

More pain for PIIGS:  Greece run. Ireland, Portugal, Spain, Italy, Belgium. Obama’s no fly zone is looking like PR. FT Libyan war. FT $US sideways. Grains futures flogged. Metals crushed. Energies, gold flat. Greece reaches do or die. To Vima (h/t Calculated Risk) Ireland up for haircuts. Labour (h/t Calculated Risk) PIMCO dumps all Treasuries. Zero Hedge No OPEC capacity increase. Reuters

2

Shocked consumers

In my previous post on Phil Lowe’s speech, I noted that the RBA is hawkish and clearly still concerned that consumers will binge as mining boom income passes through the economy. The killer quote was: Not unexpectedly, this decline in the relative price of manufactured goods has caught the attention of the household sector. In

2

The RBA shows an iron hand

Assistant Governor Philip Lowe has delivered a fantastic speech for those wishing to understand the current transition of the Australian economy and how the RBA thinks about it. It’s a very long speech and I suggest you read it in full. But here, at least, are a few highlights. First on inflation and purchasing power

0

Revenge of the PIIGS

Overnight, markets received a boost from OPEC member’s declaration that they’ll fill any existing or potential supply gap. Later, there was some doubt about the veracity of the claim. The energy complex nonetheless retreated a little, as did gold, and equities jumped. Metals were sold off early then bounced to be even. However, other markets remain

8

Have the banks’ rate increases peaked?

From Banking Day today: Westpac’s chief executive, Gail Kelly, said yesterday that she intends to make out-of-cycle interest rate cuts when lower funding costs permit, which she hopes will be in 2013 or 2014. Speaking on the ABC’s 7.30 program, Kelly said she expected the bank’s average cost of funds to plateau towards the end of

6

Sell signal

I don’t know if you trade, but if you do, there are clear reasons to get cautious. There is a gathering storm over the global economy and market patterns are now making it plain that the risk of a lightening strike is outweighing the benefits of remaining outdoors. Regular readers will know that I have

5

Carr’s wrong turn

All right you lot, no more reference to myself in the third person. Today Adam Carr takes on the RBA (h/t The Lorax) in arguing that: So how is it that the household savings ratio has risen so sharply then? Surely consumption must have fallen to facilitate this? Okay, that sounds reasonable and I’m hearing

16

Ken Henry’s lucky country

On Friday evening, Treasury boss Ken Henry delivered his final public address before stepping down in March. At the University of Tasmania Giblin Lecture, Henry delivered his magnum opus, a broad review of Australian economic history spanning three centuries (full transcript below, h/t The Lorax). The document is a must read in full, but the