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The NBN is money well spent

Yesterday, Telstra shareholders voted in support of the deal offered by the federal government and NBN Co. At a glance this deal appears to offer Telstra $11billion compensation for access to its infrastructure facilities, and for the decommissioning of the copper network. For me, the technicalities of this deal are almost immaterial in terms of

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1

Telstra plods to the fore

Telstra shareholders have approved the NBN deal, so brokers are unsurprisingly rushing to opine. Telstra offers a high, fully franked yield, so the share price only has to stay stable for it to be a decent play, at least compared with the rest of what is a very uncertain market. According to Citi, which has

4

Cochlear after the recall

Back in September,  I posted on the recall of Cochlear’s Nucleus 5 implant – COH’s primary device which makes up the lion’s share of Cochlear’s revenues (see full article here).  Since the recall there has been no other information released by Cochlear, who promised to give an update at the AGM.  Well, the AGM was held

16

Lower your expectations for Europe

Slowly but surely the news that the “plan for a plan” isn’t going to be anywhere near as impressive as expected. As I warned late last week, the best thing all European leaders could do is talk down expectations because if I have learned anything over the last 18 months of covering the European “crisis”

19

Boom and bust in iron ore

You know the ore market is in trouble when contracts start to disintegrate. There’s a raft of reports indicating just that this morning. The pick is from the AFR (and is free) but owing to its archaic attitude to the internet, copy and paste is disabled, so I can’t provide any of it. Here’s an

3

Chinese banks tighten the screw

Since late last week, the news from Chinese media has been that China Construction Bank has raised mortgage rates for first-home mortgages in Beijing.  Sina confirms that banks in more cities are now increasing interest rates.  And now Mingpao says banks in 14 cities have raised mortgages rates. The latest round of increase in interest rates is happening in Beijing,

14

No Refund

As I noted last week Bank of Queensland is showing signs of stress in its loan book, on top of that RPData has recently released data that there is growing stress on real estate agents due to sharp falls in housing transactions. Put these two together and it probably shouldn’t be too much of a surprise

6

Trading Day

The S&P/ASX 200 Index closed down 88.5 points or 2.11% today to 4186 points following weak leads from overnight US and Euro markets. In after hours trading, the index is down slightly, with Euro and US markets also pointing to lower opens. Asian markets experienced similar moves, with Japan’s Nikkei 225 down 1.4% at 8749

11

China still building like bejesus

The National Bureau of Statistics just published the latest set of economic data for third quarter, which sort of disappointed the market. The third quarter GDP grew by 9.1% in real term compared with the same period a year ago, missing expectation of 9.3%.  On a quarter-on-quarter basis, GDP grew by 2.3% in real terms, slightly

10

Will it be a black Christmas?

Dun & Bradstreet, the collections agency, has released a new consumer survey suggesting that the forthcoming Christmas will be a dour one. According to the survey: …which focuses on Australians’ expectations for savings, credit usage, spending and debt performance, also found that only 20 per cent planned to apply for new credit, down from a

51

Rate cuts are coming

The RBA has set the ground for an easing if and when they deem necessary. When they announced the statement after this month’s Board meeting they signaled that the inflation outlook having been revised by the ABS gave them some room to move if required by the economy. Unsurprisingly they reiterated it in the minutes

22

Europe loses track of time

You have to wonder if the Germans actually think that a prolonged period before resolution is preferable to something more market friendly and swift. I was only talking with a colleague last week about the different time frames in play at the moment. In Europe you can go to a city where there is a

30

Terms of trade shock brewing?

Last week I gave extensive coverage to a range of terms of trade shock stress tests conducted by the IMF on Australia. Sadly I must now discuss the same phenomenon as a realistic prospect. Over the last few days, there’s a bit coverage about how various iron ore barons and miners are “confident” of future

4

Chart of the Day: Italian bonds

Today’s charts come from an illustrative post from TF Market Advisors (via Zero Hedge), and shows the 5 year yield on Italian bonds, the Credit Default Swaps (CDS) and the spread between the former and the 5 year German Bunds: www.twitter.com/ThePrinceMB

3

Credit will find a way

As pointed out here months ago, monetary tightening of China has made credit difficult to come by.  As a result, some companies have had to borrow from the shadow banking system.  Meanwhile, other companies which have access to the Hing Kong banking system have been borrowing there as credit is much cheaper (from the perspective of Hong

22

The resources curse

Australia’s current terms of trade boom is a media darling.  This widely quoted statistic has provided a degree of comfort to those who proclaim the robustness of Australia’s economy due to close trade connections with Asia, and China in particular. Most readers would not be aware that macroeconomic researchers have built up a solid evidence

19

Trading Day: Tom Jones rally

The S&P/ASX 200 Index closed up 69 points or 1.6% today to 4275 points following a strong finish to the week on US and Euro markets on Friday. In after hours trading, the index is down slightly, with Euro and US markets also pointing to modestly higher opens. Asian markets experienced similar moves, with Japan’s

23

From QE to communism

Zero interest rate policy and quantitative easing is not working to stimulate the real economy.  No country has succeeded.  The pioneer of quantitative easing, the Bank of Japan, failed (and Japanese yen is uber-strong).  The Federal Reserve has failed, and the Bank of England has failed. Before going to quantitative easing, let’s consider whether zero interest

16

More on the car-house connection

I’ve dug into some more data to see what the car sales-housing connection might be able to tell us about future demand for credit and the results are striking. First is ex-refinancing monthly housing finance charted against car sales and, as you can see, there’s some kind of lead/lag correlation. The largest divergence over recent

13

Lending finance solid

ABS Lending Finance for August is out and shows growth across the board: AUGUST KEY FIGURES Jul 2011 Aug 2011 Jul 2011 to Aug 2011 $m $m % change TREND ESTIMATES Housing finance for owner occupation(a) 14 361 14 554 1.3 Personal finance 7 081 7 145 0.9 Commercial finance 32 298 32 948 2.0

5

The art of stating the obvious

The phones are quiet in broker land as bearish gloom grips. But the analysts’ reports still have to be produced and in theory such bearish conditions create good opportunities to buy. In theory. Wesfarmers, which is diversified, big and reasonably cashed up, is getting some analyst attention. Goldman Sachs has a buy. Goldman says the stock

26

The Platypus blues

I’ve been smitten with the Platypus Blues by Ms Luci Ellis, the erstwhile RBA Head of the Financial Stability Department. Her speech last week has received commentary on MB from H&H and Rumplestatskin but I think it needs some special detailed attention due to the extraordinary opinions expressed and how its left me feeling. Critiquing

2

Revisiting four dark clouds

In July this year I wrote a post called Four dark clouds. In it I described the challenges confronting the the globe’s four largest economies: Japan is far worse than markets or bullhawk economists predicted earlier this year. According to the NAB World In Two Pages report: In Japan, the tsunami and power shortages associated

0

China’s surplus sinks

I missed this previously. The foreign exchange reserves of China fell in September compared to August, while remaining flat for the quarter. While this is an expected outcome if the economy slows with the trade surplus narrowing and possibly less capital inflow (or even outflow), it is surprising to me that it is already happening

50

Energy efficiency doesn’t work

The word efficiency carries a meaning immersed in all things positive – you never hear that being more efficient could possibly be detrimental. In fact, if you can bear the evangelical fervour, you may have read about achieving ‘Factor Four’ or ‘Factor Five’ gains in energy efficiency, as part of a ‘Natural Capital’ revolution comprising a ‘decoupling’ economic growth

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Why agents are nervous

I think most people would appreciate that the Australian property market is struggling at the moment. In most cities house prices are falling and the stock on market is high by historical standards. It seems fairly intuitive from these two observations that housing sales volumes would also be down. As I have posted on previously market turn

12

China’s inflation set to fall further

The People’s Bank of China published the latest set of monetary statistics, which are no longer reliable… M2 Money supply grew by 13.0% yoy, well below the long-run pre-financial crisis average rate of around 16.8% yoy and slowest in many years, and less than the expected growth of 14% yoy, while M1 rose by 8.9%

11

Two speed states

I don’t use the rhetoric of the “two-speed economy” generally because it’s basically an Orwellian spin on something much older and well understood: Dutch disease. However, NAB’s monthly State by State report out this morning has a terrific breakdown of the the growth matrices in each state and makes fascinating reading. For instance, exports: And

8

Fitch installs its own Glass-Steagall

There have been times in the last couple of years when the GFC-chastened ratings agencies appeared to be racing one another back to some position of credibility faster than the world could bear. Well, that race is surely over now, with Fitch announcing after US trading the mother of all downgrade watches on, well, everybody.