Houses and Holes

48

China warnings

In the past few days there have been three new interesting media outputs that warn of growing risks of a Chinese hard landing. The first is by, of all institutions, the Australian Treasury. In a new Working Paper full text below), Treasury offers a respectable assessment of Chinese macroeconomic navigation through the GFC, and the

19

Should miners trade in yuan?

A month or so ago, before I was struck down with a monstrous lurgy, Rio announced that it was considering pricing some of it’s iron ore sales in yuan. From The Australian: In another sign of China’s growing power in world markets, the world’s third-largest miner is openly canvassing switching its iron ore settlements from

39

All ahead slow

Interest rate discussion over the past week has been fascinating. Behind the media smoke, bullhawkian economists and commentators have capitulated on aggressive interest rate rises. Most have retreated behind the fallback position of a stalled RBA, in which rate rises are still coming, but later than thought. On the other hand, of course, we’ve seen

32

Bill Evans has a panic attack

Mother of the economic gods (if there are any). Bill Evans, my hero of the past couple of days, has just trashed himself with one of the great weathervane moments in interest rate commentary. Following this morning’s RBA minutes, the Westpac Chief Economist has released the following note: Reserve Bank of Australia Board meeting minutes

26

Bullhawk down!

Another of the bullhawks, Paul Bloxham, today concedes that his August rate hike call is wrong. Bravo! However, Mr Bloxham nicely demonstrates the maxim that there’s no better defense than a good offense, dedicating much of his conference call to hammering Westpac’s Bill Evans and his rate cut call. Click here for the conference call.

14

Bank CDS blowout

A credit default swaps (CDS) is a derivative that enables market players to insure holdings of bonds (as well as gamble on their price movements). CDS prices of Australia’s big four banks are on the move – the wrong way. Here is a chart of recent market action: On a longer term time time frame

73

Burying the hawks

Bill Evans of Westpac has certainly thrown a spanner into the interest rate debate. The papers all went nuts over the weekend, leading with stories of imminent rate cuts and there are more stories today of an ensuing housing boom. Meanwhile, pretty much every interest rate commentator in the country disagreed with him. Over the

23

Retail’s real struggle

Following my post last week Let Retail Burn, Cameron Murray has followed up with a series of log-scale charts that show real retail sales growth per capita since the early nineteen eighties. Firstly, Cameron offers the overall sales picture (I have added trend lines in red): As you can see, there is an accelerating trend

17

Newscorp brand risk

Quis custodiet ipsos custodes? Who’s watching the watchmen? That’s the question now dogging the future not only of Rupert Murdoch’s UK media interests but Newscorp globally. How bad is this going to get for the Sun King? I have no idea. But I thought I’d offer a framework for thinking about it. When society authorises private

53

Bill Evans backflips

Goodness me. Hot off the press. Following May’s bullhawkian flirtation, Bill Evans of Westpac has just rocked the market with a total backflip on interest rates. He has just called 100 basis points of cuts in 2012: The market is now pricing in a 25bp rate cut by October and 50% chance of a follow on

27

Attack of the housing “pessimists”!

Not that we needed another survey to tell us, but the Melbourne Institute Westpac quarterly Consumer House Price Expectations Index is sinking. According to the index, a majority of the house-loving Australian population remains convinced that price rises are ahead. But the number of realists (strangely, Westpac refers to them as “pessimists”!) is rising fast:

9

Crude solution

David Jones may want to blame Julia Gillard, Barack Obama may want to blame Republican austerity nutters and the EU may want to blame rampant ratings agencies, but what we all really need to get things going again is more simple: cheap oil. Last night’s market action delivered slightly cheaper crude, down 2% or so

7

Property insiders losing faith

Typically, I don’t take much notice of the NAB quarterly property survey. It’s packed with industry representatives and as such risks reflecting the cognative biases so obvious across the industry. However, for the same reason, it is surely significant that the June quarter survey has printed a negative result, with even the property industry itself

61

Let retail burn

The MSM is full of shock and awe at last night’s David Jones profit warning. Farifax and News are as bad as one another. Of course, this is absolutely NO surprise to MB readers, who have known all year that retail is in the gun. The question now is should the sector be bailed out

26

Milky wilkies

What can I tell you? The great boob has delivered. The great baby is lapping it up. QE3 is coming! That’s the simple truth screamed by markets following Ben Bernanke’s testimony last night. The Dow went berko, the $US got trashed, gold hit record highs and commodities (oh commodities!) went limit up in everything from

8

Lending finance not bad

ABS Lending Finance for May is out and the news looks better than Consumer Confidence suggests. All major categories (with the exception of leasing) rose modestly, with business finance looking strongest. These figures look more robust than the RBA’s credit aggregates for business lending, which showed a flat result for May overall. Nonetheless, there has

12

Consumer confidence smashed

The Westpac/Melbourne Institute Consumer Sentiment survey is out and boy it looks like Australians really do not like their new economy. Excerpts with commentary below. • The Westpac–Melbourne Institute Index of Consumer Sentiment fell by 8.3% in July from 101.2 in June to 92.8 in July. This is a surprisingly weak result. This is the lowest level for

15

Feeling QEeeeesy

Last night’s market action should leave us in no doubt. Equities and commodities are caught in a paradox of US Fed front running. The market rout emanating from the structural debt problems of the EU and US was arrested briefly last night with the release of new Federal Reserve minutes, which showed, unsurprisingly, a willingness

37

Pitchford makes a comeback

I make no secret of my disdain for the Pitchford Thesis, that doctrine that says that current account deficits (CAD) don’t matter in an era of floating exchange rates, so long as the resulting debt is in the private sector. This was the notion that led Canberran policy-makers to turn a blind eye to Australia’s

18

NAB Survey: Retail hits GFC levels

The June NAB Business Survey again makes pretty ordinary reading with Australia’s so called two-speed economy, other wise known to the sane as Dutch Disease, turning virulent. Here’s the commentary: Domestic sector struggling to gain momentum as confidence slumps. Forecasts for growth lowered and rate rises delayed – reflecting current slowdown and, in the medium

53

Western policy chaos

Look, I’m not a bear by nature. And frankly, I’m a bit tired with the grim macro outlook. But it is what it is and today it’s most definitely taken a turn for the worse. Contagion is now rampant in ten and two year bonds at the core of Europe. Here are the charts: Italy

6

July 12 links: Raging contagion

Raging contagion: Ireland, Portugal, Spain, Italy, Belgium, Greece Rocket: $US, gold Up: ore Down: CRB, metals, grains Smashed: energ, euro, Aussie The big short on Italy. FT, NYT, WSJ Europe needs a plan B. George Soros No shit US rail traffic soft in June. Calculated Risk Mind the US output gap. Economist’s view US unemployment projections. Calculated Risk US stimulus in trouble. Gavyn Davies Rosenberg: QE3 cometh. Zero

22

Housing finance recovers a bit more

ABS Housing Finance key points above. I’ve graphed results by state below: All states showed some level of ongoing recovery from the early 2011 hammering but all, with perhaps the exception of Victoria, are still looking very anaemic with most states showing monthly housing finance commitment levels first seen a decade ago. When we dig

101

Something for everyone

I’m glad we finally have a carbon price. My guess is that the roll out of the tax will be less contentious than currently appears. The leader of the opposition may want a referendum on the issue but in my view, but once it’s in place, the tax will give way to famous Australian pragmatism

9

Blame the lenders

Exclusively from Michael Pettis’ newsletter: Over the past two years we have become pretty used to the spectacle of Chinese government officials warning the US about its responsibility to maintain the value of the huge amount of US treasury bonds the PBoC has accumulated. More recently we have been hearing complaints in Germany about the

46

Household pain higher than GFC

The venerable economists of the Melbourne Institute released their quarterly Household Financial Conditions survey yesterday and jeez we are unhappy. In fact, we were happier about our state of financial health in the midst of the greatest global economic crisis since the Great Depression: The press release added that: According to Dr. Edda Claus “the

5

Leading indicators point backwards

The Melbourne Institute/Westpac Leading Indicators Index is out today and shows that growth momentum in the economy has slowed. From the release (full report below): The annualised growth rate of the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity three to nine months into the future, was 2.7% in April 2011 below its long term

10

Dutch Disease visualised

After last week’s sectoral chartathon for employment, I thought I’d go back to the first quarter national accounts and see where production is headed sector by sector. The ABS’s Gross Value Added (GVA) is the simplest way to measure the sectoral contribution to GDP.  The result is the above chart, which shows a number of interesting

16

Sell the rallies

So, the Dow and euro are up as the latest debt crisis passes, again. I wish it were so. We have had a stonking sell-off and I suspect it’s time for a technical bounce, with some evidence beginning to flow through that lower commodities are boosting US purchasing power, and Bernanke likely to offer QE2.5

14

June 22 links: Greek illusions

Down: $US, ore Flat: energy Up: CRB, metals, grains, euro, Aussie, gold Sovereign easing: Ireland, Portugal, Spain, Italy, Belgium, Greece The illusion of voluntary haircuts. BBC, FT, Reuters ESM altered. FT Nigel Farage. Zero Hedge UK prepares for Greek default. Telegraph And it should. Martin Wolf Bank exposures. Alphaville Examining QEs. Credit Writdowns Home sales slowing again. Calculated Risk Chinese inflation washing up on US shores. WSJ Commodity