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China doom mongering

Exclusively from Michael Pettis’ newsletter: The world seems to be rapidly moving away from the China-is-the-most-successful-economy-in-the-history-of-the-world rant to the China-is-weeks-away-from-collapse rant. But repeating a story often doesn’t make it more true. My guess, and it is only a guess, is that China can continue with the current growth model for at least another four or

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European unity!

Another exciting episode in the European Soap overnight. Yet another German Finance representative, this time Bundesbank President Jens Weidmann, released statements containing the opposite message to the one delivered by Angela Merkel when she’d asked all of the elites in her country to keep quiet for the sake of unity: The European Central Bank has burdened itself with “considerable

5

More signs of US slowing

I’ve been arguing for some months that the US economy is slowing. More recently I added the narrative that at the zero bound for monetary policy, where the core price signal ceases to have meaning, it is the expectation of price intentions in the economic leaders themselves that becomes the primary signal. In short, it

20

Accounting for the rentier

My post last week on APRA’s Discussion Paper on the new Basel III Capital requirements, created a few ripples around what APRA did not address in the discussion paper. Perhaps I can turn these ripples into waves by providing more detail on why APRA’s failure to address these issues will eventually lead to systemic failure

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Harry leaves a dent on Australia

Harry S Dent is a well known author and founder of HS Dent Investment Management, an investment firm based in Tampa, Florida. Dent writes a regular economic newsletter and has written seven books analysing demographic trends and their affect on the economy and asset markets. I first stumbled across Dent’s work early last year at my

3

CPI change confuses markets

Yesterday the ABS released a revision to their methodology for seasonal adjustment to CPI subgroups – an outcome of the 16th Series CPI review.  It resulted in a new lower estimate (not a revised estimate) of the trimmed mean and weighted median measures of inflation for the June quarter. News headlines and the foreign exchange

8

China versus India

Earlier, I read a wonderful book by Yasheng Huang on Chinese growth model.  He is a critic of the Chinese way.  He believes that the current Chinese growth model is more like South American model (old Brazilian way, for example) which ultimately failed. In the below video, he compares China with India, and the gist of his

2

September 15 links: Feeling the effects

Down: $US, energy, metals Flat: CCI, gold, grains, Treasuries Up: Euro, Aussie 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 Germany 2

1

José Manuel Barroso’s speech

The EU Commission President José Manuel Barroso just spoke to the European parliament in Brussels in hope of addressing the on-going economic problems of the 17 common currency nations. Below is the full text of the speech. Eurobonds and tighter integration are being re-visited, it will be interesting to see how the leaders of the

2

How the CPI hid the housing bubble

Recent discussions about the CPI have brushed over a key change that occurred in the construction of the index in 1998. In its 13th Series the CPI became a pure price index utilising an acquisitions approach, rather than a cost-of-living index utilising an outlays approach. One feature of this change is that it removed land

10

Trading Day

The S&P/ASX 200 Index closed down 1.6% or 67 points today to 4005, after a solid up-session in the morning, when the one-two punch of lower inflation and Moody’s downgrade of French banks tipped the bourse into the red. In after hours trading, the market is steady whilst the Euro and US futures point to

12

CPI revisionism

Here are a couple of bank takes on today’s ABS CPI revisions. Consensus is that the RBA’s job of holding rates steady just got a bit easier. I beg to differ. The ABS just handed a PR weapon to every disgruntled business lobby in the services economy. Anyways, Rumplestatskin, our very own CPI guru, will

12

Moody’s downgrades French banks (updated)

Just flashing across the terminal, Moody’s moves on French banks: By David Whitehouse Sept. 14 (Bloomberg) — Societe Generale SA had its debt and deposit ratings cut by one level to Aa3 from Aa2 with a negative outlook by Moody’s Investors Service. The bank has adequate capital to support its exposure to Greece, Portugal and Ireland, Moody’s said

32

Taxpayer takes it in the team

Last weekend Wayne Swan announced a new permanent guarantee of bank deposits up to $250,000 under the Financial Claims Scheme (FCS).   The existing scheme, introduced during the financial turmoil of October 2008, guarantees bank deposits up to $1million, and will expire when the new scheme takes over on 1 February 2012. We now, in theory,

9

China is not a white knight

The last day or so has seen a string of wild rumours about China buying European bonds.  A hilarity in the whole thing is that in another report, Giulio Tremonti, the Economy Minister, complained that Asian investors just won’t buy bonds because the ECB isn’t buying enough.  So are Chinese really buying?  Probably. There is something

22

SQM reports falling listings

The latest SQM research newsletter contains some more rays of sunshine for the property market. Figures released this week by SQM Research revealed that residential property listings have actually declined during the month of August 2011, coming to a total of 362,793 nationally. Falling by 14,522 listings since July 2011, total amount of stock on

25

Interest rate magic

Consumer Confidence for September is out and shows a jump of 8.1%. Bill Evans puts this down to: This is a surprisingly strong result. We think it emphasises just how important interest rates are to households. Recall that since early May the Reserve Bank has been threatening to raise interest rates. As recently as the August Board meeting

35

Chart of the Day

Today’s chart comes from Avid Chartist, and shows why understanding the US equity markets for an Australian investor is paramount. The chart shows the ASX 200 and S&P 500 both priced in US dollars (USD), for all of 2011 up to September 12. They have tracked each other especially closely since early May, just after

129

Australian Housing Valuation Report

Australian housing is overvalued. Nobody denies it. Debate remains, however, about how overvalued. Surveys by The Economist and Demographia claim Australian housing is the most expensive in the world. On the other hand, the Reserve Bank of Australia and local data providers like Rismark acknowledge the overvaluation but see it as less extreme and sustainable. The

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Do we need a media inquiry?

Well…yes…I should say so. Rupert Murdoch owns 70% of Australian newspapers. One of his UK operations has been shown to use unethical practices on an unsettling scale. Those two seem fair enough reasons to me. On the first, the concentration of ownership in newspapers is both a competition issue and a social-democratic one. Many of

31

A crazy 24 hours in Europe

Another crazy 24 hours for Europe. It would seem that Angela Merkel is trying to muster some form of actual leadership and set a direction for Greece. Her first step was to tell her counterparts in German parliament to stop talking to the media because every time they do the market blows up. Her second

2

September 14 links: Myths and rumours

Down: $US, grains, Treasuries  CCI, metals, Euro, Aussie, gold,  energy Rampant 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 Germany 2

39

The Pascoe indicator

This afternoon, Michael Pascoe wrote a soothing piece on the European crisis that I found troubling. We don’t need to get past the first two paragraphs to find out why: Hands up anyone who thinks a Greek debt default is inevitable. OK, absolutely everyone can all put their hands down. That’s what Europe’s banks think too –

7

Trading Day

The S&P/ASX 200 Index closed up 0.8% or 34 points today to 4072. In after hours trading, the market is up another 15 points whilst Euro and US futures point to gains. Asian markets experienced similar moves, with the Nikkei 225 up nearly one percent to 8616 points, whilst the Hang Seng is closed for

21

Insolvencies jump

Just in case you missed my recent post about growing Australian business insolvencies or are still living on planet Bullhawk with the belief that everything is just fine and anyone complaining is simply a whinger, here comes Dun & Bradstreet with even more evidence to the contrary: Australia has joined Europe as the only markets to

12

NAB Survey shows markets fallout

The Nab Survey for August is in and business conditions and confidence are suffering on the back of global volatility. According to the NAB boffins: Business confidence dropped sharply in August, with heightened global uncertainty, large falls in equity markets and the fear of debt market contagion. Confidence deteriorated across all industries, except recreation & personal services

20

2008 rerun

From the excellent folk at Forecast comes another disturbing prognosis this morning: European banks continue to be hammered again this morning on a combination of escalating Greece-centred periphery fear, generalised growth and risk re-pricing (Hang Seng hit especially overnight) and also bank downgrade talk. Once again, the negative feedback between periphery pricing, bank valuation, and

10

Chart of the Day: Secular bull

Reader JR asked yesterday what is meant by a “secular” market – here is the best visual explanation and puts current market volatility in context, from Doug Short. The literal meaning of the word: Market historians call these “secular” bull and bear markets from the Latin word saeculum “long period of time” (in contrast to

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Is the equity market a dill?

Yes, I’d say it is. As FOMC member, Thomas Koenig put it recently in a CNBC video interview with Steve Liesman: …a capitalistic economy – if you really believe in its long-term benefits – has cycles. People do make mistakes. See, the market is valuable not because it’s the smartest in the world, but because