Unconventional Economist

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Links 3 July 2013

Global Macro: New Doomsday poll: 98% risk of 2014 stock crash – MarketWatch Real-estate valuation, current-account and credit growth patterns, before and after the 2008-09 Crisis – VOX Is the global boom in commodity prices finally over? – BBC United States: Martin Feldstein: The Fed Should Start to ‘Taper’ Now – Wall Street Journal Revitalized

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NSW to produce fuel from algae

By Leith van Onselen One of the purported benefits of implementing a carbon tax or an emissions trading scheme is that it will, over time, transition the economy away from dirtier sources of energy towards cleaner sources by better aligning firms’ goal of profit maximisation with the Government’s goal of lowering Australia’s carbon footprint. Today,

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Measuring China’s credit squeeze

By Leith van Onselen ANZ Bank has today released an interesting note (below) examining the second round impacts of China’s credit squeeze: – If China’s central bank continues to tighten market liquidity without accommodating the rapidly deteriorating internal and external environments, we believe financial institutions will start to de-leverage which will last for 1-2 quarters.

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Pascometer registers a change in outlook

By Leith van Onselen That didn’t take long! Michael Pascoe has today stepped back from childish derision of “doomsayers talking down the economy” to post a thoughtful and well argued piece on why Australia should look to significantly boost infrastructure investment in a bid to both boost employment, growth and long-run productivity as the mining

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Upper class welfare and the age of entitlement

By Leith van Onselen Matt Cowgill has today published a ripper article in The Guardian decrying the huge amount of tax concessions lavished on wealthy Australians, which are highly inequitable and cost the Budget billions of dollars in foregone revenue: We do a lot of spending through the tax code. Treasury estimates that all the

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At last, the mining cliff acknowledged

By Leith van Onselen Above is another interesting segment from last night’s ABC The Business (by far the best business/finance show in the country), in which a number of commentators, including Prime Minister Kevin Rudd, question whether Australia will be able to fill the void left as the mining boom unwinds. While no solutions are

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QE tapering expectations threaten US housing

By Leith van Onselen From Westpac Institutional Bank comes research arguing that market expectations of Fed tapering, which has seen the 30-year mortgage rate rise by 115bps since November 2012, putting at risk the housing market recovery: Following the 18–19 June FOMC meeting, markets became increasingly concerned that the Fed may taper its asset purchases

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Mortgage arrears up despite lower rates

By Leith van Onselen Fitch Ratings Agency has this morning released its Australian Mortgage Delinquencies by Postcode report for the March quarter, which revealed that overall mortgage delinquencies increased to 1.45% at end-March 2013, up from 1.2% at end-September 2012, but below the five-year average of 1.53%. From Fitch: Fitch Ratings says mortgage performance in

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Links 2 July 2013

Global Macro: Blackrock: ETFs are the true market – Financial Times Why Hedge Funds Are Failing Right Now – Business Insider Who Goes to Cash Reveals Extent Bonds Will Turn Into Bear Market – Bloomberg Bear market in gold pummels Einhorn’s Greenlight fund – Reuters United States: They said the sequester would be scary. Mostly,

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Is carbon pricing reducing emissions?

Cross-posted from The Conversation Australia’s carbon pricing mechanism has been vilified by the Federal Opposition and certain members of the business community, but it is a key part of Australia’s response to climate change. So one year on, where does it stand? Far from being “absolutely catastrophic” and a “wrecking ball” to the economy as

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Westpac inflation chart pack

By Leith van Onselen Please find below a chart pack from Westpac on the TD Securities-Melbourne Institute Inflation Gauge, which registered ongoing subdued inflationary conditions across the economy in June. With the Australian Dollar now falling, and tradeables comprising roughly 40% of the CPI basket, one does wonder how long these low inflationary conditions can

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Gold Driven By Financial Instability, Not Inflation

Cross-posted from Bullion Baron (Twitter: @BullionBaron) While I’ve talked about inflation adjusted targets for the Gold price, it is not my opinion that inflation or expectations of inflation have been the primary driver of the Gold market over the last half a decade. Since late 2008 the primary driver of the Gold bull market has

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Colin Barnett warns on commodity outlook

By Leith van Onselen On Friday, Western Australia’s Premier, Colin Barnett, attended the The Australian and Deutsche Bank Business Leaders Forum in Perth, where he delivered an especially sobering outlook for Australia’s second biggest export commodity: coal. From the Australian: “The change in the coal price is beyond cyclical: it is a structural change… And

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Auction clearances solid

By Leith van Onselen Auction clearance rates in Australia’s two biggest markets – Sydney and Melbourne – were once again solid over the weekend. In Australia’s biggest auction market – Melbourne – clearances rose to 73% on 601 auctions reported to the REIV. However, with 54 auctions listed as “no result”, the final clearance rate

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60 Minutes on China’s ghost cities

By Leith van Onselen Last night, 60 Minutes Australia screened an interesting and balanced report (above) examining China’s famed ghost cities and towns. Below is an extract of the transcript: We have a lot to thank our Chinese neighbours for. The Communist giant’s remarkable boom has shielded us here in Australia from the worst of

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Kiwis raid retirement accounts for housing

By Leith van Onselen The New Zealand housing market appears to be getting out of control. Amid rapid price growth, particularly in supply restricted Auckland and Christchurch:     Increasing mortgage debt: Rising average mortgage size: And near record low inventory: Young Kiwis are now raiding their retirement accounts – known as Kiwisaver – in

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RP Data weekend market summary

By Leith van Onselen Please find below RP Data’s latest weekly housing market update, which provides a useful snapshot of the housing market as at 30 June 2013. This week’s report includes: Latest weekly dwelling value results; Auction results & clearance rates Latest median house & unit prices; Average time on market & vendor discounts;;

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Links 1 July 2013

Global Macro: Tremors From the Fed’s Grand Experiment – CNBC United States: How Can America Become More Dynamic? – Forbes North Las Vegas sued over plan to seize home mortgages – reviewjournal.com Europe: German politics puts sand in cogs of EU machine – Financial Times Former Anglo Irish Bank chief David Drumm apologizes on tapes,

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How low can gold go?

By Leith van Onselen UBS has today released research asking the question: how low can gold go? Gold has fallen $125/oz since the Fed signalled a potential wind down of its QE stimulus last week. Since the start of the 2013, the gold price in US$ is now down 26.9%. The fall in the A$

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Westpac: Ignore the ToT at your peril

By Leith van Onselen Please find below an interesting new report from Westpac Institutional Bank discussing the importance of the terms-of-trade and why the currency and/or interest rates would have to fall much further before monetary conditions could be considered accommodative: There is a broad acceptance that the ToT is a very important variable in

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More mining canaries croak

By Leith van Onselen It’s been a bad few months for mining-related industries. In early May, I noted how falling mining equipment sales could be a harbinger of a sharper than expected reduction in mining capex. Over the remainder of May, we then witnessed a spate of mining services firms – Coffey, UGL, Worley Parsons,