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The US economy: hurtling towards another crisis

In a recent post, “Should the US balance its budget“, I argued that it would be a folly for the US to try to balance its budget in the near term, as this would seriously impede the economy’s recovery from the recent deep recession. But this leaves us with some obvious questions. Is the economy

Latest posts

4

Gotti is wrong on oil

But should be congratulated for staking out a position, a rare event in today’s world of commentary flip flopping. As Deus Forex Machina likes to say, disagreement makes a market so let’s rip in. Gotti asks: Why should oil prices rise in response to the latest turn of events in Libya? We are already seeing

14

Research Bonds

My fellow equities blogger Sell on News recent excellent post gave an credible rationale on why property has become the No.1 investment option for Australians – purely by default. This post will go over a very “beta” version of an idea I had awhile back in how to arrest the problem of an insufficient base

5

Links March 22: War rally

Long war. FT Yemen at the brink. FT Bahrain polarising. Mother Jones, WSJ New low: $US. Down: Ore. Flat:  futures for metals, grains. Up: Aussie, energy. Radiation falling. LA Times More food radiation. NYT Japan’s knock-on effects worse than thought. Money Game, The Oz Imagine that? El Erian, QE3 hurdle will be very high. Beyondbrics. Yeh, about as high as 1100 on

20

Dateline questions the China growth story

SBS Dateline last night showed an investigative story entitled China’s Ghost Cities. The video takes viewers on a tour of vast new cities of apartments and shops that are being built across China and which remain almost completely empty – all in the name of achieving economic growth. One of the people interviewed in the

13

Guest Post: Leigh Harkness

I discovered Leigh Harkness’s web site a few months ago while doing some research on foreign trade.  His site so intrigued me that I contacted him to see if he would be interested in doing a series of guest posts about his research and experience in his little understood area of economics. Leigh accepted my

108

Ponzi dynamics (by Leith van Onselen)

An article in Friday’s Australian Financial Review (AFR) entitled “Getting a foot in the door” neatly highlighted the ponzi-like nature of the Australian housing market and the unsustainability of current housing values. Below are some extracts from the article along with some commentary of my own. It took Lee Palmer two years of trying before

4

Links March 21: Extrapolations

Japan’s severe industrial fallout. Bloomberg Japan’s food fallout. FT, WSJ Japan and commodity fallout. Reuters Japan and local growth. Huy McKay More on the supply chain. Calculated Risk The Libyan war. George Friedman Where are the Arabs? FT All over the place. AFP, Zero Hedge Nobody knows where this is going. The Interpreter Iran calls for

127

It is not just economics

Some days I get some very nice messages from readers, other days I don’t. Friday was one of those “other” days. An excerpt from my inbox after a run through the abuse filter. When will you renter losers just accept that you are wrong and that housing isn’t going to crash. I am sick of

87

Questioning the wisdom of austerity

I have written a series of posts on this blog questioning the wisdom of fiscal austerity in the United States today. Inevitably when I make such an argument, I get comments along the lines of “what about Zimbabwe!”, “it’ll lead to hyperinflation!” and “they’re even worse off than Greece!” But these worries are all based

3

Weekly Market Analysis: March 18

Summary The S&P/ASX200 index eventually closed 0.4 per cent lower to 4,626.8 points today, after a wild rollercoaster ride. The index is down 200 points or 4.14% for the month and 2.4% since the start of the year. In effect, the XJO has gone nowhere since September 2009, rangebound between 4200 and 5000 points. In

3

Weekend reading: Crisis drags on

Crisis deepening. NYT Or stabilising. FT Winds to swing towards Tokyo. Bloomberg More radiation released than truth. Zero Hedge Japanese damage. NYT Fukushima described in 1976. Time Japan and local growth. Ian Verrender, Rowan Callick, Michael Stutchbury. Yawn. You read it here days ago. Libyan ceasefire, or not. CNBC Too late to help Libya. Max Hastings

6

The Banksters: Part 1

Note: This is part 1 of a 2-part series on trading and valuing the big four Australian banks. Part 2 shall be forthcoming soon. Fellow equities blogger Sell on News completed an excellent thematic post on the bubble like growth of the finance industry recently. In the face of a likely change in how capital

7

Intervention and the AUD

AUD/JPY and USD/JPY are up sharply at present on the back of comments from Japanese Finance minister that G7 countries will intervene to support the Dollar (sell Yen). There is also talk they will buy stocks which is what the HKMA did during the Asian crisis. The New York Times just sent a release out

2

Michael Pettis: China slowing

` Exclusively from Michael Pettis newsletter: Quite a few numbers came out this week, but none of them were especially dramatic or likely to change anyone’s mind about anything. The most interesting thing to me is that there are indications that, once again, the economy may be slowing quickly. Every time Beijing gets worried about too

4

Late to the party

As governments far and wide wake up to the danger of fallout in Japan, one is tempted to conclude that the crisis is past its worst. Governments have a habit of coming late to the party. But, in this case, I’m not so sure. I continue to think that markets are underestimating the damage being

1

Links March 18: Worse than thought

Cooling spent rods to take weeks. FT Japan shuts supply chain. NYT Canberra panics late. The Age Japan and the global economy. FT Japan’s damaged ports to hit bulk commodities. The Oz Action in Libya suddenly possible. FT Was it my article that changed Obama’s mind? 😉 Gaddafi threatens everything in response. Reuters Weak: Aussie, $US. Flat:  Ore. Up

10

Mutiny

After publishing my latest post I received the following e-mail from a reader. I suspect you may be interpreting this REIV move incorrectly. If history is any guide the Real Estate Agents are in the process of “switching sides” figuratively speaking (as they are really on their own “side” at all times and everywhere).   If the REA’s

15

How Japan will hit local growth

I am surprised at the resilience of Australian equities to the global sell-off. Either the local market is confident that the crisis can be contained (for some reason I can’t fathom, it’s behaving irrationally, or, it has assessed any economic fallout from the disaster to be minimal for Australia and already priced in). The only

10

Risk is off, but China is still on

Houses and Holes is right on the AUD we need to be careful what we wish for. We do not want to be a reserve currency – already we are seeing the strength of the AUD reallocating resources around the economy. HH’s post on Dutch disease a week or two back highlighted this and it

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Has the REIV destroyed the evidence?

Earlier in the week, a reader sent me a link to a recent Real Estate Institute of Victoria’s (REIV) news release. The release contained the following quote [my emphasis]: Members report positive expectations for market activity in the March quarter at the same time as a drop of 3–5 per cent in the median house price is expected.

6

Sell finance

With global markets facing a period of sustained uncertainty, it is worth taking a longer perspective, comparing the current conditions with the so-called “Goldilocks” economy that existed just prior to the GFC. It turned out then to be a case of all the three bears instead of Goldilocks, but at the time things seemed robust

9

Japan’s critical moment

An hour ago the IAEA released the following: Temperature of Spent Fuel Pools at Fukushima Daiichi Nuclear Power Plant Spent fuel that has been removed from a nuclear reactor generates intense heat and is typically stored in a water-filled spent fuel pool to cool it and provide protection from its radioactivity. Water in a spent

8

Links March 17: Worst case scenario

Reactor 2 containment rupture. NYT Spent rods exposed at reactor 3 and 4. IAEA Radiation hampering containment efforts. FT US, Britain advise flight. BBC Tokyo closed. Reuters PBS Newshour video on radiation in Japan. Describes how problems are containable, except if radiation prevents workers from being able to do so. Precisely what appears to be happening:

4

Japan Update 2

The situation in Japan seems to have just got considerably worse. From the BBC live feed. 0325:More on that news conference by Chief Cabinet Secretary Yukio Edano. He said: “At around 0830 today, at Fukushima Daiichi nuclear power plant, white smoke has been seen coming out of reactor three. And regarding this, currently we are

10

Stocks for Bears

It’s a scary and volatile world at the moment:  floods, cyclones, earthquakes, tsunamis, US housing crashes, Aussie housing bubbles, the GFC, QEII, PIIGS, Japanese debt, revolution in the Middle East and Charlie Sheen.  As the Chinese curse goes, we are living in interesting times. So what’s a bear to do?  I’ve never been the “head

11

Wow! – The MSM on FHBG

I am starting to think I have woken up in the twilight zone. Something very odd seems to be suddenly happening in the Australian mainstream media. Last week the Unconventional Economist posted about the MSM’s foray into anti-REIX journalism with a well researched opinion piece about the failings of negative gearing. Today I note that

6

The RBA airbrushes history

Deputy Governor of the RBA, Guy Debelle, yesterday delivered an analysis of Australia’s recent financial history that left a few things out. Let’s take a look: Over much of the past two decades, demand for credit outpaced the growth in deposits, so that banks accessed wholesale funding markets to support growth in lending. This outcome reflected

23

Spruiking as they exit

You’d seriously think that the Real Estate Industry sponsored media in Queensland would have given up by now. With north Queensland, the Gold and Sunshine coast going through well publicised correction you wonder why they would bother spending the money. But I guess old habits die hard. So once again we are subjected to the