1

The flying wombat

When it comes to investing in shares, Australians love paying high prices for former government-owned monoliths.  And the love affair continues as Qantas (QAN) released its half years results with a headline $417 million underlying profit, before tax. The economic commentariat gave mixed reviews, with Royal Bank of Scotland saying the result was reasonable whilst

Latest posts

0

Super cycle or bust

BHP has reported its much anticipated mega profit, showing just how much better it is to be leveraged into the developing world than the developed world. The market predictably sold off on the news. As for what happens next, most brokers are bullish: Deutsche Bank, Goldman Sachs, Merrill Lynch, UBS and Royal Bank of Scotland all had buys. Morgan

11

Moody’s uninformed market

After the announcement of the Moody’s review overnight, it’s something of a spectacle watching the banks swing from the line that they need to raise interest rates because of rising wholesale borrowing costs to telling us not to worry about rising wholesale borrowing costs. From the Wall Street Journal: In response to Moody’s, Commonwealth Bank’s

0

February 17: Moody’s dumps on banks

Moody’s puts all four majors on downgrade review. WSJ, Alphaville, Bloomberg Loan deposits rising in US. WSJ Bernanke Hoocoodanode? Calculated Risk Producer prices rising. Econompic China suspends house price data. Zero Hedge Chinese relocation risk. FT Brazil won’t play on yuan. WSJ Flows to China. Alphaville Bahrain rocked. FT Libya cracks down. FT RSPT stoush.

6

Key drivers of the Aussie

What drives the AUD/USD exchange rate? You would think that it’s a question that is fairly easy to answer yet conventional currency forecasters still have difficulty get their point forecasts right. I’m not making excuses for these guys and gals in the punditry but I’ve always thought that there was a little bit of an

21

The US Government’s Debt Spiral

Following on from my previous post on the impending US municipal bond crisis, I want to provide a brief overview of the debt time bomb facing the US Federal Government. Karl Denninger at Market Ticker has provided a nice analysis of the US Treasury’s 1 February presentation to the Borrowing Advisory Committee (Hat tip Bernard Hickey for the link). Denninger

4

Funny old NAB

I have been watching the National Consumer Credit Protection legislation for some time now. It seems to be slowly creeping into other people’s radar as well.  “Under the new National Consumer Credit Protection (NCCP) legislation, lenders are being more cautious when lending to the self-employed and small business owners who, unlike PAYG borrowers, do not

7

Amateur dramatics

Over the last few days we have seen the Big 4 banks put on an acting performance that makes a kindergarten presentation of teddy bear’s picnic look like a major Broadway production. The bank wars escalated tonight, with Westpac responding to NAB’s attack by axing a $395 home loan fee and increasing rate discounts. Meanwhile, NAB was

0

Big bull

The equity bulls are loudly spruiking their bull and the big cap stocks might be a beneficiary. A report by Southern Cross Equities (see below) puts the case. It notes that most equity strategists are recommending only “neutral” sector weightings in the two major sectors in Australia, materials and financials. But Southern Cross’ “multi-factor quant

17

MRRT WTF

From today’s AFR: The Gillard government’s revised mining tax will collect $60 billion less over 10 years that the resrouce super profits tax, raising questions about whether it can fund higher superannuation tax concessions and infrastructure spending. New figures released under the freedom of information (FOI) laws reveal that the mineral resource rent tax will

2

Links February 16: China’s inflation

China’s inflation. Mish Exporters in trouble. (h/t LBS) Business Insider Rebellion in Iran, Yemen, Bahrain Biiiig bear market rally. David Rosenberg Systemic risk. Kyle Bass US bond purchases, UK rules. Zero Hedge US Empire, retail solid. Calculated Risk But input costs surging. Zero Hedge The new ASX/SGX merger proposal. SMH Pass it. Bryan Frith Uranium sales

2

Kloppers, Marius Kloppers…

As this blogger keeps saying, not all markets are created equal. In strategic commodity markets, where governments are big players, the dynamics are not as simple as the balance of supply and demand determining equilibrium. In strategic commodities, when prices go up, demand does not fall. Rather, it increases as governments panic about security of

2

Gearing down

My fellow blogger, Houses and Holes, has magisterially, even regally, detailed how private debt has come to matter in Canberra circles since the global financial crisis. It seems Australia’s largest companies agree. The game of pass the parcel – private business gets the profits and ideological smugness; governments get the losses, debt problems and blame

7

Two speed everything

It was obvious from CBA’s 1H11 financial statement that Australians went on another debt fueled housing spree in December. Although I suspect Admiral Glenn from the good ship RBA would have already known what was happening, the latest housing finance figures would have had him grumbling “they’re still not listening” under his breath. The early

5

Blogging the Aussie

Cycle analysis is very important. It tells us the phases of the moons, the size of the tides, the seasons and perhaps even when the lemmings are due for a run. But can it really tell us when the AUD is going to rise or fall or the size of the bond market sell off

12

Treasury’s unhealthy optimism

For many years, anyone who mentioned the word “debt” was shunned within Treasury. That august institution was in the grip of the “Pitchford Thesis”, the notion that current account deficits didn’t matter so long as the borrowing emanated from the private sector. This was essentially a version of the efficient market hypothesis, that so long

2

Links February 15: Kloppers’ influence

Democracy contagion: Algeria, Libya, Yemen, Libya, Iran. WSJ Or, Jordan, Syria, Saudi Arabia. FT Irish haircuts. Independent US deleveraging update. Calculated Risk More pain for US housing. Calculated Risk The rise of quant data. Baseline Scenario China’s new Panama Canal. FT China’s inflation controls. Zero Hedge Versus: China’s inflation booster. The Source The China domino. John

15

Another troubling bargain

Recently I have been wondering how long it will be before another one of the second tier Queensland exposed banks comes out with a profit warning. Everyday there is a new story about property that has gone badly in Queensland, but the Gold Coast is definitely the worst. A couple of weeks ago I mentioned a “huge” auction event

7

US Municipal Bonds: The Next Crisis?

Municipal bonds are bonds issued by lower level governments (county, city or state) in the United States to raise capital for public works projects, such as sewerage, water treatment plants and roads. For decades, municipal bonds have been a favourite amongst investors in the higher tax brackets since they pay higher yields than Treasury bonds and are also exempt

7

Macro 101 – Political economics

In my previous Macro 101 post a number of people asked me some genuinely good questions about the functional process of the banking system under in certain scenarios. These questions made me realise just how much more there is to say about banking operations.  But more importantly it also made me realise how important it is

10

Carrion comfort

As usual, the media is beating housing finance data to death with a feather. It’s nothing personal, and this blogger could have thrown a dart to choose which overly-bullish article to deconstruct, but Adam Carr goes further than most so he’s up for a flaming. Using the new ABS housing finance commitments data, Carr argues the

1

Capital question

What are companies going to do with their abundant capital? The answer to that question will determine much about the medium term future of global stock markets. Much has been made of the two speed global economy, with the developed world struggling and the developing world growing fast. But there is another two speed system,

7

Madonna grows a third

With the US stock market on one of the greatest tears that this blogger can recall and the NASDAQ just 50 points shy of its post-bust high, it’s time we took a step back and looked at the bigger picture. Above is the most amazing chart in modern finance: 25 years of the S&P500 graphed

1

Links February 14: Who’s next?

Algeria? Zero Hedge Or, Bahrain? FT Week ahead for the DOW. Calculated Risk US participation rate. Calculated Risk, Zero Hedge DOW internals. DragonFly US housing reform. Alphaville All time high for US Feb petrol prices. Mish Aussie as oil play. PragCap US manufacturing lean and mean. Street Light Fine Gael ahead in Ireland. FT Gittins! loves a surplus?

44

The Baby Boomer Bust?

The 21st century will be the century of old age, where declining birth rates meet longer life expectancies. This ageing of the population will affect many areas of the international economy, from consumption and growth to asset valuations.  The impacts from ageing will likely be most acute in Western Nations, although some developing countries, most notably