Weekend Reading: 14-15 October 2017

Global Macro / Markets / Investing: Bigger Corporations Are Making You Poorer – Vice Driverless Cars Are Giving Engineers a Fuel Economy Headache – Bloomberg Bears Become Bulls in Unbroken U.S. Stock Market Rally – Bloomberg The Dangers Of A “Get It While You Can” Mentality – Real Investment Advice One reason it’s dumb for

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Macro Afternoon

by Chris Becker Asia ends the week with a rally in stock markets outside China while the USD reversed its recent bounceback as Yen and Aussie dollar also lifted. Gold also rose but only slightly as other commodities cooled off. In mainland China the Shanghai Composite is having another pause, up a few points going into


RBA warns on property specufestors

From the just released biannual Financial Stability Review (FSR): The strong growth of investor borrowing for property in recent years has potential implications for financial and macroeconomic stability. The characteristics and risk profile of households’ investment property exposures differ in important ways from those of owner-occupiers… Because interest expenses on investment properties are tax deductible,


The spooky mortgage risk signs our bankers are ignoring

Cross-posted from The Conversation: I’m not normally a fan of parliament hauling private sector executives before them and asking thorny questions. But when the Australian House of Representatives did so this week with the big banks it was both useful and instructive. And, to be perfectly frank, terrifying. Let’s start with Westpac CEO Brian Hartzer.


NSW new home grant scheme widely rorted

From Jessica Irvine: One in five recipients of a now abolished $5000 “new home grant” double-dipped on the scheme to receive multiple grants, including 1500 people and 1869 companies who pocketed more than five grants each. First home buyers were not eligible for the grants, which were introduced by the Baird government in 2012 and


Scott Morrison’s negative gearing lie exposed

By Leith van Onselen Let’s recall Australia’s real estate treasurer, Scott Morrison’s, speech to the Australian Housing and Urban Research Institute in April, whereby he argued that negative gearing was being used primarily by ordinary “mum and dad” investors like teachers, and to restrict negative gearing would hurt lower income earners: Figures to be released


AFG also shows rotation from investors to first home buyers

By Leith van Onselen Australian Finance Group (AFG) has released its housing finance data for the September quarter, which registered a seasonal rise in mortgage applications, but a decline year-on-year. The number of mortgage applications rose by a seasonal 1.4% over the September quarter but was down by 3.4% over the year, whereas the value


Costello attacks the super fee gouge

By Leith van Onselen Former treasurer Peter Costello has argued that compulsory superannuation contributions should be taken out of the hands of bank-run retail super funds and union-backed industry super funds, who are gouging members with excessive fees. The chairman of the $133 billion Future Fund contends that this money should instead be invested in


Citi: Aussie mortgage underwriting standards poor despite regulatory tightening

By Leith van Onselen Australia’s poor mortgage underwriting standards have been well documented recently. The recent UBS survey on Australian mortgages concluded that brokers were loose with lending standards: One of the key areas of focus of the 2017 UBS Evidence Lab Australian Mortgages survey was to assess the level of factual accuracy in mortgagor’s


PBO: Bracket creep to punish middle-income earners

By Leith van Onselen The Parliamentary Budget Office (PBO) has released a new report claiming that middle-income earners will bear the burden of bracket creep (aka ‘fiscal drag’) as wage rises push 1.8 million Australians into higher tax brackets: The PBO’s 2017–18 Budget medium-term projections report identified that the projected return to surplus in 2020–21


Coalition desperately tries to avert private health insurance ‘death spiral’

By Leith van Onselen Commentators often talk about the electricity “death spiral”, which arises when demand for power declines, due in part to customers taking up solar, leading to higher prices to cover fixed network costs. That is, the more people that take-up solar power, the faster decline in electricity demand, and the more fixed


Bloomies Crapstralia series targets Aussie retirement system

By Leith van Onselen Turns out that Bloomberg is not done with its Crapstralia series. After already rubbishing Australia’s economic structure, productivity, the NBN, the housing bubble, the scrotum share market, the energy disaster, and toxic privatisations, now Satyajit Das has questioned Australia’s retirements system: Australians make up barely 0.3 percent of the globe’s population


Only the conservative media seems capable of a population debate

By Leith van Onselen Why is it that only the conservative (“Right”) side of the media and politics seems capable of having a debate on Australia’s future population? Over the past year, we have seen conservative commentators like Judith Sloan, Terry McCrann, Adam Creighton, Andrew Bolt, and Mark Latham, Quadrant Magazine, as well as federal


Real estate Treasurer launches bubble defense world tour

Most economic leaders tour the world to discuss their competitive advantages for investment, whether its innovation, high tech, natural endowment, skilled populace, whatever. Not us. We go to protest too much about the bubble: In a speech overnight in New York to Citigroup, the Treasurer said although house prices in the nation’s largest cities had grown


As dwelling construction unwinds, NSW and VIC shortages to rise

By Leith van Onselen With the ABS on Wednesday releasing its dwelling commencements and completions data for the June quarter, it’s time to once again examine how dwelling construction is tracking against population growth at the national and state and territory levels. The below charts track the following, which are based on the latest available


CoreLogic weekly Australian house price update

By Leith van Onselen In the week ended 12 October 2017, the CoreLogic 5-city daily dwelling price index, which covers the five major capital city markets, rose by 0.08%: Values rose everywhere but Sydney: So far in October, dwelling values have increased by 0.13%, again with all jurisdictions except Sydney rising in value: So far


NZ house prices fall in September as volumes collapse to 6-year low

By Leith van Onselen The REINZ has released its house price data for September, which revealed a 1.3% seasonally adjusted monthly fall in the national median house price, with prices up just 0.6% year-on-year: Outside Auckland, seasonally adjusted house prices fell by 0.9% in September, with prices up 5.4% year-on-year. Looking at the major cities,


Climate flip-flopping Coalition condemns Abbott climate flip-flopping

Via The Guardian: Statements by Tony Abbott suggesting that climate change is “probably doing good” are different to his opinion while he was prime minister and it is up to him to explain why he has changed his view, Julie Bishop has said. Speaking from South Korea on the ABC’s 7:30 on Thursday, the foreign affairs minister


Daily iron price update (saved by coal)

Iron ore price charts for October 12, 2017: Tianjin benchmark fell 40 cents to $57.40. Steel futures caught up to some Golden Week losses. Coking coal is saving the complex. Reuters explains: Northern China’s Shanxi province, the country’s top coal producing region, will aim to cut concentrations of hazardous airborne particles known as PM2.5 by


Links 13 October 2017

Global Macro / Markets / Investing: Should Individuals Invest in Bitcoin? In a Word, No. – WSJ Bitcoin Is Retaking Its Place as King of the Cryptocurrencies – Bloomberg Junk Bond Boom Reaches Far Corners of the World – WSJ Investors giving ’cash incineration engine’ Tesla a lot of rope, but may soon lose patience


Macro Afternoon

by Chris Becker Stocks were broadly positive across Asia today taking the good level from US stocks overnight, with the USD weakening against the majors and gold, which is closing back in on the $1300USD per ounce level. The lack of economic and geopolitical catalysts are definitely calming markets this week. In mainland China the


The paradise that is Sydney 2037

Some days this place truly is a mad house, Domainfax: Self-driving cars on roads with solar panels, hologram commercials, drones making deliveries, skyways between buildings, a magnetically-levitating train pulling into Circular Quay and trees. Lots more trees. It’s a view of how Sydney could look in 20 years. A virtual reality vision of the future city has been launched