Links February 9: China hot

Chinese inflation and rates up. Bloomberg Who cares. FT US bond market pressure. Barrons Housing affordability groups meet. The Age Full China bull. Robin Bromby Contagion on: Portugal, Spain, Italy, Greece Ore price steady. Reuters BDI stabilises. Dry Ships

Latest posts


Macro 101 – Bank operations

With the slow gurgling sound of  the lack of retail spending by the public in my ear, it is time to get back to my other stream of conversation.  I am going to continue on with my macroeconomics series. Today I am going to talk about banks and how they operate in the context of macroeconomics


Bizarro World

Today I promised myself that I would take a break from the housing market in order to tackle other areas of interest, such as demographics, China, population policy, and investing. But then I was handed an article by a colleague entitled Why must we make the same old policy failures in the housing market?   At


Australia underpriced?

OK, Australian mining’s booming. But the stock market is not reflecting it. A report by Deutsche Bank ranks equity market returns in local currency since the beginning of last year. Australia comes second last, with only Brazil doing worse. Both countries are beneficiaries of the commodities boom and China’s rise, which tells you something about


The “cautious consumer” meme

Is the media deliberately obtuse? Following Myer’s complete wipeout, there’s a universal chorus of “cautious consumers” being the problem. It’s the weather, it’s the banks, it’s rate rises, it’s your grandmother’s cat. The problem with this “cautious consumers” line is that it implies a choice. The Australian shopper has apparently elected not to buy. Well,


Links February 8: Pinning the ears back

Bizarro European summit. Eurointelligence, Wolfgang Munchau Market’s verdict: Contagion on. Portugal, Spain, Italy, Belgium, Ireland, Greece, Krugman wrong again. NYT Bangladesh the next food domino. Zero Hedge Wall St bouncing back. Simon Johnson US economy accelerating. Tim Duy O’Farrell backs burbs. SMH China’s Lewisian turning point. John Garnaut Cautious consumers yada, yada, yada. The Age IWT


Trouble on the western front

The politics of housing in Australia is something that has fascinated me for a long time. I guess that it all started in the early 1980s with the introduction of negative gearing. Back then the politics was easy, there were literally millions of people with very limited amounts of superannuation who were very happy to have


Disparate groups slam Australia’s housing affordability

In the wake of the 2011 Demographia International Housing Affordability Survey, which identified Australia as having the most unaffordable housing in the Anglosphere, it appears that pressure is building on the Australian Government to take corrective action. Over the past two weeks, concerns have been raised by three disparate groups: the Sacred Heart Mission, the Real Estate Institute of


Fruits of disleveraging

So then, after today’s howler by Myer, reality has partially  dawned on the market and the media: Retail is toast. The above chart shows today’s bloodbath for the stock. The only wonder is why it rose in the previous month. There are a number of explanations in the media for the result, most repeating the


Qantas’ wake turbulence

The news that Qantas is looking at an alliance with a large Asian carrier may be too little too late. Will Qantas have much of a brand to bring to the table? Its heavy focus on the domestic market has not done its brand any favours, indeed it has done damage.  In order to have a


Dear Prudence

As mentioned in my last couple of posts, new consumer protection legislation was introduced on January 1 to little media attention. Early last week I noted that the legislation could be having a greater impact on lending than many expected. However the true measure of the impact of legislation is just how loud the effected vested interests scream (hat tip


Fashion victim

Sure enough, markets woke up late Friday to the truth about the RBA’s Statement on Monetary Policy. That is, it was far more dovish than the chatterazzi made out. By the close, the dollar was some half a cent lower on the day and well below the level it was when the statement was released.


Ban the bonus!

It’s bonus time for bankers around the world and the GFC is a distant memory. In the US, the Wall St bonus pool is at a record high. In the UK, Barclays Bob Diamond of Barclays is in hot water. And here, if the Sunday Telegraph (h/t threedogsandakid) is to be believed, then MacBank is


Links February 7: Profits and bonuses

Currency manipulation. Michael Pettis Versus capital controls. WSJ China: bulls vs bears. WSJ Week ahead for the DOW. Calculated Risk Peripheral Europe needs more. VOX Not a done deal.  WSJ Egyptian parties meet. NYT Bonus time! Rotten Apple, FT, Sunday Telegraph Poor fan. Stuart Washington Love the levy. Gittins! Miners’ mind-numbing profits. Adele Ferguson More


US Democratic Party Shoots Itself in the Foot

The United States Democratic Party has a problem. Following the 2010 Census, which showed strong population growth in Republican held states, six House of Representative seats and Electoral College votes are to be reapportioned toward states won by John McCain (the 2008 Republican candidate) from states won by President Barrack Obama (see below map). This loss


New Zealand Deleverages (Continued)

Following Wednesday’s post, New Zealand Deleverages: Taste of Things to Come, two important pieces of information have been released supporting my contention that the New Zealand economy is facing a prolonged period of anaemic growth as household’s deleverage following their borrowing binge in the 2000s.  First, data was released on Thursday showing a ‘shock’ rise in unemployment to 6.8% from


Weekend Reading: QEIII

US unemployment report solid. Calculated Risk Long Treasuries screaming. Zero Hedge Bernanke denies role in food spike. FT Reluctant to move. Gavyn Davies Merkel’s mission. Bloomberg Clawbacks are coming. FT Big banks and fiscal ruin. Baseline Scenario Game on for Portugal. Bloomberg SWF now. Michael West TBTF. Malcolm Maiden Fairfax addresses it’s rising shareholder. Adele Ferguson Expanding


The price of prudent banking

Systemic risk caused by non-prudent lending is obviously a danger to the economy. It is therefore important that the financial system has a level of legislation and regulation that ensures that risk is correctly measured and worn by those who seek to profit from it. The world’s financial regulators are slowly adopting Basel standards for financial regulation in hope that it will remove the


Dutch Disease hits profit season

Analysts’ forecasts for the reporting season are showing just how biased the Australian economy is becoming towards the mining sector. UBS is estimating earnings per share growth for this financial year to be 14.4 per cent. Resources are predicted to be up 43 per cent, the rest of the market up only 4.5 per cent.


Hawkish blather

There’s quite a lot of blather in the media about the RBA’s outlook on interest rates following the quarterly statement on monetary policy. Most of it predicting more rate rises sooner rather than later – here, here and here – and everyone interpreting the RBA’s statement that it will “look through” the flood effects as proof that it’s


Paul Krugman is wrong (updated)

A few days ago, Nobel Laureate Paul Krugman declared again that there is no ‘financialisation’ element to the current commodity price surge. He began: I’ve been getting a fair bit of correspondence insisting that political unrest, in the Arab world and elsewhere, is being caused by … Ben Bernanke. You see, quantitative easing is responsible for


Links February 4: Inflate/deflate

US ISM strongish. Bloomberg Versus US employers still unsure of recovery. FT Rice now flying. Zero Hedge Liberalise food. Javier Blas UN indicators have food prices at record. Zero Hedge IMF warns Asia overheating. WSJ European consumers close wallets. Econompic Irish bank run. Ambrose Evans-Pritchard Ireland by Michael Lewis. Vanity Fair Contagion returns. Portugal China anomalies. Zero


Australia doesn’t need more securitisation

Regular readers of this blog will know that I am highly sceptical of measures aimed at increasing competition within the mortgage market. Back in December, I argued that Australia’s housing bubble had been caused by a combination of easy credit and unresponsive housing supply. In the early-1990s, these non-bank lenders entered the Australian mortgage market and began raising funds via securitisation


Has the debt tide turned ?

I have followed the AFG mortgage reports for some time. AFG claims to be the largest brokerage service in the country with about 20% of the market.  The figures they produce are only a guide to the overall mortgage market, but previously their reports have matched very closely with the more comprehensive figure from the ABS that have come later. The


Digging for dividends

Here’s the latest idea in the market. Dividend payments from mining companies (yes, some mining companies pay dividends). The long term commodity boom, which is dominated by a global oligopoly, may be triggering a change in the way mining companies are evaluated, away from capital gains and towards dividend. Analysts are trying to ride the sentiment; probably as a


Links February 3: Inflation rages

Egypt riots. BBC Yemen President offers resignation. Hindustan Times Pakistan next? Marc Faber Worse to come for food. FT Wen commits to tackling inflation. Reuters Iceland’s successful bankruptcy. Bloomberg Neoclassical to behavioural economics. Credit Writedowns (h/t Naked Cap) US refinance now reverse ATM. Calculated Risk Australia more risky (and expensive). The Age Yasi to boost commodity


NZ Deleverages: Taste of Things to Come

Readers that have followed this blog for a while will know that I follow events in New Zealand closely, as I believe that events there can provide important insights and lessons for Australia. In many ways, New Zealand is a microcosm of Australia (minus the resources). We share essentially the same banking system (New Zealand’s largest banks are owned by Australia’s Big


Buying the dips

Today’s report by UBS on global equity market performance in last December highlights the value of buying after bad news. The best performing market was … Greece. Presumably after the announcements that Japan and China would pitch into help the Eurozone debt auctions. Those who bought during the Greece crisis will have done well. Of course China will help the Euro; it is positioning to take


Queensland’s cyclone

Cyclone Yasi has been upgraded to a Category 5 storm ( the highest level ) and on current estimates is expected to hit between Cairns and Innisfail at around 10pm tonight. The size of this storm is overwhelming, and the bureau of meteorology has announced that this is largest recorded storm ever to hit Queensland. Weatherzone


Yuan gush

From Michael Pettis’s exclusive newsletter comes this update on Chinese lending and interest rates: It seems that already bankers might be anticipating the relaxation of lending targets.  Rumors on the ground suggest that new lending in January may come in as high as RMB 1.2 trillion.  This might seem pretty strong evidence that the PBoC