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

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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


Links February 2: Eye of the storm

Egypt’s million man march. FT, Bloomberg Jordan sacks government. FT Will unrest spread to Saudi Arabia? Ambrose Evans-Pritchard What does revolution cost in Oz? $22m. The Age ISM power. Calculated Risk Commodity laggards breaking out. Barron’s Stock picking is dead. Zero Hedge China housing bubble hits terminal velocity. Bloomberg Chanos on short China. FT Higher rates coming in


The Australian banks’ $135 billion funding chase

The Australian Financial Review (AFR) today published an article entitled Banks in $135bn funds chase, which highlighted the significant offshore funding challenges facing Australia’s banks. Here’s an extract of what the AFR had to say: The heavy reliance of Australian banks on international financing will force the big four banks to seek about $135 billion in wholesale funding


Holy cash cow, Batman!

Oh yes, ladies and gentleman, fresh from the RBA, that’s another monthly moonshot in Australia’s terms of trade for January. That means: Over the past year, the index has risen by 49 per cent in SDR terms. Much of this rise has been due to increases in iron ore, coking coal and thermal coal export


Queensland’s water bill

A cyclone the size of the Northern Territory is currently bearing down on North Queensland. The emergency broadcast system sent an SMS to every Queenslander last night and according to the Queensland Premier Cyclone Yasi will hit the north Queensland coast with greater ferocity than devastating Cyclone Larry. Thousands of residents, as well as patients at Cairns hospital, face


Get yourself a hard hat

Some boom. According to Bloomberg: Australian manufacturing contracted in January for a fifth straight month as measures of inventories, wages and supplier deliveries declined, a private survey showed. The manufacturing index was 46.7, compared with 46.3 in December, the Australian Industry Group and PricewaterhouseCoopers said in a survey released in Canberra today. A number below 50


Go Wes young man

Will the uprising in Egypt be an influence on the Woolworths share price? The interconnection of the global economy can be exaggerated, of course. The news that Coles is rapidly catching up will be exciting more investment attention in the short term. Coles’ food and liquor sales grew by 6.3%in the latest half compared with 3.5%


The great disleveraging

The RBA’s credit aggregates for December were out yesterday and as always make interesting reading. Owner-occupier mortgage debt expanded at an annualised rate  of 7.3% seasonally adjusted. Investor mortgages grew at 4.8%. Personal debt shrank at 4.2% annualised and business at 4.1%. All four of these figures are showing slow declines or low growth plateaus.


Links February 1: Risk awwwwwn

Egypt rebels rally to El Baradei. WSJ, NYT Brent hits $100. Barchart US PMI details. Zero Hedge Loneliest man at Davos. Bloomberg China’s housing poor. Telegraph US dependent upon global rebalancing. Tim Duy Reform monetary policy. Henry Thornton Coking coal moonshot continues. Coal Portal Maybe this is why. BOM No financialisation of commodities. Krugman (is he nuts?)


Don’t give me credit

I have mentioned Veda Advantage previously. They produce a nice report on Australian credit demand on a quarterly basis. Today they released their latest report. For those who understand credit dynamics and its economic effects this report is very concerning. Personal loan enquiries rose 2% year-on-year during the December quarter, the first sign of growth after 11 consecutive


Up or Downer

OK, the stock’s a dog. But might it be a counter cyclical punt? The announcement by Downer EDI that it would make a further $250 million provision for its Waratah project saw the shares fall by about a fifth. “Problems are compounding with no end in sight” Morningstar warns. “Here we go again” Macquarie Equities


The China domino

The stated goal of the Hu Jintao-led Chinese government is a “harmonious society”. Perhaps that is why the word “Egypt” was blocked on certain search engines over the weekend. Multiple factors are in play in Egypt, but there is one vital similarity with China: Food inflation of a breadth and severity that few in the


Links January 31: Fog of war

Egypt approaches endgame. FT Army withdrawing to create chaos? The Arabist Suez not the problem. Contagion is. James Hamilton All things oil – up. Barchart Harmony. China blocks “Egypt”. Reuters China bubble risk. Telegraph Happy Davos. Simon Johnson No commodity speculation. (Nah, none at all) Greed, green and grains Cyclones in Qld. SMH Qld dogs should marry.


The Gold Coast’s other casino

As I have mentioned previously, the Gold Coast is the frontline of the credit driven correction occurring in Australia. I have previously expressed my concern about the flow-on effects to Queensland’s banks.  Today I note that the local spruikers are back trying to talk up the market. FOUR of 11 prestige properties were sold in an exclusive auction held by Ray White Surfers


Mother Nature is not finished

As Julia Gillard attempts to convince everyone that the flood levy is the “best thing for the country” I have to reprint the following lines. “It is not true to say to Australians that there is a big pile of money there that somehow I could just go and use,” Ms Gillard told the Seven Network today.


Neocon’s revenge II

History, it seems, is not without a sense of irony. You may recall that September 11, 2001 marked the rise in the US of a new breed of foreign policy hawk: The Neoconservatives. The stated goal of the ‘Neocons’ was a “Project for a New American Century”. Their principles were laid out in 1997 in


Weekend Reading: Neocon’s revenge

Egypt turmoil. Bloomberg, Stratfor, FT Follow the struggle. The Arabist The importance of Suez. Zero Hedge Yemen mass protests. The Telegraph Syria mans the barricades. Zero Hedge Jordan marches. FT Fed primed for more. Tim Duy So’s Timmy Geithner. BusinessWeek US GDP. Calculated Risk, Econompic Dubai’s world succumbs to Ozimandius. Telegraph (h/t Naked Capitalism) The China


Macro 101 – Credit effects

In my previous post I talked about the sectoral balance equation which is fundamental to understanding how an economy functions at a macro level.  The function is also useful to understand the likely high-level economic outcomes of  monetary and fiscal policy changes made by a government. If a government is running a surplus budget then they are taxing more



This blogger has looked on in astonishment as the iron ore price has moonshot through a sequence of cup and handle formations to an all time high. There are a variety of reasons behind the rise, not the least being the blow-off in Chinese growth. However, a number of variables are now in play that


The trouble with being normal

There is the sound of distant murmuring as concerns rise in the media and amongst economists that inflation is on the rise, raising the prospect that the Reserve Bank will raise rates further. Australia, it seems, is different and that has consequences for investment. It already has comparatively high interest rates compared with most of the developed


Links January 28: The levy breaks

China land games. Market Watch Japan downgraded. Zero Hedge, The Source China will raise further. Bloomberg Now it’s uranium. Refomed Broker Caterpillar’s 2011 forecast. WSJ Food stockpiling. FT Levy politics. Peter Hartcher Interests slam levy. The Oz Two-speed pay. SMH Loving the China bubble. The Age Coal to rocket. The Oz


Macro 101 – Sectoral balance

I note today that the PM has announced the introduction of a flood levy, some policy changes and cuts of $2.8 billion dollars in government spending including a cut of the national rent assistance scheme. That last point is something I want to discuss in a future post because it will have some interesting effects on housing. All


Village gossip

The news that Village Roadshow is looking to sell its 52% stake in its radio investment Austereo has led to speculation amongst the chatterazzi that Village is looking to privatise. Maybe. Although if the chatterazzi are predicting it surely that is unlikely to be the real motive. More probable is that Village needs the cash.


Bank wedge

A couple of recent developments are worth assessing with regard to the outlook for banks and their ability to manage interest rate margins. Some weeks ago this blogger wrote in reference to the floods and the RBA: …  the world is quickly swinging from a GFC-deflation toward a recovery led by commodity price inflation … Australia’s


Link January 26: Rolling on

Spanish banks. Eurointellignce US refi kaboom. Calculated Risk Does Martin Wolf read MacroBusiness? Food rocks Egypt. FT India muscles up. FT Contagion running: Ireland, Portugal, Spain, Italy, Belgium, Greece More SHIBOR. Zero Hedge Will China save Europe? Bloomberg Pavlov’s bulls. Jeremy Grantham Dollar down on more Fed giveaways. Businessweek Coal back. SMH Adapt or die.


UK deleveraging: “standard of living to plunge at fastest rate since 1920s”

The Telegraph today published a disturbing article on the dire state of the UK economy: Households face the most dramatic squeeze in living standards since the 1920s, the Governor of the Bank of England warned, as he reacted to the shock disclosure that the economy was shrinking again. Families will see their disposable income eaten up as


Australia Day links

Double dip recession in UK. Telegraph SHIBOR spike. Zero Hedge, II EFSF roars into debt. Asymtotix, FT Contagion continues: Ireland, Belgium, Portugal, Greece, Spain, Italy India raging inflation. Economic Times Fake demand. Tim Duy Give them stimulus. Peter Martin CBA customer support smashed. SMH Australian inflation. Adam Carr Chinese coal market tension. The Economist Hess


Capitulation contagion

This morning I reported that after many attempts to keep a stiff upper lip ANZ finally capitulated on house prices for 2011.  This afternoon I note that the rest of the Australia seems to have joined in. House prices in Australia are expected to fall moderately over the next year, with the biggest declines to be



The chatterazzi are indulging in hand wringing over Woolworths’ first profit downgrade since the company re-listed 19 years ago. “Strange days indeed” says one broker. “Myriad factors” are “laying siege to the fortunes and future of our major retailers” says The Age. Have to keep a watchful eye on those “myriad factors” at all times