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?)

Latest posts


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


ANZ softens on house prices

In late July last year the ANZ bank released one of its reports on property investing called the Australian property outlook. Its summary for the Australian residential housing market was: With interest rates expected to rise, we expect house price growth will (temporarily) slow to low single digits in 2011. Nonetheless in the absence of


The levy is right

According to the SMH this morning: The Prime Minister, Julia Gillard, has all but confirmed that a one-off levy to help cover the cost of flood damage is on the cards but the bulk of funds will be raised by budget cuts. Speaking before the inaugural meeting yesterday with the 13-member taskforce of business and


Links January 25: Mixed messsages

Inflation is coming. Alphaville Not to the US. John Dizard, Tim Duy Flood inflation here. FT Quant churn. Zero Hedge Short bonds & stocks. Nic Lenoir China to slow. China Daily Greed siezes metals. Bloomberg Ore falls !?!?!?! Bloomberg Ore flood panic. John Garnaut Record ore inventory. Bloomberg Levy and cuts pay for floods. SMH New frugalism


China’s Demographic Time Bomb

The 21st century will be the century of old age, where declining birth rates meet longer life expectancies. Nowhere are these demographic shifts occurring as quickly as in China, which is facing demographic challenges that threaten to slow its long-term expansion. China’s demographic headwinds stem from its ‘one child policy’, which was brought into effect in 1979 and is


Flood moves to real estate

The real estate fallout from the Queensland floods has begun, and the re-pricing of flooded areas is underway. If you have $250,000 in cash you maybe able to get this little beauty , but given the pre-flood median in that area was $300,000 I am very doubtful it will sell for anything like that price, if it does at


Fitch’s Freudian slip

FitchRatings recently released its 2011 Australia outlook report on structured Finance.  The overall message from the report itself is not particularly interesting and has received little press. The  report rates RMBS as stable, ABS stable but with some weakness and CBMS Stable/Negative, and has some discussion of the Queensland flooding on the RMBS market. Flooding


Fostering failure

Australia’s corporate sector, having resoundingly failed the test of globalisation, is now unerringly positioning itself to become part of the global food chain. Many ASX listed companies are likely to be swallowed up by global players that possess the managerial skill so lacking in Australia’s cartels. Just imagine how much more they will be worth if they are


Fitch as a fiddle final

Bloomberg and AAP/Business Spectator both report breathlessly this morning that the big four banks have passed the Fitch stress test. The AAP/BS version is particularly flattering: Under a severe scenario, gross losses could total over $6 billion across all four banks, with net losses reaching 10 per cent of their combined operating profits, Fitch said in a


China’s blunder

The ongoing demise of the Bretton Woods II (BWII) currency system and its implications for the balance of world growth has been a recurrent theme for this blog. And if recent commentary around China is any guide, the breakdown is accelerating toward another critical moment. To recount, this blogger wrote last year: BWII is the