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Weekend special: Perverse Chinese banking

Take an hour today to view this spectacular discussion about the contemporary Chinese banking system from G+ (h/t Patrick Chovanec). It includes the history of reform, the epic fallout of the 08/09 stimulus, real levels of debt, off balance sheet and non-performing loans, asset bubbles, the role of inflation, triggers for crisis, durability of growth,

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Data vault

Australian Data In a rather quiet week of local data we had a couple of key releases. The major highlight was wages data where had mixed outcomes. Over the long run however the leading indicators of employment continue to signal that there is further weakness ahead which should keep a lid on wage pressures much

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Innovate or die

I have been reliably informed by Houses & Holes that we are “all going to die”, and rather sooner than we all imagined. Something to do with the economic meltdown in Europe and America, I believe. While I have no reason to doubt such potent insight — after all, death is the best one way

18

The buck stops here

Sam Burmingham, founder and editor of the WeMoney Newsletter, has written an entertaining article on his blog on attribution theory. Sam’s article is provided below for your reading pleasure. As always, comments are welcome. The events of the past few weeks have been the perfect reminder of a concept that struck a chord with me

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Weekend Links: Another rough night

To the moon:  gold Up: grains,metals, CRB ,energy Flat: Treasuries, Euro, Aussie Down: $US Core 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

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An exit plan for Europe

Over the last year or so Europe has been moving towards a “crunch” point where a decision must be made between fiscal-political unity and separation. I have explained at length that the austerity measures introduced to periphery nations would not work as suggested by the IMF and EU because the reduction of debt would lead

9

Technicals point down

In today’s charting post, I’ll cover some of the key markets to explain the context of last night’s breakdown in risk and possibly where we are heading. Currencies The AUD/JPY cross is closely correlated with the S&P/ASX200 and begins my analysis. This 18 month daily chart explains what has happened to the Yen from before

19

Squabbling over the carcass

I find it odd how equity markets move. The credit markets have been continually screaming about Europe for weeks and if you have been reading you would know that the economic system in Europe has been slowly collapsing inwards on the ECB’s balance sheet. None of this should have been a surprise to share markets,

47

This is not a test

Sadly I’ve been right. The US is plunging into recession. Not just idling in, plunging. Last night’s collapse in the Philly Fed leaves no room for doubt. Europe will follow. Next up in the US will be a new round of job losses. Look at this chart from Zero Hedge which compares the Philly Fed Index

11

US recession a certainty

From the excellent analysts at Forecast comes this note from yesterday: US recession a certainty on asset based probability model * Probability model currently arguing that a recession is a near certainty within next year * Backs up signals from the more coincident consumer confidence gauge * Argues for more ‘distribution’ as risk is unloaded

14

The stress in household credit

Yesterday, in a post about some long term housing data, I added an M3 chart that got a bit of attention. For those who don’t know, M3 is a broad measure of money in the Australian economy including all types of deposits in the lending institutions. As “loans create deposits” M3 is a good proxy

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WA has no idea

On Wednesday, Delusional Economics posted a cracking article about a new mortgage product being offered by BankWest enabling first-time buyers to purchase a home with only a 3% deposit: First homebuyers will be able to borrow 97 per cent of a loan under a new Bankwest mortgage product. Bankwest managing director Jon Sutton announced the $500m loan strategy

2

Chinese house prices stall

Yesterday, the National Bureau of Statistics published the latest set of widely followed but wildly unreliable home prices indices for the 70 cities. For newly constructed homes, prices fell in 14 cities on a month-on-month basis (vs. 12 cities in June), while 17 cities recorded flat prices )vs. 14 cities in June).    On a year-on-year

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August 19: Disastrous data

Rockets: Treasuries, $US, gold Smacked: Euro,  Aussie, grains, metals, CRB Thunderstruck:  energy Ragin’ 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

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Do we have Dutch disease?

Well, obviously. But exactly what form it takes is open to question and fresh from the farm, Paul Bloxham of HSBC, takes the question on in a comprehensive new report. According to Bloxham, we aren’t ill at all (just as we have no housing bubble). However, we do face the following challenges: First, through banking

1

Trading Day

The S&P/ASX 200 closed today down 52 points or 1.26% to 4251 points. Asian markets experienced similar lossess, with the Nikkei 225 closing down 1.25% at 8943 points, and the Hang Seng down 0.5% at 20184 points. Other risk assets are mixed, with the AUD slipping against the USD, now at $1.0502, WTI crude down

19

Margin deleveraging

The RBA released the quarterly Margin Lending – D10 data tables today (XLS table), and its not a pretty picture for the Australian stock market. One of the key factors in a new bull market in stocks, just like property, is a propensity for investors to borrow more on expectation of higher earnings – alongside

32

The foolproof investment

I just noticed that the residex blog had a couple of interesting data tables containing the breakdown of growth in house and unit prices over various time periods according to their own indexes. Houses Area Median Value Growth Rent Sales Predictions 20 Years % p.a. 10 Years % p.a. Year Ending July 2011 Last Quarter

23

Weekly wages rise in May quarter

  ABS average weekly earnings is out and shows wage pressures in the pipeline in the first half of the year. As you can see from the chart above wages appear to be bouncing off the bottom. The RBA would not like this. In the below table, green is at or below the national average

15

Fly, be free

Qantas’ move to develop more of a regional strategy is something worth watching. Although we are in the Asian region, and heavily export to Asia, very few big Australian companies have developed strategies into the region. One that did, AMP (Axa Asia Pacific), just sold off the juicy Asian operations and concentrated on developing its

9

ECB moves into FX

Some interesting movements in Euroland last night. Last week I stated that the lack of definitive action by the Euro-elite was morphing the issue of sovereign debts slowly into a banking crisis. We have seen that recently in the European CDS market, and that continues: The cost of insuring European sovereign and corporate debt against

2

Chart of the Day

Another analog comparison between markets, this time from Barry Ritholz at The Big Picture. Its an 11 year lag of the Japanese Nikkei 225 vs the US S&P500 Index. A little known fact that the S&P500 is still below its high in 2000, even unadjusted for inflation.

46

Run on Wenzou real estate

Wenzhou is a city famous for producing lighters.  It also produces many real estate speculators who have been buying properties everywhere from their home town to Hong Kong, and probably as far as Dubai.  Now in their home town, however, they are scrambling to sell their real estate holdings. NBD reports that the rush to sell started probably two weeks ago. 

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McKibbin’s parting shot

From The Oz today comes an interview with Warwick McKibbin as he prepares for departure from the RBA Board. Never one to go gently into that good night, and bearing the MB standard of Reynard the Fox, McKibbin has launched a final broadside against the structure of the RBA Board. Outgoing Reserve Bank board member

8

August 18 links: More undollarness

Up: Treasuries grains, metals, energy, CRB, gold, Euro,  Aussie Down: $US Contagion easing: 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

2

Trading Day

The S&P/ASX 200 closed today up 56 points or 1.33% to 4303 points. Asian markets experienced mixed results, with the Nikkei 225 closing down 0.5% at 9057 points, and the Hang Seng closing up 0.93% at 20400 points. Other risk assets are mixed, with the AUD slipping against the USD, now at $1.0468, WTI crude

40

Earth to APRA…

In their latest monthly report this is what Herron Todd White had this to say about Western Australian housing: Perth Western Australia’s mining industry continues to be a symbol of Australia’s growing economic prominence on the global stage. The vast riches on offer have resulted in rapid population growth leaving the housing market in an

0

Use it or lose it

The “volatility” in the market — for which read, “what the hell is going on”? — is pushing brokers inexorably in the direction of dividends and capital management. If you can’t pick the direction of the capital gain, go to the income or the capital tricks. After the odd $100 billion GFC capital raising on

2

Leading indicators still lousy

The Westpac/Melbourne Institute Leading Indicators Index is out today. I’ve criticised this index before because some of its components look obsolete, but as you can see, it has a pretty decent track record of anticipating trend changes in growth: And there’s not much doubt about what it’s signaling ahead today: weakness. The annualised growth rate