34

Bull versus bear is dead

As the S&P500 rocketed into the close this morning on yet another European bailout rumour, it occurred to me just how broken the equity market is right now. We are trapped in bear market dynamics of grinding sell-offs punctuated by explosive short-covering rallies with no end in sight. The obvious conclusion to draw is that we

Latest posts

22

Europe stumbles, Dow cheers

As I expected there doesn’t seem to be any clear consensus on anything of real importance coming out of the latest meeting of European financial ministers. The only real resolution was for the Greek collateral deal for Finland, but once you read the details you have to wonder why they would even bother: The deal will

20

Is mining threatening our food security?

..there must be some data that they could have used to address the “value” of having future food security. This was a request once made of me in the context of losing productive capacity in agriculture from cutting water entitlements on environmental grounds.  It certainly got me thinking.  Given the recent conflicts between farmers and

19

China’s hard landing conundrum

A Chinese hard  is not an option, at least while there are other options. So, I have been asking myself for the past few months how to avoid a hard landing, or to delay it at the very least.  The most popular defence of the bullish camp (or the most popular argument against the bearish camp)

13

October 5 links: China worries

Rocket: $US  Flat: Treasuries, ore Crushed: CRB, Aussie, euro, grains, metals 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 10 Year

11

Trading Day

Another volatile day on the S&P/ASX 200 Index, with a large absorption of data, closing down 25 points or 0.6% today to 3872 points. The market is up slightly in the after hours futures market. Asian markets had larger falls, Japan’s Nikkei 225 closing down 1% at 8452 points, and the Hang Seng also down

3

RBA releases commodity prices

The Reserve Bank of Australia (RBA) has released its preliminary estimates for September 2011 commodity prices. Here’s the summary (emphasis added): Preliminary estimates for September indicate that the index rose by 1.0 per cent (on a monthly average basis) in SDR terms, after rising by 0.3 per cent in August (revised). The largest contributors to

19

Bill Evans looking good

Westpac’s Bill Evans cut from the pack back in July to forecast year end rate cuts. He was ridiculed at the time by many, including some especially infantile drivel from the bullhawks. Well, after today’s RBA meeting he’s looking awfully good. And today issued a note reaffirming his stance: Westpac Economic update As expected Reserve

19

Cut next month, if needed

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. Conditions in global financial markets have continued to be very unsettled, with uncertainty increasing about both the prospects for resolution of the sovereign debt and banking problems in Europe, and the

12

Record exports

ABS trade figures are out today and there’s no doubt about it, August was a cracking month, posting a big jump to record export revenues above $28 billion for the first time and delivering a surplus of $3.1 billion, the second highest ever. The good news came from one primary source, iron ore: As you

13

More European chaos

Sorry this is late today (technical issues). As I said yesterday it’s going to be a tough week for Europe, and last night certainly was that. It started poorly when the Chairman of the Financial Stability Board and soon-to-be head of the European Central Bank, Italian Mario Draghi, admitted that European banks were obviously having

29

NSW units approvals rocket

August building approvals are out and month on month approvals nationally jumped 11.4% from a depressed level. Private sector housing approvals remained very subdued, falling 1% m/m and 9.5% y/y. However units approvals rocketed 35%, propelled mostly by a huge jump in NSW. There were also smaller rises in VIC  and QLD but both remain in down

38

Cut rates, trash the dollar

It’s RBA day today and while the Bloomberg survey of 21 market economists finds that none think the RBA will cut rates, I reckon it is time they did. The Australian economy is just not as strong as the RBA had thought as recently as June. The inflation outlook is nowhere near as dire as

6

Chart of the Day: Euro down

Today’s chart focuses on the Euro/USD cross, from a short term and medium term perspective. After last night’s continued falls on Wall Street and in Euro bourses, the US dollar rally has continued, best exemplified by the falls in the Euro: The daily chart above shows the first breakdown in the Euro coming as the

11

Global PMI’s point down

Overnight, global PMIs painted a gloomy picture of advancing economic weakness. First up, the J.P.Morgan Global PMI dropped into recession for the first time since June 2009, falling from 50.2 in August to 49.9 in September: The new orders index showed greater weakness with a 0.9 point fall: Ironically, the US was the stand out perfomer, with

7

Where Chanos is wrong on China

Jim Chanos was among the earliest folks to go short on China real estate developers. Those shares are now being killed.  It is just amazing that there are some people who are still mocking him. If you really want to mock Jim Chanos, it is the long corruption bit, his long bets on Macau casinos

31

I’m giving up on AFG

My long term readers will be aware that I have followed the loan issuance data from AFG since I started blogging. Over time I have noticed quite a few problems with their reporting and data, most notably a large revision in LVR calculations that went completely unmentioned by AFG themselves. Over the last few months I have

12

Statistics lessons from The Drunkard’s Walk

Leonard Mlodinow’s terrific book The Drunkard’s Walk is an historical narrative on the philosophy of randomness and probability intertwined with modern statistical anecdotes. If the inner nerd in you enjoys a little mathematical philosophy like mine does it is definitely be worth the read. The anecdotes in the book provide lessons on the cautious interpretation

16

October 4 links: Down, down, prices are down

Up: $US, Treasuries, gold Flat: grains, metals, ore Down: CRB, Aussie, euro 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 10 Year

11

Trading Day

The S&P/ASX 200 Index closed down 111 points or 2.8% today to 3897 points. The market has dropped 10 points in the after hours futures market, whilst Euro and US markets are also set to open down, and at crucial support levels. Breakouts below are likely to result in the next step down. Asian markets

72

Where are all the deposits coming from?

It has been a while since the last mailbag but I got asked a cracking question over the weekend so it is definitely time to share another e-mail with the wise readership of MacroBusiness. Today’s e-mail comes from a reader Harrison who is wondering where all the banking deposits are coming from. Just wondering if

7

Inflation contained for now

Find below the release for today’s TD Securities-Melbourne Institute Monthly Inflation Gauge: The TD Securities – Melbourne Institute Monthly Inflation Gauge rose by 0.1 per cent in September, following a 0.1 per cent decrease in August and a 0.3 per cent rise in July. In the twelve months to September, the Inflation Gauge rose by

24

Manufacturing is getting murdered

Nice. The raging recession in Australian manufacturing is worsening. The PMI dropped to a new cycle low, having been in effective recession for over a year. The internals of the survey are very nasty. 10 out of 12 sectors are shrinking: Capacity utilisation is collapsing, suggesting more job losses are ahead: The rate of new

22

Chart of the Day: Roll over CRB

Today’s chart will be very simple and illustrates what is happening on risk markets around the world. Its an index I’ve followed previously, the CRB Index – which measures a basket of 19 commodities, split amongst the energy, base metals, agricultural etc. And what is the chart saying? Rollover and stay down. The QE effect

21

Shall we pull the fiscal or monetary lever?

For the first time in many months, nobody is talking about the RBA in a rates meeting week. Ironically, the silence accompanies a context which has made a shift in monetary polcy more likely than at many previous meetings this year. The global economy is unequivocally slowing, recession talk in Europe and the US is now

5

Another ugly week in Europe

Quelle Surprise! Greece will miss its deficit targets: The budget deficit will reach 8.5 percent of GDP this year, missing a 7.6 percent target. It will be brought down to 6.8 percent of GDP next year but will still miss the bailout target of 6.5 percent of GDP. Three critical months remain to finish 2011,

4

China’s manufacturers miss their Xmas bounce

China’s official manufacturing purchasing mangers index (PMI) improved for the second month in September 2011.  The headline PMI rose from 50.9 in August to 51.2 in September, just slightly above market expectation of 51.1. New orders index increased slightly from 51.1 to 51.3, and output rose from 52.3 to 52.7.  Finished goods inventory increased from

8

The Australian dollar rerating

Equities have just finished their worst quarter, in terms of returns, since the dark days of Act 1 of the GFC and the impact of this has been to severly dent Australian dollar sentiment. But even as the dollar teeters on the edge of another cascading fall you’d have to say that the currency is

25

Value investing in volatile times

Several MacroBusiness bloggers have talked about the possibility of share markets entering a period dubbed the “Great Volatility”.  This is essentially a secular bear market where prices rise and fall 20‑50% within a year but give low growth (1-2%) on average over the long term.  This would be in contrast to the “Great Moderation” –

12

A better Buffett Rule

Recently American billionaire investor Warren Buffet wrote this article in the opinion pages of the New York Times arguing that the super-rich (top 400 personal incomes) have been molly-coddled by tax reforms of the past three decades.  Buffett noted that he only paid an average tax rate of 17.4%, while the tax burdens of his